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New Investment Opportunities in Kazakhstan

An Institutional Investor Sponsored Statement on new Investment Opportunities in Kazakhstan

The Sovereign Wealth Fund of Kazakhstan “Samruk-Kazyna” is transferring a sizeable part of state enterprises to the market environment. Kazakh and foreign investors are invited to buy shares in 106 companies of the Fund, which is conducting this work according to the country’s plans for this so-called second wave of privatization.

The first wave of privatization was carried out by the country’s leadership in the 1990’s to help create a market economy. The challenge of the current wave of privatization is defined as strengthening the foundations of the market economy. The key idea of this campaign is to give impetus to further development of private business in the country.

At present “Samruk –Kazyna” JSC is transferring companies to the private sector that had been created earlier as part of government initiatives to diversify the economy and develop new industries.

The Fund has worked on the privatization plan under the instruction of the government for a number of objective reasons: lack of experience and financial capabilities among representatives of the Kazakh business community, lack of strategic partners to work and lack of funding on reasonable terms in the absence of state guarantees, etc. Now the country’s leadership intends to sell these enterprises to the private sector, which is ready to develop these companies in the future.

The sale of assets by “Samruk- Kazyna” JSC to the private sector started with an earlier phase, but that time it was the sale of the Fund’s non-core assets and properties. By the end of 2013, 482 out of 713 such assets and facilities had been divested from the structure of the Fund. This includes 405 assets sold to the private sector.

Now the sale will include core assets which are subsidiaries of the national economy such as oil and gas company “KazMunayGas”, the operator of the railway company “Kazakhstan Temir Zholy”, a world leader in uranium production “Kazatomprom” and others. International companies will also have the opportunity to acquire some companies of “Samruk-Kazyna” JSC without restrictions for strategic or socially significant reasons. The list of assets sold in the competitive environment comprises structures in which the Fund intends to sell up to 100% ownership. Legally, restrictions on the sale of large stakes in international companies are not available. The exceptions are strategic assets, decisions on which are taken in consultation with the Commission on Strategic Targets under the Government of the Republic of Kazakhstan.

Moreover, “Samruk-Kazyna“ is considering the possibility of selling a part of some enterprises to transnational corporations (TNCs).

The feasibility of this step is dictated by future opportunities, such as the transfer of new technologies, the development of the industrial base or the extension of the diversity of export production. The TNCs are normally referred to developed and competitive companies, major institutions, with production facilities in different countries.

Local companies that have established contacts with TNCs become participants in developed know-how and learn to work in international markets in a competitive environment.

The book value of the assets of “Samruk-Kazyna” JSC at the end of 2013 was estimated at about US$93 billion. The assets of the traded companies are about 10% of this amount. The Fund’s management has already stated that the sales of the companies are subject to three key principles: transparency, legality and economic feasibility.

Financial Director and Board Member Nurlan Rakhmetov explained the meaning of these principles:

“First of all is transparency. The newest types of information technologies are used to ensure transparency of procedures for the sale of assets and property. It is planned that the asset sale may be conducted on the electronic site of the Ministry of Finance. Legal principles require that the sale of assets and property must fulfill appropriate due diligence requirements and be free of encumbrances or claims from third parties. In compliance with the requirements of current legislation, proposals for the sale of assets will be submitted to those who might have pre-emptive rights, where there is a second owner or shareholder. In case of refusal of those rights, the asset or facility will be put up for auction and sold to the successful bidder determined in course of bidding that complies in with all rules. The words ‘following the principle economic feasibility’ are self-explanatory. The Fund will sell assets at fair market value, trying to get maximum profit. If any assets do not find demand, the Fund will take further decisions on the disposition of that property.” At present, the Fund is engaged in active outreach on the issue of sale of its facilities, regularly publishing information on the sales charts. The plans include holding regular public meetings with potential investors and purchasers.

“SAMRUK-KAZYNA” JSC IS THE SOVEREIGN WEALTH FUND OF KAZAKHSTAN

• Almost 600 companies

• US$93 billion of assets

• Annual revenues of about US$33 billion

• EBITDA margin of 21.3%

• More than 360,000 employees

INDUSTRIAL DIVERSIFICATION IS EXTENSIVE WITH SUBSIDIARIES GROUPED INTO THE FOLLOWING SEGMENTS:

Oil & Gas; Mining and industrial; Transportation; Telecommunication; Power; Financial and development institutes

“SAMRUK-KAZYNA“ IS CURRENTLY EXECUTING 163 PROJECTS WITH AN INVESTMENT OF $146 BILLION USD AND INTENDS TO INCREASE ITS INVESTMENT PORTFOLIO IN UPCOMING YEARS.

Some of the projects are managed by “Samruk- Kazyna” in collaboration with number of global corporations, such as: Total, Areva, BAE Systems, Chevron, General Electric, CITIC Group and others. The Fund intends to expand the geography and list of alliances in the near future. “Samruk-Kazyna” invites investors to Kazakhstan for mutually beneficial collaboration.

CONTACT INFORMATION

Samruk Kazyna Headquarters:

8, Block B, Kunaeva street,

Astana city 010000, Republic of Kazakhstan

Tel: +7(7172)554-100

Fax: +7(7172)554-000

www.sk.kz

Institutional Investor Sponsored Statement •  September 2014

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