Sound investments into your future Country Overview The The - - PowerPoint PPT Presentation

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Sound investments into your future Country Overview The The Republic Republic of of Kazakhstan Kazakhstan is a transcontinental country in Central Asia and Eastern Europe, the vast majority of its territory being located in Central Asia. With

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Sound investments into your future

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The The Republic Republic of

f Kazakhstan

Kazakhstan is a transcontinental country in Central Asia and Eastern Europe, the vast majority of its territory being located in Central Asia. With its territory of 2,727,300 sq km (1,053,000 sq mi) ranked as the 9th largest country in the world, it is also the world's largest landlocked country. Kazakhstan is a member of the CIS. Capital city – Astana; largest city – Almaty (former capital). National currency – Tenge (KZT).

Country Overview

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Country Overview (continued)

Politics and Economy

The Republic of Kazakhstan is a unitary state with presidential regime Main industry: Oil & Gas (9th place in the world) GDP:

Jan-Jun 2011 – 107.1%, or $ 69.29 bn 2010 – 107.0%, or $148.05 bn 2009 – 101.2%, or $115.31 bn 2008 – 103.3%, or $133.44 bn 2007 – 108.9%, or $104.85 bn

Population

Population: 16.5 mln. people

Age 0-19 – 33% Structure 20-39 – 33% (2010) 40-59 – 24% 60 & older – 10%

Working population (APFs’ members): 8.2 mln. people Average monthly income (Jul. 2011): USD 640 Retirement age: men – 63 women – 58 Longevity (2010): average – 68.4 years men – 63.5 women – 73.3 Natural population growth rate increased from 6.22% (2003) to 13.35% (2010)

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Pension System in Kazakhstan Pension System in Kazakhstan

1997 1997 - reform of the pension system in Kazakhstan and establishment of the first “State Accumulative Pension Fund” (Gosudarstvenny Nakopitelny Pensionny Fond) which then became the APF “GNPF”, JSC New pension system is based on the three pillars:

PAYG PAYG pillar pillar, the former Soviet Union heritage based upon the “solidarity of generations” where the State budget is a source of pension distributions by means of taxes and other budgetary receipts. Pension distributions amount depends on the employment duration. Currently, this pillar covers those who had been employed for at least six months prior to January 1, 1998. Compulsory Compulsory defined defined contributions contributions accumulative accumulative pension pension plan plan (99.77% of all accumulated pension assets as of 1 July 2011). Pension contributions fixed at 10% of the gross monthly income are paid by all employed citizens of Kazakhstan and foreign stateless individuals who established permanent residence in Kazakhstan, to their individual accounts in one of the APFs selected in contributors’ discretion. Contributors have the right to transfer their savings from one APF to another twice a year, but all savings of each member must be kept in one APF at a time. Voluntary Voluntary accumulative accumulative pension pension plan plan embracing voluntary and voluntary-occupational pension

contributions. This pillar is less developed.

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As of September 1st, 2011, there are 11 Accumulative Pension Funds (APF) operating in Kazakhstan. The APFs in Kazakhstan are

licensed to act also as the Asset Management Companies (AMC). They manage pension assets of their members (contributors), and also have their own assets and capital that are accounted for separately (Chilean

Chilean model model).

Pension assets are accumulated and accounted for based on the

Unit Unit-Linked Linked Plan Plan, i.e. the cash value of pension contributions

varies according to the current net asset value of the underlying investment assets. It allows protection and flexibility in investment. The APFs have three income sources

three income sources:

1. Monthly commission fee on accumulated pension assets

(≤0.05%, GNPF’s current fee is 0.0475%)

2. Monthly commission fee on investments return (≤15%, GNPF’s

current fee is 15%) 3. Return from investments of own assets

Pension System in Kazakhstan (continued) Pension System in Kazakhstan (continued)

Unit-Linked Plan Accumulation of Pension Assets & Asset Management Income Structure

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Pension Market Performance Pension Market Performance

0% 20% 40% 60% 80% 100% 120% 140% 160% 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Pension assets, mln. KZT Pension assets growth rate, % Pension Assets 17 194 mln. USD (01.09.2011) 2 520 024 mln. KZT Average annual growth rate for the last 3 years – 21%

Individual Contributors’ Accounts Compulsory Voluntary Voluntary Occupational 1998 3 752 386 1999 2 994 513 2000 3 715 535 2001 4 630 205 22 071 2002 5 399 320 25 084 2003 6 164 316 27 364 2004 6 974 437 30 157 2 764 2005 7 613 369 32 336 3 297 2006 8 537 712 32 978 3 752 2007 9 223 712 40 904 3 848 2008 9 613 112 41 499 4 030 2009* 7 732 128 41 682 4 076 2010 7 989 782 39 534 4 045 01.09.2011 8 117 097 38 376 4 088

USD 1 = KZT 146.56 (average ForEx rate in August 2011)

Average Pension Savings Per 2 118 USD Contributor (01.09.2011) 311 ths. KZT

* zero-balance and double accounts were eliminated

0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.09 0.11 0.13 0.15 0.24 0.28 0.31

Average Pension Savings Per Сontributor, mln. KZT

Accumulated Net Investment 4 270 mln. USD Income (01.09.2011) 625 786 mln. KZT

0% 10% 20% 30% 40% 50% 60% 70% 80% 100,000 200,000 300,000 400,000 500,000 600,000

Net investment income, mln. KZT Net investment income growth rate, %

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Atameken GNPF Kazakhmys Republic Capital Grantum NefteGazDem Ular Umit Eurasian APF HBRK APF Otan

Kazakhstan APFs Kazakhstan APFs (01.09.2011) (01.09.2011)

Ular Umit , -$23,

Atameken, $14, 2% GNPF, $113, 20% HBRK APF, $223, 40% Kazakhmys, $6, 1% NefteGazDem, $25, 5% Astana $34 6% Grantum, $67, 12% Otan, - $4, - 1% Capital, $35, 6% Republic, $15, 3%

Gross Investment Return (J an-Aug 2011), US$ mln

Ular Umit , $2,789, 16% Atameken, $531, 3% GNPF, $3,065, 18% HBRK APF, $5,813, 34% Kazakhmys, $164, 1% NefteGazDem, $640, 4% Astana $849 5% Grantum, $1,477, 8% Otan, $486, 3% Capital, $906, 5% Republic, $475, 3%

Pension Assets, US$ mln

Astana GNPF GNPF Kazakhmys Republic Atameken Grantum NefteGazDem Ular Umit Capital HBRK APF Otan

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APFs’ Investment Portfolio APFs’ Investment Portfolio (01.09.2011) (01.09.2011) Total Pension Assets US$17.2 bn.

Securitites of the M inistry of Finance of the RK, the National Bank of the RK and the Local Authorities of the RK , $7,264,271, 42% Nonpublic Foreign Shares and Bonds, $1,549,619, 9% Foreign Government Securities, $290,984, 2% International Financial Organizations Securities, $814,411, 5% Nonpublic Domestic Shares and Bonds, $4,917,459, 28% Deposits in the National Bank of the RK and the Second-Tier Banks, $1,260,357, 7% Refined Precious M etals, $836,794, 5% Cash and Other Assets, $289,262, 2%

APFs' Portfolio Structure, in USD '000

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Regulation Regulation

There are three three main main prudential prudential regulations regulations established and controlled by the Committee: The APFs’ activity is licensed and regulated by the Committee Committee of

f the

the National National Bank Bank of

f the

the Republic Republic of

f Kazakhstan

Kazakhstan for for Control Control and and Supervision Supervision of

f the

the Financial Financial Markets Markets and and Firms Firms

Prudential regulations Limits

1 minimum capital requirement

≥ 0.04%

K2 K2 annual average weighted investment return benchmark for the last 60 months One APF’s K2 ≥ 70% of average weighted K2 of all APFs Limits on pension assets invested Limits on pension assets invested into non-public securities and and pension assets deposited pension assets deposited with second-tier banks

- GRK Securities
- Foreign Gov. Securities
- Securities of IFO and Banks for

Development

- Domestic Shares
- Domestic Debt Securities
- Foreign Shares
- Foreign Debt Securities
- M utual Funds Shares (subject to

the investment rating availability)

≥ 30% of pension assets; ≤ 10% of own assets per country; ≤ 10% of own assets per each emitter; ≤ 10% of each emitter’s stock; ≤ 25% of each emitter’s own equity ≤ 10% of each emitter’s stock; ≤ 25% of each emitter’s own equity; ≤ 10% of each emitter’s assets

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*GNPF is the only APF with direct GRK participation through the National Bank’s share

GNPF Shareholders GNPF Shareholders

The National Bank of the Republic of Kazakhstan* 90 90,01 01% % The European Bank for Reconstruction and Development 9,99% 9,99%

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GNPF Privatization GNPF Privatization The main objective of GNPF privatization is not the profit gain, but the strengthening of the Fund’s market position thanks to a foreign investor’s expertise and experience, namely by:

enhancing corporate management
advancing internal risk management system
sharing best practices in investments
providing access to the global markets

The National Bank of the RK along with EBRD now intend to sell the control stock of GNPF to a new Strategic Investor, and conduct a search for this purpose.

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Pension Assets 3 065 mln. USD (01.09.2011) 449 158 mln. KZT Average annual growth rate for the last 3 years – 22%

USD 1 = KZT 146.56 (average ForEx rate in August 2011)

Average Pension Savings Per 2 118 USD Contributor (01.09.2011) 311 KZT

10% 20% 30% 40% 50% 60% 70% 80% 90% 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

Pension assets, mln. KZT Pension assets growth rate, %

Contributors Compulsory Voluntary Voluntary professional 1998 3 092 374 1999 1 697 292 2000 1 811 991 2001 2 143 104 2002 2 299 416 2003 2 332 900 2004 2 431 125 2005 2 302 966 2006 2 378 890 42 2007 2 439 137 75 2008 2 417 306 102 2009* 1 742 157 119 5 2010 1 786 633 143 3 01.09.2011 1 856 201 171 3

* zero-balance and double accounts were eliminated

GNPF Performance

0.01 0.02 0.02 0.03 0.03 0.04 0.04 0.05 0.07 0.08 0.10 0.17 0.21 0.24 0.000 0.050 0.100 0.150 0.200 0.250

Average Pension Savings Per Сontributor, mln. KZT

Accumulated Net Investment 847 mln. USD Income (01.09.2011) 124 152 mln. KZT

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 20,000 40,000 60,000 80,000 100,000 120,000

Net investment income, mln. KZT Net investment income growth rate, %

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2008 2009 2010 01 Aug.2011 Employees 430 436 658 760 Branches 18 18 18 18 Agent points 31 53 100 117 Service centers 2 2

GNPF, 23%

Members

GNPF Market Share GNPF Market Share (as of as of 01.09.2011) 01.09.2011)

GNPF, 23%

Accumulated Net Investment Return

GNPF 18%

Pension Assets

GNPF GNPF is ranked 2nd among the Kazakhstan APFs

($3 065 mln.) (1 856 K) ($847 mln.)

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Investment Portfolio Investment Portfolio (01.09.2011) (01.09.2011) Pension Assets $3 065 mln.

GRK Securities 34,85 Foreign Gov. and IFO Securities 10,99 Stocks 3,66 Corporate Bonds 18,48 Deposits 16,65 PPN 2,97 Gold 9,02 REPO 2,67 Cash 0,71

Portfolio Structure, %

KZT, 71.33 USD , 18.41 RUR, 7.94 EUR , 0.44 GBP, 0.22 BRL , 1.66

Currency Structure, %

GNPF Own Assets $143 mln. (all denominated in KZT)

GRK Securities 57,85 Deposits 32,7 REPO 5,13 Cash 4,31

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Equity, mln. USD/ KZT 90 1 096 98 14 473 121 17 883 137 20 094 Assets, mln. USD/ KZT 91 10 892 101 14 905 125 18 395 143 20 930 Net income, mln. USD/ KZT 10 1 157 22 3 215 22 3 296 12 1 796 ROA, % ROE, % 13.6 24.9 19.7 9.1 13.7 25.4 20.3 9.5 EPS, in ‘000 USD/KZT 1 133 3 370 3 379 1 207

GNPF Basic Financial Indicators

Indicators 2008 2009 2010 2011 (8 months)

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Country Overview Country Overview

 be a legal entity  have a minimum rating as set below:  Legal entity registered in an off-shore zone* or the one having affiliates registered in off- shore zones shall not act as a shareholder of any pension fund in Kazakhstan  A legal entity – non-resident of the Republic of Kazakhstan – shall have a written permission from an authorized body in order to become a major shareholder

*All restricted off-shore zones are listed in the Appendix A

Standard and Poors M oody's Investors Service Fitch Dominion Bond Rating Service (DBRS) J apan Credit Rating Agency (J CR) Rating and Investment Information

(R&І)

Capital Intelligence

ВВ- Ва3 ВВ-

BBL BB- BB- BB-

Per the Law of the Republic of Kazakhstan On the Pension Provisions in the Republic of Kazakhstan (The Law), Article 36: A non A non-resident investor shall resident investor shall:

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The Government of the Republic of Kazakhstan is currently airing a range of adjustments to the Law including the following:

All shares of the AFPs operating in Kazakhstan shall be listed in KASE
Starting from January 1

January 1st

st,

, 2013 2013,

– An APF’s outstanding stock shall be distributed among shareholders, with 3 of them being major shareholders not affiliated to each other. One shareholder (with its affiliates) may hold < 75% of the stock, or

– Minority shareholders of an APF shall hold ≥10% of the outstanding stock of the APF. Such shareholders shall not be affiliated with each other, nor with the APF itself

Starting from January 1st,

January 1st, 201 2014,

– An APF’s outstanding stock shall be distributed among shareholders, with 3 of them being major shareholders not affiliated to each other. One shareholder (with its affiliates) may hold < 75% of the stock, or

– Minority shareholders of an APF shall hold ≥25% of the outstanding stock of the APF. Such shareholders shall not be affiliated with each other, nor with the APF itself

The above shall not apply to the APFs with participation of the GRK Foreign Investors: Foreign Investors: Prospective Prospective Legal Issues Legal Issues

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