1. 2. 3. 4. 5. 6. Letter from the Chairperson Financial statements Profit and loss Corporate Corporate Consolidated of the Management Board analysis analysis governance responsibility financial statements

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Annual report for 2009 with participation of the Symphony Orchestra FINANCIAL SYMPHONY of the State Academic Opera and Ballet Theatre named after Abai 1. 2. 3. 4. 5. 6. Letter from the Chairperson Financial statements Profit and loss Corporate Corporate Consolidated of the Management Board analysis analysis governance responsibility financial statements

FINANCIAL SYMPHONY 1. Letter from the Chairperson of the Management Board Annual report, 2009

LETTER FROM THE CHAIRPERSON OF THE MANAGEMENT BOARD

Dear shareholders, clients and partners,

The global economic crisis continued to impact on Kazakh financial stability and economic development in 2009. The last year has been very difficult for the banking sector: both financial institutions and the country were downgraded by ratings agencies; economic growth slowed down; three Kazakh banks announced debt restructuring; and the national currency was devalued.

Nevertheless, we believe that year 2009 brought invaluable positive signs and became a peculiar stress-test for all financial market players. Kazakh banks were able to withstand the crisis and evolve as qualitatively new institutions.

Government efforts to support the economy were welcomed by the banks and their corporate and individual clients. Kazkommertsbank participated in the majority of the government programs, including bank recapitalization, refinancing of corporate clients and mortgage loans, and providing support to the construction sector. Kazkommertsbank received KZT 184 billion under the government stabilization package in 2009. FINANCIAL SYMPHONY 1. Letter from the Chairperson of the Management Board Annual report, 2009

The Bank's results in 2009 The Bank continued to optimize its required control and risk minimization to competently address ongoing market operating expenses, a stabilizing factor. The measures. We have significantly developed fluctuations. By 2009 the Kazakh banking system had Bank reduced its number of branches, our approach towards customer lending, The support and involvement of the Board changed; the priorities had shifted on the back decreased its administrative expenses, tightened requirements for new borrowers, of Directors has been a key factor in driving of the external and internal factors. Some introduced a recruitment freeze, and improved our risk monitoring system on our successful exit from the crisis. The Board Kazakh banks were not able to repay their implemented redundancies. Operating existing loans, and optimized loan collection of Directors worked closely with the external liabilities on time; other banks could expenses decreased by 10% and the cost-to- procedures. Management Board of the Bank and not take new lending risks. Amidst this income ratio decreased from 16.9% in 2008 to significant attention has been paid to uncertain environment Kazkommertsbank Liquidity. Between 2008 and 2009 the 12.2% in 2009. improving corporate governance in line with was able to remain stable and able to fulfill its Bank passed its peak of foreign redemptions global best practices. One of the steps in this goal of delivering operational changes. Total assets decreased to KZT 2,587.9 and in 2009 the external liabilities of the Bank direction was to increase the number of Despite a very negative backdrop the Bank billion at 31 December 2009. By that time decreased by US$3.6 billion. In 2010 to date, independent directors of the Bank (three finished the year with steady results, which Kazkommertsbank had become the market the foreign redemptions of the Bank stand at independent directors out of seven members reflected external realities. leader by total assets with a market share of around US$152 million. The Bank has repaid 20.4%. 58% of its total foreign debt outstanding as of the Board). I believe that the extensive The net income decreased by 5.7% to KZT Loans to customers in 2009 were flat and of YE2007. As such, the Bank has an experience and competency of the members 19.0 billion in 2009 as a result of increased opportunity to start accumulating funds for of the Board of Directors will provide a provisioning charges. Net interest income amounted to KZT 2,160.8 billion while loans to customers on a gross basis went 4,5% down future repayments in 2010. knowledgeable and stable backdrop in before provisions decreased by 3.2% to KZT supporting further development of the Bank. 193.2 billion. The negative impact of the crisis less Tenge devaluation effect. Equity. 2009 was marked by two events, on the Kazakh economy led to a deterioration Retail lending received timely support which were significant both for in the Bank's asset quality. Under these through the government's mortgage Kazkommertsbank and Kazakh banking sector * * * in general. In May, in accordance with the circumstances Kazakh banks created refinancing programs. Kazkommertsbank was Maintaining our existing client base government support program, the National additional provisions. The provisioning charges one of the main participants in the program, through our provision of ongoing support will Wealth Fund Samruk-Kazyna became a accordingly increased by 28.1% to KZT 193.1 and it refinanced mortgage loans for KZT 24 be an absolute priority in 2010. We plan to shareholder of the Bank by acquiring a stake billion in 2009. billion. The Bank's overall market share in retail continue improving our risk management of 21.2%. As a result of new share placement, loans was 12.1%. system, to control asset quality, further Net interest income before provisions for the capital of the Bank increased by US$ 296 The domestic deposit market became one optimize our branch network and control the impairment losses decreased by 3.2% to KZT billion thanks to the participation of the GDR of the Bank's most important funding Bank's liquidity. I believe that our objectives 193.2 billion for the year ended 31 December holders, the European Bank for Recon- sources. Kazkommertsbank increased and plans will allow us to continue to 2009 caused by the decrease in the average struction and Development and the National customer accounts (excluding funds under successfully withstand any further instability yield on interest-earning assets compared to Wealth Fund Samruk-Kazyna. the smaller decrease in average cost of the government stabilization package) by and exit the crisis as a new and strong The other important event which, in our interest-bearing liabilities. Net interest margin 16.6% to KZT 1,100.9 billion in 2009. Market institution. We look forward to the future with view demonstrates shareholder confidence in before provisions for impairment losses in share in total deposits remained flat at optimism as a time to exploit new the Bank, took place in December. Alnair 2009 was 7.8% compared to 8.0% in 2008. 20.3%. Corporate deposits (excluding funds opportunities. I would like to extend my under the government stabilization package) Capital Holding, one of the major shareholders gratitude to my colleagues for their Operating income increased by 15.7% to increased by 13.6%, while retail deposits in the Bank, increased its stake in professionalism, diligence and team spirit, and KZT 58.9 billion. This increase was primarily increased by 24.2%, thereby demonstrating a Kazkommertsbank to 28.6%. The additional thank our shareholders, clients and partners caused by an income from the purchase of high level of confidence in Kazkommerts- share purchase did not affect the stakes of for their cooperation and confidence. We wish own debt securities and a gain from bank. A significant achievement during the other major shareholders. them all well in 2010. operations with financial assets. There was a last year has been to decrease our loans-to- The transaction was recieved warmly by slight change in the structure of net fee and deposits ratio from 219% in 2008 to 169% in the financial community. commission income. There was an increase in Nina ZHUSSUPOVA 2009. the share of income from banking cards Corporate governance. The current Chairperson services and the share of pension asset Asset quality. Macroeconomic downturn, environment requires responsible and of the Management Board management fees in the structure of fees and limited access to financing and worsened measured management decisions, efficient commissions income. financial circumstances for borrowers have use of competitive advantages and the ability

4 Contents 5 1. 2. 3. 4. 5. 6. Letter from the Chairperson Financial statements Profit and loss Corporate Corporate Consolidated of the Management Board analysis analysis governance responsibility financial statements

FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

FINANCIAL STATEMENTS ANALYSIS

The banking system of Kazakhstan significantly changed in 2009. For Kazkommertsbank, 2009 was a busy year with the Bank actively participating in the stabilization programmes of the Kazakh government and successfully reduced liabilities. The Bank was named The Best Bank in Kazakhstan by Global Finance magazine and The Most Transparent Bank in Kazakhstan by Standard & Poor's.

The Bank is a leader in the banking sector by assets with a market share of 20.4%, and one of the leading banks by loans – 23.3%, and deposits – 20.4% (according to FMSA). FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

THE ANALYSIS OF THE CONSOLIDATED FINANCIAL Loans to customers continued to make up December 2009 compared to 3.5% as at 31 the largest share of the Group's assets: 83.5% December 2008. STATEMENTS OF THE GROUP as at 31 December 2009 compared to 82.0% as at 31 December 2008.

Due to the decrease in short-term deposits LOANS TO CUSTOMERS with other banks and transfer of the Group's free funds to liquid securities, the share of ASSETS domestic currency in February 2009. Net of The most important objectives for the Bank loans and advances to banks and other devaluation effect, in real terms the Group's during 2009 were to retain existing reliable assets decreased by KZT 426.2 billion (US$ financial institutions as at 31 December 2009 The consolidated assets of the Group customer base rather than growth of the loan 2,871 million), or by 14.1% compared to 2008. decreased to 5.7% compared to 9.2% as at 31 amounted to KZT 2,588 billion (US$ 17,431 portfolio, provide the customers with The decrease was mainly due to a decrease in December 2008. And the share of investments million) as at 31 December 2009, as compared financing, continue the financing of loans to customers and loans and advances to portfolio increased to 5.2% as at 31 December to KZT 2,615 billion (US$ 21,648 million) as at construction projects and search for flexible banks and other financial institutions. 2009 from 3.0% as at 31 December 2008. The 31 December 2008. The assets of the Group solutions to borrowers' problems whilst free funds were invested in the highly liquid decreased by KZT 26.9 billion (US$ 4,216 protecting the interests of the Bank and its There were no significant changes in the assets – short-term notes of the National million), in nominal terms. The main reason depositors. As a result, the gross loan portfolio structure of the Group's assets in 2009. Bank of the Republic of Kazakhstan. for the decrease was the devaluation of (including documentary operations, in real terms, net of devaluation) decreased by KZT The share of precious metals and funds 163.6 billion (US$ 1,102 million) or 5.5% in As at 31 December 2009 As at 31 December 2008 with national (central) banks did not change 2009. 0.9% significantly and amounted to 3.6% as at 31 1.3% 0.7% 1.4% 3.6% 3.5% The structure of the loan portfolio 5.7% 9.2% 5.2% 31 December 2009 31 December 2008 Change, net of devaluation 3.0% KZTm US$m KZTm US$m KZTm US$m % Loans to customers Loans to customers 2,665,426 17,954 2,399,693 19,866 (90,279) (608) (3.3)% Loans under repurchase agreements 889 6 34,417 285 (35,911) (242) (97.6)% Loans to customers (gross) 2,666,315 17,960 2,434,110 20,151 (126,190) (850) (4.5)% Less allowance f or impairment losses 505,548 3,405 289,328 2,395 180,913 1,218 55.7% Loans to customers 2,160,767 14,555 2,144,782 17,756 (307,103) (2,068) (12.4)%

Contingent liabilities 83.5% 82.0% Guarantees 122,096 822 109,550 907 546 3 0.4% Letters of credit 8,391 57 37,570 311 (37,907) (255) (81.9)% Total guarantees and letters of 130,487 879 147,120 1,218 (37,361) (252) (22.3)% Loans to customers credit, gross Less allowance f or impairment losses Investments portfolio 7,217 49 6,271 52 (178) (1) (2.4)% on contingent liabilities Loans and advances to banks and other financial institutions Contingent liabilities, net 123,270 830 140,849 1,166 (37,183) (251) (23.2)% Cash, accounts with National Banks, precious metals

Property, equipment and intangible assets Total loan portfolio (gross) 2,796,802 18,839 2,581,230 21,369 (163,551) (1,102) (5.5)% Other assets Less allowances for impairment * Investments portfolio includes: financial assets at fair value through profit or loss, investments available-for-sale, losses on loans and contingent 512,765 3,454 295,599 2,447 180,735 1,217 54.4% investments held to maturity, investments in associates and goodwill. liabilities Total loan portfolio (net) 2,284,037 15,385 2,285,631 18,922 (344,286) (2,319) (13.1)%

8 Contents 9 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

The volume of the loan portfolio (gross) In order to withstand the financial crisis and cards as well as lending to private the government stabilization programmes for decreased in real terms, net of devaluation, by provide for stability of the Bank, a key Bank entrepreneurs through the small businesses the benefit of its corporate and retail KZT 126.2 billion (US$ 850 million) or by 4.5% priority was to work with the existing customer support programme. customers, who receive improved financing during 2009 and amounted to KZT 2,666 billion base and improve asset quality. The Bank terms as a result. (US$ 17,960 million) as at 31 December 2009 continues to improve the risk management The Bank continued to participate in the compared to KZT 2,434 billion (US$ 20,151 system, and focus on the problem loans on a stabilization programme of the Government of The share of corporate loans in the total million) as at 31 December 2008. The decline case-by-case basis. The Bank will also continue Kazakhstan in 2009, and through financing loans to customers amounted to 86.7% as at 31 was due to planned and early loan repayments to cooperate with customers to improve their and refinancing programmes of the National December 2009 and 83.7% as at 31 December by customers. The early loan repayments were businesses and help them to repay the loans. Wealth Fund Samruk-Kazyna, the Distressed 2008. The share of retail loans was 13.3% and mainly due to foreclosure of Eurobonds, issued The Bank continues to accrue provisions Assets Fund and the Damu Entrepreneurship 16.3%, respectively. by the Bank's subsidiary Kazkommerts adequate to cover the impairment losses on Development Fund. The Bank participates in International B.V., earlier accepted as collateral, loans to customers. As a result, the volume of for loans to customers backed by this collateral accrued provisions amounted to KZT 505.5 and consequent cancellation of these billion (US$ 3,405 million) as at 31 December Eurobonds. The total volume of repaid loans 2009 compared to KZT 289.3 million (US$ 31 December 2009 31 December 2008 Change, net of devaluation amounted to US$ 1,089 million in principal and 2,395 million) as at 31 December 2008. The KZTm US$m KZTm US$m KZTm US$m % US$ 28 million in interest. provisions grew by KZT 180.9 billion or US$ 1,218 million (55.7%, in real terms, net of Loans to corporate clients 2,312,599 15,577 2,036,855 16,862 (28,320) (191) (1.2)% The gross volume of documentary devaluation). The provisioning rate increased to Loans to retail clients 353,716 2,383 397,255 3,289 (97,870) (659) (21.7)% operations (in real terms, net of devaluation) 19.0% as at 31 December 2009 compared to Total loans to customers, gross 2,666,315 17,960 2,434,110 20,151 (126,190) (850) (4.5)% decreased by KZT 37.4 billion (US$ 252 11.9% as at 31 December 2008. The provisions Less allowance f or impairment losses 505,548 3,405 289,328 2,395 180,913 1,218 55.7% million) or by 22.3% and amounted to KZT for impairment losses on guarantees and Total loans to customers, net 2,160,767 14,555 2,144,782 17,756 (307,103) (2,068) (12.4)% 130.5 billion (US$ 879 million) as at 31 contingent liabilities amounted to KZT 7.2 December 2009 compared to KZT 147.1 billion billion as at 31 December 2009 compared to (US$ 1,218 million) as at 31 December 2008. KZT 6.3 billion as at 31 December 2008. Despite The decrease in the volume of documentary the growth in nominal terms, in real terms, net The share of gross retail loans in total loans its new mortgages granting policy, it also operations was mainly due to the closure of of devaluation, the volume of provisions to customers decreased by 3% during 2009 participated in the mortgage restructuring, letters of credit denominated in foreign decreased by KZT 0.2 billion or 2.4%. due to the decrease in these loans (in real financing and refinancing programme, and currency by KZT 37.9 billion (US$ 255 million) terms, net of devaluation) by 21.7% or by KZT the share of mortgages and consumer loans or by 81.9%. Letters of credit denominated in Loans to customers amounted to KZT 2,161 97.9 billion (US$ 659 million). The decrease in within retail loans increased by 3.6%, while Tenge make up only 3.2% of total volume of billion (US$ 14,555 million) as at 31 December the share and in the volume can be explained the shares of other types of lending letters of credit. 2009 compared to KZT 2,145 billion (US$ by the toughened potential borrower appraisal decreased. As a result of tougher credit policy 17,756 million) as at 31 December 2008. The policy. However, the Bank was actively and an increase in mortgages, the share of The volume of guarantees issued by the decrease in real terms, net of devaluation, participating in the government's mortgage consumer loans also decreased. Group did not change significantly, and its real amounted to KZT 307.1 billion (US$ 2,068 refinancing programme. The gross retail loans growth, net of devaluation, amounted to only million) or 12.4%. amounted to KZT 353.7 billion (US$ 2,383 Gross corporate loans decreased 0.4% (KZT 0.5 billion of US$ 3 million) during million) as at 31 December 2009 compared to insignificantly during 2009, net of 2009. However, the currency structure of the The Bank provides services to large and KZT 397.3 billion (US$ 3,289 million) as at 31 devaluation, by 1.2% (KZT 28.3 billion or US$ guarantees changed significantly. In medium industrial Kazakh enterprises and December 2008. 191 million) and amounted to KZT 2,313 billion December 2008 the KZT guarantees transnational companies working in (US$ 15,577 million) as at 31 December 2009, constituted 52.6% of total guarantees. Kazakhstan in several sectors: trade financing, Within the retail loans, the major share is compared to KZT 2,037 billion (US$ 16,862 Foreign currency guarantees were 47.4%. As project financing, short-term lending and made up of mortgages and consumer loans – million) as at 31 December 2008. Despite the at 31 December 2009 KZT guarantees' share lending to small and medium enterprises. 88.6% as at 31 December 2009 (66.8% and decrease in the volume, the share of corporate increased to 63.2% and foreign currency 21.8%, respectively), compared to 85.0% as loans within the total gross loans increased to guarantees increased to 36.8%. The Bank also works with individuals, at 31 December 2008 (56.3% and 28.7%, 86.7% due to a faster decrease in the share of providing consumer lending, mortgages, credit respectively). Although the Bank toughened retail loans to 13.3%.

10 Contents 11 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

The structure of the loan portfolio by sectors: the economy, the wholesale and retail trade increased by 8.3% or KZT 1.8 billion or US$ 12 sector is still subject to high risk. million and medicine increased by 8.3% or KZT As at 31 December 2009 As at 31 December 2008 0.5 billion US$ 3 million. The increases are in The Bank believes it would be reasonable to real terms, net of devaluation. avoid the concentration of risk in any one industry and has therefore diversified its The decrease in the total loan portfolio was 15.0% 18.2% lending. a result of less exposure to the following 22.6% 25.6% industries (in real terms, net of devaluation): During 2009 the Bank increased exposure investments and finance – by 20.4% or KZT to hotel and restaurant businesses (by 15.6% 33.3 billion (US$ 224 million), energy – by or KZT 27.4 billion or US$ 184 million), 34.0% or KZT 31.3 billion (US$ 211 million), 5.4% manufacturing of other non-metallic mineral agriculture – by 52.3% or KZT 28.2 billion 4.8% products increased by 13.2% or KZT 14.7 billion (US$ 190 million) and machinery construction 26.9% or US$ 99 million, mining and metallurgy – by 30.2% or KZT 15.9 billion (US$ 107 5.6% increased by 17.1% or KZT 2.5 billion or US$ 17 million). 28.4% 6.8% million, production of construction material

8.8% 7.1% 15.7% 9.1% The changes in the currency structure of gross loan portfolio, net of devaluation

Trade 31 December 31 December Change in 2009 Change in 2009

Residential and commercial construction 2009 2008 Nominal Net of devaluation Real estate KZTm KZTm KZTm KZTm % Hotel business Investments and finance Loans to customers, gross 2,666,315 2,434,110 232,205 (126,190) (4.5%) Production of other non-metallic mineral products KZT 958,195 859,575 98,620 98,620 11.5% Other US$ 1,647,753 1,488,529 159,224 (181,761) (9.9%) The largest share within the corporate loan state programmes, and continues to finance Euro 14,847 12,986 1,861 (1,473) (9.0%) portfolio was made up by gross loans to the residential construction. Russian ruble 44,377 71,916 (27,539) (41,362) (48.2%) residential (16.8%) and commercial construction (10.1%), to real estate operations Government's support to residential Other* 1,143 1,104 39 (214) (15.8%) (15.7%), trade (15.0%) and hotel and construction completion of certain restaurant business (8.8%). The aggregate construction projects led to an increase in * the changes in other currencies were calculated based on the US$ exchange rate changes share of these sectors within the corporate loans to real-estate (in real terms, net of loan book amounted to 66.4%. devaluation) by 72.7% or KZT 153.2 billion The volume of US$ loans (in real terms, net of devaluation), decreased by 9.9%, while the (US$ 1,032 million). volume of KZT loans increased by 11.5%. This was a result of mortgage refinancing from the The volume of loans to construction, both funds of the National Wealth Fund Samruk-Kazyna during 2009, as the loans denominated in residential and commercial, (in real terms, net The loans to wholesale and retail trade foreign currencies were transferred to KZT. of devaluation) decreased by KZT 51.3 billion decreased (in real terms, net of (US$ 345 million) or 7.6% and amounted to devaluation) by 16.7% or by KZT 69.5 billion KZT 620.9 billion (US$ 4,183 million) as at 31 (US$ 468 million) and amounted to KZT December 2009, compared to KZT 579.2 370.6 billion (USD 3,068 million) as at the 31 billion (US$ 4,795 million) as at 31 December December of 2008 and decreased to KZT 2008. 347.3 billion (US$ 2,339 million) as at 31 December 2009. Despite the higher The Bank is a participant and a partner of turnover and profitability in trading the government in the implementation of enterprises compared to other sectors of

12 Contents 13 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

Net loan portfolio currency breakdown Loan portfolio breakdown by maturities The structure of the loan portfolio by the type of collateral:

2007 2007 37.6 % 57.9 % 4.5 % 30.9 % 37.3 % 26.5 % 5.3 % As at 31 December 2009 As at 31 December 2008 3.02% 1.53% 7.84% 0.04% 1.04% 2.72% 2.58% 2008 33.8 % 62.5 % 3.7 % 2008 26.2 % 42.1 % 28.3 % 3.4 % 3.76% 3.21% 7.82% 41.28% 2009 35.8 % 61.9 % 2.3 % 2009 22.9 % 45.8 % 30.3 % 1.0 %

14.26%

KZT US$ Other More than 5 years 1-5 years 1-12 months Up to 1 month 12.08% 1.43% The major trend during recent years has amounted to 1.0% and 30.3%, compared to 53.75% been towards longer loan terms, in accordance 3.4% and 28.3% as of 31 December 2008. 8.85% with the clients demand. As at 31 December 10.28% 2009 the share of loans (net, excluding The loans granted to customers are 8.20% 5.43% 10.88% accrued interest) maturing in more than one backed by real estate, guarantees, year amounted to 68.7%, an insignificant inventories, equipment, state securities, Real estate Uncollateralised loans change from 68.3% as at 31 December 2008. shares and deposits. The value of collateral is Shares Various guarantees This shows the increase in demand for longer- assessed very conservatively, with the Equipment Company guarantees term loans, granted by the Bank from its own involvement of independent experts when Debit accounts Cash and government guarantees funds, in the framework of credit lines of needed. As at 31 December 2009 the share of Merchandise Other EBRD, international financial organizations, uncollateralized gross loans decreased to and the Government of the Republic of 3.1% compared to 4.5% as at 31 December Kazakhstan. 2008. The majority of uncollateralized loans The credit risk of the Bank is concentrated are made up of short term loans granted to on the loan book, letters of credit and The share of short-term loans up to 1 reliable borrowers. guarantees. During 2009, the Bank Provisioning rate month, 1-12 months as at 31 December 2009 increased its allowance for impairment losses on the loan portfolio, increasing the 20% provisions by KZT 180.9 billion or US$ 1,218 19.00% 31 December 2009 31 December 2008 million or 55.7% (in real terms, net of 15% devaluation). The volume of provisions KZTm % KZTm % 11.90% reached KZT 505.5 billion (US$ 3,405 10% Collateralised loans 2,521,413 94.6 2,234,461 91.8 million), and the effective provisioning rate increased to 19.0% as at 31 December 2009 5% 5.60% Loans with collateral under the 61,282 2.3 89,902 3.7 compared to 11.9% as at 31 December 2008. registration process 2007 2008 2009 The increase in allowance was necessary as a 0% Provisions/Gross Loans (%) Uncollateralised loans 83,620 3.1 109,747 4.5 reaction to the increase in credit risk: overdue loans were KZT 115.7 billion (US$ Total 2,665,315 100.0 2,434,110 100.0 958 million) – 4.8% of total loans as at 31 December 2008, and increased to KZT 441.3 billion (US$ 2,972 million) – 16.5% of total loans as at 31 December 2009.

14 Contents 15 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

Asset quality has deteriorated since the Doubtful; Funds placed with other banks in real institutions, the major share is constituted by beginning of the financial crisis in 2007. The Loss. terms, net of devaluation, decreased by KZT foreign currency funds, as the Bank's liabilities poor macroeconomic conditions in the 149.3 billion (US$ 1,006 million) or by 50.2% are mostly denominated in foreign currency. beginning of 2009 negatively affected the The volume of Standard and Substandard during 2009. The decrease was mainly due to a As at 31 December 2009 the share of FX loans asset quality and this reflects the general loans amounted to KZT 954.9 billion (US$ decrease in deposits with leading foreign and advances to banks and other financial situation in the economy with many of the 6,432 million) as at 31 December 2009 banks placed in 2008 to protect the liquid institutions fell to 91.1%, KZT loans and Bank's corporate customers becoming compared to KZT 1,571 billion (US$ 13,008 assets. As a result of the decrease in loans and advances to banks – 8.9%, compared to distressed. The Bank is continuously working million) as at 31 December 2008. Their share advances with banks and other financial 98.1% and 1.9% as at 31 December 2008, on improving the quality of its loan portfolio. amounted to 35.8% compared to 64.5% in institutions, their share decreased to 5.7% as respectively. The loans granted by the Bank are categorized 2008. The share of problem loans in the loan at 31 December 2009 compared to 9.2% as at depending on the ability of the borrower to portfolio has increased since 2007 due to the 31 December 2008. The Bank places its funds with other banks meet the payments schedule. Financial deterioration of the borrowers' financial very conservatively, on short-term deposits circumstances are also considered, as well as circumstances. The volume of correspondent accounts in through previously approved limits. The funds relationships between the Bank and the real terms, net of devaluation, increased by were backed by the state securities and placed borrower, the credit history of the loan Although the volume of Standard and KZT 23.2 billion (US$ 156 million) or 98.0%, with leading foreign banks. collateral and the level of its credit rating Substandard loans decreased, they mostly from KZT 19.3 billion (US$ 159 million) as at 31 (listed below): were reclassified into Watch category, where December 2008 to KZT 46.8 billion (US$ 315 As at 31 December 2009, 96.0% of the the risk for the Bank is not yet critical. The million) as at 31 December 2009. loans and advances to banks and other Standard; share of Doubtful and Loss categories financial institutions, net of accrued interest Substandard; continues to grow and amounted to 27.0% in The volume of loans to other banks income, were placed with maturities up to 1 Watch; 2009. decreased (in real terms, net of devaluation) year, compared to 97.6% as at 31 December by KZT 22.6 billion (US$ 153 million) or 96.0%. 2008.

Collateral received under reverse loans and advances to banks and other financial institutions repurchase agreements as at 31 December investments portfolio 2009 was represented by notes issued by the 31 December 31 December Change during 2009 Ministries of Finance of Russian Federation The structure of investments portfolio Loan and advances to banks and other 2009 2008 Net of devaluation financial institutions and the Republic of Kazakhstan, Russian changed during 2009. The share of debt KZTm KZTm KZTm % banks and companies, executive bodies and securities increased to 64.4% from 57.7% as at 31 December 2008, while the share of Loans 939 19,284 (22,647) (96.0)% entities of the Russian Federation. The fair value of collateral amounted to KZT 11.8 billion derivatives decreased to 27.9% from 31.1%. In Deposits 89,737 203,501 (161,058) (64.2)% (US$ 80 million). addition, in early 2009 the Bank sold its stakes Correspondent accounts with other banks 46,828 19,262 23,183 98.0% in the Pension Fund «Ular Umit» and Pension Within the currency structure of the loans Assets Management Company «Zhetysu». Loans under reverse repurchase agreements 10,893 65 10,828 16,606.7% and advances to banks and other financial

Gross 148,397 242,112 (149,694) (50.2)% Less: allowance for impairment losses 22 299 (345) (94.0)% Net 148,375 241,813 (149,349) (50.2)%

16 Contents 17 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

As at 31 December Gegraphical breardown of financial The investments available-for-sale 2009 2008 Change, net of devaluation assets at fair value through profit or loss increased in real terms, net of devaluation, by KZT 1.0 billion (US$ 7 million) or by 6.3%. KZTm Share KZTm Share KZTm % as at 31 December 2009 These investments consist mainly of debt Financial assets at fair value through 114,203 85.1% 58,130 74.4% 50,782 80.1% profit or loss 34% securities, such as Treasury Notes of the Ministry of Finance of the Republic of - debt securities 74,125 55.2% 32,537 41.7% 39,932 116.8% Kazakhstan and securities issued by large - shares 2,638 2.0% 1,276 1.6% 1,126 74.4% Kazakh issuers. - derivatives 37,440 27.9% 24,317 31.1% 9,724 35.1% 61% Investment available-for-sale 16,696 12.4% 15,056 19.2% 988 6.3% 5% The investments held to maturity increased Kazakhstan in real terms, net of devaluation, by 15.5% or - debt securities 11,444 8.5% 11,755 15.0% (311) (2.6)% CIS OECD countries KZT 127 million, due to the purchase of Halyk - shares 5,252 3.9% 3,301 4.2% 1,299 32.9% Bank's Eurobonds for a total amount of KZT Investments held to maturity 943 0.7% 776 1.0% 127 15.5% 337 million. KZT 174 million notes issued by the

- debt securities 943 0.7% 776 1.0% 127 15.5% National Bank of Kyrgyzstan matured during As a result of investments in the securities 2009. Investments in associates - 0.0% 1,775 2.3% (1,775) (100.0)% mentioned above, the currency structure of

Goodwill 2,405 1.8% 2,405 3.1% - - financial assets held at fair value through profit or loss also changed significantly. The Cash and balances INVESTMENTS PORTFOLIO 134,247 100.0% 78,142 100.0% 50,122 59.6% share of assets in KZT increased from 60.7% with national (central) banks as at 31 December 2008 to 80.0% as at 31 The volume of financial assets held at fair terms, net of devaluation, by KZT 46.2 billion December 2009, and the share of FX assets and precious metals value through profit or loss increased during (US$ 311 million) or by 9 times and amounted decreased during 2009 to 20.0% compared to 2009 to KZT 114.2 billion (US$ 769 million) to KZT 51.8 billion (US$ 349 million) as at 31 39.3% as at 31 December 2008. The share of cash and balances with from KZT 58.1 billion (US$ 481 million) as at 31 December 2009. national (central) banks and precious metals in December 2008, an increase (in real terms, As at 31 December 2009, the fair value of the Group's assets did not change significantly net of devaluation) of KZT 50.8 billion (US$ As at 31 December 2009, financial assets assets arising from the derivative financial in 2009 and amounted to 3.6%. 342 million) or 80.1%. held at fair value through profit or loss instruments amounted to KZT 37.4 billion (US$ represented mostly by state securities and 252 million), compared to KZT 24.3 billion Cash and accounts with national (central) Funds coming from new depositors and Kazakh issuers, with their share amounting to (US$ 201 million) as at 31 December 2008, banks as at 31 December 2009 amounted to loan portfolio amortisation is accumulated by 61%. Major issuers include: National Bank of mainly due to the increase in their fair value. KZT 90.5 billion (US$ 610 million), a decrease the Bank in highly liquid assets. The major the Republic of Kazakhstan, Ministry of (in real terms, net of devaluation) of KZT 11.3 increase during 2009 was in the short-term Finance of the Republic of Kazakhstan, JSC In nominal terms the increase was at KZT billion (US$ 76 million) or by 11.1%. This was notes of the National Bank of Kazakhstan «Kazakhtelecom», JSC «Kazexportastyk». The 13.1 billion (US$ 51 million) net of devaluation. due to a decrease in the funds placed with the (denominated in domestic currency), fact that these entities are guarantors on The derivatives increased by KZT 9.7 billion National Bank as minimum reserve considered by the Bank as a reliable these securities, significantly increases the (US$ 65 million) or 35.1%, mainly due to the requirements (MRR). As at 31 December 2009 investment. The short-term notes of the reliability of these financial assets. increase in their fair value. Due to a decrease in MRR amounted to KZT 35.5 billion (US$ 239 National Bank of Kazakhstan increased in real the effective portion of hedged instruments million) compared to KZT 49.9 billion (US$ 413 and cancellation of the cross-currency swap, million) as at 31 December 2008. The decrease the net fair value of derivative instruments in MRR was due to both a decrease in used for hedging decreased to KZT 11 million requirements and significant decrease in as at 31 December 2009, compared to KZT foreign liabilities of the Bank. The volume of 12.0 billion as at 31 December 2008. foreign financial liabilities decreased from US$ 9,928 million (KZT 1.2 billion) as at 31 The Bank uses derivative instruments to December 2008 to US$ 5,592 million (KZT 0.8 limit its currency and interest risks. billion) as at 31 December 2009. The MRR on

18 Contents 19 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

the Bank's domestic and foreign liabilities Currency breakdown of accounts LIABILITIES OF THE GROUP decreased from 2% and 3% in 2008 to 1.5% with National (Central) banks and 2.5% in 2009. in 2008 and 2009 Kazkommertsbank continued to repay its debt in accordance with payment schedules during the reported period, in compliance with all covenants without any restructuring or rolling-over. The share of cash in the «Cash and 31 December balances with national (central) banks» 2008 Funding base: marginally decreased and amounted to 38.7% 44.7 % 10.6 % 44.7 % as at 31 December 2009 compared to 39.7% as at 31 December 2008. As at 31 December 2009 As at 31 December 2008 31 December The structure of accounts with national 2009 (central) banks by currencies significantly 67.9 % 8.6 % 23.5 % 6.20% 9.50% 5.10% 3.70% changed during the reported period. 4.00% 12.90% 1.40% 6.00% As at 31 December 2009 KZT funds KZT US$ Other increased to 67.9% compared to 44.7% as at 31 December 2008, US$ funds' share 21.10% decreased to 8.6% compared to 10.6% and devaluation, during 2009 by KZT 1. 9 billion other currencies funds constituted 23.5% (US$ 13 million) or 5.2% as a result of versus 44.7% as at 31 December 2008. regular revaluation of the buildings and other real estate held on the consolidated 29.50% The significant increase of KZT funds is statement of financial position of the 42.50% partly a result of the increase in the share of Group. domestic liabilities, denominated in KZT, and 58.10% the decrease in foreign liabilities, denominated The value of buildings, facilities and land in foreign currencies. on the consolidated statement of financial position as at 31 December 2009 amounted to KZT 23.1 billion (US$ 156 million) Loans and advances from banks and other financial institutions Property, equipment and compared to KZT 13.6 billion (US$ 112 Customer accounts intangible assets million) as at 31 December 2008. The Debt securitites increase in 2009 was due to the completed Other borrowed funds Property, equipment and intangible assets construction of a new office in December Other liabilities as at 31 December 2009 amounted to KZT 34.0 2009. Subordinated debt billion (US$ 229 million), compared to KZT 35.5 billion (US$ 294 million) as at 31 December Intangible assets include software, 2008. patents and licenses, and amounted to KZT The Bank significantly decreased its increased to 58.1% from 42.5% as at 31 1.9 billion as at 31 December 2009 foreign debt during 2009. Total liabilities December 2008, as a result of a decrease in The property, equipment and intangible compared to KZT 1.8 billion as at 31 decreased in real terms, net of devaluation, by the share of debt securities from 29.5% to assets decreased in real terms, net of December 2008. KZT 514.5 billion (US$ 3,466 million) or 21.1%, as well as other debt repayment. The 19.0%, and amounted to KZT 2,198 billion share of loans and advances from banks and (US$ 14,807 million) as at 31 December 2009. other financial institutions and other borrowed funds decreased from 12.9% and Domestic sources of funding, such as 6.0%, respectively, in 2008 to 9.5% and customer deposits continue to constitute the 1.4%, in 2009. The share of subordinated debt major part of liabilities. The share of deposits on the contrary, marginally increased from

20 Contents 21 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

5.1% as at 31 December 2008 to 6.2% as at 31 Kazakhstan, the Bank attracts customers by F u n d S a m r u k - K a z y n a , t h e D a m u comprised of the Bank providing its own December 2009. offering reasonable terms and conditions Entrepreneurship Development Fund and the financial resources under the programme and long-term mutually beneficial Distressed Assets Fund as at 31 December based on co-financing terms in proportion of cooperation. 2009 held as deposits amounted to KZT 175.6 30/70 (KZT 1.56 billion out of the Bank's fund Customer accounts billion compared to KZT 35.1 billion as at 31 and KZT 3.64 billion out of the funds of the Customer accounts increased (in real December 2008. Their share within corporate Distressed Assets Fund). The Bank continues to follow its strategy: terms, net of devaluation) by KZT 173.7 billion deposits amounted to 18.5% compared to diversify its deposit base, and provide the (US$ 1,170 million) or 15.8% during 2009, and 4.9% in 2008. As at 31 December 2009 the The Bank finances completion of compatibility of products and services with amounted to KZT 1,276 billion (US$ 8,598 funds received from the National Wealth construction projects also from the funds of an acceptable level of risk. The Bank does not million) as at 31 December 2009, compared to F u n d S a m r u k - K a z y n a , t h e D a m u the Distressed Assets Fund. As at 31 December intend to increase its deposit base by KZT 979.5 billion (US$ 8,109 million) as at 31 Entrepreneurship Development Fund and the 2009 the funds under this programme totaled increasing deposit rates. Being one the most December 2008. The increase was in both Distressed Assets Fund amounted to KZT to KZT 20 billion. reliable and transparent banks in corporate and retail segments. 230.6 billion (US$ 1,554 million). KZT 175.6 billion (US$ 1,183 million) of these funds were Customer deposits reflected in customer deposits, KZT 19.1 billion (US$ 128 million) in other borrowed funds, KZT billion and KZT 36.0 billion (US$ 242 million) in share The structure of the Group's customer accounts: 327,6 capital. As at 31 December Change in 2009 263,8 2009 2008 Net of devaluation The Bank actively participated in the 309,7 KZTm Share, % KZTm Share, % KZTm % stabilization programme of the government of the Republic of Kazakhstan. The funds placed 948,8 Corporate deposits 948,842 74.3 715,682 73.1 139,879 17.3 with the Bank by the National Wealth Fund 585,4 715,7 - Demand deposits 269,572 21.1 132,305 13.5 128,589 91.2 Samruk-Kazyna in the form of deposits to fund mortgage refinancing amounted to KZT - Term deposits 679,270 53.2 583,377 59.6 11,290 1.7 24 billion. Further, KZT 84 billion was received 2007 2008 2009 Retail deposits 327,622 25.7 263,771 26.9 33,810 11.5 for the financing of the real sector of the economy. The funds placed with the Bank for Retail deposits Corporate deposits - Demand deposits 36,925 2.9 24,595 2.5 11,117 43.1 financing the completion of real estate in - Term deposits 290,697 22.8 239,176 24.4 22,693 8.5 Almaty and Astana amounted to KZT 34 billion as at 31 December 2009, and the major part of As a result of increased confidence of the Total deposits 1,276,464 100.0 979,453 100.0 173,689 15.8 these funds were received prior to 31 population in the Bank and the development - Demand deposits 306,497 24.0 156,900 16.0 139,706 83.8 December 2008. of different products, the retail deposits, net of devaluation effect, increased by 11.5% or - Term deposits 969,967 76.0 822,553 84.0 33,983 3.6 The financing of small entrepreneurs KZT 33.8 billion (US$ 228 million) from KZT working in the processing industry is provided 263.8 billion (US$ 2,184 million) in 2008 to under the General Agreement № 3-4 SP as of 9 KZT 327.6 billion (US$ 2,07 million) in 2009. October 2009 between the National Wealth The growth was primarily in the term deposits, Fund Samruk-Kazyna, the Distressed Assets which increased by 8.5% or KZT 22.7 billion The share of corporate deposits amounted KZT 139.9 billion (US$ 942 million) or 17.3%. Fund, the Damu Enterpreneurship (US$ 153 million). Simultaneously, the demand to 74.3% in 2009 compared to 73.1% in 2008. The increase was mainly due to an increase in Development Fund and the second-tier banks retail deposits increased by 43.1% or KZT 11.1 The volume of corporate deposits as at 31 the funds placed with the Bank in the on disposal of funds of the Distressed Assets billion (US$ 75 million). December 2009 amounted to KZT 948.8 framework of the government's stabilization Fund in the second-tier banks for further billion (US$ 6,391 million) compared to KZT programme by 5 fold, and an increase in crediting of entrepreneurs working in the The composition of the deposit base by 715.7 billion (US$ 5,925 million) in 2008, an demand deposits (by 83.8%). The total processing industry. The programme funds currency is described next page. increase (in real terms, net of devaluation) of volume of the funds of the National Wealth amount to KZT 5.2 billion in total. This is

22 Contents 23 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

increased inflow from these Funds. The The debt securities issued decreased by As of 31 December Change in 2009 majority of the government funds are 45.7% or KZT 389.8 billion (US$ 2,626 million) net of devaluation 2009 2008 reflected in the customer accounts. to KZT 463.7 billion (US$ 3,123 million) as at 31 effect December 2009, from KZT 678.3 billion (US$ Absolute The largest decrease in the liabilities was 5,615 million) as at 31 December 2008. KZTm % KZTm % change, % change due to the decrease of the debt securities KZTm issued, loans and advances from bank and The Group repaid the following Eurobonds Corporate deposits 948 842 74.3 715 682 73.1 139 879 17.3 other financial institutions as well as other according to the schedule: SGD 100 million - KZT 508 188 39.8 310 558 31.7 197 630 63.6 borrowed funds. Eurobond (US$ 70 million) in February 2009, - FX 440 654 34.5 405 124 41.4 (57 751) (11.6) JPY 25 billion Eurobond (US$273 million) in Retail deposits 327 622 25.7 263 771 26.9 33 810 11.5 The significant increase in corporate July 2009, US$ 500 million Eurobond in deposits by 15.8% or KZT 173.7 billion (US$ November 2009. The Eurobonds were issued - KZT 124 354 9.7 133 304 13.6 (8 950) (6.7) 1,170 million) was attributable to the funds by the special-purpose vehicle, Kazkommerts- - FX 203 268 15.9 130 467 13.3 42 760 26.6 received under the government stabilization bank International B.V. Total customer accounts 1 276 464 100.0 979 453 100.0 173 689 15.8 programmes from the National Wealth Fund - KZT 632 542 49.6 443 862 45.3 188 680 42.5 Samruk-Kazyna, the Distressed Assets Fund Cancellation of certain Eurobonds led to and the Damu Entrepreneurship Development the additional significant decrease in the debt - FX 643 922 50.4 535 591 54.7 (14 991) (2.3) Fund. securities by US$ 1,226 million (US$ 496 million, GBP 125 million, EUR 367 million). Deposits are an important source of by 11.6% or KZT 57.8 billion (US$ 389 million), The deposits in KZT in the currency funding for the Bank as it offers competitive while the FX retail deposits increased by structure of the deposits increased by 42.5% market terms on customer deposits. The Bank Loans and advances from 26.6% or KZT 42.8 billion (US$ 288 million). or KZT 188.7 billion (US$ 1,271 million). is a participant of the Kazakhstan Deposit banks and other financial However, their share in total deposits Insurance Fund. increased only slightly to 49.6% of total The share of retail deposits in total deposits institutions was 25.7% as at 31 December 2009, compared deposits in 2009 from 45.3% in 2008. The Deposits continue to be the major priority to 26.9% as at 31 December 2008. The slight growth was attributable to an increase in KZT both for corporate and retail business of the Loans and advances from banks and other decrease in the share of retail deposits can be corporate deposits (by 63.6%) due to an Bank. The Bank plans to continue its efforts in financial institutions was KZT 209.1 billion (US explained by the faster growth in corporate inflow of funds under the government maintaining an existing deposit base as well as 1,409 million) as at 31 December 2009 deposits. stabilization programmes from the National attracting new deposits and customers. compared to KZT 296.4 billion (US$ 2,454 Wealth Fund Samruk-Kazyna, the Damu million) as at 31 December 2008). Entrepreneurship Development and the The customer accounts (term and demand Distressed Assets Fund. deposits) remain a significant and importnant Debt securities In 2009 the loans and advances from banks element of total funding, showing an issued and other financial institutions decreased by Retail deposits in KZT decreased by 6.7% increase during the period. The share of KZT 150.8 billion (US$ 1,016 million or by due to the devaluation of the national customer accounts jumped to 58.1% as at 31 41.9%) in real terms, net of devaluation The year of 2009 was very difficult for the currency and the conversion of retail deposits December 2009 from 42.6% as at 31 effect, due to scheduled repayments of the global markets and the Kazakh banking from KZT to foreign currencies. December 2008 largely due to both on Group's liabilities. schedule and early redemption of other sector. Despite unfavourable conditions in The FX deposits saw a slight decrease (by liabilities of the Group. At the same time, in 2009, the Bank demonstrated good results 2.3%), and their share in total deposits also 2009 the Bank continued its active and timely repaid a significant portion of its decreased from 54.7% as at 31 December cooperation under the government external liabilities. 2008 to 50.4% as at 31 December 2009. The stabilization programme with the National outflow of FX corporate deposits was Wealth Fund Samruk-Kazyna, the Damu compensated by an inflow of FX retail Entrepreneurship Development Fund and the deposits. The FX corporate deposits decreased Distressed Assets Fund, which resulted in

24 Contents 25 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

Change in 2009 Change in 2009 31 December 2009 31 December 2008 31 December 2009 31 December 2008 (net of devaluation) (net of devaluation) Absolute Financing of Damu Enterpreneurship KZTm % KZTm % % change 19 059 61.1 2 716 2.0 16 343 601.7 change, Development Fund KZTm DPR programme 0 0.0 111 436 81.1 (136 963) (100.0) Correspondent accounts 2 934 1.4 14 653 5.0 (14 732) (83.4) Long-term loans from other organizations 12 113 38.9 23 172 16.9 (14 845) (55.1) Loans and advances from banks and financial 173 517 83.0 202 509 68.3 (73 448) (29.7) institutions Other borrowed funds 31 172 100.0 137 324 100.0 (135 465) (81.3) Syndicated loans 0 0.0 36 451 12.3 (44 801) (100.0)

EBRD loan 32 671 15.6 33 252 11.2 (8 225) (20.1) Loans under repurchase agreements 0 0.0 9 526 3.2 (9 605) (100.0) The funds received by the Bank from the medium business projects and provides new Loans and advances from banks 209 122 100.0 296 391 100.0 (150 814) (41.9) Damu Entrepreneurship Development Fund opportunities for the entrepreneurs to under the government stabilization strengthen their market positions and expand

programme increased to KZT 19.1 billion (US$ their businesses. 128 million) as at 31 December 2009. In 2009, loans and advances from banks Other borrowed and other financial institutions (excluding On 25 November 2008 the Government of Subordinated loan syndicated loans) decreased in real terms by funds Kazakhstan issued a Decree #1085 on joint KZT 73.4 billion or US$ 495 million, due to a actions of the Government of Kazakhstan, the The subordinated debt of the Bank decrease in securitized loans of The other borrowed funds decreased National Bank of Kazakhstan and the Financial increased by 15.9% to KZT 136.4 billion as at 31 Moskommertsbank by KZT 25.4 billion (US$ significantly, net of devaluation effect, during Management and Supervision Agency on December 2009 from KZT 117.7 billion. The 171.2 million) as well as a slight decrease in the 2009 by 81.3% or KZT 135.5 billion (US$ 912 stabilization of the economy and financial increase net of devaluation was 0.3% or KZT loans and deposits of some Western banks million) due to early termination of system in 2009-2010. 0.5 billion. and a decrease, net of devaluation, in securitization programme, which accounted securities sold under repurchase agreements for the largest proportion on this item. On 11 In line with the Decree on 14 February 2009 On 31 July and 3 August 2009, the Bank amounting to KZT 9.6 billion or US$ 65 June 2009 acting in its capacity as originator, Kazkommertsbank, the National Wealth Fund conducted two placements of 9% million. K a z k o m m e r t s b a n k r e q u e s t e d t h e S a m r u k - K a z y n a a n d t h e D a m u subordinated notes with maturity in 2019 for programme's controlling parties (Ambac Entrepreneurship Development Fund signed a total amount of KZT 0.965 billion. The notes Kazkommertsbank also acted as a clearing Assurance Corporation, MBIA Insurance General Agreement on disposal of funds in the were issued under the third issue of the first agent for the majority of the banks working in Corporation, Financial Guaranty Insurance second-tier banks for further crediting of notes programme of the Bank (the total Kazakhstan and holding LORO accounts in the Company, the Asian Development Bank and small and medium enterprises. Under the amount of the programme is KZT 30 billion). banks. LORO accounts decreased, net of WestLB) to terminate the programme. The agreement small and medium enterprises are The total amount of the third issue is KZT 10 devaluation, by KZT 14.7 billion (US$ 99 principal amount of $850.4 million was able to get loans from the Bank at a lower billion. The terms of the issue envisage multiple million). The loans from European Bank on redeemed by the SPC on 11 June 2009; $99.6 rates to finance their projects. placements of the notes within the next ten Reconstruction and Development decreased million had already been repaid on 16 March years. As at 31 December 2009 the total by KZT 8.2 billion (US$ 55 million). 2009. The loans under the General Agreement are amount of placed subordinated notes under provided to the small and medium enterprises the third issue of the first notes programme (according to the legislation) to be used in the was KZT 2.0 billion. economy of Kazakhstan to acquire new and modernization of the fixed assets, working On 1 December 2009 the Bank has repaid capital and refinancing of existing loans. 8% indexed notes for KZT 4.4 billion. These notes amounted to KZT 3.4 billion as at 31 The Bank's cooperation with the Damu December 2008. The issue was registered in Entrepreneurship Development Fund and the November 2002 for total amount of KZT 7.5 National Wealth Fund Samruk-Kazyna billion. The placement of the notes was supports the financing of the small and conducted during duration of the notes.

26 Contents 27 FINANCIAL SYMPHONY 2. Financial statements analysis Annual report, 2009

2009 2008 As at 31 December CAPITALIZATION OF THE GROUP (KZTm) (KZTm) 1 Normative capital :

The Group's capitalization Group as at 31 December 2009 was KZT 1,585 billion (up by Tier I capital: 4.6% compared to 2008). Share capital (common shares) 7 787 5 746

Share premium 195 006 152 684 as at 31 December Retained earnings 161 971 140 762 2009 2009 2008 2008 Current income 19 423 21 805 KZTm US$ thousand KZTm US$ thousand Minority interest (223) 278 Long-term liabilities 1,059,204 7,134,609 1,085,012 8,982,631 Goodwill (2 405) (2 405) Subordinated debt 136,411 918,840 117,724 974,617 2 Total liabilities 1,195,615 8,053,449 1,202,736 9,957,248 Innovative instruments 14 085 11 965 Equity Total tier I capital 395 644 330 835

Common shares 7,787 52,452 5,746 47,570 Fixed assets revaluation funds 3 5 040 5 905 Preference shares 1,244 8,379 1,244 10,299 Share capital (preference shares) 1 244 1 244 Share capital 9,031 60,831 6,990 57,869 Subordinated loan 4 Share premium 195,006 1,313,526 152,684 1,264,045 97 871 95 005 Fixed assets revaluation reserves 4,935 33,241 6,918 57,273 Total tier II capital 104 155 102 154 Other reserves 180,839 1,218,099 146,992 1,216,922 Total capital 499 799 432 989

Total equity 389,811 2,625,697 313,584 2,596,109 Tier 1 capital adequacy ratio 15.94% 13.53% Total capitalization 1,585,426 10,679,146 1,516,320 12,553,357 Total capital adequacy ratio 20.14% 17.70%

1. Based on the Basel Agreement. In the first half of 2009, the Bank registered and 9,704,658 common shares. Other minorities 2. The calculations of the capital adequacy as at 31 authorized for placement 325,000,000 common acquired 1,618,690 common shares. December 2009, 2008 and 2007 include Share capital and reserves shares with a nominal value of KZT 10 per common subordinated loan in amount not exceeding 50% share for a total amount of KZT 3,250 million. On 14 The increase in equity in 2009 was attributable to of the tier 1 capital. In case of bankruptcy or 20.14% May 2009 the Bank completed placement of an increase in other reserves. Thus, the funds created liquidation of the Bank this liability will be repaid 204,338,177 common shares. As a result of the through the net profit increased by 12% or KZT 19.5 after the Bank will fulfill its obligations to all other placement, the share capital of the Bank increased by billion, and hedging reserves increased by 91.3% or creditors. 17.70% KZT 44.47 billion. The common shares were placed at KZT 9.8 billion. Simultaneously, the investment 3. Innovative instruments include perpetual notes. 15.15% 4. The fixed assets revaluation funds include 55% US$ 1.45 per common share and US$ 2.90 per GDR revaluation reserves increased by 94.2% or KZT 4.6 389 811 (the basis asset of which are two common shares). billion. of reserve capital/deficit on revaluation of securities available-for-sale (according to the Basel Agreement). The National Wealth Fund Samruk-Kazyna The Bank's capital calculated based on the Basel 313 584 acquired 165,517,241 common shares. At the same Agreement, increased by 15.4% (KZT 66.8 billion) 306 667 time, the major shareholders of the Bank did not KZT 499.8 billion as at 31 December 2009 (including participate in the new share placement. The Tier 1 capital of KZT 395.6 billion) from KZT 433 European Bank for Reconstruction and Development billion as at 31 December 2008 (including Tier 1 (EBRD), which is a shareholder of the Bank since capital of KZT 330.8 billion). As at 31 December 2009 2003, has fully exercised its pre-emptive rights and tier 1 and total capital adequacy ratios calculated on Share capital attributable to acquired 27,497,588 common shares of the Bank. the Basel Agreement were 15.9% and 20.1%, the shareholders of the parent The GDR holders also exercised their pre-emptive respectively (31 December 2008: 13.5% and 17.7%, rights via the Bank of New York Mellon and acquired respectively). Capital adequacy 2007 2008 2009

28 Contents 29 1. 2. 3. 4. 5. 6. Letter from the Chairperson Financial statements Profit and loss Corporate Corporate Consolidated of the Management Board analysis analysis governance responsibility financial statements

FINANCIAL SYMPHONY 3. Profit and loss analysis Annual report, 2009

NET PROFIT OF THE GROUP

Operating profit before income tax and non-controlling interest was KZT 31.8 billion for the year ended 31 December 2009 compared to KZT 11.5 billion for 2008 (up by 177.0%). In 2009 income tax expense amounted to KZT 12.8 billion compared to income tax benefit of KZT 8.7 billion in 2008. Net profit after income tax and before non-controlling interest was 5.7% lower in 2009 compared to 2008 at KZT 19 billion versus KZT 20.2 billion. The reduction in net profit for 2009 compared to 2008 was attributable to an increase in corporate income tax expenses as a result of recalculation of deferred income tax liabilities due to the changes in tax legislation. FINANCIAL SYMPHONY 3. Profit and loss analysis Annual report, 2009

For the year ended 31 December Interest income for 2009 decreased by liabilities. The Bank has repaid syndicated loan 2009 2008 Change 2.1% or KZT 7.8 billion to KZT 372.9 billion and Eurobonds on schedule and bought-back

KZTm KZTm KZTm % from KZT 380.8 billion in 2008 due to a some part of Eurobonds, which resulted in a decrease in average interest-bearing assets decrease in the above-mentioned balance Net interest income 89 48,815 (48,726) 99.82 (by 1.3%) and average yield on interest- items. Net non-interest income 58,870 2,155 56,715 2 631.79 bearing assets from 15.20% in 2008 to Operating income 58,959 50,970 7,989 15.67 15.09% in 2009. The interest income on loans to customers Operating expense (30,673) (34,049) 3,376 (9.92) also decreased, however, its share in total (Provision)/Recovery of provision for (1,472) (2,718) 1,246 (45.84) The largest decrease was noted on the interest income is traditionally high: it was guarantees and other contingencies interest income on loans and advances to 96.8% in 2009 (2008: 95.7%). The interest (Provision)/Recovery of provision for 600 856 (256) (29.91) banks and other financial institutions by income on loans to customers decreased by impairment losses on other assets 31.4% and on interest income on operations 0.8% due to increased average volumes of Gain from sale of associates and share of 4,372 (3,585) 7,957 (221.95) with securities despite that their share in total non-performing and overdue loans from KZT results in associates interest income is only 1.2% (2008: 1.6%). 97.8 billion in 2008 to KZT 281.8 billion in Operating profit before income tax 31,786 11,474 20,312 177.03 This is explained by the reduction in average 2009. Average interest rates on loans to Income tax (expense)/benefit (12,763) 8,690 (21,453) (246.87) volumes on these items. Thus, average loans customers decreased from 16.62% to 16.24% Net profit 19,023 20,164 (1,141) (5.66) and advances to banks and financial despite a slight increase in net loans to Attributable to: institutions decreased by 23.7% in 2009, on customers in 2009 compared to 2008 (by Shareholders of the parent 19,423 21,805 (2,382) (10.92) securities by 10.6%. In 2009 the Bank made 1.5%). Non-controlling interest (400) (1,641) 1,241 75.60 both scheduled and early repayments of its Profitability ratios ROA 0.7% 0.7% ROE 5.4% 6.5% Interest expense For the year ended 31 December

Expense, Change Average interest-bearing liabilities Interest income KZT mln

For the year ended 31 December KZTm % 2009 2008

Income, Average Average Change Average interest-bearing assets 2009 2008 Average Average KZTm volumes, volumes, yield yield KZTm % 2009 2008 KZT bn KZT bn

Average Average 2009 2008 Average Average volumes volumes yield yield Interest expense on debt securities (KZT bn) (KZT bn) 76,928 72,251 4,677 6.47 840 9.2 813 8.9 issued and subordinated debt

Interest income on loans Interest expense on loans and 361,154 364,214 (3,060) (0.84) 2,224 16.2 2,191 16.6 to customers advances from banks and other 15,123 27,989 (12,866) (45.97) 279 5.4 455 6.0 financial institutions and on Interest income on loans repurchase agreements and advances to banks 7,236 10,554 (3,318) (31.44) 188 3.8 247 4.3 Interest expense on customer and other financial accounts and repurchase 82,435 72,288 10,147 14.04 1,168 7.1 972 7.44 institutions agreements

Interest income on Interest expense on other liabilities 4,504 8,139 (3,635) (44.66) 89 5.2 145 5.93 4,549 6,009 (1,460) (24.30) 60 7.6 67 9.0 securities Dividends on preference shares 747 598 149 24.92 Total interest income 372,939 380,777 (7,838) (2.06) 2,472 15.1 2,505 15.2 Total interest expense 179,737 181,265 (1,528) (0.84) 2,376 7.58 2,385 7.6

32 Contents 33 FINANCIAL SYMPHONY 3. Profit and loss analysis Annual report, 2009

Interest expense decreased by 0.8% (by programme (total amount of the programme Net interest income KZT 1.5 billion) in 2009 compared to 2008 due is KZT 30 billion). to a slight decrease in average interest-bearing For the year ended 31 December 2009 2008 Change liabilities by 0.3% and average yield on Interest expense on customer accounts interest-bearing liabilities from 7.58% in 2008 increased by 14% (KZT 10.1 billion) for 2009 to KZTm KZTm % to 7.53% in 2009. The average interest- KZT 82.4 billion compared to KZT 72.3 billion Interest income 372,939 380,777 (7,838) (2.06) bearing liabilities in 2009 were KZT 2,376 for 2008. The increase was attributable to an Interest expense (179,737) (181,265) 1,528 (0.84) billion compared to KZT 2,385 billion in 2008. increase in average customer accounts during Net interest income before provision on impairment 193,202 199,512 (6,310) (3.16) 2009, largely due to placement of funds by losses on interest-bearing assets Interest expense on customer accounts and the National Wealth Fund Samruk-Kazyna Provision on impairment losses on interest-bearing (193,113) (150,697) (42,416) 28.15 debt securities issued remain to have the under the government stabilization assets largest shares in total interest expense. Their programme. At the same time, average yield shares increased from 39.9% and 39.9% in on customer accounts decreased from 7.4% Net interest income 89 48,815 (48,726) 99.82 2008 to 45.9% and 42.8% in 2009, to 7.1%, respectively. respectively. Such an increase was attributable Net interest income before provisions for impairment losses on interest-bearing assets to the decrease in the share of loans and In 2009 interest expense on loans and decreased by 3.2% in 2009 to KZT193.2 billion from KZT199.5 billion in 2008. The decrease was advances from banks, the share in total advances from banks and other financial attributable to a decrease in average yield on interest-bearing assets from 15.20% in 2008 to interest expense decreased from 15.4% in institutions decreased by 46% to KZT 15.1 15.09% in 2009 as well as a slight decrease in average yield on interest-bearing liabilities from 2008 to 8.4% in 2009. billion from KZT 28 billion in 2008. This is 7.58% in 2008 to 7.53% in 2009. explained by the decrease in average loans and Interest expense on debt securities issued, advances from banks and other financial The next table shows net interest income, yield, margin and spread. including subordinated debt, increased by institutions by 38.8% (KZT 176.7 billion). Such 6.5% or KZT 4.7 billion in 2009 due to an significant decrease in average loans and For the year ended 31 December increase in average debt securities and advances from banks compared to average 2009 2008 % change subordinated debt as a result of devaluation loans and advances from banks in 2008 was KZTm KZTm % from KZT 813 billion on average in 2008 to attributable to repayment of large scheduled

KZT 840 billion on average in 2009. In US$ redemptions, namely, syndicated loans for the 2,471,877 2,504,548 1.3 terms their average volume decreased by total of US$ 600 billion and US$ 69 million Average interest-bearing assets 15.7%. closer to the end of 2008 as well as general Interest income 372,939 380,777 2.1 Net interest income before provisions for reduction in repurchase operations and loans 193,202 199,512 3.2 Interest expense on subordinated debt and advances from other Western banks. In impairment losses on interest-bearing assets increased by 29.2% or KZT 3.1 billion in 2009. December 2009 the Bank repaid US$300 Yield (%) 15.1 15.2 On 31 July and 3 August 2009 the Bank million syndicated loan. In June 2009 the Bank Net interest margin (%) 7.8 8.0 conducted two placements of subordinated terminated its DPR programme for US$950 Spread (%)* 7.6 7.6 notes with maturity in 2019 for a total amount million, which resulted in a significant of KZT 965 million. The notes were issued decrease in interest expense on other * Spread is a difference between yield on interest-bearing assets and yield on interest-bearing liabilities. under the third issue of the first notes borrowed funds from KZT 8.1 billion in 2008 to KZT 4.5 billion in 2009 (almost two times Net interest margin was 7.8% in 2009 compared to 8% in 2008. decrease).

34 Contents 35 FINANCIAL SYMPHONY 3. Profit and loss analysis Annual report, 2009

Interest income before provisions Interest income after provisions Interest margin before provisions/average assets Interest margin after provisions/average assets

199 512 193 202 6.1% 8.0% 7.8%

144 696 3.1% 1.9%

0.0% 74 740 2007 2008 2009 48 815

89 Net interest margin after provisions for 2009 decreased to 0.0% from 1.9% in 2008.

2007 2008 2009

Net interest income (before provisions) Provisions for impairment losses Yield on interest-bearing liabilities on interest-bearing assets Yield on interest-bearing assets

For the year ended 31 December 7.8% 2009 2008 Change 2009 7.3% KZTm KZTm KZTm % 15.1% Provisions for impairment losses on loans to 193,463 151,674 41,789 27.6 customers

8.0% Provisions for impairment losses on loans to (350) (977) 627 (64.2) banks 2008 7.2% Total 193,113 150,697 42,416 28.1 15.2%

Provisions for impairment losses on customers from 11.9% as at 31 December 6.1% interest-bearing assets increased by KZT 42.4 2008 to 19% as at 31 December 2009. 2007 7.2% billion (28.1%) in 2009 to KZT 193.1 billion Deterioration of asset quality and the Bank's compared to KZT 150.6 billion for 2008. The conservative policy on provisioning also 13.3% increase in provisioning charges was due to contributed to the increase in provisioning growth in provisioning rate on loans to charges.

36 Contents 37 FINANCIAL SYMPHONY 3. Profit and loss analysis Annual report, 2009

Net non-interest income Operating expense

For the year ended 31 December The Bank's efforts on implementing stricter cost control in 2009 resulted in significant cost 2009 2008 Change reduction. Operating expense for 2009 decreased by 10% compared to 2008 to KZT 30.7 billion.

KZTm share, % KZTm share, % KZTm %

For the year ended 31 December Net gain/(loss) on financial assets and liabilities at 22,793 38.7 (28,373) (1 316.6) 51,166 (180.33) fair value through profit and loss share, % Operating expense 2009 2008 2009 2008 Total operating expense 30 673 34 049 100 100 Net gain/(loss) on foreign exchange and precious (15,022) (25.5) 5,617 260.6 (20,639) (367.44) metals operations Staff costs 14 400 16 475 46.9 48.4

Property and equipment maintenance, depreciation and amortization 8 851 9 976 28.8 29.3 Net fee and commission income 17,413 29.6 17,421 808.4 (8) (0.05) Taxes, other than income tax, insurance payments 3 393 2 784 11.1 8.2 Net realized (loss)/gain on investments available-for- (1,026) (1.7) (2,038) (94.6) 1,012 (49.66) sale Advertising costs 887 1 694 2.9 5

Dividends recorded 186 0.3 176 8.2 10 5.68 Communications 692 749 2.3 2.2 Other income 34,526 58.6 9,352 434.0 25,174 269.18 Bank cards services 648 521 2.1 1.5 Net non-interest income 58,870 100.0 2,155 100.0 56,715 2 631.79 Consulting and audit services 399 394 1.3 1.1

Collection services 153 39 0.5 0.1

Net non-interest income of the Group for and commission income. The share of fee and Other costs 1 250 1 417 4.1 4.2 2009 was KZT 58.9 billion. Significant increase commission income from plastic cards in net non-interest income in 2009 compared operations increased from 16.9% to 20.3%, Staff costs were the largest share (46.9%) of expenses was due to increased payments to the to 2008 is attributable to income from and the share of fee and investment fees on operating expense, and have decreased by almost Kazakhstan Deposit Insurance Fund. An increase repurchase of own debt in amount of KZT 30.7 administered pension funds increased from 13% (KZT 2.1 billion) in 2009. The optimization of in bank card services expenses was attributable to billion («Other income») as well as to gain 9.5% to 12.8%. This was largely attributable to the branch network also contributed to the cost the growth in bank card business (increase in the from operations with financials assets in the increase in fee and commission income on reduction and it resulted in a decrease in number of banking cards, ATMs, POS terminals). amount of KZT 22.8 billion. The latter was due these operations from 15.9% to 30.1%, headcount of 7%. Three new outlets were Collection services increased significantly in 2009 to positive revaluation of swap operations for respectively. Also, there were changes in the opened and 32 outlets were closed in 2009. The as the loan book quality deteriorated and the purposes of hedging currency and interest structure of fee and commission expense. The number of outlets decreased fro 186 to 157. collection activities increased. rate risks (the gain in 2009 was KZT 26.2 billion share of fee and commission expense on compared to loss of KZT 23.7 billion in 2008). plastic cards services increased from 30.1% to Property and equipment maintenance, Income tax expense 44.5%, and the share of insurance activity fee depreciation and amortization costs decreased by 11% (KZT 1.1 billion) due to decreased number of Corporate income tax expense in 2009 was Net loss on foreign currency and precious and commission expense increased from outlets and optimization of the premises as well KZT 12.8 billion. Effective tax rate was 40.2% due metals operations was KZT 15 billion as at 31 21.2% to 33.6%. The increase was caused by as tightened maintenance costs. to recalculation of deferred tax liabilities as a increased operations on these services. The December 2009 compared to income of KZT result of transfer of the earlier approved tenors 5.6 billion for 2008 due to loss on trading decrease in the share of investment expenses Advertising costs decreased by 48% (by KZT for a gradual decrease of the corporate income operations of KZT 15.2 billion for 2009 on administered pension funds from 28.5% to 0.8 billion) in 2009 due to reduced activity in tax for later periods. In 2009 amendments were compared to KZT 7.5 billion gain in 2008. 2.4% is attributable to the fact that in 2009 advertising campaigns. introduced to the Tax Code, according to which there was some improvement of financial the corporate income tax rate was reduced to Net fee and commission income remained markets and stabilization in the securities An increase in other operating expenses in 17.5% from 1 January 2012 and to 15% from 1 flat at KZT 17.4 billion. However, there were prices, which resulted in reduction in negative 2009 is attributable to the operating activities of January 2013. The corporate income tax rate used some changes in the structure of the net fee revaluation. the Bank. Thus, an increase in tax and insurance for the 2009 financial statements is 20%.

38 Contents 39 1. 2. 3. 4. 5. 6. Letter from the Chairperson Financial statements Profit and loss Corporate Corporate Consolidated of the Management Board analysis analysis governance responsibility financial statements

FINANCIAL SYMPHONY 4. Corporate governance Annual report, 2009

Corporate Governance

1. Overview of the corporate governance system

The corporate governance system in Kazkommertsbank is founded on the principle of full and unconditional compliance with the regulatory requirements of the Republic of Kazakhstan and our commitment to full compliance with international best practice. The corporate governance system is based on the Corporate Governance Code («the Code») which was approved by the Bank's General Shareholders Meeting in 2006. The Bank complies with the Code in its everyday operations in order to facilitate efficient, effective and entrepreneurial management that can deliver shareholder value over the longer term. Good corporate governance contributes to improving the performance of the Bank by helping the Board carry out its duties in the best interests of all of its shareholders.

The Code meets the requirements of the Joint-Stock Companies Law of Republic of Kazakhstan, which provides the legal framework for corporate governance standards in the country. The code also fulfills the regulatory requirements of other Republic of Kazakhstan legislation, key provisions of the Combined Code of the UK Financial Reporting Council (The Combined Code), as well as the Articles of Association of the Bank and Model Corporate Governance Code, approved by the Issuers Council. FINANCIAL SYMPHONY 4. Corporate governance Annual report, 2009

The following founding principles form the Kazkommertsbank is owned by its The Board of Directors is the main oversight and effective functioning of the basis of the corporate governance system at shareholders, and it guarantees the equal supervisory body of the Bank. It carries out Board committees. Kazkommertsbank: treatment of all shareholders by providing strategic management of the Bank, provides them with the opportunity to participate in control over financial activities and risk MEMBERS OF THE BOARD 1. The principle of safeguarding and governing the Bank via the General management, and implements decisions and OF DIRECTORS appreciation of the rights and legitimate Shareholder Meeting as well as exercising their policies which have been approved by the interests of the Bank's shareholders; right to receive dividends and information General Shareholders Meeting. In compliance Nurzhan S. Subkhanberdin (46) 2. The principle of good management of about the Bank's operations and with the Code, the roles of Chairman of the Chairman the Bank; performance. Board of Directors and Chairman of the Appointment: joined the Bank in 1991 and 3. The principle of transparency and Management Board are separated, with the became Chairman in September 2002. objectivity in the disclosure of information 2. CORPORATE GOVERNANCE STRUCTURE Chairman of the Board of Directors being Biography: Prior to becoming Chairman of about the Bank's performance; responsible for leading the Board of Directors the Board Mr Subkhanberdin was Chairman 4. The principle of respect for law and The General Shareholders Meeting is the and the Chairman of the Management Board of the Management Board of the Bank, ethical standards; Bank's highest governing body. The Board of being responsible for providing executive having been appointed to that position in 5. The principle of a fair dividend policy; Directors of Kazkommertsbank is elected by management of the day-to-day business of 1993. From 1991 to 1993, he was the First 6. The principle of fairness in personnel and shareholders and is accountable to them. The the Bank. Meetings of the Board of Directors Deputy Chairman of the Bank. Mr. recruitment policies; Board provides strategic management and should be held when necessary but at least Subkhanberdin graduated from Moscow State 7. The commitment to protect the oversight of the executive body which is made once a month. University and has a degree in economics from environment; up of the Management Board, the Board Kazakhstan State University («KSU»). 8. The commitment to a fair resolution of committees, Internal Audit Department and BOARD OF DIRECTORS corporate conflicts. the Corporate Secretary. Members of the Board of Directors are appointed based on decisions made at the General Shareholders Meeting. The External Auditor approves Governing body General Audit appointments are subject to mandatory Shareholders Meeting Committee approval by the Agency of the Republic of Kazakhstan for regulation and supervision of financial markets and financial organisations (AFN). Overall, the Board should be composed of at least five but not more than seven elects

reports members. Independent Directors should

appoints account for at least a third of the Board. Internal Audit appoints Supervisory body Department Risk Currently, the Board of Directors of the Board of Directors Committee Bank is made of 7 Directors, 3 of them are independent Directors. Although all Directors are equally accountable under the Kazakh Law

appoints for the proper stewardship of the company's

elects affairs, the independent Directors fulfill a vital reports role in corporate accountability. They are Corporate Secretary Nomination & responsible for examining the strategies Executive body Remuneration proposed by the Executive Directors, as well as Management Board Committee evaluating the performance of the Bank's management in meeting agreed targets and objectives. They also play a leading role in the provides recommendations and reports

42 Contents 43 FINANCIAL SYMPHONY 4. Corporate governance Annual report, 2009

Nina A. Zhussupova (48) Gail Buyske (56) Chairperson of the Management Board Non-executive Independent Director Appointment: Joined the Bank in 1995 and Appointment: 2003 became a member of the Board of Directors in September 2002. Biography: Since joining the Bank in August 1995, Ms Zhussupova has served as First Deputy Chairman of the Management Board, Manager of the Accounts Office and Chief Accountant of the Bank. She holds a degree in economics from the Almaty Institute for National Economy («AINE»).

well as Chairman of the Committee on Development of Audit Theory and Practice under the Chamber of Auditors of Kazakhstan. He is also the President of the Committee membership: Member of the Guild of Internal Auditors and Accountants of Audit Committee, Risk Committee and Kazakhstan. Nomination and Remuneration Committee Daulet H. Sembaev (75) Biography: Gail Buyske is a banker and Archag Patrick Vosgimorukian (37) Deputy Chairman of the Board non-executive director who was worked in Non-executive Director, of Directors senior positions at the EBRD and JP Morgan Representative Appointment: joined the Bank in 1999 Chase. She has a PhD in political science from of Alnair Capital Holding Became Deputy Chairman in 2002 Columbia University. Appointment: 2009 Biography: Mr Sembaev was Chairman of Biography: Mr Vosgimorukian is General the Board of Directors and Advisor to the Mukhtar S. Yerzhanov (60) Director of AMUN Capital Advisors KZ, an Chairman of the Management Board from Non-executive Independent Director affiliate of Alnair. From 2007 to 2008 he was 1999 to 2002. He is a former Chairman of the Appointment: 2008 Managing Director at Renaissance Capital National Bank of Kazakhstan, President of the Committee membership: Member of the Central Asia, where he was responsible for Kazakhstan Association of Financiers and a Audit Committee and Nomination and investment banking and finance in Central Asia Member of Parliament. He has also held senior Remuneration Committee and the Caucasus. Previously, from 2000 to positions with various government bodies and 2007 he was Head of Mergers & Acquisitions in commercial companies. He graduated as an Biography: Mr Yerzhanov is a Partner at an CEE and CIS, ABN AMRO Corporate Finance engineer from the Kazakhstan Mining audit company, a Professor at the Kazakh London Ltd. Prior to that, from 1998 to 2000 Institute in 1958. Economics University and Turan University, as he worked as an EMEA TNT (Technology,

44 Contents 45 FINANCIAL SYMPHONY 4. Corporate governance Annual report, 2009

Packard, Johnson & Johnson and Heinz. THE BOARD OF DIRECTORS reviewing the Bank's internal control and Currently he acts as Chair of the Audit COMMITTEES risk management systems; Committee at RESO-Garantia (Russia's largest developing and updating risk management insurance provider); Chair of the Strategy Kazkommertsbank has developed an policy which is aligned with the Bank's Committee and Member of the Audit effective system of corporate governance and strategy; Committee at Sotsgorbank (Moscow, Russia); control over its financial and economic affairs monitoring asset quality of the loan and Chair of the Audit Committee and as a means of safeguarding the rights and portfolio of the Bank; Member of the Risks Committee at AK BARS legitimate interests of its shareholders. developing recommendations for internal Bank (Kazan, Russia). During the period documentation of the Bank, including risk 2004-2007, Mr. Shibaev worked as The Board of Directors appoints and management policy; Partner/Deputy Head at the Moscow/CIS oversees the Audit Committee, which has the considering development plans, updating Office of Roland Berger Strategy Consultants following responsibilities: and implementation of the risk assessment GmbH. From 1999 to 2000 he was Vice- models; President and Director at Deloitte & Touche monitoring the integrity of the financial discussing the risk management strategy Corporate Finance Inc (Toronto, Canada), and disclosure of the Bank, with the Management Board. from 1998 to 1999 he acted as a Head of reviewing the company's internal financial Corporate Finance/First Deputy CEO at ING controls; Members of the Risk Committee Barings (Moscow). In 1990-1997 Mr. Shibaev m o n i t o r i n g a n d r e v i e w i n g t h e worked as Managing Partner and Partner at effectiveness of the company's internal audit Gail Buyske - Chair Coopers & Lybrand in USSR and Russia. He has function; Non-executive Director an MBA from The Henley Management making recommendations to the Board in Archag Patrick Vosgimorukian College, UK, a PhD in Economics from relation to the appointment, re-appointment Non-executive Director MGIMO, Russia, and is a Fellow of the and removal of the external auditor and to Sergei Shibaev Association of Chartered Certified approve the remuneration and terms of Non-executive Director Accountants (ACCA, UK, 1995). engagement of the external auditor; Adil Batyrbekov reviewing and monitoring the external Media, Telecommunications) Equity Research Member of the Management Board auditor's independence and objectivity and the Analyst for the Middle East and Africa at with responsibilities for Retail risks. effectiveness of the audit process. Societe Generale Securities. In 1994 he graduated with a bachelor degree in The Nomination and Remuneration International Relations from the American Members of the Audit Committee Committee reports to the Board of Directors University in Paris (AUP, Paris, France); and in and provides recommendations on key 1998 he completed Customer Function-CF30 Sergei Shibaev - Chair appointments, the performance of senior (Investment Advisor Function-CF21) with the Non-executive director managers including their assignments and Financial Services Authority (FSA, London, UK). Gail Buyske transfers as well as the work appraisal and Non-executive director motivation system. It also advises the Board on Sergei Shibaev (51) Mukhtar Yerzhanov general issues of corporate governance, Non-executive Non-executive director corporate culture and business ethics. Independent Serik Ahanov Director Chairman of the Financial Members of the Nomination Appointment: 2009 Experts Association of Kazakhstan and Remuneration Committee Committee membership: Member of the Audit Committee and Risk Committee Mukhtar Yerzhanov - Chair Biography: Mr Shibaev has worked as an The Risk Committee is appointed by the Non-executive director advisor to several multinational companies, Board and has three Non-executive Directors. Gail Buyske including BP, Mars, Unilever, Hewlett- It has the following key responsibilities: Non-executive director

46 Contents 47 FINANCIAL SYMPHONY 4. Corporate governance Annual report, 2009

Galym Dauletbakov Prior to joining the Bank he held a number of senior position at Kazakhstan's Bank of management, including construction and CFO Ratiopharm Kazakhstan senior positions at ABN AMRO Bank in Development. He has attained PhD in maintenance of the branches. Ms. Alen Shayakhmetov Kazakhstan, including Country Head of Loan economics. Kumalakova holds a degree in Accounting Head of Standards Control Products and Head of Trade and Commodities. from Almaty National Institute of Economics. Galina Shin - Secretary He holds degrees with distinction from Baurzhan K. Zhumagulov has been a Director for Personnel Columbia University, Georgetown University Managing Director of the Bank since 2005. He Amar T. Hanibal was appointed as a and Al Farabi Kazakh State National supervises the Bank's credit department. Managing Director in December 2009. Prior to THE MANAGEMENT BOARD University. In addition to his other Previosly Mr Zhumagulov was the General the appointment, he was the Executive responsibilities Mr. Auezov chairs charity Director of TOO «Caspian Industrial Financial Director of Risk Management Department. The Management Board is the collective foundation «Kus Zholy», sponsored by the Group». He holds a degree in economics from Before joining the Bank, Mr. Hanibal held executive body of Kazkommertsbank that Bank. the Kazakh Economic University. He attained various positions at ABN AMRO offices in oversees the Bank's day-to-day operations. In MBA from Saitam University (Japan). Amsterdam, Chicago and London. Mr. Hanibal 2009 the Management Board was extended to Andrey I. Timchenko has been a attained a degree in economics from European 15 members with the appointment of two new Managing Director since 2003. He joined the Alexander V. Barsukov has been a University in Brussels and has a MBA from Managing Directors, Sergey Mokroussov, and Bank in 1998 and has since held a number of Managing Director of the Bank since 2005, Harvard Business School (USA). Amar Ganibal. positions. Previously Mr. Timchenko was a Tax and his responsibilities include the supervision Advisor at Ernst & Young Almaty. On the of the Bank's Legal Department. Mr Barsukov Sergey D. Mokroussov was appointed as Members Management Board he supervises the retail was a Managing Partner at McGuire Woods a Managing Director in December 2009. He of the Management Board business and marketing activities of the Bank. (Kazakhstan). He holds a degree in Law from joined Kazkommertsbank in 2003 and since He has a graduate degree in Law from the the Kazakh State National University. then he has held a number of senior positions Nina A. Zhussupova is the Chairman of Kazakh State University of Law. in corporate banking including product the Management Board. She is responsible for Askarbek Nabiyev was appointed a development and project finance. Since July overall management of the Bank and is Dennis Y. Fedossenko has been a Managing Director in February 2007 having 2008 he has been supervising relations with accountable to the Board of directors. Managing Director since 2003. He joined the joined the Bank of JSC «Kazkommertsbank» in international financial institutions. Mr. Bank in 1996 and has held a number of February 2007. He supervises financial Mokroussov graduated from Pavlodar State Ermek N. Shamuratov has served as a positions in Treasury Department of the Bank. analysis, budgeting and control, and University with a degree in economics and Managing Director since 1998. He is the He graduated from the Kazakh State Academy management reporting. Mr. Nabiyev holds a management. He received his MBA from former Deputy Chairman of Halyk Savings of Management. graduate degree in economics from Kazakh Dartmouth College (USA). Bank. He holds a degree in mathematics from State Academy of Management. the KSU. Alexander V. Yakushev has been a 3. KEY DEVELOPMENTS Managing Director since 1999. He also heads Adil Batyrbekov was appointed a IN CORPORATE GOVERNANCE IN 2009 Beibit T. Apsenbetov has been a the Regional Directorate and the Akmola Managing Director in February 2007. He Managing Director since 2002. Previously he branch of Kazkommertsbank. Mr. Yakushev supervises risk management and the collateral Changes in the shareholder structure was a Partner at Deloitte & Touche, where he has been in the banking sector since 1990 and servicing of the Bank. Mr. Batyrbekov holds an was in charge of management consulting and joined Kazkommertsbank in 1996 having left MBA degree from Nottingham University In 2009 Kazkommertsbank received KZT led the firm's operations in Kazakhstan. He has the position of Chairman of the Board of (UK) and a degree in International Economics 184 billion from National Welfare Fund completed courses on mergers and KRAMDS bank. He graduated from Gorky from Kazakh State Academy of Management. Samruk-Kazyna. This amount includes the acquisitions at Wharton Business School, the Pedagogical Institute of Foreign languages. Prior to joining KKB he spent over 6 years as deposit KZT 36 billion, used by Samruk- Pennsylvania University. At the Bank he the Head of credit division at ABN AMRO Kazyna in May 2009 to purchase 21.26% of supervises the branch network. Erik Z. Balapanov has been a Managing Kazakhstan. shares of the Bank. European Bank for Director of the Bank since 2003. He supervises Reconstruction and Development (EBRD) also Magzhan M. Auezov has been a the corporate business of the Bank. He is Kulyash Kumalakova was appointed a p a r t i c i p a t e d i n t h e i n c r e a s e o f Managing Director since 2002. Since 2009 he Chairman of the Board of Grantum Pension Managing Director in January 2008, having Kazkommertsbank's capital. By contributing has been Chairman of the Board of Directors Fund and Grantum Asset Management. joined the Bank in 1994. She supervises US$ 40 million to the capital of the Bank, EBRD of the Bank's subsidiary, Moskommertsbank. Before joining the Bank Mr. Balapanov held a logistics, procurement and facility increased its stake to 9.77%. In December

48 Contents 49 FINANCIAL SYMPHONY 4. Corporate governance Annual report, 2009

2009 Alnair Capital Holding increased its stake The AGM also authorised the Board of Attendance of the meetings of the Board of directors in 2009* in the Bank to 28.57%. Directors of the Bank to approve the Share Issue Prospectus and changes to it; approved Members of the Board Independent Directors General Shareholder remuneration for the members of the Board Meetings Subkhanberdin Zhussupova Sembaev Filmeridis Vosgimorukian Buyske Yerzhanov Shibaev Meetings of Directors for 2009; considered shareholders' appeals to the Bank and its 28.01.09 ü ü ü ü ü ü

A total of three General Shareholder authorities' actions and the results of this 12.02.09 ü ü ü ü ü ü Meetings of Kazkommertsbank took place in consideration ; and were informed about the 18.02.09 ü ü ü ü ü ü 2009. On 2 March an Extraordinary General remuneration of the members of the Board of Meeting considered and approved an Directors and Management Board in 2008. 04.03.09 ü ü ü ü ü ü increase in the number of authorized 16.03.09 ü ü ü ü ü ü common shares and preferred shares of the On 21 July 2009 an Extraordinary General 19.03.09 Bank. The new shares were subsequently Meeting elected two new members of the ü ü ü ü ü ü issued and placed as part of the Bank's Board of Directors: Mr. Archag Patrick 30.03.09 ü ü ü ü ü ü financial stabilisation programme, with a Vosgimorukian, a Non-executive Director 16.04.09 ü ü ü ü ü ü large stake acquired by Samruk-Kazyna representing Alnair Capital Holding, and Mr. National Welfare Fund. Sergei Shibaev, an Independent Director. 28.04.09 ü ü ü ü ü ü

22.05.09 ü ü ü ü ü ü The 2009 Annual General Shareholders Developments in the Board of Directors 01.06.09 ü ü ü ü ü ü Meeting was held on 26 May in Almaty. The AGM approved the Bank's audited, In July 2009 the Bank decided to increase 17.06.09 ü ü ü ü ü ü consolidated, annual financial statements for the number of independent directors from 24.06.09 ü ü ü ü ü ü 2008 and the Management Report for 2008. two to three. Following the approval by the 09.07.09 The Meeting also agreed the following: EGM on 21 July Sergei Shibaev was appointed ü ü ü ü ü ü as an Independent Director. 23.07.09 ü ü ü ü ü ü Preference shares to pay US$0.04 dividend 28.07.09 ü ü ü ü ü ü on 10 December 2009. On 22 May 2009 the Board accepted the No dividend on the Bank's common shares resignation of Mr. John Filmeridis, a Non- 05.08.09 ü ü ü ü ü ü with respect to its 2008 results. executive Director and the representative of 27.08.09 ü ü ü ü ü ü Increase in the Bank's reserve capital by Alnair Capital Holding on the Board, due to 04.09.09 ü ü ü ü ü ü ü KZT 5.4 billion to KZT 50 billion. personal reasons. On 21 July following the Extend the term of Mr. Mukhtar Yerzhanov approval by the EGM he was replaced on the 07.09.09 ü ü ü ü ü ü ü on the Board of Directors for another year. Board by Mr. Archag Patrick Vosgimorukian. 28.09.09 ü ü ü ü ü ü ü

29.09.09 ü ü ü ü ü ü ü

29.10.09 ü ü ü ü ü ü ü

03.11.09 ü ü ü ü ü ü ü

11.11.09 ü ü ü ü ü ü ü

26.11.09 ü ü ü ü ü ü ü

09.12.09 ü ü ü ü ü ü ü

11.12.09 ü ü ü ü ü ü ü

24.12.09 ü ü ü ü ü ü ü

* including participation through the conference call facility

50 Contents 51 1. 2. 3. 4. 5. 6. Letter from the Chairperson Financial statements Profit and loss Corporate Corporate Consolidated of the Management Board analysis analysis governance responsibility financial statements

FINANCIAL SYMPHONY 5. Corporate responsibility Annual report, 2009

INVESTING FOR THE FUTURE

In order to emerge from the difficult financial markets of recent years in a strong position, Kazkommertsbank has had to operate like a well-tuned orchestra so this year's Annual Report represents an appropriate opportunity to promote our partnership with one of Kazakhstan's leading cultural phenomena, the State Academic Opera and Ballet Theatre named after Abai. Kazkommertsbank has been proud to be the primary sponsor for the National Opera for the last three years and has been pleased to support the National Opera prepare for two major productions and in its efforts to promote young and upcoming musical talent.

In 2009 the Kazakhstan economy continued to be affected by the global financial crisis. As one of the largest financial institutions in Kazakhstan, the Bank has accepted its responsibility for safeguarding jobs, assisting its clients and the local communities they operate in, and helping to solve social problems on a national and regional level. FINANCIAL SYMPHONY 5. Corporate responsibility Annual report, 2009

The Bank actively co-operated with the projects on hold, including those partly funded group. Since gaining independence, the and retain the best employees in all of the Government and Samruk-Kazyna National by deposits from the consumers. Republic of Kazakhstan has aspired to creating areas in which we operate. We are committed Welfare Fund in devising and implementing equal opportunities for all its citizens to treating them fairly, developing their nationwide crisis mitigation programmes. It The Bank's participation in Government-led regardless of their ethnic origin, race, religious potential and providing a positive working also intensified its social and charitable crisis mitigation initiatives made it possible to beliefs, gender and age. This principle is environment. activities at the time when its support was reduce the cost of mortgages for over 9000 consolidated in the National Constitution of needed the most. This helped to consolidate borrowers in 2008-2009. In 2009 the Bank the Republic of Kazakhstan. The compensation package for the Bank's the Banks reputation as a socially responsible helped to finance the completion of employees includes the following company, as well as a reliable and dependable residential construction projects in 6 areas in This principle of equal opportunities is fully benefits: financial institution. Almaty and Astana making it possible for integrated in the Bank's internal policies, set nearly 1000 families to move in to new homes. out in the Bank's Corporate Code of Business annual bonus reflecting the performance The Bank aims to bring its corporate Over 26 billion tenge of state funds were Ethics. Out of the total workforce of 5816, of individuals as well as the performance responsibility standards and practices in to line distributed by the Bank for refinancing loans 3635 are women. 23 positions of the Bank's 43 of the business unit; with international best practice. Since 2005, to small and medium sized enterprises. Department Directors are women. Two long service record pay supplement; Kazkommertsbank has been an active women are members of the Management additional annual leave days for long participant in the UN Global Compact, the During 2009 the Bank participated in the Board, including Nina A. Zhussupova, the service; world's largest corporate citizenship and implementation of the following key Chair of the Bank's Management Board. additional annual leave days for sustainability initiative. The key principles of Government lending programmes: employees, living in ecologically the Global Compact - covering the areas of 13 ethnic groups are represented in the unfavorable regions (9 calendar days for human rights, labour standards, protection of Financing and refinancing of small and Bank's workforce, reflecting the multiethnic the Kyzylorda region and 10 days for the the environment and countering corruption - medium business and multicultural environment in which we live Semipalatinsk region), together with the have been integrated into the Bank's corporate Financing and refinancing of mortgages and run our business. The average age of the annual salary supplement; Code of Business Ethics and into a number of Financing required to finalise construction Bank's employees is 33. financial help in the following policies and practices, ranging from internal projects circumstances: regulations on recruitment and remuneration The Bank's business success depends on wedding, of employees through to the Sponsorship and By the end of 2009 cranes in some of the the quality of its employees. We aim to attract birth of a child, Charity and Lending Policy. The principles of residential construction sites of the largest sponsorship and charity have formed the basis pre-financial crisis construction company Kuat of the Charter governing the Bank's corporate were seen working again. Following complex charity fund Kus Zholy. multi-party negotiations, led by the Bank, a special purpose project company Global BATTLING THE STORM Building Contract (GBC) was established. The TOGETHER Government committed to funding c o m p l e t i o n o f c o n s t r u c t i o n a n d The global financial crisis, shortage of Kazkommertsbank to supervise financial credit and the resulting slump in the world management of the project. prices for natural resources have had significant implications for the business EQUAL OPPORTUNITY IS PART OF OUR environment in Kazakhstan. The majority of CORPORATE CULTURE the Bank's clients, both corporate and private, were affected with their income significantly Kazakhstan is a vast country, with a impacted and their credit capacity reduced. geographical areas five times larger than The construction industry that was previously France. It is also a multiethnic country and one of the driving forces of the Kazakh home to around 100 different ethnic groups economy has faced particularly severe and many different religious denominations, challenges and has had to put some of its with ethnic Kazakhs forming the largest

54 Contents 55 FINANCIAL SYMPHONY 5. Corporate responsibility Annual report, 2009

need for medical treatment, undertaken by the charitable foundation, Kuz «Guardian Angel» project. As a result, the and modern languages for its scholarships. In emergencies, such as fire, theft or natural Zholy, which is wholly owned by the Bank, project received an additional KZT3 million. 2009 students from the Academy for calamities, managed by the Foundation's Board of Cinematography and the College of funeral for a family member, Trustees and advised by an independent group «A Gift of Life to Children» is another Choreography were granted «KAZKOM death of an employee; of experts. Kus Zholy's projects are financed long-running project of the Foundation in the Scholarship» for the first time. Decisions on through a combination of direct funding by area of children's healthcare.. The project awarding these KAZKOM scholarships are bonuses to the winners of the annual «Best the Bank, client donations and voluntary provides financial aid for medical treatment of made by the Board of Trustees of Kus Zholy, Employee» and «Best Branch» competitions; contributions by the Bank's employees. In seriously ill children abroad. During 2009, advised by university chancellors and student favorable interest rates on consumer loans 2009 the Foundation's projects continued to employees and customers of the Bank councils. and credit cards; be focused mainly on children and young donated over KZT11 million by using the paid training opportunities for the Bank's people in the areas of healthcare, access to Homebank electronic banking system. The INVESTING IN CULTURE employees both in Kazakhstan and abroad; education, promotion of talent, sport and Bank oversees the project, guaranteeing its employee pension programmes; physical fitness, and the creation of integrity and effective use of funds. Donations: KZT28.5 million provision of compulsory accident opportunities. Additionally the Bank reimbursed costs for insurance; international money transfers, currency Kazakh National Kurmangazy provision of medical cover for the Bank's HEALTHCARE exchange and servicing the debt for the Music Conservatory managers, including coverage for family parents of the sick children. The Bank also members; Donations: KZT 30 million provided the opportunity for all residents of KZT10 million benefits for disabled, single parents, and Kazakhstan to donate money to this project retired employees. The «Doctor Santa Claus» project has through its other partners by using an Over the past nine years the Bank has been been well supported, with employees of electronic payment system. Over 200 children a benefactor for Kazakh National During the 2009 financial year the Bank Kazkommertsbank cancelling their corporate have received urgent treatment abroad Kurmangazy Music Conservatory, the main provided financial help to 634 employees. The New Year parties in December 2009 and through this project in the last three years. national music academy. In 2009 it celebrated Bank also paid college, university or other donating the savings of over KZT5 million to its 65th anniversary. The financial backing professional training fees for 52 of its children receiving treatment for cerebral palsy. EDUCATION provided by the Bank and other key employees. The funds were used for procuring and benefactors helps students and teachers of donating rehabilitation equipment to hospitals Donations: KZT 10 million the National Conservatory to receive PHILANTHROPIC and special boarding schools for children with education overseas and represent Kazakhstan INITIATIVES musculoskeletal diseases. A «KAZKOM Scholarship» is paid by Kus on the international stage. In November 2009 Zholy to high-achieving university students the Symphonic Orchestra of the National Despite the significant deterioration of the Project «Guardian Angel», which started from low-income families, and over the years Conservatory undertook a concert tour in the business environment in 2009, the Bank did in 2007 and continued through 2009, was it has proved to become the most popular United States, with the concerts at high profile not reduce its donations to good causes. Since designed to save the lives of the country's charitable activity supported by the Bank and venues as the Kennedy Center in Washington 2004 its philanthropic activities have been youngest newborn babies. In 2009 the Bank Kus Zholy. Since it was launched in 2007 the and Concert Hall of San Francisco joined forces with «Kuz Zholy» to invest circa scholarship fund has increased every year, and Conservatory of Music. The main KZT20 million in this project. The aim of the in 2009 it started awarding scholarships on a performance was held at the world famous project is to fund acquisition, delivery and competitive basis. 27 colleges and universities Carnegie Hall in New York, as part of the installation of modern, state-of-the-art applied for the competition. As a result 48 International conference «Invest Kazakhstan». surgical and therapeutic equipment designed talented and high-achieving students from 15 Members of the Kazakh Government, heads for medical treatment of newborns. The Bank universities were awarded a «KAZKOM of the largest Kazakh companies as well as has promoted the project to its credit card Scholarship» of KZT180,000. To underline the international investors participated in the holders by issuing credit cards carrying philanthropic nature of this programme the event. Kazkommertsbank sponsored the children pictures with the «Guardian Angel» Foundation only considers candidates studying audio and video recording of this concert. contact details. The Bank also funded a non-financial disciplines, such as industrial nationwide advertising campaign for the engineering, education, environmental studies

56 Contents 57 FINANCIAL SYMPHONY 5. Corporate responsibility Annual report, 2009

The State Academic Opera and Ballet local nomad folk singers to becoming a home Community support: KZT24 000 000 environment and aims to operate in a way that Theatre named after Abai for opera and symphonic music. The first minimizes its carbon footprint. ballet performance staged at this theatre in The programme «We are the KZT17 million 1938 was the beginnings of the now famous Champions!» has become a traditional social In 2009, the Bank introduced an internal Kazakh ballet. Special departments were activity of the Bank's branches and promotes policy to recycle paper. The Bank promotes Kazkommertsbank has been the general established at the Moscow Conservatory and sports competitions between school and local paperless banking among its customers benefactor of the State Academic Opera and other top Soviet schools of music, dance and youth teams. The Programme has been through the use of internet banking and Ballet Theatre named after Abai since 2008. drama in order to produce specialists for the implemented since 2007 and has been used by electronic payments. Paper and electrical The principal funding of the theatre comes emerging opera and ballet of Kazakhstan. A regional branches, as these activities result in equipment are disposed of in an from the Government. However, additional particularly strong boost to the development to loyal relationships with local authorities. environmentally responsible way. Modern financial support provided by the Bank has of the State Academic Opera and Ballet Different sport tournaments with awards equipment that helps to save water and helped it realize its ambitious dreams of Theatre named after Abai came during the were organized in 7 cities of the Kazakhstan. energy has been installed in the Bank's producing performances of some of the world Second World War, when many of the biggest The programme «We are the premises. greatest operas. The lifespan of such names of the Soviet cultural elite were Champions!» has become a tradition, and productions is typically over thirty years. evacuated to Kazakhstan. Internationally promotes sports competitions between school Lending to businesses and projects that are renowned dancer and director Galina Ulanova and local youth teams. Kus Zholy sponsors likely to violate environmental legislation is Thanks to the additional funding provided staged «Giselle» at the theatre. During its 76 regional sporting competitions in close strictly prohibited at the Bank. At the same by the Bank, in October 2009, the theater year history the theater's reputation was cooperation with the regional councils which time, priority treatment is given to projects pleased its audiences with a highly successful maintained by several operas and ballets by provide management assistance to these benefiting the environment. For example, production of «The Elixir of Love» by «Elixir of top European and Russian composers, as well events. This year the campaign visited 7 cities loans provided by the Bank have helped Love» by Gaetano Donizetti. Remarkably, it as Kazakh productions. across Kazakhstan. Kazakhstan Kagazy plc, a Kazakh based was set only by the junior troupe. industrial group, to launch large-scale The State Academic Opera and Ballet Commemorating the Soviet victory over production of container board, corrugated Please see some comments from the Theatre named after Abai is the largest theatre Nazi Germany in the Second World War and board and packaging materials using waste media reviews: in Kazakhstan and Central Asia. Its troupe celebrating our war veterans has always been paper, used corrugated containers and paper includes several winners of top international an important feature of community life in our sacks as raw materials. «New production is a special event for any music competitions. It has become home for country, and played a vital role in the theatre. But the production of the Donizetti's an annual international opera and ballet education of the younger generations. In 2009 The Bank also continued to provide finance «Elixir of Love" was met by standing ovation festival. New productions in the past few Kus Zholy continued its wide-ranging project for the construction of a waste recycling plant even at a rehearsal. It is truly unique. This is the years have included the operas - E. Rahmadiev «Thank you for the peace in which we in Almaty. The plant is the first of its kind in second production at this theatre funded by «Abylai Khan», Puccini's «Turandot» and «La live!» which combined the provision of Kazakhstan and uses a technology developed Kazkommetsbank». Boheme», Verdi's «Il Trovatore». Ballet: A. financial support to war veterans with in Spain that allows recycling of paper, metals, The Vremya Melikov «The Legend of Love», George.Bizet sponsorship of community events celebrating glass and plastics. Unusable waste is and Radion Schedrin «Carmen», Alfred veterans in 22 towns and cities across compressed into briquettes, so helping to Schnittke's «antique-style suite» and Dmitry reduce landfill. «They had been playing with the idea of Kazakhstan. Many employees of the Bank Shostakovich's «Charlie». The theatre is keen producing «The Elixir of Love» for about three volunteered to participate in organizing to develop further cooperation with theatre years. Now thanks to the sponsorship by commemorative events and personal visits to companies from other countries. The theatre's Kazkommertsbank the theatre managed to set disabled veterans in Almaty. immediate plans include the production of the performance in a fairly short time». Wagner's «Tannhauser» in cooperation with The Business of Kazakhstan WORKING TOWARDS the Berlin Opera and Ballet, and the A SUSTAINABLE ENVIRONMENT production of Sergei Prokofiev's «Romeo and The theatre was founded in 1934 through Juliet» to be staged by the great Sergei the efforts of a few outstanding singers who As a corporate citizen and a participant in Grigorovich from the Moscow Bolshoi had never received formal music education. It the UN Global Compact, Kazkommertsbank Theatre. has gone a long way from being a stage for recognizes its responsibility to the

58 Contents 59 JOINT STOCK COMPANY KAZKOMMERTSBANK

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007 JOINT STOCK COMPANY KAZKOMMERTSBANK

TABLE OF CONTENTS

Page

STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007...... 64

INDEPENDENT AUDITORS' REPORT ...... 66

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007:

Consolidated income statements ...... 68

Consolidated statements of comprehensive income...... 70

Consolidated statements of financial position ...... 72

Consolidated statements of changes in equity ...... 74

Consolidated statements of cash flows ...... 80

Notes to the consolidated financial statements ...... 82

62 63 JOINT STOCK COMPANY KAZKOMMERTSBANK Maintaining statutory accounting records introduced extensive measures both in in compliance with legislation and accounting Kazakhstan and globally in order to redress the STATEMENT OF MANAGEMENT'S RESPONSIBILITIES standards of the Republic of Kazakhstan; capital and liquidity imbalance. The Group has FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED Taking such steps as are reasonably become an active participant in funding available to them to safeguard the assets of measures introduced by the Kazakhstan FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2009, the Group; and government, and its future funding and 2008 AND 2007 Detecting and preventing fraud and other capital plans for 2010 include an element of irregularities. continued reliance on these measures.

The following statement, which should be read in conjunction with the The recent economic downturn and severe The consolidated financial statements for independent auditors' responsibilities stated in the independent auditors' liquidity conditions continue to place extreme the years ended 31 December 2009, 2008 and pressure on the financial markets in particular 2007 were authorized for issue on 5 April 2010 report set out, is made with a view to distinguishing the respective and the global economy, generally. by the Management Board of JSC responsibilities of management and those of the independent auditors in Governments and central banks have Kazkommertsbank. relation to the consolidated financial statements of Joint Stock Company Kazkommertsbank and its subsidiaries (the «Group»). On behalf of the Management Board of the Bank: Management is responsible for the Preparing the consolidated financial preparation of the consolidated financial statements on a going concern basis, unless it statements that present fairly the financial is inappropriate to presume that the Group will position of the Group as at 31 December 2009, continue in business for the foreseeable 2008 and 2007 the consolidated results of its future. operations, cash flows and changes in equity Zhussupova N.A. Shoinbekova G.K. for the years then ended, in accordance with Management is also responsible for: Chairman of the Board Chief Accountant International Financial Reporting Standards 5 April 2010 5 April 2010 («IFRS»). Designing, implementing and maintaining Almaty Almaty an effective and sound system of internal In preparing the consolidated financial controls, throughout the Group; statements, management is responsible for: Maintaining proper accounting records that disclose, with reasonable accuracy at any Selecting suitable accounting principles and time, the consolidated financial position of the applying them consistently; Group, and which enable them to ensure that Making judgements and estimates that are the consolidated financial statements of the reasonable and prudent; Group comply with IFRS; Stating whether IFRS have been followed; and

64 65 INDEPENDENT AUDITORS' REPORT assessment of the risks of material We believe that the audit evidence we have misstatement of the consolidated financial obtained is sufficient and appropriate to To the Shareholders of JSC Kazkommertsbank: statements, whether due to fraud or error. In provide a basis for our audit opinion. making those risk assessments, the auditor considers internal control relevant to the Opinion Report on the consolidated financial preparation and fair presentation of entity's preparation and fair presentation of statements consolidated financial statements that are the consolidated financial statements in order In our opinion, the consolidated financial free from material misstatement, whether due to design audit procedures that are statements present fairly, in all material We have audited the accompanying to fraud or error; selecting and applying appropriate in the circumstances, but not for respects, the financial position of the Group as consolidated financial statements of Joint appropriate accounting policies; and making the purpose of expressing an opinion on the at 31 December 2009, 2008 and 2007, and its Stock Company Kazkommertsbank and its accounting estimates that are reasonable in effectiveness of the entity's internal control. financial performance and cash flows for the subsidiaries (the “Group”), which comprise the the circumstances. An audit also includes evaluating the years then ended in accordance with consolidated statements of financial position appropriateness of accounting policies used International Financial Reporting Standards. as at 31 December 2009, 2008 and 2007, the Auditors' responsibility and the reasonableness of accounting consolidated income statements, the estimates made by management, as well as consolidated statements of comprehensive Our responsibility is to express an opinion evaluating the overall presentation of the income, changes in equity and cash flows for on these consolidated financial statements consolidated financial statements. the years then ended, and a summary of based on our audit. We conducted our audit in significant accounting policies and other accordance with International Standards on explanatory notes. Auditing. Those standards require that we Andrew Weekes

comply with ethical requirements and plan and Engagement Partner

perform the audit to obtain reasonable Management's responsibility for the assurance whether the consolidated financial Chartered Accountant consolidated financial statements statements are free from material Certificate of Public Practice 78586

Australia Management of the Group is responsible misstatement. for the preparation and fair presentation of these consolidated financial statements in An audit involves performing procedures to accordance with International Financial obtain audit evidence about the amounts and

Reporting Standards. This responsibility disclosures in the consolidated financial includes: designing, implementing and statements. The procedures selected depend Nurlan Bekenov maintaining internal control relevant to the on the auditor's judgment, including the Deloitte, LLP State license on auditing in the Republic of Qualified auditor

Kazakhstan Number 0000015, type MFU-2, issued by the Ministry of Finance of the Republic of Kazakhstan Qualification certificate # 0082 of the Republic of Kazakhstan dated 13 September 2006 General Director Deloitte, LLP

5 April 2010 Almaty, Kazakhstan

66 67 JOINT STOCK COMPANY KAZKOMMERTSBANK OPERATING PROFIT BEFORE INCOME TAX 31,786 11,474 73,655

Income tax (expense)/benefit 12 (12,763) 8,690 (15,904) CONSOLIDATED INCOME STATEMENTS NET PROFIT 19,023 20,164 57,751 FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007 Attributable to: Ordinary shareholders of the Parent 17,152 18,406 46,468 Year ended Year ended Year ended Preference shareholders of the Parent 2,271 3,399 9,495 31 December 31 December 31 December Notes Non-controlling interest (400) (1,641) 1,788 2009 2008 2007 (KZT million) (KZT million) (KZT million) 19,023 20,164 57,751 Interest income 4, 34 372,939 380,777 316,458 EARNINGS PER SHARE Interest expense 4, 34 (179,737) (181,265) (171,762) Basic and diluted (KZT) 13 24.27 32.01 80.85

NET INTEREST INCOME BEFORE PROVISION FOR IMPAIRMENT LOSSES ON INTEREST BEARING 193,202 199,512 144,696 ASSETS

Provision for impairment losses on interest bearing 5, 34 (193,113) (150,697) (69,956) assets

NET INTEREST INCOME 89 48,815 74,740 On behalf of the Management Board of the Bank:

Net gain/(loss) on financial assets and liabilities at 6 22,793 (28,373) 20,642 fair value through profit or loss Net (loss)/gain on foreign exchange and precious 7 (15,022) 5,617 (15,464) metals operations Fee and commission income 8 20,957 21,745 23,558 Fee and commission expense 8 (3,544) (4,324) (2,713) Net realized (loss)/gain on investments available- 9 (1,026) (2,038) 119 for-sale Zhussupova N.A. Shoinbekova G.K. Dividends received 186 176 145 Chairman of the Board Chief Accountant Other income 10 34,526 9,352 6,919 5 April 2010 5 April 2010

NET NON-INTEREST INCOME 58,870 2,155 33,206 Almaty Almaty

OPERATING INCOME 58,959 50,970 107,946

OPERATING EXPENSES 11, 34 (30,673) (34,049) (31,200)

PROFIT BEFORE OTHER OPERATING PROVISIONS 28,286 16,921 76,746 AND RESULTS OF ASSOCIATES

Provision for impairment losses on other transactions 5 (1,472) (2,718) (1,238) Recovery of provision/(provision) for guarantees 5 600 856 (3,186) and other contingencies Gain from sale of associates and share of results 21, 34 4,372 (3,585) 1,333 of associates

The notes on pages 82-203 form an integral part of these consolidated financial statements.

68 69 JOINT STOCK COMPANY KAZKOMMERTSBANK TOTAL COMPREHENSIVE INCOME 31,363 5, 085 56, 794

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Attributable to: FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007 Ordinary shareholders of the Parent 27,731 6, 321 50 ,019 Preference shareholders of the Parent 4,133 775 9, 495 Non-controlling interest (501) (2, 011) (2, 720) Year ended Year ended Year ended 31 December 31 December 31 December TOTAL COMPREHENSIVE INCOME 31,363 5, 085 56, 794 2009 2008 2007 (KZT million) (KZT million) (KZT million) 19,023 20 ,164 57 ,751 NET PROFIT On behalf of the Management Board of the Bank:

Property and equipment: Revaluation of property and equipment (1,896) (362 ) 5 ,239

(1,896) (362) 5,239

Investments available-for-sale: Unrealized gain/(loss) on revaluation of investments available- 1,627 (4,237 ) 9 for-sale Zhussupova N.A. Shoinbekova G.K. Gain transferred to income statement on sale of investments (34) (82 ) (119) available-for-sale Chairman of the Board Chief Accountant Loss transferred to income statement on impairment of 1,060 2, 120 - 5 April 2010 5 April 2010 investments available-for-sale Parent’s share from revaluation of associated companies reserves (130) 3 - Almaty Almaty

2,523 (2, 196) (110)

Cash flow hedges: Loss on cash flow hedges (1,992) (43,397 ) - Plus: net gain on hedging reserve transferred to earnings 14,219 30, 000 -

12,227 (13,397 ) -

Exchange differences on translation of foreign operations 2,443 (3,4 43) (4, 514)

Deferred income tax: Deferred income tax recognized on revaluation of property and 379 72 (1, 572) equipment Deferred income tax recognized on property and equipment due (401) 1, 144 - to tax rate changes Deferred income tax recognized on loss on investments available-for-sale, on cash flow hedges and due to tax rate (2,935) 3, 103 - changes

(2,957) 4 ,319 (1, 572)

The notes on pages 82-203 form an integral part of these consolidated financial statements.

70 71 JOINT STOCK COMPANY KAZKOMMERTSBANK EQUITY: Equity attributable to equity holders of the Parent: Issued and outstanding share capital 31 9,031 6,- 99 0 6,99 8 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Share premium reserve 195,006 152,- 684 152,85 5 Property and equipment revaluation reserve 4,935 6,918 6,020 AS AT 31 DECEMBER 2009, 2008 AND 2007 Other reserves 180,839 146,992 140,794

Total equity attributable to equity holders of the Parent 389,811 313,584 306,667 31 December 31 December 31 December Notes 2009 2008 2007 Non-controlling interest (223) 27 8 12,55 2 (KZT million) (KZT million) (KZT million)

ASSETS: Total equity 389,588 313,86 2 319,21 9 Cash and balances with national (central) banks 14 90,533 90,47 8 168,14 8 Precious metals 15 1,209 317 - TOTAL LIABILITIES AND EQUITY 2,587,873 2,614,80 5 2,997,23 2 Financial assets at fair value through profit or loss 16 114,203 58,130 188,77 6 Loans and advances to banks and other financial institutions 17 148,375 241,813 212,823 Loans to customers 18, 34 2,160,767 2,144,782 2,366,33 5 Investments available-for-sale 19 16,696 15,05 6 3,03 6 On behalf of the Management Board of the Bank: Investments held to maturity 20 943 77 6 37 5 Investments in associates 21, 34 - 1,77 5 3,22 2 Goodwill 22 2,405 2,40 5 2,40 5 Property, equipment and intangible assets 23 33,971 35,46 5 34,25 9 Other assets 24 18,771 23,80 8 17,85 3

TOTAL ASSETS 2,587,873 2,614,80 5 2,997,23 2 Zhussupova N.A. Shoinbekova G.K. LIABILITIES AND EQUITY Chairman of the Board Chief Accountant LIABILITIES: Loans and advances from banks and other financial institutions 25 209,122 296,391 723,431 5 April 2010 5 April 2010 Customer accounts 26, 34 1,276,464 979,45 3 895,083 Almaty Almaty Financial liabilities at fair value through profit or loss 16 35,991 54,339 7,730 Debt securities issued 27 463,656 678,285 739,68 8 Other borrowed funds 28 31,172 137,324 148,934 Provisions 5 11,945 10,27 6 10,63 8 Deferred income tax liabilities 12 24,519 10,20 5 30,496 Dividends payable 15 5 2 Other liabilities 29 8,990 16,94 1 13,84 5

2,061,874 2,183,21 9 2,569,84 7 Subordinated debt 30 136,411 117,724 108,166

Total liabilities 2,198,285 2,300,94 3 2,678,013

The notes on pages 82-203 form an integral part of these consolidated financial statements.

72 73 JOINT STOCK COMPANY KAZKOMMERTSBANK CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007

Share capital Treasury Share Property and Investments Cumulative Hedging Retained Total equity Non- Total shares premium equipment available- translation reserve1 earnings1 attributable controlling equity reserve revaluation for-sale fair reserve1 to equity interest reserve value holders of deficit 1 the Parent

(KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

31 December 2006 6,999 (4 ) 152,534 2,436 4 0 7 6 - 84,74 8 246,8 29 15,2 72 262,1 01

Net profit ------55,963 55,963 1,7 88 57,7 51 Gain on revaluation of property and equipment - - - 5,239 - - - - 5,2 39 - 5,2 39 Release of property and equipment revaluation reserve due to depreciation and disposal of previously revalued assets - - - (119) - - - 119 - - - Investments available-for-sale - - - - (110 ) - - - (110 ) - (110 ) Exchange differences on translation of foreign operations - - - - - (18 ) - 12 (6) (4,50 8) (4,514 ) Deferred income tax - - - (1,536) - - - (36) (1,57 2) - (1,57 2)

Total comprehensive income - - - 3,58 4 (110 ) (18 ) - 56,05 8 59,5 14 (2,72 0) 56,794 Share capital increase of: - ordinary shares 1 - 15 3 - - - - - 154 - 15 4 Purchase of treasury shares - (1) (119) - - - - - (120 ) - (12 0) Sale of treasury shares - 3 28 7 - - - - - 290 - 290

31 December 2007 7,000 (2 ) 152,85 5 6,02 0 (70 ) 5 8 - 140,80 6 306,667 12,5 52 319,2 19

74 75 JOINT STOCK COMPANY KAZKOMMERTSBANK

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007

Share capital Treasury Share Property and Investments Cumulative Hedging Retained Total equity Non- Total shares premium equipment available- translation reserve1 earnings1 attributable controlling equity reserve revaluation for-sale fair reserve1 to equity interest reserve value holders of deficit 1 the Parent

(KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

31 December 2007 7,000 (2 ) 152,8 55 6,0 20 (7 0) 5 8 - 140,80 6 306,667 12,5 52 319,2 19

Net profit ------21,80 5 21,80 5 (1,64 1) 20,164 Loss on revaluation of property and equipment - - - (362 ) - - - - (362 ) - (362 ) Release of property and equipment revaluation reserve due to depreciation and disposal of previously revalued assets - - - (93) - - - 93 - - - Investments available-for-sale - - - - (2,19 5) - - - (2,195 ) (1) (2,196) Cash flow hedges ------(13,397 ) - (13,397 ) - (13,397 ) Exchange differences on translation of foreign operations - - - - - (3,07 4) - - (3,074 ) (369) (3,44 3) Deferred income tax - - - 1,35 3 42 3 - 2,68 0 (137 ) 4,319 - 4,319

Total comprehensive income - - - 898 (1,77 2) (3,07 4) (10,717 ) 21,761 7,096 (2,0 11) 5,0 85

Purchase of treasury shares - (14 ) (40 6) - - - - - (420 ) - (42 0) Sale of treasury shares - 6 235 - - - - - 24 1 - 24 1 Change in non-controlling interest due to increase of ownership share ------(10,263) (10,263)

31 December 2008 7,000 (10 ) 152,68 4 6,918 (1,84 2) (3,016 ) (10,717 ) 162,567 313,58 4 27 8 313,8 62

76 77

JOINT STOCK COMPANY KAZKOMMERTSBANK

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007

Share capital Treasury Share Property Investments Cumulative Hedging Retained Total equity Non- Total shares premium and available- translation reserve1 earnings1 attributable controlling equity reserve equipment for-sale fair reserve1 to equity interest

revaluation value holders of reserve deficit1 the Parent

(KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

31 December 2008 7,000 (10 ) 152,684 6,918 (1,84 2) (3,016 ) (10,7 17) 162,5 67 313,584 27 8 313,86 2

Net profit ------19,4 23 19,42 3 (40 0) 19,0 23 Loss on revaluation of property and equipment - - - (1,896) - - - - (1,896) - (1,896) Release of property and equipment revaluation reserve due to depreciation and disposal of previously revalued assets - - - (80 ) - - - 80 - - - Investments available-for-sale - - - - 2,52 3 - - - 2,52 3 - 2,5 23 Cash flow hedges ------12,2 27 - 12,22 7 - 12,2 27 Exchange differences on translation of foreign operations - - - - - 2,54 4 - - 2,54 4 (10 1) 2,4 43 Deferred income tax - - - (7 ) (490 ) - (2,44 5) (15 ) (2,957 ) - (2,95 7)

Total comprehensive income - - - (1,983) 2,033 2,54 4 9,7 82 19,4 88 31,864 (50 1) 31,363

Increase of share capital - ordinary shares 2,044 - 42,4 28 - - - - - 44,47 2 - 44,4 72 Purchase of treasury shares - (13) (266) - - - - - (279) - (27 9) Sale of treasury shares - 10 160 - - - - - 17 0 - 17 0

31 December 2009 9,044 (13) 195,0 06 4,935 191 (47 2) (935 ) 182,0 55 389,811 (22 3) 389,58 8

On behalf of the Management Board of the Bank:

1 The amounts included within the Investments available-for-sale fair value deficit, Cumulative translation reserve, Hedging reserve and Retained earnings, in the above table, are included within “Other reserves” in the consolidated statement of financial position.

Zhussupova N.A. Shoinbekova G.K. Chairman of the Board Chief Accountant The notes on pages 82-203 form an integral part of these consolidated financial statements. 5 April 2010 5 April 2010 Almaty Almaty

78 79 JOINT STOCK COMPANY KAZKOMMERTSBANK JOINT STOCK COMPANY KAZKOMMERTSBANK

CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007 FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007

Year ended Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 31 December Notes Notes 2009 2008 2007 2009 2008 2007 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) CASH FLOWS FROM OPERATING ACTIVITIES: CASH FLOWS FROM INVESTING ACTIVITIES: Interest received from financial assets at fair value through Purchase of property, equipment and intangible assets (14,186) (5,928) (16,261) profit or loss 2,802 5,7 01 6,44 0 Proceeds on sale of property, equipment and intangible Interest received on loans and advances to banks and other assets 11,412 134 1,362 financial institutions 7,957 10,0 76 9,45 7 Dividends received 186 17 6 - Interest received from loans to customers 234,827 332,85 8 264,828 Proceeds on sale of investments available-for-sale 2,764 5,07 4 6,29 5 Interest received from investments available-for-sale 1,653 37 0 4 8 Purchase of investments available-for-sale (5,328) (3,666) (6,94 6) Interest received from investments held to maturity 41 10 5 32 Proceeds on maturity of investments held to maturity 173 39 84 2 Interest paid on loans and advances from banks and other Purchase of investments held to maturity (525) (422) (84 8) financial institutions (16,301) (31,022) (40,030 ) Purchase of investments in associates - (2,172) (134 ) Interest paid on customer accounts (80,995) (76,896) (46,60 1) Proceeds on disposal of investments in associates 6,147 - - Interest paid on debt securities issued (72,695) (66,735 ) (44,492 ) Purchase of subsidiaries, net of cash of entities acquired - (2,940 ) (1,52 5) Interest paid on other borrowed funds (4,663) (8,19 5) (9,117 ) Interest paid on subordinated debt (5,824) (4,40 0) (3,005 ) Net cash inflow/(outflow) from investing activities 643 (9,705 ) (17,215 ) Fee and commission received 20,957 22,14 9 23,55 8 Fee and commission paid (3,544) (4,14 0) (2,713) CASH FLOWS FROM FINANCING ACTIVITIES: Other income received 3,795 8,7 56 6,893 Issue of ordinary shares 44,472 - 15 4 Operating expenses paid (24,456) (37,393 ) (41,537 ) Purchase of treasury shares (279) (420 ) (120 ) Proceeds on sale of treasury shares 170 24 1 29 0 Cash inflow from operating activities before changes in Proceeds from debt securities issued 37,570 111,164 321,63 2 operating assets and liabilities 63,554 151,2 34 123,761 Repurchase and repayment of debt securities issued (404,941) (173,00 8) (23,94 4) Proceeds from subordinated debt 2,530 8,54 9 33, 919 Changes in operating assets and liabilities Repayment of subordinated debt (3,391) - (4,87 8) (Increase)/decrease in operating assets: Repayment of other borrowed funds (140,265) (12,95 3) 79,7 56 Funds deposited with National Bank of the Republic of Dividends paid on preference shares (738) (59 5) (60 3) Kazakhstan and cash on hand 722 75,0 90 29,414 Funds deposited with Central Bank of Russian Net cash (outflow)/inflow from financing activities (464,872) (67,02 2) 406,2 06 Federation (771) 2,2 52 (718) Funds deposited with National Bank of the Kyrgyz Effect of changes in foreign exchange rate on cash and Republic (49) 4 2 (15 ) cash equivalents 5,653 (22) 567 Funds deposited with National Bank of Tajikistan 29 (4 9) - Precious metals (892) (317 ) 80 7 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (86,428) 24,64 8 84,94 3 Financial assets at fair value through profit or loss (49,372) 100,4 82 173,811 Loans and advances to banks and other financial CASH AND CASH EQUIVALENTS, beginning of period 14 168,994 144,34 6 59,4 03 institutions 94,026 11,937 88,29 5 Loans to customers 245,123 115,67 4 (701,115 ) CASH AND CASH EQUIVALENTS, end of period 14 82,566 168,9 94 144,34 6 Other assets 11,083 (5,884 ) (5,749) Increase/(decrease) in operating liabilities: Loans and advances from banks and other financial institutions (121,917) (426,163) (171,383) On behalf of the Management Board of the Bank: Customer accounts 145,223 80,4 62 164,34 4 Other liabilities (10,760) 3,15 3 (3,808)

Cash inflow/(outflow) from operating activities before taxation 375,999 107,913 (302,356 )

Income tax paid (3,851) (6,516) (2,259 )

Net cash inflow/(outflow) from operating activities 372,148 101,3 97 (304,615 ) Zhussupova N.A. Shoinbekova G.K. Chairman of the Board Chief Accountant 5 April 2010 5 April 2010 The notes on pages 82-203 form an integral part of these consolidated financial statements. Almaty Almaty

80 81 JOINT STOCK COMPANY KAZKOMMERTSBANK JSC Kazkommerts Securities is a joint stock company was registered with the Chamber of company and has operated under the laws of Commerce of the Netherlands under the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS the Republic of Kazakhstan since 1997. The license № 24317181 dated 13 February 2001 for company's primary business consists of conducting separate types of banking and FOR THE YEARS ENDED 31 DECEMBER 2009, 2008 AND 2007 trading with securities, including broker and other types of operations. dealing operations, consulting in investments ORGANISATION and corporate finances, organization of Kazkommerts Capital II B.V. is a limited JSC Kazkommertsbank (the “Bank”, or The registered office of the Bank is located security issuances, allocation and underwriting liability partnership (B.V.) and has operated “Kazkommertsbank”) is a joint stock bank and at: 135Zh, Gagarin str., Almaty 050060, of securities, and purchase and sale of under the laws of the Kingdom of the operates in the Republic of Kazakhstan since Republic of Kazakhstan. securities in the capacity of the agent. In Netherlands since 11 April 2000. The Company 1990. The Bank's activities are regulated by the As at 31 December 2009 and 2008, the connection with the renaming from OJSC to was established for the primary purpose of Agency of the Republic of Kazakhstan on Bank has 23 branches in the Republic of JSC company received license on broker and raising funds for the Bank in foreign capital regulation and supervision of financial market Kazakhstan, and a representative office in dealing operations № 0401201207 dated 17 markets. The company has license № and financial organizations (the “FMSA”) in London. As at 31 December 2007, the Bank May 2006 and license for investment portfolio 24305284 dated 11 April 2000 issued by the accordance with the license № 48 dated 27 had 25 branches in the Republic of management № 0403200439 dated 17 May Chamber of Commerce of the Netherlands for December 2007 and by the National Bank of Kazakhstan, and a representative office in 2006 issued by the FMSA. conducting operations. the Republic of Kazakhstan (the “NBRK”). The Dushanbe, Tajikistan. Bank's primary business consists of Kazkommertsbank is a parent company of LLP Processing Company is a limited liability JSC OCOPAIM Grantum Asset Manage- commercial banking activities, operations with the banking group (the “Group”) which partnership and has operated under the laws ment (“Grantum PAMC”) is a joint stock securities, foreign currencies and derivative consists of the following enterprises of the Republic of Kazakhstan since 9 July company and has operated under the laws of instruments, originating loans and consolidated in the financial statements: 2004. The company is registered with the the Republic of Kazakhstan since 1998. The guarantees. Ministry of Justice of the Republic of company's primary business is investment Kazakhstan under № 64313-1910-ТOO. The management of pension funds. The company Proportion or ownership Company's primary business is to provide has license № 0411200249 dated interest/voting rights Name Country of Type of operation payment and other types of card processing. 26 June 2006 on investment management of 2009 2008 2007 operation pension funds issued by the FMSA, license Republic of JSC Kazkommerts Securities 100% 100% 100% Securities market transactions 0403200454 dated 26 June 2006 on Kazakhstan Kazkommerts International B.V. is a № LLP Processing Republic of Payment card processing and other limited liability partnership (B.V.) and has management of investment portfolio issued 100% 100% 100% Company Kazakhstan related services operated under the laws of the Kingdom of by the FMSA, license № 0402200299 dated 26 Kazkommerts Kingdom of Raising funds for the Bank on 100% 100% 100% International B.V. Netherlands international capital markets the Netherlands. The Company was June 2006 on broker and dealer activity Kazkommerts Kingdom of Raising funds for the Bank on 100% 100% 100% established for the primary purpose of raising without right to custody activities issued by Finance II B.V. Netherlands international capital markets Kazkommerts Kingdom of Raising funds for the Bank on funds for the Bank in foreign capital markets. the FMSA. 100% 100% 100% Capital II B.V. Netherlands international capital markets The company was registered with the JSC OCOPAIM Grantum Asset Republic of Investment management of pension 100% 100% 100% Management Kazakhstan assets Chamber of Commerce of the Netherlands LLP Kazkommertsbank RFCA is a limited Republic of Operations with financial instruments liability partnership and has operated under LLP Kazkommertsbank RFCA - 100% 100% under the license № 24278506 dated 1 Kazakhstan on Regional financial centre of Almaty the laws of the Republic of Kazakhstan since 11 Republic of October 1997 for raising funds, including the JSC Kazkommerts Life 100% 100% 100% Life insurance Kazakhstan issuance of bonds and other securities and January 2007. The company's primary business Republic of CJSC Kazkommertsbank Tajikistan 100% 100% 100% Commercial bank entering into agreements regarding those consists of trading with securities, including Tajikistan Kyrgyz activities. broker and dealing operations on Regional OJSC Kazkommertsbank Kyrgyzstan 94.64% 94.64% 93.58% Commercial bank Republic financial centre of Almaty. The company has Republic of JSC Grantum APF 80.01% 80.01% 80.01% Pension fund Kazakhstan Kazkommerts Finance II B.V. is a limited license № 0401201454 dated 2 March 2007 on JSC Insurance Company Kazkommerts- Republic of 100% 100% 65% Insurance liability partnership (B.V.) and has operated broker and dealing operations at the stock Policy Kazakhstan LLP Commercial bank under the laws of the Kingdom of the market with the right to maintain customer Russia 100% 100% 52.11% Commercial bank Moskommertsbank Netherlands. The Company was established accounts as a nominal holder issued by the LLP Investment Group East Kommerts Russia 50% 50% 50% Securities market transactions for the primary purpose of raising funds for FMSA. On 28 January 2009, the Board of the Bank at foreign capital markets. The Directors of the Bank approved to voluntarily

82 83 liquidate its subsidiary LLP Kazkommerts transferred cash to fund the capital of CJSC JSC Grantum APF is a joint stock company MKB provides a wide spectrum of banking RFCA. In accordance with the Order № 162 Kazkommertsbank Tajikistan in the amount of and has operated since 1998 under the laws of products and services for individuals, corporate dated 03 June 2009 of the Chairman of the KZT 604 million and KZT 602 million, the Republic of Kazakhstan. The company's clients and financial institutions. The Bank's FMSA, the license № 0401201454 issued to LLP respectively. On 24 January 2008, CJSC primary business consists of the receipt of primary business consists of retail banking, Kazkommertsbank RFCA on 2 March 2007 was Kazkommertsbank Tajikistan received an pension contributions of depositors and crediting of small and medium business and terminated as the result of voluntary operating license from the National Bank of making pension payments to recipients under the corporate sector. At the date of acquisition liquidation. Currently LLP Kazkommertsbank Tajikistan for banking operations in both the laws of the Republic of Kazakhstan. The the estimated fair value of the net assets of RFCA is in the process of liquidation. national currency and foreign currencies № company operates based on a state license on MKB approximated their carrying value. 33/1. the receipt of pension contributions and JSC Kazkommerts Life is a joint stock JSC Kazkommertsbank Kyrgyzstan is a joint making pension payments № 0000019 dated LLP Investment Group East Kommerts is a company and has operated under the laws of stock bank and has operated under the laws of 20 April 2006, issued by the FMSA. limited liability partnership and operates on the Republic of Kazakhstan. The company's the Kyrgyz Republic since 1991. The Bank's the securities market. The main activities of primary business consists of life insurance. The operations are regulated by the National Bank JSC Insurance Company Kazkommerts- LLP Investment Group East Kommerts are company has a license on life insurance of the Kyrgyz Republic according to license № Policy is a joint stock company and operates broker dealer activities and depository (reinsurance) services № 42-2/1 dated 14 April 010 dated 15 April 2005 for banking under laws of the Republic of Kazakhstan services.The company has a license on 2008 issued by the FMSA. operations in national currency and license № since 1996. The company's primary business depository activities operations № 177-08298- 010/1 dated 15 April 2005 for banking consists of insurance of property, cargoes, 000100 dated 08 February 2005, license on On 29 May 2007, the Board of Directors of operations in foreign currency. The Bank's auto insurance, civil liability insurance of brokerage services № 177-08289-100000 the Bank decided to establish a subsidiary primary business consists of commercial vehicle owners, insurance of other civil dated 08 February 2005, license on dealer bank, CJSC Kazkommertsbank Tajikistan. The banking activities, acceptance of deposits liabilities and reinsurance. The company has services № 177-08292-010000 dated 08 Bank received an approval from the FMSA № from individuals, transfer of payments, licenses on voluntary insurance services DOS February 2005 and license on securities 93 on 6 September 2007 for the creation of a operations with foreign exchange and № 13-11/2 dated 13 April 2007 and on management № 177-08295-001000 dated 08 subsidiary bank in Tajikistan. On 22 November derivative instruments, originating loans and obligatory insurance services OS № 13-11/2 February 2005. At the date of acquisition the 2007 and 25 December 2007 the Bank guarantees. dated 13 April 2007 issued by the FMSA. estimated fair value of the net assets of LLP Investment Group East Kommerts LLP Commercial Bank Moskommertsbank approximated their carrying value. «MKB») is a limited liability partnership and operates under the laws of the Russian Acquisitions and sales Federation since 2001. MKB's operations are regulated by the Central Bank of the Russian On 24 July 2007 the Bank acquired a Federation in accordance with the license on 52.11% ownership interest in the share capital the banking operations № 3365 dated 20 of LLP Moscommertsbank. Prior to this date, September 2002 and license on the banking the Bank consolidated LLP Moscommertsbank operations with private sector № 3365 dated as the Bank had control enabled by the trust 16 June 2005. License of the Federal securities management agreements with LLP commission on broker operations Moscomertsbank's shareholders. The Bank № 177-11190-100000 dated 18 April 2008, also entered into an agreement for trust license on the depository activity № 177-11200- management of the remaining 47.89%. Due 000100 dated 18 April 2008, license on dealer to the nature of the assets acquired, operations № 177-11192-010000 dated 18 April management has estimated that the fair value 2008, license on the trust operations № 177- of the net assets of LLP Moscommertsbank 11196-001000 dated 18 April 2008 and license approximated their carrying values. of stock broker commodity futures and option The purchase price on acquisition of LLP transactions in the exchange trade № 1283 Moscommertsbank has been allocated as dated 4 December 2008. follows:

84 85 Book value at Fair value at 24 July 2007 24 July 2007 The purchase price was agreed in 2006, consolidate its interest in LLP Investment

(KZT million) (KZT million) however, the acquisition did not occur in 2007. Group East Kommerts as under the (unaudited) (unaudited) The negative goodwill resulted from a change requirements of IFRS, it is of the opinion that it Assets in the net asset value between these dates. exerts sufficient control over the operations of the company, as the Bank has control over the Cash and balances with national (central) banks 6,705 6, 705 On 4 October 2007, the Bank acquired Board of Directors of LLP Investment Group Financial assets at fair value through profit or loss 14,250 14 ,250 50% of the ownership interest of LLP East Kommerts. Loans and advances to banks and other financial institutions 4,414 4 ,414 Investment Group East Kommerts for KZT 146 Loans to customers 181,533 181, 533 million. In accordance with IAS 27 The purchase price on acquisition of LLP Loans under reverse repurchase agreements 13,693 13, 693 «Consolidated and Separate Financial Investment Group East Kommerts has been Property, equipment and intangible assets 1,673 1,673 Statements», the Bank has opted to allocated as follows: Other assets 1,961 1,961

Book value at Fair value at 224,229 224 ,229 4 October 2007 4 October 2007

Liabilities (KZT million) (KZT million) Loans and advances from banks and other financial institutions 47,405 47 ,405 (unaudited) (unaudited) Customer accounts 29,752 29, 752 Assets Debt securities issued 109,440 109, 440 Cash and balances with national (central) banks 2,684 2, 684 Subordinated debt 19 19 Loans to customers 2,271 2 ,271 Securities purchased under repurchase agreements 336 336 Property, equipment and intangible assets 166 166 Derivative financial liabilities 13 13 Other assets 9,014 9, 014 Other liabilities 561 561

14,135 14 ,135 187,526 187 ,526 Liabilities Loans and advances from banks and other financial institutions 6,025 6, 025 Net assets 36,703 36, 703 Other liabilities 7,481 7 ,481 Non-controlling interest (17 ,577)

13,506 13, 506 Share of net assets acquired, being 52.11% 19, 126 Net assets 629 629 Purchase consideration (17, 740)

Non-controlling interest (314 ) Excess of the Bank’s interest in fair value of net assets of LLP Moscommertsbank over cash consideration paid 1, 386 Share of net assets acquired, being 50.00 % 315

Purchase consideration (14 6) Purchase consideration consists of the following: Excess of the Bank’s interest in fair value of net assets of Elimination of intercompany balances with LLP Investment Group East Kommerts over cash consideration paid 169 LLP Moscommertsbank on acquisition 11, 525

Net cash outflow on acquisition: Net cash inflow on acquisition: Cash consideration paid (6, 215) Cash consideration paid (14 6) Less: cash and cash equivalents acquired, being 52.11% 3, 494 Less: cash and cash equivalents acquired, being 50.00% 1, 342

Total 1, 196 Total (2, 721)

86 87 Negative goodwill on acquisition of LLP Company Kazkommerts Life for KZT 290 The negative goodwill arose due to a change within the parameters of a privileged Investment Group East Kommerts, recognized million. The Bank's capital share did not in the net assets between the date of the pricing acquisition program. The amount of the through consolidated income statement, arose change. and the date the transaction took place.This is transaction of KZT 480 million comprised due to the fact that LLP Investment Group East due to the purchase consideration for JSC 80.01% of total shares placed. The Bank's Kommerts is attributable to the access to On 28 April 2008, the Bank acquired Insurance Company Kazkommerts-Policy being share in the capital of JSC Grantum APF did resources available to LLP Investment Group 53,486 ordinary shares (35%) of JSC determined as at 31 December 2007, while the not change. East Kommerts under the combination. These Insurance Company Kazkommerts-Policy from transaction was finalized on 28 April 2008. The resources include affiliation to the the European Bank of Reconstruction and resulting gain was recorded within other income. On 27 May 2008, the Bank acquired the Kazkommerts brand, access to the branch Development for KZT 1,630 million. The Bank's remaining share in LLP Commercial Bank system of the Bank and LLP Commercial bank capital share in JSC Insurance Company The income and revenue of JSC Insurance Moscommertsbank («MKB») capital – Moscommertsbank and to the financing Kazkommerts-Policy increased to 100% upon Company Kazkommerts-Policy from the 47.89%. The transaction amount of KZT through the Bank. acquisition. beginning of the period till the date of 5,484 million brought the Bank's share in the acquisition, were accounted for as being MKB capital to 100% upon acquisition.An The excess of the Bank's interest in fair An independent appraisal of the fair value attributable to minority interest. Prior to the independent appraisal of the fair value of the value of net assets of LLP Investment Group of the assets acquired was not needed due to date of acquisition, the Group consolidated acquired assets was not needed due to the East Kommerts and LLP Commercial bank the fact that the fair value of most purchased JSC Insurance Company Kazkommerts-Policy fact that the present value of most purchased Moscommertsbank is credited to the assets and liabilities being available and easily as it had a controlling interest in JSC Insurance assets and liabilities was available and easily consolidated income statement on the dates definable. The fair value of the net assets Company Kazkommerts-Policy. definable. The fair value of the net assets of acquisition. purchased and the Bank's interest in the purchased and the Bank's interest in the definitive net fair value of net assets of JSC On 19 May 2008, the Bank acquired definitive net fair value of net assets of MKB On 22 April 2008, the Bank acquired Insurance Company Kazkommerts-Policy over 480,071 ordinary shares of JSC Grantum APF over the consideration paid are as follows:

290,000 ordinary shares of JSC Life Insurance the consideration paid, are as follows: Book value as at Fair value as at 27 May 2008 27 May 2008

Book value as at Fair value as at (KZT million) (KZT million) 28 April 2008 28 April 2008 (unaudited) (unaudited)

(KZT million) (KZT million) Assets (unaudited) (unaudited) Cash and balances with national (central) banks 8,731 8, 731 Assets Financial assets at fair value through profit or loss 7,071 7 ,071 Cash and balances with national (central) banks 12 12 Loans and advances to banks and other financial institutions 14,947 14 ,947 Financial assets at fair value through profit or loss 1,495 1, 495 Loans to customers 185,354 185 ,354 Loans and advances to banks 3,487 3, 487 Loans under reverse repurchase agreements 13,371 13 ,371 Investments available-for-sale 1,362 1, 362 Property, equipment and intangible assets 2,533 2, 533 Loans under reverse repurchase agreements 1,084 1, 084 Other assets 1,687 1, 687 Property, equipment and intangible assets 171 171 Other assets 2,387 2, 387 233,694 233, 694 Liabilities 9,998 9, 998 Loans and advances from banks and other financial institutions 71,433 71, 433 Liabilities Customer accounts 34,371 34 ,371 Other liabilities 4,755 4 ,755 Debt securities issued 86,192 86, 192 Subordinated debt 16 16 Derivative financial instruments 1,082 1, 082 4,755 4 ,755 Other liabilities 1,037 1, 037

Net assets 5,243 5, 243 194,131 194 ,131 Non-controlling interest -

Net assets acquired, being 35% 1, 835 Net assets 39,563 39, 563 Purchase consideration (1,5 81) Non-controlling interest -

Excess of the Bank’s interest in fair value of net assets of Net assets acquired, being 47.89% 18, 946 JSC Insurance Company Kazkommerts-Policy over cash consideration paid 254 Purchase consideration (16, 063)

Net cash outflow on acquisition: Excess of the Bank’s interest in fair value of net assets of JSC Insurance Company Kazkommerts-Policy purchase intergroup balances elimination 49 LLP Commercial bank Moscommertsbank over cash consideration paid 2, 883 Purchase cash outflows: Total paid in cash (1,630 ) Net cash outflow on acquisition: Cash acquired, being 35% 4 LLP Commercial bank Moscommertsbank purchase intergroup balances elimination (10, 579) Purchase cash outflows:

Total paid in cash (5,4 84) Total (1,626) Cash acquired, being 47.89% 4 ,181

Total (1, 303)

88 89 31 December 2009 31 December 2008 31 December 2007 Direct Direct Direct Number of 1 Number of 1 Number of 1 ownership, ownership, ownership, shares shares shares % % %

JSC Central-Asian Investment 184,679,013 23.722 184,679,013 32.14 184,679,013 32.13 Company (“CAIC”)

European Bank for Reconstruction and 76,095,329 9.77 48,597,741 8.46 48,597,741 8.45 Development Subkhanberdin N.S. 72,570,672 9.32 72,570,672 12.63 72,570,672 12.62 The excess of the Bank's interest in the fair Kazkommertsbank Kyrgyzstan for KZT 11 Life (“insurer”) at the placement price of KZT participateJSC Alnair Capi talin Hoacquisitionlding of shares of the new th 222,408,342 28.57 144,625,896 25.17 value of net assets was credited to “Other million. The share of the Bank increased from 7(“Al naiirs”)s ue of OJSC Kazkommertsbank 1,000 per share. As a result, the share- capital - income” in the consolidated income statement 93.58% up to 94.64%. KyrgyzstanJSC National Wel f(“subsidiaryare Fund bank') of 66,036 of the insurer increased by KZT 69 million and 165,517,2413 21.26 - - on the date of acquisition. sharesSamruk – Kazwithyna placement price of KGS 500 per amounted to KZT 1,451 million. The ownership- - On 28 January 2009, the Board of share.Other sh arAseho ldera sresult of the57, 33placement,0,567 share7.36 share 124 ,14of1,5 48the Bank21. 6did not 269,change002,39 5 and 46.80 Negative goodwill has been recognised on Directors of the Bank approved the decision to capital of the subsidiary bank will increase by amounted to 100%. the acquisition of 47.89% of the issued voluntarily liquidate its subsidiary LLP KGSTotal 33,018 thousand. JSC778, Kazkommertsbank601,1644 100.00 574,614,870 100.00 574,849,821 100.00 ordinary share capital of MKB due to the Kazkommerts RFCA (“Kazkommerts RFCA”) has used its pre-emptive right and acquired The investments of the Bank into the share investment in MKB being considered a and return its license for brokerage and 62,500 shares for KGS 31,250 thousand. On 12 capital of subsidiaries were made with the financial rather than strategic investment by dealership activities issued in favor of March 2010, JSC Kazkommertsbank made purpose of increasing their financial stability the previous shareholders. As such the Bank Kazkommerts RFCA by authorized payment from dividends received from the and compliance with the prudential and capital was solely responsible for the development of governmental bodies. The procedure on subsidiary bank. The ownership share of JSC adequacy requirements. MKB, including the enhancement of internal voluntary liquidation will be conducted in Kazkommertsbank did not change and business processes and building brand accordance with the requirements of current amounted to 94.64%. Shareholders recognition. In addition, the previous legislation. shareholders did not intend to make any On 24 December 2009, the Bank As at 31 December 2009, 2008 and 2007, additional capital contributions in MKB in light On 10 March 2009, the Bank sold its stake purchased 69,000 shares of the new issue of the following shareholders owned the issued of worsening market conditions. As a result, in associates, JSC APF Ular Umit and JSC JSC Life Insurance Company Kazkommerts ordinary shares of the Bank: the Bank acquired the remaining 47.89% of OCOPAIM Zhetysu, for KZT 5,817 million and issued ordinary share capital of MKB at a price KZT 200 million, respectively. The gain on sale 31 December 2009 31 December 2008 31 December 2007 exceeding the initial investment of the of these companies amounted to KZT 4,027 Direct Direct Direct Number of 1 Number of 1 Number of 1 previous shareholders, however, below the million. Movement of investments in ownership, ownership, ownership, shares shares shares current fair value. associates is disclosed in Note 21. % % %

JSC Central-Asian Investment 184,679,013 23.722 184,679,013 32.14 184,679,013 32.13 On 8 August 2008, the Bank acquired On 25 March 2009, the Bank purchased Company (“CAIC”)

50,000 ordinary shares of JSC OCOPAIM 900 thousand shares of the new issue of JSC European Bank for Grantum Asset Management within the Kazkommerts Securities, within the additional Reconstruction and 76,095,329 9.77 48,597,741 8.46 48,597,741 8.45 Development parameters of a privileged acquisition issue on the right of preferential purchase, at Subkhanberdin N.S. 72,570,672 9.32 72,570,672 12.63 72,570,672 12.62 program. The amount of the transaction was the price of placement of KZT 1,000 per share. JSC Alnair Capital Holding 222,408,342 28.57 144,625,896 25.17 KZT 500 million. The Bank's capital share did As a result, the share capital of JSC (“Alnair”) - - not change.On 10 September 2008, the Bank Kazkommerts Securities increased by KZT 900 JSC National Welfare Fund 165,517,2413 21.26 - - has paid a premium on the existing shares held million and amounted to KZT 1,475 million. The Samruk –Kazyna - - of Kazkommerts Capital II B.V. by contributing share of the Bank did not change and Other shareholders 57,330,567 7.36 124,141,548 21.6 269,002,395 46.80 cash of KZT 132 million. amounted to 100%. Total 778,601,1644 100.00 574,614,870 100.00 574,849,821 100.00 OJSC Kazkommertsbank Kyrgyzstan On 24 March 2009, the Bank purchased increased share capital by 20.5% (or KZT 71 292 thousand shares of the new issue of million) through the placement of an additional JSC Life Insurance Company Kazkommerts Life 1 These percentage holdings were calculated based on the direct holding of each shareholder in the total number of common shares 41,000 ordinary shares. On 24 October 2008, at the placement price of KZT 1,000 per share. outstanding. 2 Total number of shares under CAIC’s control is 241,885,810 common shares (ownership – 31.06%), including 56,324,076 shares the Bank bought 38,368 shares of this new As a result, the share capital of the insurer received in trust management from JSC National Welfare Fund Samruk-Kazyna and 882,721 shares owned indirectly through JSC emission in accordance with its prevailing increased by KZT 292 million and amounted to Ak-Zhalyn, subsidiary of CAIC. 3 As at 31 December 2009, out of total mentioned number of common shares, 56,324,076 common shares were passed to trust purchase right for KZT 163 million. The share of KZT 1,382 million. The share of the Bank did management with voting right to CAIC and 50,208,649 shares to JSC Alnair. However, on 28 December 2009, JSC Alnair and the Bank of 93.58% did not change. not change and amounted to 100%. JSC National Welfare Fund Samruk-Kazyna cancelled the agreement on trust management of the Bank’s shares with actual cancellation became effective in January 2010. 4 This number is calculated at each reporting date as the total number of the common shares outstanding minus treasury shares On 24 December 2008, the Bank acquired On 29 September 2009, the Board of purchased by the Bank’s market-maker based on the requirements of the Kazakhstan Stock Exchange. 2 , 5 6 8 o r d i n a r y s h a r e s o f O J S C Directors of JSC Kazkommertsbank decided to

90 91

1 These percentage holdings were calculated based on the direct holding of each shareholder in the total number of common shares outstanding. 2 Total number of shares under CAIC’s control is 241,885,810 common shares (ownership – 31.06%), including 56,324,076 shares received in trust management from JSC National Welfare Fund Samruk-Kazyna and 882,721 shares owned indirectly through JSC Ak-Zhalyn, subsidiary of CAIC. 3 As at 31 December 2009, out of total mentioned number of common shares, 56,324,076 common shares were passed to trust management with voting right to CAIC and 50,208,649 shares to JSC Alnair. However, on 28 December 2009, JSC Alnair and JSC National Welfare Fund Samruk-Kazyna cancelled the agreement on trust management of the Bank’s shares with actual cancellation became effective in January 2010. 4 This number is calculated at each reporting date as the total number of the common shares outstanding minus treasury shares purchased by the Bank’s market-maker based on the requirements of the Kazakhstan Stock Exchange. Number of ordinary shares is calculated net Samruk-Kazyna, the Bank and its major Mr. Subkhanberdin N.S., opted not to exercise (“IFRS”) issued by the International of the treasury shares. shareholders. According to these agreements, their pre-emptive purchase rights or Accounting Standards Board (“IASB”) and Samruk-Kazyna will not participate in the day- participate in the increase. The European Bank Interpretations issued by the International JSC Central-Asian Investment Company to-day management of the Bank. The major of Reconstruction and Development Financial Reporting Interpretations Committee (“CAIC”) is one of the entities through which shareholders of the Bank have maintained (“EBRD”), a shareholder of the Bank since (“IFRIC”). the Directors and Management Board control over the Bank, as Samruk-Kazyna has 2003, used its pre-emptive rights and members own shares of the Bank. As at 31 transferred a portion of its common shares to purchased 27,497,588 ordinary shares. The These consolidated financial statements December 2009, CAIC held 184,679,013 shares the trust management of major shareholders holders of GDRs purchased 9,704,658 are presented in millions of Kazakhstani tenge of the Bank (2008: 184,679,013 shares, 2007: CAIC and Alnair. As a result of this agreement, ordinary shares via the Bank of New York (“KZT”), unless otherwise indicated. 184,679,013 shares). As at 31 December 2009 CAIC, European Bank for Reconstruction and Mellon in the framework of pre-emptive Subkhanberdin N.S. owned 87.21% (2008: Development and Mr. Subkhanberdin purchase rights. Minority shareholders These consolidated financial statements 87.21%, 2007: 87.21%) and Zhussupova N.A. together have voting rights on 50% plus one purchased 1,618,690 ordinary shares in have been prepared under the historical cost 12.79% (2008: 12.79%, 2007: 12.79%). As at common share of the Bank. CAIC, Mr. accordance with their pre-emptive rights. convention, except for the measurement at 31 December 2009, Subkhanberdin N.S. owns Subkhanberdin and Alnair were granted an fair value of certain financial instruments and 30.01% (2008: 40.66%, 2007: 40.64%) of option to repurchase the additional shares 14 January 2010, JSC Alnair Capital Holding measurement of property and equipment at the ordinary share capital of the Bank through issued from Samruk-Kazyna exercisable within has acquired additional shares of revalued amounts according to International direct and indirect ownership as a result of his a period of four years from the date of the JSC Kazkommertsbank. As a result of the Accounting Standard (“IAS”) 39 “Financial holdings in CAIC, Zhussupova N.A. owns ordinary share's issue. transaction, Alnair has increased its holding of Instruments: Recognition and Measurement” 3.97% (2008: 4.11%, 2007: 4.11%) through JSC Kazkommertsbank's common shares to and IAS 16 “Property, Plant and Equipment”, indirect ownership. European Bank for Reconstruction and 28.565% and now owns 222,408,342 respectively.Kazkommertsbank and its Development (“EBRD”) is an international common shares of the Bank. The earlier subsidiaries (except for subsidiaries in Russia JSC Alnair Capital Holding (“Alnair”) is a financial institution established in 1991 to agreement between Alnair and JSC National and Tajikistan) maintain their accounting company operating under the laws of the support market economies in the countries of Welfare Fund Samruk-Kazyna, in relation to records in accordance with IFRS. Subsidiaries in Republic of Kazakhstan and is owned by a Central Europe and Central Asia. It has been a the placement of 6.448% of the Bank's Russia and Tajikistan maintain their accounting private investment fund, established by Sheikh shareholder of the Bank since 2003. EBRD is a common shares under the trust management records in accordance with local GAAP and Takhnun bin Zaid Al-Nahayan. Alnair has been large investor in the region, and in addition to of Alnair, has been terminated based on the their financial statements are prepared from a shareholder of the Bank since 2008 and allocating its own funds, it attracts significant mutual agreement of both parties. This the local statutory accounting records and together with “Alnair Capital” LLP has the direct foreign investments. It's shareholders purchase has not resulted in any changes to adjusted to conform with IFRS. official status of bank holding. Alnair owns are 61 countries and two intergovernmental the shareholdings structure of other major shares in the form of GDRs, which are organisations. shareholders – Mr. Subkhanberdin, JSC These consolidated financial statements included in the total amount of shares under Central Asian Investment Company (“CAIC”), have been prepared based on the accounting the nominal holding with the Central During the first half of 2009, 325,000,000 European Bank for Reconstruction and records of the Bank and its subsidiaries. The Depository. ordinary shares for total amount of KZT 3,250 Development (“EBRD”) and JSC National preparation of consolidated financial million were authorized for issue by the Welfare Fund Samruk-Kazyna. statements in conformity with IFRS requires JSC Samruk-Kazyna National Welfare Fund shareholders. On 14 May 2009, the Bank management to make estimates and (“Samruk-Kazyna”) belongs to the completed the placement of 204,338,177 These consolidated financial statements assumptions that affect the reported Government of the Republic of Kazakhstan. ordinary shares. As a result of the placement were authorized for issue by the Bank's amount of assets and liabilities and Samruk-Kazyna took its position in the Bank in of shares, the Bank's share capital increased Management Board on 5 April 2010. disclosure of contingent assets and liabilities 2009 following the Government's decision to by KZT 44.47 billion (149.82/$1). The new at the date of the consolidated financial protect the rights of the Bank's creditors and shares were priced at US$ 1.45 per ordinary 2. BASIS OF PRESENTATION statements and reported amounts of support the sustainability of the Kazakh share and US$ 2.90 per GDR (representing revenues and expenses during the reporting banking system. two ordinary shares). Accounting basis period. Actual results could differ from those estimates. Estimates that are particularly Samruk-Kazyna plans to be a shareholder Samruk-Kazyna purchased 165,517,241 These consolidated financial statements susceptible to change relate to the provisions of the Bank for a limited period based on the ordinary shares. Meanwhile, the main have been prepared in accordance with for impairment losses and the fair value of terms of the agreements signed between shareholders of the Bank, CAIC, Alnair and International Financial Reporting Standards financial instruments.

92 93 The Group had a change in accounting 3. SIGNIFICANT ACCOUNTING Equity items of the foreign entity are For a business combination involving an policy during 2009 with regards to the POLICIES translated at exchange rates on the date of entity or business under common control, all presentation of the consolidated statements the transactions; assets and liabilities of the subsidiary are of cash flows from indirect to direct method. All resulting exchange differences are measured at the carrying values recorded in The direct method is a requirement of the Basis of consolidation classified as equity until the disposal of the the stand-alone financial statements of the National Bank of the Republic of Kazakhstan investment; subsidiary. The difference between the for annual periods starting from The consolidated financial statements On disposal of an investment in a foreign carrying value of the acquired share in net 1 January 2009. This change is retrospectively incorporate the financial statements of the entity, related exchange differences are assets of the subsidiary and the cost of applied in accordance with IAS 8 “Accounting Bank and entities (including special recognized in the consolidated income acquisition are recorded directly in equity Policies, Changes in Accounting Estimates and purpose entities) controlled by the Bank statement. attributable to the owners of the parent. Errors”. In addition, IAS 1 “Presentation of (its subsidiaries). Control is achieved where Financial Statements” requires the the Bank has the power to govern the Business combinations The results of subsidiaries acquired or presentation of the statement of financial financial and operating policies of an disposed of during the year are included in the position as at the beginning of the earliest investee entity so as to obtain benefits The assets, liabilities and contingent consolidated income statement from the period when a reporting entity applies an from its activities. liabilities of a subsidiary are measured at their effective date of acquisition or up to the accounting policy retrospectively. For the fair values at the date of acquisition. Any effective date of disposal, as appropriate. Group, this consolidated statement of The results of subsidiaries acquired or excess of the cost of acquisition over the fair financial position would be as at 31 December disposed of during the year are included in the values of the identifiable net assets acquired The difference, between the carrying 2006. However, the retrospective accounting consolidated income statement from the is recognized as goodwill. Any deficiency of amount of non-controlling interest and the for the change in accounting policy had no effective date of acquisition or up to the the cost of acquisition below the fair values of amount received on its purchase is recognized impact on the consolidated statement of effective date of disposal, as appropriate. the identifiable net assets acquired (i.e. in equity attributable to the owners of the financial position as at 31 December 2006. discount on acquisition) is credited to the parent. Therefore that consolidated statement of Where necessary, adjustments are made to consolidated income statement in the period financial position has not been presented in the financial statements of subsidiaries to of acquisition. Recognition and measurement these consolidated financial statements. bring the accounting policies used into line of financial instruments with those used by the Bank. The non-controlling interest is initially Functional currency measured at the minority's proportion of the The Group recognizes financial assets and All significant intra-group transactions, fair values of the assets, liabilities and liabilities in its consolidated statement of Items included in the financial statements balances, income and expenses are eliminated contingent liabilities recognized. The equity financial position when it becomes a party to of each entity of the Group are measured on consolidation. attributable to equity holders of the parent the contractual provisions of the instrument. using the currency that best reflects the and net income attributable to non-controlling Regular way purchases and sales of financial economic substance of the underlying events In translating the financial statements of a shareholders' interests are shown separately in assets and liabilities are recognized using and circumstances relevant to that entity (the foreign subsidiary into the presentation the consolidated statement of financial settlement date accounting. Regular way “functional currency”). The reporting currency for incorporation in the consolidated position and consolidated income statement, purchases of financial instruments that will be currency of the Group is the Kazakhstani financial statements, the Group follows a respectively. subsequently measured at fair value between tenge. translation policy in accordance with IAS 21 trade date and settlement date are accounted “The Effects of Changes in Foreign Exchange The Group accounts for increases in for in the same way as for acquired Rates” (“IAS 21”), and in particular, performs ownership of a controlled entity by revaluing instruments. the following procedures: all identified assets and liabilities of the subsidiary to fair value at the date of exchange Financial assets and liabilities are initially Assets and liabilities, both monetary and in proportion to the amounts attributable to recognized at fair value plus, in the case of a non-monetary, of the foreign entity are the additional interest acquired. Goodwill is financial asset or financial liability not at fair translated at closing rate; recognized for any excess of the cost of value through profit or loss, transaction costs Income and expense items of the foreign the increase over the Group's interest in the that are directly attributable to the acquisition entity are translated at exchange rates on the net fair value of the identifiable assets and or issue of the financial asset or financial date of the transactions; liabilities. liability. The accounting policies for

94 95 subsequent re-measurement of these items risks and rewards have been neither retained Cash and balances with national instruments that are managed together and are disclosed in the respective accounting nor transferred, the Group assesses whether (central) banks for which there is evidence of a recent and policies set out below. or not is has retained control of the asset. If it actual pattern of short-term profit taking or has not retained control, the asset is Cash and balances with national (central) (3) which are designated by the Group at fair Derecognition of financial assets derecognized. Where the Group has retained banks include cash on hand and unrestricted value through profit or loss upon initial and liabilities control of the asset, it continues to recognize balances on correspondent and time deposit recognition. the asset to the extent of its continuing accounts with the National Bank of the Financial assets involvement. Republic of Kazakhstan, the Central Bank of A financial asset other than a financial the Russian Federation, the National Bank of asset held for trading may be designated at A financial asset (or, where applicable a Financial liabilities Kyrgyz Republic and the National Bank of fair value through profit or loss upon initial part of a financial asset or part of a group of Tajikistan with original maturities within 90 recognition if: (1) such designation eliminates similar financial assets) is derecognized where: A financial liability is derecognized when days. or significantly reduces a measurement or the obligation is discharged, cancelled, or recognition inconsistency that would the rights to receive cash flows from the expires. For the purposes of determining cash otherwise arise; (2) the financial asset forms asset have expired; flows, cash and cash equivalents includes part of a group of financial assets or financial the Group has transferred its rights to On the redemption or settlement of debt advances to banks in countries included in the liabilities or both, which is managed and its receive cash flows from the asset, or retained securities (including subordinated liabilities) Organization for Economic Co-operation and performance is evaluated on a fair value basis, the right to receive cash flows from the asset, issued by the Group, the Group derecognises Development (“OECD”). The minimum reserve in accordance with the Group's documented but has assumed an obligation to pay them in the debt instrument and records a gain or loss deposit required by the Central Bank of the risk management or investment strategy, and full without material delay to a third party being the difference between the debt's Russian Federation, the National Bank of the information about the grouping is provided under a 'pass-through' arrangement; and carrying amount and the cost of redemption Republic of Kazakhstan, the National Bank of internally on that basis; or (3) it forms part of the Group either (a) has transferred or settlement. The same treatment applies the Kyrgyz Republic and the National Bank of a contract containing one or more embedded substantially all the risks and rewards of the where the debt is exchanged for a new debt Tajikistan are not included in cash equivalents. derivatives, and IAS 39 “Financial Instruments: asset, or (b) has neither transferred nor issue that has terms substantially different Recognition and Measurement” permits the retained substantially all the risks and rewards from those of the existing debt. The Precious metals entire combined contract (asset or liability) to of the asset, but has transferred control of the assessment of whether the terms of the new be designated as at fair value through profit or asset. debt instrument are substantially different Assets and liabilities denominated in loss. takes into account qualitative and quantitative precious metals are translated at the current A financial asset is derecognized when it characteristics including a comparison of the rate computed based on the second fixing of Financial assets and liabilities at fair value has been transferred and the transfer qualifies discounted present value of the cash flows the London Metal Exchange rates using the through profit or loss are initially recorded and for derecognition. A transfer requires that the under the new terms with the discounted KZT/USD exchange rate effective on the date. subsequently measured at fair value. The Group either: (a) transfers the contractual present value of the remaining cash flows of Changes in the bid prices are recorded in net Group uses quoted market prices to determine rights to receive the asset's cash flows; or (b) the original debt issue. gain/(loss) on foreign exchange and precious fair value for financial assets and liabilities at retains the right to the asset's cash flows but metals operations. fair value through profit or loss. Fair value assumes a contractual obligation to pay those Where an existing financial liability is adjustment on financial assets and liabilities at cash flows to a third party. After a transfer, replaced by another from the same lender on Financial assets and liabilities at fair fair value through profit or loss is recognized the Group reassesses the extent to which it has substantially different terms, or the terms of value through profit or loss in the consolidated income statement for the retained the risks and rewards of ownership of an existing liability are substantially modified, period. the transferred asset. If substantially all the such an exchange or modification is treated as Financial assets and liabilities at fair value risks and rewards have been retained, the a de-recognition of the original liability and through profit or loss represent derivative The Group enters into derivative financial asset remains in the consolidated statement of the recognition of a new liability, and the instruments or securities (1) acquired instruments to manage currency and liquidity financial position. If substantially all of the difference in the respective carrying amounts principally for the purpose of selling them in risks and for trading purposes. These risks and rewards have been transferred, the is recognized in the consolidated income t h e n e a r f u t u r e , ( 2 ) w h i c h a r e instruments include forwards on foreign asset is derecognized. If substantially all the statement. a part of a portfolio of identified financial currency, precious metals and securities.

96 97 Reclassification of financial assets or pricing models that take into account the whether the derivatives that are used in liability affects profit or loss. Where a current market and contractual prices of the hedging transactions are highly effective in forecast transaction is no longer expected to On 13 October 2008, IASB issued underlying instruments and other factors. offsetting changes in cash flows of hedged occur, the cumulative unrealised gain or loss amendments to IAS 39 and IFRS 7 which Derivatives are carried as assets when their fair items. If the hedge is not highly effective in is recognised in profit or loss immediately. permits certain reclassification of non- value is positive and as liabilities when it is offsetting changes in cash flows attributable derivative financial assets (other than those negative. Derivatives are included in financial to the hedged risk, consistent with the Loans and advances to banks designated as at fair value through profit or assets and liabilities at fair value through documented risk management strategy, and other financial institutions loss at initial recognition under the fair value profit or loss in the consolidated statement of hedge accounting is discontinued. A hedge is option) out of the fair value through profit or financial position. Gains and losses resulting normally regarded as highly effective if, at In the normal course of business, the loss category in particular circumstances. The from these instruments are included in Net inception and throughout its life, the Group Group maintains advances and deposits for amendments to IFRS 7 introduce additional gain/loss from financial assets and liabilities at can expect, and actual results indicate, that various periods of time with other banks. disclosure requirements as the Group has fair value through profit or loss in the changes in the fair value or cash flows of the Loans and advances to banks and other reclassified financial assets in accordance with consolidated income statement. hedged items are effectively offset by financial institutions with a fixed maturity the amendments to IAS 39. The amendments changes in the fair value of the hedging term are subsequently measured at amortized are effective as of 13 October 2008 and, due Derivative instruments embedded in other instrument, and actual results are within a cost using the effective interest rate method, to rare market circumstances as in accordance financial instruments are treated as separate range of 80% to 125%. and are carried net of an allowance for with the amendments, the Group applied the derivatives if their risks and characteristics are impairment. revised IAS 39 retrospectively from not closely related to those of the host With cash flow hedges, the effective 1 July 2008. Transfers must be made at fair contracts and the host contracts are not portion of the gain or loss on the hedging Securities repurchase and reverse value and this fair value becomes the carried at fair value with unrealized gains and instrument is recognised directly in repurchase agreements and lending instruments' new cost or amortized cost. losses reported in the consolidated income consolidated statement of changes in equity. transactions Reclassifications made before 1 November statement. An embedded derivative is a The gain or loss relating to the ineffective 2008 were backdated to 1 July 2008; component of a hybrid (combined) financial portion is recognized immediately in profit or In the normal course of business the Group subsequent classifications were effective from instrument that includes both the derivative loss, and is included in the “Net gain/(loss) enters into financial assets sale and purchase the date the reclassification was made. The and a host contract, with the effect that some on financial assets and liabilities at fair value back agreements (“repos”) and financial Group has reclassified certain debt and equity of the cash flows of the combined instrument through profit or loss” line of the assets purchase and sale back agreements securities out of trading instruments category vary in a similar way to a stand-alone consolidated income statement. Amounts (“reverse repos”) in the normal course of into the available-for-sale category. The derivative. deferred in equity are recycled in profit or business. Repos and reverse repos are utilized carrying values of these assets, the effect of loss in the same periods when the hedged by the Group as an element of its treasury the reclassification on the income statement Hedge accounting item is recognised in profit or loss, in the management. and the impairment losses relating to these same line of the consolidated income assets are shown in Note 19. From 1 January 2008, the Group statement as the recognised hedged item. A repo is an agreement to transfer a implemented a hedge accounting policy to Hedge accounting is discontinued when the financial asset to another party in exchange Derivative financial instruments designate certain financial instruments as cash Group revokes the hedging relationship or for cash or other consideration and a flow hedges in accordance with IAS 39 when the hedging instrument expires, is sold, concurrent obligation to reacquire the In the normal course of business, the “Financial Instruments: Recognition and terminated or exercised, or no longer financial assets at a future date for an amount Group enters into various derivative financial Measurement”. qualifies for hedge accounting. On the equal to the cash or other consideration instruments including forwards, swaps and discontinuance of hedge accounting (except exchanged plus interest. These agreements are options on foreign currency, precious metals At inception of the hedge relationship, the where a forecast transaction is no longer accounted for as financing transactions. and securities to manage currency and Group documents the relationship between expected to occur), any cumulative Financial assets sold under repos are retained liquidity risks and for trading purposes. hedging instruments and hedged items, along unrealized gain or loss recognised in equity is in the consolidated financial statements and Derivatives are initially recognized at fair value with its risk management objectives and the recognised in profit or loss when the hedged the consideration received under these at the date a derivative contract is entered into way in which effectiveness will be assessed at cash flow occurs or, if the forecast agreements is recorded as a collateralized and are subsequently re-measured to their fair inception and during the period of the hedge. transaction results in the recognition of a deposit received within loans and advances value at each reporting date. The fair values Furthermore, at inception of the hedge and on financial asset or financial liability, in the from banks and other financial institutions are estimated based on quoted market prices an ongoing basis, the Group documents same periods during which the asset or and customer accounts.

98 99 Assets purchased under reverse repos are payments that are not quoted in an active carrying amounts and the present value of the amount sufficient, in the opinion of the recorded in the consolidated financial market other than those classified in other expected future cash flows, including amounts management, to cover relevant losses. The statements as cash placed on deposit which is categories of financial assets. recoverable from guarantees and collateral, provisions are created as a result of an collateralized by securities and other assets discounted at the financial asset's original individual evaluation of assets subject to risks and are classified within loans and advances to Loans to customers granted by the Group effective interest rate. Such impairment losses regarding financial assets being material banks and other financial institutions and are initially recognized at fair value plus are not reversed unless in a subsequent period individually and on the basis of an individual or loans to customers. related transaction costs that directly relate to the amount of the impairment loss decreases joint evaluation of financial assets not being acquisition or creation of such financial assets. and the decrease can be related objectively to material individually. In the event that assets purchased under Where the fair value of consideration given an event occurring after the impairment was reverse repos are sold to third parties, the does not equal the fair value of the loan, for recognized, such as recoveries, in which case The change in the impairment is included results are recorded in net gains/(losses) on example where the loan is issued at lower than the previously recognized impairment loss is into profits using the provision account respective assets. Any related income or market rates, the difference between the fair reversed by adjustment of an allowance (financial assets recorded at amortized cost) expense arising from the pricing difference value of consideration given and the fair value account. or by a direct write-off (financial assets between purchase and sale of the underlying of the loan is recognized as a loss on initial recorded at cost). Assets recorded in the assets is recognized as interest income or recognition of the loan and included in the Investments available-for-sale consolidated statement of financial position expense in the consolidated income consolidated income statement according to are reduced by the amount of the impairment. statement. nature of the losses. Subsequently, loans are If an available-for-sale asset is impaired, The factors the Group evaluates in carried at amortized cost using the effective the cumulative loss comprising the difference determining the presence of objective The Group enters into repos and reverse interest method. Loans to customers are between its cost (net of any principal payment evidence of occurrence of an impairment loss repos agreements under which it receives or carried net of any allowance for impairment and amortization) and its current fair value, include information on liquidity of the debtor transfers collateral in accordance with normal losses. less any impairment loss previously recognized or issuer, their solvency, business risks and market practice. Under standard terms for in the consolidated income statement, is financial risks, levels and tendencies of default repurchase transactions in the Republic of Write off of loans and advances transferred from equity to the consolidated on obligations on similar financial assets, Kazakhstan and other CIS states, the recipient income statement. Reversals of impairment national and local economic tendencies and of collateral has the right to sell or repledge the Loans and advances to banks and losses in respect of equity instruments conditions, and fair value of the security and collateral, subject to returning equivalent customers are written off against the classified as available-for-sale are not guarantees. These and other factors securities on settlement of the transaction, only allowance for impairment losses when recognized in the consolidated income individually or in the aggregate represent, to a if the counterparty fails to meet its obligations deemed uncollectible. Loans and advances are statement. Reversals of impairment losses on great extent, an objective evidence of per the agreement on the lending transaction. written off after management has exercised debt instruments are reversed through the recognition of the impairment loss on the all possibilities available to collect amounts due consolidated income statement if the increase financial asset or group of financial assets. As at 31 December 2009, the fair value of to the Group and after the Group has sold all in fair value of the instrument can be securities transferred as collateral under loans available collateral. Subsequent recoveries of objectively related to an event occurring after It should be noted that the evaluation of under repurchase agreements amounted to amounts previously written off are reflected the impairment loss were recognized in the losses includes a subjective factor. The (2008: KZT 11,095 million, 2007: KZT 82,147 as an offset to the charge for impairment of consolidated income statement. management of the Group believes that the million). financial assets in the consolidated income amount of recorded impairment is sufficient statement in the period of recovery. For the financial instruments recorded at to cover losses incurred on assets subject to As at 31 December 2009, the fair value of cost the impairment represents the difference risks at the reporting date, although it is not securities received as collateral under reverse Impairment losses between the carrying value of the financial improbable that in certain periods the Group repurchase agreements amounted to KZT asset and current value of the estimated can incur losses greater than recorded 12,238 million (2008: KZT 23,413 million, Assets carried at amortized cost future cash flows discounted using the current impairment. 2007: KZT 21,501 million). market interest rate for a similar financial The Group accounts for impairment losses instrument. Such impairment losses are not Finance leases Loans to customers of financial assets when there is objective reversed. evidence that a financial asset or group of Financе leases are leases that transfer Loans to customers are non-derivative financial assets is impaired. Impairment losses The impairment is calculated based on the substantially all the risks and rewards incident financial assets with fixed or determinable are measured as the difference between analysis of assets subject to risks and reflects to ownership of an asset. Title may or may not

100 101 eventually be transferred. Whether a lease is a accrued using the effective interest method, securities are carried at amortized cost, using identifiable assets, liabilities and contingent finance lease or an operating lease depends on which are recognized directly in the the effective interest rate method, less any liabilities of the associate at the date of the substance of the transaction rather than consolidated income statement. When sold, allowance for impairment. Amortized acquisition is recognized as goodwill. The the form of the contract. A lease classified as the gain/loss previously recorded in equity is discounts are recognized in interest income goodwill is included in the carrying amount of finance lease if: recycled through the consolidated income over the period to maturity using the effective the investment and is assessed for impairment statement. The Group uses quoted market interest method. as part of the investment. Any deficiency of The lease transfers ownership of the asset prices to determine the fair value for the the cost of acquisition below the Group's share to the lessee by the end of the lease term; Group's investments available-for-sale. If the Investments in associates of the fair values of the identifiable assets, The lessee has the option to purchase the market for investments is not active, the Group liabilities and contingent liabilities of the asset at a price which is expected to be establishes fair value by using valuation An associate is an entity over which the associate at the date of acquisition (i.e. sufficiently lower than the fair value at the techniques. Valuation techniques include using Group is in a position to exercise significant discount on acquisition) is credited in the date the option becomes exercisable such recent arm's length market transactions influence, but is neither a subsidiary nor a joint consolidated income statement in the period that, at the inception of the lease, it is between knowledgeable, willing parties, venture. Significant influence is the power to of acquisition. reasonably certain that the option will be reference to the current fair value of another participate in the financial and operating exercised; instrument that is substantially the same, policy decisions of the investee but is not Where a Group company transacts with an The lease term is for the major part of the discounted cash flow analysis and option control or joint control over those policies. associate of the Group, profits and losses are economic life of the asset even if title is not pricing models. If there is a valuation technique eliminated to the extent of the Group's transferred; commonly used by market participants to price The results and assets and liabilities of interest in the relevant associate. Losses may At the inception of the lease the present the instrument and that technique has been associates are incorporated in these provide evidence of an impairment of the value of the minimum lease payments demonstrated to provide reliable estimates of consolidated financial statements using the asset transferred in which case appropriate amounts to at least substantially all of the fair prices obtained in actual market transactions, equity method of accounting. provision is made for impairment. value of the leased asset; and the Group uses that technique. The leased assets are of a specialized Investments in associates are carried in the As discussed in Note 21, Investments in nature such that only the lessee can use them Dividends received on equity investments consolidated statement of financial position at associates, the Bank sold its stake in JSC APF without major modifications being made. are included in dividend received in the cost and adjusted for goodwill and post- Ular Umit and JSC OCOPAIM Zhetysu, thus consolidated income statement. acquisition changes in the Group's share of the financial information of the associates as at The Group as a lessor presents finance net assets of the associate, less any and for the year ended 31 December 2009 is leases as loans and initially measures them in Non-marketable debt/equity securities are impairment in the value of individual not presented. the amount equal to net investment in the stated at amortized cost/cost less impairment investments. Losses of associates in excess of lease. Subsequently the recognition of finance losses, if any, unless fair value can be reliably the Group's interest in those associates are not Details of the Group's investments in income is allocated to accounting periods so as measured. recognized. associates, including summarized financial to reflect a constant periodic rate of return on information of the associates, as at and for the Group's net investment in the finance When there is objective evidence that such Any excess of the cost of acquisition over the years ended 31 December 2008 and 2007 lease. securities have been impaired, the cumulative the Group's share of the fair values of the are presented below: loss previously recognized in equity is removed Investments available-for-sale from equity and recognized in the consolidated income statement for the period. As at and for the year ended 31 December 2008: Investments available-for-sale represents These financial assets are recognized net of Fair value of Total assets of Total liabilities of Revenue of Net loss investments in associated associated company associated debt and equity investments that are intended impairment loss. Name of associated Ownership associates company company company interest to be held for an indefinite period of time. Investments available-for-sale are initially Investments held to maturity (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) recorded at fair value and subsequently are 49.35% 1,775 18,263 14,061 5, 625 (3,880) measured at fair value, with such re- Investments held to maturity are debt JSC APF Ular Umit measurement recognized directly in equity, securities with determinable or fixed JSC OCOPAIM Zhetysu 50.00% - 1,371 6,971 539 (8,481) except for impairment losses, foreign payments. The Group has a positive intent and exchange gains or losses and interest income the ability to hold them to maturity. Such

102 103 As at and for the year ended 31 December 2007: when incurred and included in operating decrease previously charged. A decrease the in expenses unless they qualify for capitalization. carrying amount arising on the revaluation of Fair value of Total assets of Total liabilities of Revenue of Net profit such land and buildings is charged as an investments in associated associated company associated Name of associated Ownership The carrying amounts of property, plant expense to the extent that it exceeds the associates company company company interest and equipment and intangible assets are balance, if any, held in the properties (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) reviewed at each reporting date to assess revaluation reserve relating to a previous whether they are recorded in excess of their revaluation of that asset. 49.35% 1,752 3,840 342 5,143 1,805 JSC APF Ular Umit recoverable amounts. The recoverable amount JSC OCOPAIM Zhetysu 50.00% 1,433 2,909 12 1,522 902 is the higher of fair value less costs to sell and Depreciation on revalued buildings is 18.40% 37 227 7 170 77 LLP First Credit Bureau value in use, where carrying values exceed this charged to consolidated income statement. estimated recoverable amount, assets are On the subsequent sale or retirement of a written down to their recoverable amount. An revalued property, the attributable revaluation Goodwill On disposal of an investment, the amount impairment is recognized in the respective surplus remaining in the property and of goodwill attributable is included in the period and is included in operating expenses. equipment revaluation reserve is transferred Goodwill arising on the acquisition of a determination of the profit or loss on disposal. After the recognition of an impairment loss directly to retained earnings. subsidiary represents the excess of the cost of the depreciation charge for property, acquisition over the Group's interest in the fair Property, equipment equipment and intangible assets is adjusted in Market value of property is assessed using value of the identifiable assets, liabilities and and intangible assets future periods to allocate the assets' revised one of four methods: contingent liabilities of a subsidiary at the date carrying value, less its residual value (if any), of acquisition. Goodwill is initially recognized Property and equipment, except for on a systematic basis over its remaining useful The comparable sales method which as an asset at cost and is subsequently buildings and other real estate and life. involves analysis of market sales prices for measured at cost less any accumulated construction, and intangible assets are carried similar real estate property; impairment loss. The Group's policy for at historical cost less accumulated Land and buildings held for use in supply of The income-based method which assumes goodwill arising on the acquisition of an depreciation. Buildings and other real estate services, or for administrative purposes, are a direct relationship between revenues associate is described under 'Investments in and construction are carried at market value. stated in the consolidated statement of generated by the property and its market associates' above. Depreciation on assets under construction and financial position at their revalued amounts, value; those not placed in service commences from being the fair value at the date of revaluation, The costs method which presumes the The Group tests goodwill for impairment at the date the assets are ready for their intended determined from market-based evidence by value of property to be equal to its recoverable least annually. An impairment loss recognized use. an appraisal undertaken by professional amount less any depreciation charges; for goodwill is not reversed in a subsequent independent appraisers, less any subsequent The value is determined based on available period. Depreciation of property, equipment and accumulated depreciation and subsequent public information and internet data on sales intangible assets is charged on the carrying accumulated impairment losses. Revaluations and purchases of property and real estate. If the Group's interest in the net fair value value of property and equipment and is are performed with sufficient regularity such of the identifiable assets, liabilities and designed to write off assets over their useful that the carrying amount does not differ Non-current assets held for sale contingent liabilities exceeds the cost of the economic lives. Depreciation is calculated on a materially from that which would be business combination, the Group: straight line basis at the following annual determined using fair values at the reporting A non-current asset is classified as held for prescribed rates: date. sale if it is highly probable that the asset's (a) Reassesses the identification and carrying amount will be recovered through a measurement of the Group's identifiable Buildings and other real estate 1-10% Any revaluation increase arising on the sale transaction rather than through assets, liabilities and contingent liabilities of Furniture and equipment 4-50% revaluation of such land and buildings is continuing use and the asset (or disposal acquired company and the measurement of Intangible assets 15-50% credited to the property and equipment group) is available for immediate sale in its the cost of the combination; and revaluation reserve, except to the extent that it present condition. Management must be Leasehold improvements are amortized reverses a revaluation decrease for the same committed to the sale, which should be (b) Recognizes immediately in the over the shorter of the life of the related asset previously recognized as an expense, in expected to qualify for recognition as a consolidated income statement any excess leased asset or the lease term. Expenses which case the increase is credited to profit or completed sale within one year from the date remaining after that reassessment. related to repairs and renewals are charged loss for the period to the extent of the of classification of an asset as held for sale.

104 105 Non-current assets held for sale are other assets and liabilities in a transaction that taxes levied by the same taxation authority on payment when due under the original or measured at the lower of its carrying amount affects neither the tax profit nor the the same taxable entity. modified terms of a debt instrument. Such and fair value less costs to sell. If the fair value accounting profit. financial guarantee contracts and letters of less costs to sell of an asset held for sale is Countries where the Group operates also credit issued are initially recognized at fair lower than its carrying amount, an impairment Deferred tax liabilities are recognized for have various other taxes other than income value. Subsequently they are measured at the loss is recognized in the consolidated income taxable temporary differences arising on tax, which are assessed on the Group's higher of (a) the amount recognized as a statement as loss from non-current assets investments in subsidiaries and associates, and activities. These taxes are included as a provision; and (b) the amount initially held for sale. Any subsequent increase in an interests in joint ventures, except where the component of operating expenses in the recognized less, where appropriate, asset's fair value less costs to sell is recognized Group is able to control the reversal of the consolidated income statement. cumulative amortization of initial premium to the extent of the cumulative impairment temporary difference and it is probable that revenue received over the financial guarantee loss that was previously recognized in relation the temporary difference will not reverse in Loans and advances from banks and contracts or letter of credit issued. to that specific asset. the foreseeable future. Deferred tax assets other financial institutions, customer arising from deductible temporary differences accounts, debt securities issued, other Contingencies Taxation associated with such investments and interests borrowed funds and subordinated debt are only recognized to the extent that it is Contingent liabilities are not recognized in Income tax expense represents the sum of probable that there will be sufficient taxable Loans and advances from banks and other the consolidated statement of financial the current and deferred tax expense. profits against which to utilize the benefits of financial institutions, customer accounts, debt position but are disclosed unless the possibility the temporary differences and they are securities issued, other borrowed funds and of any outflow in settlement is remote. A The current tax expense is based on taxable expected to reverse in the foreseeable future. subordinated debt are initially recognized at contingent asset is not recognized in the profit for the year. Taxable profit differs from fair value less transaction costs. Subsequently, consolidated statement of financial position net profit as reported in the consolidated The carrying amount of deferred tax assets amounts due are stated at amortized cost and but disclosed when an inflow of economic income statement because it excludes items of is reviewed at each reporting date and reduced any difference between net proceeds and the benefits is probable. income or expense that are taxable or to the extent that it is no longer probable that redemption value is recognized in the deductible in other years and it further sufficient taxable profits will be available to consolidated income statement over the Share capital excludes items that are never taxable or allow all or part of the asset to be recovered. period of the borrowings using the effective and share premium reserve deductible. The Group's current tax expense is interest method. calculated using tax rates that have been Deferred tax is calculated at the tax rates Share capital is recognized at historical enacted during the reporting period. that are expected to apply in the period when Provisions cost. Share premium reserve represents the the liability is settled or the asset is realized. excess of contributions over the nominal value Deferred income tax is the tax expected to Deferred tax is charged or credited in the Provisions are recognized when the Group of the shares issued. Gains and losses on sales be payable or recoverable on differences profit or loss, except when it relates to items has a present legal or constructive obligation of treasury stock are charged or credited to between the carrying amounts of assets and charged or credited directly to other as a result of past events, and it is probable share premium reserve. liabilities in the financial statements and the comprehensive income, in which case the that an outflow of resources embodying corresponding tax bases used in the deferred tax is also dealt with in other economic benefits will be required to settle the Costs directly attributable to the issue of computation of taxable profit, and is comprehensive income. obligation and a reliable estimate of the new shares, other than on a business accounted for using the balance sheet liability obligation can be made. combination, are deducted from equity net of method. Deferred tax liabilities are generally Deferred income tax assets and deferred any related income taxes. recognized for all taxable temporary income tax liabilities are offset and reported Financial guarantee contracts issued and differences and deferred tax assets are net on the consolidated statement of financial letters of credit Dividends on ordinary shares are recognized to the extent that it is probable position if: recognized in equity as a reduction in the that taxable profits will be available against Financial guarantee contracts and letters of period in which they are declared. Dividends which deductible temporary differences can The Group has a legally enforceable right credit issued by the Group are credit insurance that are declared after the reporting date are be utilized. Such assets and liabilities are not to set off current income tax assets against that provides for specified payments to be treated as a subsequent event under IAS 10 recognized if the temporary difference arises current income tax liabilities; and made to reimburse the holder for a loss it “Events after the Balance Sheet Date” and from goodwill or from the initial recognition Deferred income tax assets and the incurs because a specified debtor fails to make disclosed accordingly. (other than in a business combination) of deferred income tax liabilities relate to income

106 107 Preference shares Recognition of income and expense deferred, together with the related direct Commissions earned on ceded reinsurance costs, and recognized as an adjustment to the contracts are recorded to the consolidated Preference shares having a prescribed Recognition of interest income effective interest rate of the resulting loan. income statement at the date the reinsurance dividend amount are considered to be and expense Where it is unlikely that a loan commitment contract is written and deemed enforceable. compound financial instruments in will lead to a specific lending arrangement, the accordance with the substance of the Interest income and expense are loan commitment fees are recognized in the Policy acquisition costs, comprising contractual arrangement and accordingly the recognized on an accrual basis using the profit or loss over the remaining period of the commissions paid to insurance agents and liability and equity components are presented effective interest method. The effective loan commitment. Where a loan commitment brokers, which vary with and are directly separately in the consolidated statement of interest method is a method of calculating the expires without resulting in a loan, the loan related to the production of new business, are financial position. On initial recognition the amortized cost of a financial asset or a commitment fee is recognized in the profit or deferred, recorded in the accompanying equity component is assigned the residual financial liability (or group of financial assets loss on expiry. Loan servicing fees are consolidated statement of financial position amount after deducting from the initial or financial liabilities) and of allocating the recognized as revenue as the services are within other assets, and are amortized over carrying amount of the instrument as a whole interest income or interest expense over the provided. Loan syndication fees are the period in which the related written the fair value determined for the liability relevant period. The effective interest rate is recognized in the profit or loss when the premiums are earned and is reviewed for component. The fair value of the liability the rate that exactly discounts estimated syndication has been completed. All other impairment in circumstances where its component on initial recognition is estimated future cash payments or receipts through the commissions are recognized when services are carrying amount may not be recoverable. If by discounting expected future cash flows at a expected life of the financial instrument or, provided. the asset is greater than the recoverable market interest rate for a comparable debt when appropriate, a shorter period to the net amount it is written down immediately. All instrument. Subsequently the liability carrying amount of the financial asset or Underwriting income and expenses other costs are recognized as expenses when component is measured according to the same financial liability. incurred. principles used for subordinated debt, and the Underwriting income includes net written equity component is measured according to Once a financial asset or a group of similar insurance premiums and commissions earned Reserve for insurance losses and loss the same principles used for share capital. financial assets has been written down (partly on ceded reinsurance reduced by the net adjustment expenses written down) as a result of an impairment change in the unearned premium reserve, Retirement and other benefit obligations loss, interest income is thereafter recognized claims paid, the provision of insurance losses The reserve for insurance losses and loss using the rate of interest used to discount the and loss adjustment expenses, and policy adjustment expenses is included in the In accordance with the requirements of the future cash flows for the purpose of acquisition cost. consolidated statement of financial position legislation of the countries in which the Group measuring the impairment loss. within reserves and is based on the estimated operates certain percentages of pension Net written insurance premiums amount payable on claims reported prior to payments are withheld from total Interest income also includes income represent gross written premiums less the reporting date, which have not yet been disbursements to staff to be transferred to earned on investments in securities. Other premiums ceded to reinsurers. Upon settled, and an estimate of incurred but not pension funds, such that a portion of salary income is credited to the consolidated income inception of a contract, premiums are reported claims relating to the reporting expense is withheld from the employee and statement when the related transactions are recorded as written and are earned on a pro period. instead paid to a pension fund on behalf of completed. rata basis over the term of the related policy the employee. This expense is charged in the coverage. The unearned premium reserve Due to the absence of prior experience, the period in which the related salaries are earned. Recognition of fee represents the portion of the premiums reserve for incurred but not reported claims Upon retirement all retirement benefit and commission income and expense written relating to the unexpired terms of (“IBNR”) is determined by applying current payments are made by the pension funds as coverage and is included within other assets government guidance as provided by the selected by employees. The Group does not Loan origination fees are deferred, in the accompanying consolidated statement FMSA. Under this guidance, the IBNR reserve have any pension arrangements separate from together with the related direct and of financial position. is calculated as being equal to the expected the state pension system of the countries in incremental costs, and recognized as an loss ratio for each line of business times the which the Group operates. In addition, the adjustment to the effective interest rate of the Losses and loss adjustments are charged to value of coverage, less the losses actually Group has no post-retirement benefits or loan. Where it is probable that a loan the consolidated income statement as reported. other significant compensated benefits commitment will lead to a specific lending incurred. requiring accrual. arrangement, the loan commitment fees are

108 109 The methods for determining such Rates of exchange Segment reporting important to the portrayal of the Group's estimates and establishing the resulting financial condition. reserves are continuously reviewed and The exchange rates used by the Group in The segments are identified on the basis updated. Resulting adjustments are reflected the preparation of the consolidated financial used by the Group's chief operating decision Allowance for impairment losses in current income. statements as at year end are as follows: maker to allocate resources and evaluate of loans and receivables performance, in accordance with IFRS 8 Reinsurance “Operating Segments”. The Board reviews The Group regularly reviews its loans and 31 31 31 December December December discrete financial information for each of its receivables to assess for impairment. The In the ordinary course of business, the 2009 2008 2007 segments, including measures of operating Group's loan impairment provisions are

Group cedes reinsurance. Such reinsurance KZT/1 US Dollar 148.46 120.79 120.30 results, assets and liabilities. The segments are established to recognize incurred impairment arrangements provide for greater KZT/1 Euro 213.95 170.24 177.17 managed primarily on the basis of their losses in its portfolio of loans and KZT/1 Kyrgyz Som 3.37 3.06 3.43 diversification of business, allow management KZT/1 Russian Rouble 4.90 4.11 4.92 results, which excludes certain unallocated receivables. The Group considers accounting to control exposure to potential losses arising costs related to interest expense on debt estimates related to allowance for from legal risks and provide additional securities issued and loans and advances to impairment of loans and receivables a key capacity for growth. banks and other financial institutions and source of estimation uncertainty because (i) Reinsurance assets include balances due Offset of financial assets operating expenses other than salaries and they are highly susceptible to change from from reinsurance companies for paid and and liabilities other employee benefits. Segments with a period to period as the assumptions about unpaid losses and loss adjustment expenses, majority of revenue earned from sales to future default rates and valuation of and ceded unearned premiums. Amounts Financial assets and liabilities are offset external customers and whose revenue, result potential losses relating to impaired loans receivable from reinsurers are estimated in a and reported net on the consolidated or assets are ten per cent or more of all the and receivables are based on recent manner consistent with the claim liability statement of financial position when the segments are reported separately. performance experience, and (ii) any associated with the reinsured policy. Group has a legally enforceable right to set off Geographical segments of the Group have significant difference between the Group's Reinsurance is recorded gross unless a right of the recognized amounts and the Group been reported based on the domicile of the estimated losses and actual losses would offset exists and is included in the intends either to settle on a net basis or to Company within the Group. require the Group to record provisions which accompanying consolidated statements of realize the asset and settle the liability could have a material impact on its financial financial position within other assets. simultaneously. In accounting for a transfer of Areas of significant management statements in future periods. a financial asset that does not qualify for judgment and sources of estimation Reinsurance contracts are assessed to derecognition, the Group does not offset the uncertainty The Group uses management's judgment ensure that underwriting risk, defined as the transferred asset and the associated liability. to estimate the amount of any impairment reasonable possibility of significant loss, and The preparation of the Group's loss in cases where a borrower has financial timing risk, defined as the reasonable Fiduciary activities consolidated financial statements requires difficulties and there are few available possibility of a significant variation in the management to make estimates and sources of historical data relating to similar timing of cash flows, are transferred by the The Group provides trustee services to its judgments that affect the reported amounts borrowers. Similarly, the Group estimates Group to the reinsurer. customers. Also the Group provides depositary of assets and liabilities at the reporting date changes in future cash flows based on past services to its customers, which include and the reported amount of income and performance, past customer behavior, The Group regularly assesses its transactions with securities on their depository expenses during the period ended. observable data indicating an adverse reinsurance assets for impairment. A accounts. Assets accepted and liabilities Management evaluates its estimates and change in the payment status of borrowers reinsurance asset is impaired if there is incurred under the fiduciary activities are not judgments on an ongoing basis. Management in a group, and national or local economic objective evidence that the Group may not included in the Group's consolidated financial bases its estimates and judgments on conditions that correlate with defaults on receive all amounts due to it under the terms statements. The Group accepts the historical experience and on various other assets in the group. Management uses of the contract and that event has a reliably operational risk on these activities, but the factors that are believed to be reasonable estimates based on historical loss experience measurable impact on the amounts that the Group's customers bear the credit and market under the circumstances. Actual results may for assets with credit risk characteristics and Group will receive from the reinsurer. risks associated with such operations. differ from these estimates under different objective evidence of impairment similar to assumptions or conditions. The following those in the group of loans and receivables. estimates and judgments are considered The Group uses management's judgment to

110 111 adjust observable data for a group of loans The Bank has formulated a work-out Valuation The Group considers that the accounting or receivables to reflect current strategy for construction loans, which is of financial instruments estimate related to valuation of financial circumstances not reflected in historical currently being implemented, most instruments where quoted markets prices are data. significantly in the city of Almaty. In many Financial instruments that are classified at not available is a key source of estimation cases the approach taken by the Bank fair value through profit or loss or available- uncertainty because: (i) it is highly susceptible The most significant judgment is applied in necessitates close partnership with local for-sale, and all derivatives, are stated at fair to change from period to period because it assessing impairment levels in real estate loans municipal authorities, construction sub- value. The fair value of such financial requires management to make assumptions and construction financing. Current economic contractors, suppliers of construction instruments is the estimated amount at which about interest rates, volatility, exchange rates, and market conditions make historical materials, and the availability of construction the instrument could be exchanged between the credit rating of the counterparty, valuation statistical loss levels less relevant in materials, specialized equipment and labor. willing parties, other than in a forced or adjustments and specific feature of the determining the inherent loss levels in the loan liquidation sale. If a quoted market price is transactions and (ii) the impact that portfolio. Instead, management is required to Additional investments in real estate and available for an instrument, the fair value is recognizing a change in the valuations would use recent empirical evidence of impairment or construction projects provides revenues and calculated based on the market price at the have on the assets reported on its consolidated employ analytical tools to estimate future the opportunity to generate more cash flows close of business on the balance sheet date. statement of financial position as well as its economic value of collateral secured under for existing borrowers of the Bank that are When valuation parameters are not observable profit/(loss) could be material. loans or the expected cash generating ability involved in ancillary services to the in the market or cannot be derived from of borrowers' business. This area of judgment construction sector, such as equipment observable market prices, the fair value is The Group uses quoted market prices from bears significant sensitivity to various risk leasing, construction materials, site mana- derived through analysis of other observable independent information sources, for all its factors, such as general economic growth, gement, labor outsourcing, transportation, market data and the use of discounted cash financial assets and liabilities recorded at fair central government involvement, support of security, and other services. flow pricing models. Where market-based value, with the exception of certain debt local authorities, trends in the housing and valuation parameters are not directly securities, which are valued using internal commercial real estate markets, and changes Fair value changes in the above factors and observable, management will make a models, and derivative financial instruments, in the regulatory environment. The assumptions may result in significant judgment as to its best estimate of that which are valued using a valuation model assumptions underlying this judgment are adjustment to loan loss provisions and the parameter in order to determine a reasonable based on market data. highly subjective. carrying value of loans to customer. reflection of how the market would be The Group also considers both the credit Management seeks to regularly update expected to price the instrument. In exercising risk of its counterparties, as well as its own The level of loan loss provisions at the assumptions and the approach it has taken this judgment, a variety of tools are used creditworthiness when estimating the fair reporting date is supported by following toward individual borrowers. including proxy observable data, historical value of financial instruments, including factors: data, and extrapolation techniques. The best derivatives. The Group attempts to mitigate The allowances for impairment losses of evidence of fair value of a financial instrument credit risk to third parties by entering into The economic value assessment of financial assets in the consolidated financial at initial recognition is the transaction price netting and collateral arrangements. Net collateral under real estate loans. In some statements have been determined on the basis unless the fair value of that instrument is counterparty exposure (counterparty cases management used certain assumptions of existing economic and political conditions. evidenced by comparison with other positions netted by offsetting transactions to determine the inherent value of collateral, The Group is not in a position to predict what observable current market transactions in the and both cash and securities collateral) is then such as land, based on highest and best use, changes in conditions will take place in same instrument or based on a valuation valued for counterparty creditworthiness and current observable lease rates and sale prices Kazakhstan and what effect such changes technique whose variables include only data this resultant value is incorporated into the fair for commercial and residential real estate. might have on the adequacy of the allowances from observable markets. Any difference value of the respective instruments. The Group Moreover, the assessment sometimes for impairment of financial assets in future between the transaction price and the value generally calculates the credit risk adjustment depends on expectations that local municipal periods. based on a valuation technique is not for derivatives on observable credit data. government will continue funding capital recognized in the consolidated income expenditure costs for infrastructure deve- The carrying amount of the allowance for statement on initial recognition. Subsequent Credit risk is measured using dynamic lopment in and around any given real estate impairment of loans to customers as at 31 gains or losses are only recognized to the models that calculate the probability and project. In certain cases, additional financing December 2009 is KZT 505,548 million (31 extent that it arises from a change in a factor potential future exposure given default. The as well as investment is factored into December 2008: KZT 289,328 million, 31 that market participants would consider in main inputs used in these models are generally determining the value. December 2007: KZT 140,363 million). setting a price. data relating to individual issuers in the

112 113 portfolio and correlations thereto. The main observable such as in OTC derivatives Category as per Quoted Internal models 31 December inputs used in determining the underlying cost contracts. As at 31 December 2009, 2008 and the consolidated prices in active based on market 2008 of credit for credit risk derivatives are quoted 2007, the impact of credit valuation statement of financial markets prices Total credit spreads and the correlation between adjustments in the derivatives portfolio was position (Level 1) (Level 2) individual issuers' quoted credit derivatives. not material to the Group. Assets: Trading assets Debt securities 32,537 - 32,537 The Group also considers its own Had management used different assum- Equity investments 1,276 - 1,276 creditworthiness when determining the fair ptions regarding the interest rates, volatility, Derivative financial Foreign exchange - 24,317 24,317 value of an instrument, including OTC exchange rates, the credit ratings of the instruments contracts derivative instruments and financial liabilities counterparties, a larger or smaller change in held at fair value through profit or loss if the the valuation of financial instruments where Available-for-sale 11,755 - 11,755 Group believes market participants would take quoted market prices are not available could financial assets Debt securities that into account when transacting the have had a material impact on the Group's Equity securities - 3,301 3,301 respective instrument. The approach to reported net income. Liabilities: measuring the impact of the Group's credit Derivative financial Foreign currency - 54,339 54,339 risk on an instrument is done in the same The table below summarizes the Group's instruments contracts manner as for third party credit risk. The financial assets and liabilities held at fair value impact of the Group's credit risk is considered by valuation methodology at 31 December Category as per Quoted Internal models 31 December when calculating the fair value of an 2009, 2008 and 2007, respectively: the consolidated based on market 2007 instrument, even when credit risk is not readily statement of financial prices in active prices position markets Total (Level 2) (Level 1) Internal Quoted 31 December Assets: Category as per Internal models models the consolidated prices in active based on 2009 Trading assets Debt securities 130,271 - 130,271 (unobserv- statement of financial markets market prices Total able inputs) Equity investments 15,647 - 15,647 position (Level 1) (Level 2) (Level 3) Derivative financial Foreign exchange - 42,835 42,835 instruments contracts Assets: Securities contracts - 23 23 Trading assets Debt securities 73,526 - 599 74,125

Equity investments 2,638 - - 2,638

Derivative financial Foreign exchange Available-for-sale - 37,440 - 37,440 3,034 - 3,034 instruments contracts financial assets Debt securities Available-for-sale Equity securities - 2 2 11,444 - - 11,444 financial assets Debt securities Liabilities: Equity securities - 5,252 - 5,252 Derivative financial Foreign exchange - 7,684 7,684 instruments contracts

Liabilities: Securities contracts - 46 46 Derivative financial Foreign exchange - 35,991 - 35,991 instruments contracts

114 115 Reconciliation from the beginning balances determination of fair value of assets and The carrying amount of goodwill as at 31 IFRS 7 'Financial Instruments: Disclosures - to the ending balances in Level 3 of fair value liabilities of businesses acquired requires the December 2009 is KZT 2,405 million (2008: Improving Disclosures about Financial hierarchy for the year ended 31 December exercise of management judgment; for KZT 2,405 million, 2007: KZT 2,405 million). Instruments'. On 5 March 2009, the IASB 2009 was presented as follows: example those financial assets and liabilities issued an amendment to IFRS 7 'Financial for which there are no quoted prices, and Adoption of new Instruments: Disclosures' which requires Year ended those non-financial assets where valuations and revised standards enhanced disclosures about fair value 31 December reflect estimates of market conditions. A measurements and liquidity risk. Among other 2009 difference in fair values would result in things, the amendment (1) requires disclosure Beginning of the year - In the current year, the Group has adopted changes to the goodwill arising and to the all of the new and revised Standards and of any change in the method for determining Transfer from Level 1 2,372 category post-acquisition performance of the Interpretations issued by the IASB and the fair value and the reasons for the change; (2) Total losses recognized acquisition. Goodwill is not amortized but is IFRIC of the IASB that are relevant to its establishes a three-level hierarchy for making in the consolidated (1,773) tested annually or more frequently for operations and effective for annual reporting fair value measurements; (3) requires income statement impairment if events or changes in periods ending on 31 December 2009. The disclosure for each fair value measurement in

599 circumstances indicated that it might be adoption of these new and revised Standards the balance sheet of which level in the End of the year impaired. and Interpretations has not resulted in hierarchy was used and any transfers between significant changes to the Group's accounting levels, with additional disclosures whenever Internal models used in estimation of fair For the purposes of impairment testing, policies that have affected the amounts level 3 of the hierarchy is used including a value of certain debt instruments are based on goodwill acquired in a business combination is reported for the current or prior years. measure of sensitivity to a change in input discounted future cash flows with/or without allocated to each of the Group's cash- data; (4) clarifies that the current maturity consideration of restructuring plan depending generating units or groups of cash-generating IFRS 8 requires operating segments to be analysis for non-derivative financial on type of debt security. Discount factors are units expected to benefit from the identified on the basis of internal reports and instruments should include issued financial estimated using yield curve which in turn is combination. Goodwill impairment testing components of the Group that are regularly guarantee contracts; and (5) requires formed by constructing risk-free curve for a involves the comparison of the carrying value reviewed by the Group's management to disclosure of a maturity analysis for derivative given currency of debt instrument adding a risk of a cash-generating unit or group of cash allocate resources and assess their financial liabilities. It is effective for periods premium. The risk premium value is measured generating units with its recoverable amount. performance. The internal reports about the beginning on or after 1 January 2009. in basis points and reflects an issuer's credit risk The recoverable amount is the higher of the components of the Group that are regularly determined using a robust scoring model. This unit's fair value and its value in use. Value in reviewed by the Group's management have Standards and interpretations issued internal model does not take directly into use is the present value of expected future the same composition and format that was and not yet adopted consideration available market information cash flows from the cash-generating unit or historically disclosed in the Group's operating related to prices. However, on a regular basis group of cash-generating units. Fair value is s e g m e n t s i n f o r m a t i o n . T h e r e f o r e The Group has not applied the following its outcomes are compared with prices of the amount obtainable for the sale of the management of the Group has not restated IFRS and Interpretations of the IFRIC that have similar instruments or quoted prices of certain cash-generating unit in an arm's length the operating segments information been issued but are not yet effective: debt instruments, which the Management of transaction between knowledgeable, willing disclosed within the consolidated financial the Group believes to be not reliable due to low parties. statements. IFRS 3 'Business Combinations' – On 10 trading volumes, and minimal of those values is January 2008, the IASB issued an amendment used to determine fair value of the debt Impairment testing inherently involves a From 1 January 2009, the Group to IFRS 3 'Business Combinations' which instrument. Reasonable possible changes in the number of judgmental areas: the implemented an amendment to IAS clarifies and changes certain elements of key assumptions used, on which Management preparation of cash flow forecasts for 1“Presentation of Financial Statements” accounting for a business combination, has based its determination of the fair values, periods that are beyond the normal (revised 2008), which changes the way in including measurement of contingent did not cause the carrying amount of those requirements of management reporting; which non-owner changes in equity are consideration, step acquisition and intangible debt instruments to change significantly. the assessment of the discount rate required to be presented. The Group also assets and also widens the scope of this appropriate to the business; estimation of decided to change titles of primary financial standard. There are also associated Goodwill the fair value of cash-generating units; and statements as they will be referred to in IFRS amendments to IAS 27, IAS 28 and IAS 31. The the valuation of the separable assets of even though it is not required to be renamed in amendment to IFRS 3 is effective for periods Goodwill is the excess cost of an acquisition each business whose goodwill is being an entity's financial statements. beginning on or after 1 July 2009. The over the fair value of its net assets. The reviewed.

116 117 4. NET INTEREST INCOME

Year ended Year ended Year ended 31 December 31 December 31 December amendment is not expected to have a material and to clarify the definition of a related party. 2009 2008 2007 effect on the Group's consolidated financial The revised standard also clarifies that (KZT million) (KZT million) (KZT million) statements. disclosure is required of any commitments of a Interest income comprises: Interest income on financial assets recorded at related party where a particular event occurs amortized cost: In December 2008 the IFRIC issued or does not occur in the future, including - interest income on homogenous and individually interpretation IFRIC 17 'Distributions of executory contracts (recognised and assessed watch assets 157,058 190,881 124,534 Non-Cash Assets to Owners' and the IASB unrecognised). The revised standard is - interest income on unimpaired financial assets 140,869 162,525 176,742 - interest income on impaired financial assets 70,532 21,483 6,617 made consequential amendments to IFRS 5 effective for annual periods beginning on or Interest income on financial assets at fair value 'Non-Current Assets Held for Sale and after 1 January 2011, with earlier application through profit or loss 3,211 5,345 8,380 Discontinued Operations'. The interpretation permitted. Management of the Group is Interest income on investments available-for-sale 1,269 543 185 requires distributions to be presented at fair currently assessing the impacts of adoption of Total interest income 372,939 380,777 316,458 value with any surplus or deficit to be the amendments. recognised in income statement. The Interest income on financial assets recorded at amendment to IFRS 5 extends the definition of IFRS 9 'Financial Instruments' - On 12 amortized cost comprises: Interest on loans to customers 360,339 363,182 297,608 disposal groups and discontinued operations November 2009, the IASB issued IFRS 9 Interest on loans and advances to banks and other to disposals by way of distribution. IFRIC 17 is 'Financial Instruments', which significantly financial institutions 7,236 10,554 9,312 effective for annual periods beginning on or overhauls the accounting requirements for Interest on investments held to maturity 69 121 31 after 1 July 2009. The interpretation is not financial instruments under IFRS. IFRS 9 is Amortization of discount on loans 815 1,032 942 expected to have a material effect on the mandatory for annual periods beginning on or Total interest income on financial assets recorded at Group's consolidated financial statements. after 1 January 2013, with early application amortized cost 368,459 374,889 307,893 permitted. IFRS 9 requires that a financial In October 2009, the IASB issued an asset be classified into one of three categories Interest income on financial assets at fair value through profit or loss: amendment to IAS 32 on the classification of for measurement and income recognition: (1) Interest income on financial assets held-for-trading 3,211 5,345 8,380 rights issues. For rights issues offered for a Amortised cost, (2) Fair value through profit fixed amount of foreign currency current or loss (FVTPL) and (3) Fair value through Total interest income on financial assets at fair value practice appears to require such issues to be other comprehensive income. The standard through profit or loss 3,211 5,345 8,380 accounted for as derivative liabilities. The requires reclassification between amortised Interest income on investments available-for-sale 1,269 543 185 amendment states that if such rights are cost and FVTPL (or vice versa) if a financial issued pro rata to an entity's all existing asset no longer meets the criteria for its Total interest income 372,939 380,777 316,458 shareholders in the same class for a fixed original classification. IFRS 9 replaces the Interest expense comprises: amount of currency, they should be classified existing classification and measurement Interest on financial liabilities recorded at amortized cost 179,737 181,265 171,762 as equity regardless of the currency in which requirements in IAS 39 for financial assets. It Total interest expense 179,737 181,265 171,762 the exercise price is denominated. The changes the manner in which entities classify amendment is effective for annual periods and measure investments in debt and equity Interest expense on financial liabilities recorded at beginning on or after 1 February 2010. securities, loan assets, trade receivables, and amortized cost comprise: Management of the Group is currently derivative financial assets by requiring entities Interest on customer accounts 82,435 72,288 51,542 Interest on debt securities issued 63,054 61,511 56,103 assessing the impact on adoption the to classify financial assets as being measured Interest on loans and advances from banks and amendment. at either amortized cost or fair value other financial institutions 15,123 27,989 46,023 depending on the entity's business model and Interest expense on subordinated debt 13,874 10,740 7,947 The IASB has revised IAS 24 Related Party the contractual cash flow characteristics of Interest expense on securitization program 2,792 6,250 8,008 Preference share dividends 747 598 604 Disclosures on 4 November 2009 to provide a the asset. Management of the Group is Other interest expense 1,712 1,889 1,535 partial exemption from the disclosure currently evaluating impact of adoption of requirements for government-related entities IFRS 9. Total interest expense on financial liabilities recorded at amortized cost 179,737 181,265 171,762

Net interest income before provision for impairment losses on interest bearing assets 193,202 199,512 144,696

118 119 The Group classifies corporate loans as homogenous and individually assessed watch 5. ALLOWANCE FOR IMPAIRMENT LOSSES AND OTHER PROVISIONS non-performing and accordingly impaired if assets. Homogenous assets are not there is a default on payment of the principal individually impaired, because there is not The movements in allowance for impairment losses on interest bearing assets were as follows: or accrued interest for 30 days or more. enough objective evidence to recognize them The impairment of the loan is identified as impaired. At the same time, the Group Loans and Loans to Total within credit monitoring, which includes assesses these assets for credit risk and advances to banks customers monitoring of payments of the customer and impairment on a collective basis taking into and other financial preparation of regular monitoring reports on account the general macroeconomic institutions the customer and his loans every 6 or 12 environment as well as industry specific (KZT million) (KZT million) (KZT million) months, depending on the solvency of the developments. The individually assessed watch (Note 17) (Note 18 ) customer. In addition, on a regular basis the assets consist of loans not past due, but there credit managers monitor the quality of the is a possibility that the credit losses may arise loan, financial position and business of the in the future due to a possible negative trend 31 December 2006 857 73, 936 74 ,793 customer, and observe the terms of the loan in the borrower's financial position or evidence Additional provision due to acquisition of agreements. For the purpose of provisioning, of some unsatisfactory financial results which LLP Investment Group East Kommerts - 46 46 assessment of impairment losses for corporate affect the ability of a borrower to repay. The Additional provision recognized 459 69, 451 69, 910 loans is performed on an individual basis. financial standing of such clients, is evidenced Write-off of assets - (7 24) (7 24) and monitored, based on business results, Recoveries of assets previously written off - 81 81 repayment discipline and cash flows. The consumer loans are classified as non- Foreign exchange differences (40) (2, 427) (2, 467) performing or impaired if there is a default on During 2009, the Group has actively 31 December 2007 1,276 140 ,363 14 1,639 payments of the principal or accrued interest participated in government economic stimulus for 60 days or more. For the purpose of programs of Kazakhstan Government, which (Recovery of provision)/additional provision recognized (977) 151, 674 150 ,697 provisioning, assessment of impairment losses allowed borrowers to take benefit from lower Write-off of assets - (1, 172) (1, 172) is made on the collective or portfolio basis. interest rates on their borrowings. Refinancing Foreign exchange differences - (1, 537) (1, 537) has allowed many customers to significantly

According to the Group's credit portfolio reduce their debt service burden as interest 31 December 2008 299 289 ,328 289 ,627 management policy, if at least one loan of a rates were decreased to a range of 9% to customer is recognized as impaired based on 12.5%, depending on the type of the customer (Recovery of provision)/additional provision recognized (350) 193, 463 193, 113 the above mentioned criteria, the total debt on and the refinancing program. As a result of Write-off of assets - (17 1) (171) such a customer is considered impaired, i.e. the refinancing, a portion of the loans, Foreign exchange differences 73 22, 928 23, 001 other performing loans of such customer are previously included in the collectively assessed also recognized as impaired. for impairment category have been 31 December 2009 22 505, 548 50 5,570 reclassified as unimpaired.

For certain performing loans which are not overdue, the Group classifies them as The Group creates allowance for Directors. The amount of provision is impairment losses in order to cover credit reviewed relative to the credit portfolio and losses, including losses where the asset is not current economic conditions. The amount of specifically identified. At least monthly, the provision is determined by individual and provision for impairment losses on interest portfolio-based approaches. As at 31 bearing assets is reviewed by the Chairwoman December 2009, 2008 and 2007, of the Board, the Head of Risk Management Management deemed the provision for Department, the Chief Financial Officer, and impairment losses to be appropriate and the Chief Accountant. At least quarterly, the sufficient to absorb losses that are inherent to provision for impairment losses and overall the portfolio. credit quality is reviewed by the Board of

120 121 Total provisions for impairment losses on insurance provision and guarantees and other off- Insurance provisions comprised: balance sheet contingencies comprise: 31 December 31 December 31 December 2009 2008 2007 (KZT million) (KZT million) (KZT million) 31 December 2009 31 December 2008 31 December 2007

(KZT million) (KZT million) (KZT million) Annuity insurance 1,520 498 199 Civil liability for damage 929 853 91

Insurance provisions 4,728 4,005 3,422 Property 664 934 978 Provisions on guarantees and other contingencies 7,217 6,271 7,216 Vehicles 330 468 770

Accidents 297 272 487 11,945 10,276 10,638 Civil liability for owners of vehicles 115 510 241 Freight 110 95 462 Life insurance 54 38 8 The movements in insurance provisions and allowances for impairment losses on other Insurance of environmental risk 40 43 27 transactions were as follows: Financial loss insurance 11 28 - Railway transport 10 13 15 Other 648 253 144

Insurance Other Total provisions assets 4,728 4,005 3,422 (KZT million) (KZT million) (KZT million) (Note 24) Guarantees Other insurance provisions include and other 31 December 2006 2,703 117 2, 820 provisions for insurance of private lawyers, off-balance auditors and audit organizations, medical, air sheet contingencies Additional provision recognized 889 349 1, 238 and marine transport and others. (KZT million) Write-off of assets (170) (187 ) (35 7) (Note 32) The movements in provision for guarantees Recoveries of assets previously written off - 44 44 31 December 2006 4,055 and other contingencies were as follows:

Additional provision recognized 3,186 31 December 2007 3,422 323 3, 745 Exchange difference (25)

31 December 2007 7,216

Additional provision recognized 583 2, 135 2 ,718 Recovery of provision (856) Exchange difference Write-off of assets - (2 49) (2 49) (89)

Exchange difference - 94 94 31 December 2008 6,271

Recovery of provision (600) Exchange difference 1,546 31 December 2008 4,005 2, 303 6, 308 31 December 2009 7,217

Additional provision recognized 723 749 1, 472 Write-off of assets - (67 3) (67 3) Exchange difference - 377 377

31 December 2009 4,728 2, 756 7, 484

122 123 6. NET GAIN/(LOSS) ON FINANCIAL ASSETS AND LIABILITIES AT 8. FEE AND COMMISSION INCOME AND EXPENSE FAIR VALUE THROUGH PROFIT OR LOSS Year ended Year ended Year ended 31 December 31 December 31 December Year ended Year ended Year ended 2009 2008 2007 31 December 31 December 31 December (KZT million) (KZT million) (KZT million) 2009 2008 2007 Fee and commission income: (KZT million) (KZT million) (KZT million) Cash operations 4,575 4 ,985 6,681 Plastic cards operations 4,251 3, 668 3,036 Net gain/(loss) on financial assets and liabilities Documentary operations 3,668 4,723 5 ,069 held-for-trading 22,793 (28, 373) 20,642 Settlements 2,973 3, 006 2, 986 Investment fees on administered pension funds 2,689 2, 067 863 Total net gain/(loss) on financial assets and Foreign exchange and securities operations 2,027 2, 346 3,892 Encashment operations 281 284 248 liabilities at fair value through profit or loss 22,793 (28, 373) 20,642 Other 493 666 783

Net gain/(loss) on operations with financial assets Total fee and commission income 20,957 21, 745 23, 558 and liabilities held-for-trading comprise: Realized gain/(loss) on trading operations 2,039 (72) (61) Unrealized (loss)/gain on fair value adjustment Fee and commission expense: of financial assets held for trading (6,173) (4, 451) 965 Plastic cards services 1,578 1,300 1,107 Hedge ineffectiveness 730 (1 86) - Insurance activity 1,190 917 787 Foreign exchange and securities operations 252 257 337 Net gain/(loss) on operations with derivative Correspondent bank services 148 160 164 financial instruments 26,197 (23, 664) 19,738 NBRK computation center services 110 92 97 Investment expenses on administered pension funds

Total net gain/(loss) on financial assets and 86 1,231 - liabilities at fair value through profit or loss 22,793 (28, 373) 20,642 Documentary operations 41 84 29 Other 139 283 192

Total fee and commission expense 3,544 4 ,324 2,713

7. NET (LOSS)/GAIN ON FOREIGN EXCHANGE AND PRECIOUS METALS OPERATIONS 9. Net realized (loss)/GAIN on investments available-for-sale Year ended Year ended Year ended 31 December 31 December 31 December 2009 2008 2007 Year ended Year ended Year ended 31 December 31 December 31 December (KZT million) (KZT million) (KZT million) 2009 2008 2007 (KZT million) (KZT million) (KZT million) - Dealing, net (15,232) 7,476 7,468 Loss from impairment of investments available-for-sale (1,060) (2,120) - Translation differences, net 210 (1,8 59) (22,932 ) Realized gain from investments available-for-sale 34 82 119

(15,022) 5 ,617 (15,464 ) (1,026) (2,038) 119

Translation differences for the year ended assets and liabilities denominated in non- 31 December 2009 amounted to KZT 210 functional currencies such as the USD, million (31 December 2008: loss of KZT 1,859 Japanese Yen, Euro, Pound and Singaporean million, 31 December 2007: loss of KZT 22,932 dollar. million). This result arises on the revaluation of

124 125 10. OTHER INCOME 11. OPERATING EXPENSES

Year ended Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 31 December 2009 2008 2007 2009 2008 2007 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

Income from repurchase of own debt Staff costs 14,400 16, 475 15 ,980 securities and early redemption of other obligations 30,727 902 - Depreciation and amortization 3,672 3, 379 2,519 Insurance income 4,586 4,349 4,134 Operating leases 2,663 3, 604 2 ,400

Income from sale of property, equipment and intangible assets 107 72 48 Payments to the Individuals’ Deposit Insurance Fund 2,160 1,627 1,742 Fines and penalties received 68 57 288 Property and equipment maintenance 1,917 2,215 1,392 Taxes, other than income tax 1,233 1,157 1,632 Negative revaluation of foreclosed assets held for sale (1,207) - - Advertising costs 887 1,694 1,519 Bargain purchase gain on acquisition of stake Communications 692 749 707 in subsidiaries - 3,137 1,555 Bank cards services 648 521 383 Other 245 835 894 Consulting and audit services 399 394 382 Security services 333 440 326 34,526 9,352 6,919 Vehicle maintenance 266 338 325 Business trip expenses 223 401 524 Collection services 153 39 - In 2009 the Bank foreclosed loans to 493 million) which resulted in a gain on Training and information services 143 215 240 customers in the amount of KZT 162,938 extinguishment of KZT 23,378 million. On 1 Stationery 130 166 184 million (USD 1,097 million) for Eurobonds April 2009 the Bank purchased KZT 19,187 Legal services 98 19 30 issued by its subsidiary Kazkommerts million (USD 127 million) in aggregate principal Mail and courier expenses 92 106 90 International B.V. recorded at book value of amount of Securitization Notes through Charity and sponsorship expenses 88 123 102 KZT 168,256 million (USD 1,133 million) which tender offer held since 23 March 2009 till 30 Other expenses 476 387 723 resulted in a gain on redemption of own debt March 2009. The price of purchase was USD of KZT 5,318 million. In addition, the Bank 920 per USD 1,000 in principal amount of purchased from the market Eurobonds issued Notes, which resulted in a gain of KZT 2,031 30,673 34 ,049 31, 200 by Kazkommerts International B.V. with book million. value of KZT 73,203 million (equivalent of USD

126 127 12. INCOME TAX Deferred taxes reflect the net tax effects Relationships between tax expenses and accounting profit for the years ended 31 December of temporary differences between the 2009, 2008 and 2007 are explained as follows: The Group provides for taxes based on the carrying amounts of assets and liabilities for financial reporting purposes and the amounts Year ended Year ended Year ended tax accounts maintained and prepared in 31 December 31 December 31 December accordance with the tax regulations of used for tax purposes. Temporary differences 2009 2008 2007 countries where the Group and its subsidiaries as at 31 December 2009, 2008 and 2007 relate (KZT million) (KZT million) (KZT million) mostly to different methods of income and operate and which may differ from IFRS. Profit before income tax 31,786 11, 474 73, 655 expense recognition as well as to recorded values of certain assets. Tax at the statutory tax rate (20% for 2009 and The Group is subject to certain permanent 30% for 2008 and 2007) 6,357 3, 442 22, 097 tax differences due to non-tax deductibility of Tax effect of temporary differences as at Tax effect of permanent differences: certain expenses and a tax free regime for 31 December 2009, 2008 and 2007: - tax exempt income (168) (1, 687) (5 ,611) certain income. - non-deductible expense 1,402 3, 714 415 Recalculation of net deferred liability expenses due to tax rate changes 4,892 (14, 267) - 31 December 31 December 31 December Adjustments to prior year provisions for income tax 280 108 (997 )

2009 2008 2007 Income tax expense/(benefit) 12,763 (8, 690) 15 ,904 (KZT millions) (KZT million) (KZT million)

Current income tax expense 1,406 7 ,282 3, 795 Deferred income tax assets: Deferred income tax expense/(benefit) 11,357 (15, 972) 12, 109 Unrealised loss on trading securities and derivatives 2,967 6,082 1,462 Income tax expense/(benefit) 12,763 (8, 690) 15 ,904 Provision on guarantees and letters of credit 836 - -

Unrealised loss on revaluation of financial instruments treated as cash flow hedges 234 2,680 - Realized loss on securities 676 1,030 - Bonuses accrued 478 649 706 Corporate income tax rate in the Republic There was a further change during 2009 in Investments in associates 238 - - of Kazakhstan was 20% during 2009 and tax legislation in Kazakhstan in relation to Unamortized deferred loan fees 81 132 - 30% during 2008 and 2007. During 2008 corporate income tax, which is set at 20% for there was a change in tax legislation in financial years ending 31 December 2009, Deferred tax losses 1,198 240 136 Kazakhstan in relation to corporate income tax 2010 and 2011, 17.5% for the financial year

Total deferred income tax assets 6,708 10,813 2,304 which was set at 20% for the financial year ending 31 December 2012 and 15% for ending 31 December 2009, 17.5% for the financial years ending 31 December 2013 and financial year ending 31 December 2010 and thereafter. Deferred income tax liabilities: 15% for financial years ending 31 December Allowance for losses on loans and advances to banks 2011 and thereafter. and customers 29,294 19,144 20,147 2009 2008 2007 (KZT million) (KZT million) (KZT million) Property, equipment and intangible assets and Deferred income tax liabilities accumulated depreciation 1,807 1,498 2,795 1 January 10,205 30 ,496 16, 851 Increase/(decrease) of deferred tax liability due to tax rate Provision on guarantees and letters of credit - 264 1,198 changes 4,892 (14 ,267) - Investments in associates 2 108 946 Increase/(decrease) of deferred tax liability 6,465 (1, 705) 12, 109 Change in hedging reserve 2,445 (2, 680) - Unrealised gain on trading securities and derivatives 124 4 7,714 Increase/(decrease) of deferred tax expenses through the equity due to tax rate changes 453 (1, 144) - Change in available-for-sale reserve 438 ( 423) - Total deferred income tax liabilities 31,227 21,018 32,800 Change in deferred tax liability from revaluation of property and equipment (379) (72) 1,536 Net deferred income tax liabilities 24,519 10,205 30,496 31 December 24,519 10 ,205 30 ,496

128 129 13. EARNINGS PER SHARE As described in Note 31, dividend payments Cash and cash equivalents for the purposes of the consolidated statement of cash flows are per ordinary shares cannot exceed the comprised of the following: Basic and diluted earnings per share are dividends per share on preference shares for calculated by dividing the net income for the the same period. Therefore, net profit for the 31 December 31 December 31 December year attributable to equity holders of the period is allocated to the ordinary shares and 2009 2008 2007 parent by the weighted average number of the preference shares in accordance with their (KZT million) (KZT million) (KZT million) participating shares outstanding during the legal and contractual dividend rights to year. participate in undistributed earnings: Cash and balances with national (central) banks 90,533 90 ,478 168, 148 Loans and advances to banks in Organization for Economic Co-operations and Development (“OECD”) countries with original maturities less than 3 months 77,611 164 ,025 139,042 Year ended Year ended Year ended 31 December 31 December 31 December Less funds deposited with the National Bank of the 2009 2008 2007 Republic of Kazakhstan (“NBRK”) and cash on hand (84,405) (85 ,127) (160,217) (KZT million) (KZT million) (KZT million) Less funds deposited with the Central Bank of Russian Basic and diluted earnings per share Federation (“CBR”) (949) (17 8) (2,430) Net profit for the year attributable to equity holders of the Less funds deposited with the National Bank of the parent 19,423 21 ,805 55,963 Kyrgyz Republic (“NBKR”) (204) (15 5) (197) Less: additional dividends that would be paid on full distribution of profit to the preferred shareholders (2,271) (3, 399) (9,495) Less funds deposited deposit with the National Bank of Tajikistan (20) (4 9) - Net profit for the year attributable to ordinary shareholders 17,152 18 ,406 46, 468

82,566 168 ,994 14 4,346 Weighted average number of ordinary shares for basic and diluted earnings per share 706,725,587 574,861, 869 574,828,600

Earnings per share – basic and diluted (tenge) 24.27 32.01 80.85 In accordance with Kazakhstan legislation, The balances with the CBR as at 31 December second-tier banks are required to maintain 2009 include KZT 2,220 million (2008: KZT 2,559 Minimum Reserve Requirements (the “MRR”) in million, 2007: KZT 5,246 million), of which KZT the form of cash on hand and funds deposited on 949 million (2008: KZT 178 million, 2007: KZT correspondent account with the National Bank in 2,430 million) represents the obligatory minimum 14. CASH AND BALANCES WITH NATIONAL (CENTRAL) BANKS national and freely-convertible currencies. MRR is reserve deposits required by the CBR. The Group defined as a share in percentage of total of the is required to maintain the reserve balance at the Bank's liabilities and calculated as of a certain CBR at all times. 31 December 31 December 31 December 2009 2008 2007 date, as an average amount for fourteen calendar (KZT million) (KZT million) (KZT million) days. As at 31 December 2009, an amount of KZT The balances with the NBKR as at 31 35,537 million (2008: KZT 49,925 million, 2007: December 2009 include KZT 1,198 million (2008: Cash on hand 35,073 35,879 41,082 KZT 155,205 million) of cash on hand and balance KZT 415 million, 2007: KZT 344 million), of which Balances with national (central) banks 55,460 54,599 127,066 maintained with the NBRK represents MRR and is KZT 204 million (2008: KZT 155 million, 2007: KZT restricted in use. 197 million) represents the minimum reserve

90,533 90,478 168,148 deposits required by the NBKR at all times. The balances with the NBRK as at 31 December 2009 include KZT 51,767 million (2008: KZT The balances with the National Bank of 51,329 million, 2007: KZT 121,476 million) and Tajikistan as at 31 December 2009 include KZT 275 cash on hand of KZT 32,638 million (2008: KZT million (2008: KZT 296 million, 2007: Nil), of 33,798 million, 2007: KZT 38,741 million), totaling which KZT 20 million (2008: KZT 49 million, 2007: KZT 84,405 million (2008: KZT 85,127 million, Nil) represents the minimum reserve deposits 2007: KZT 160,217 million), which represent required by the National Bank of Tajikistan. reserve assets that are not restricted in use in accordance with the requirements of the NBRK.

130 131 15. PRECIOUS METALS 31 December 31 31 December As at 31 December 2009, the Group used Alliance Bank, JSC BTA Bank, JSC BTA 2009 December 2007 (KZT million) 2008 (KZT million) quoted market prices from independent Ipoteka and JSC Azia Auto) and market data (KZT million) information sources for all of its financial on them is either unavailable or the

Precious assets at fair value through profit or loss, with Management of the Group believes the metals 1,209 31 7 - the exception of derivative financial market for these debt securities to be not 1,209 31 7 - instruments, which are valued using valuation active enough to use quoted prices. As at 31 models based on market data, and certain December 2009, total carrying value of these 16. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH debt securities, which are valued using debt securities amounted to KZT 599 million PROFIT OR LOSS valuation models not based on observable (total nominal value of KZT 6,451 million) and market data. The Group applied the model to unrealized loss on fair value adjustment of

31 December 31 December 31 December certain debt securities of local issuers debt securities recognized during 2009 2009 2008 2007 undergoing the process of restructuring (JSC amounted to KZT 1,773 million. (KZT million) (KZT million) (KZT million)

Debt securities 74,125 32,537 130,271 Derivative financial instruments 37,440 24,317 42,858 Ownership 31 December Ownership 31 December Ownership 31 December Equity investments 2,638 1,276 15,647 share 2009 share 2008 share 2007

% (KZT million) % (KZT million) % (KZT million) Total financial assets at fair value through profit

or loss 114,203 58,130 188,776 Equity investments: GDRs of Kazakhstani bank 0.20 1,609 0.64 610 0.01 80 The financial assets at fair value through profit or loss relate entirely to financial assets held for trading. GDRs of Russian bank 0.072 546 0.103 214 0.07 652 Shares of Kazakhstani companies 0.124-0.158 265 0.001-0.293 162 0.007-0.282 701 31 December 31 December 31 December GDRs of Russian companies 0.0001-2.468 67 0.0001-0.01 30 - - 2009 2008 2007 ADRs of Russian company 0.014 58 0.003 12 - - Nominal Amount Nominal Amount Nominal Amount interest interest interest GDRs of Kazakhstani rate % (KZT million) rate % (KZT million) rate % (KZT million) company 0.0006 31 0.0006 8 0.247 3,771 0.00001- Debt securities: Shares of Russian companies 0.006-0.619 29 0.0001-2.00 108 19.559 7,565 Short-term NBRK notes - 51,822 - 5,609 - 1,845 Shares of foreign company 0.0003 27 0.0003-5.93 45 - - Bonds of Kazakhstani companies 5.69-11.00 7,837 8.00-19.20 12,356 4.90-12.40 22,684 Shares of Kazakhstani bank 0.006 6 0.025 75 0.0007-0.043 363 State treasury bonds of the Shares of Russian bank - - 0.00001 12 0.00001 19 Ministry of Finance of Republic ADRs of Kazakhstani of Kazakhstan 4.05-8.90 5,738 4.50-8.75 1,765 3.78-6.68 926 company - - - - 0.654 2,496 Bonds of Russian companies 7.29-16.50 2,891 7.28-13.80 3,078 7.28-13.80 4,030 2,638 1,276 15,647 Bonds of Russian banks 15.00-16.00 1,905 7.34-9.90 1,828 7.34-8.25 703 Bonds of Kazakhstani banks 7.50-10.90 1,440 6.00-12.00 2,390 6.00-12.00 4,151 Bonds of international financial organizations 4.847-7.75 1,385 6.50-15.715 2,920 1.56-20.09 87,336 Eurobonds of Kazakhstani banks 3.148-8.00 591 7.875-8.125 2,089 7.75-8.13 2,900 Bonds of local executive bodies of the Russian Federation 6.73-8.20 218 7.26-8.70 378 7.75-9.20 607 As at 31 December 2009, financial assets at loss included state treasury bonds of the Bonds of federal loan of the Ministry of Finance of the fair value through profit or loss included Ministry of Finance of the Republic of Russian Federation 8.00 154 9.00 124 9.00-10.00 343 Bonds of Development Bank of accrued interest income on debt securities of Kazakhstan, bonds of Kazakhstani companies, Kazakhstan 6.50 144 - - - - KZT 441 million (2008: KZT 592 million, 2007: pledged under repurchase agreements with Bonds of Russian investment KZT 1,506 million). other banks and customers of fair value of funds - - - - - 4,273 KZT 9,860 million (2007: KZT 82,147 million). Eurobonds of OECD countries - - - - 4.75 253 As at 31 December 2009, there were no All of the repurchase agreements open as at 31 Bonds of Atyrau local executive bodies - - - - 8.50 220 financial assets pledged under repurchase December 2008 were settled by January 2009 agreements. As at 31 December 2008, (2007: February 2008). 74,125 32,537 130,271 financial assets at fair value through profit or

132 133 31 December 2009 31 December 2008 31 December 2007 The Group's cash flow hedges relate to As at 31 December 2009, the aggregate Nominal Net fair value Nominal Net fair value Nominal Net fair value

value (KZT million) value (KZT million) value (KZT million) exposure to variability in the anticipated future amount of unrealized gains under foreign cash flows on its financial liabilities. exchange swap contracts deferred in the Derivative hedging reserve relating to the exposures financial Assets Liabilities Assets Liabilities Assets Liabilities instruments: To hedge the cash flows on financial amounted to KZT 975 million (2008: the Foreign liabilities with floating interest rates, the aggregate amount of unrealized losses of KZT exchange Group uses interest rate swap contracts to 11,034 million, 2007: Nil). The cash flows contracts: Foreign exchange the floating rates for fixed rates. As under these contracts will occur quarterly, for exchange such, the Group converts its floating rate debt periods up to February 2017. These contracts 303,891 37,182 (24,0 11) 305,917 21,265 (34,6 48) 381,001 25,724 (2,1 45) swap repayments to fixed rate debt repayments are designated as hedge instruments to hedge Spot 4,684 - - 18,563 2 (8) 74,996 19 (25) and minimizes the effect of change in the exchange rate risk arising from the future Forward contracts 1,041 8 (4) 112,221 1,941 (4,1 35) 64,652 2,105 (381 ) interest rates on its future cash flows. The cash flows of the funds raised by the Group Options - - - 23,227 163 - - - - cash flows related to the hedging from international financial organizations in relationships will occur over the life of the currencies other than tenge. Interest Rate debt securities instruments which are being contracts: hedged. As at 31 December 2009, the aggregate Interest rate amount of unrealized losses under interest swap 111,743 250 (11,97 6) 124,591 946 (15,5 48) 82,740 14,987 (5,1 33) To hedge the foreign exchange risk on rate swap contracts deferred in the hedging Securities financial liabilities the Group uses cross- reserve relating to the exposures amounted to purchase/ Sale currency swap contracts to convert, partially KZT 2,144 million (2008: KZT 2,363 million, contracts: or in-full, its repayments on foreign currency 2007: Nil). The cash flows under these Securities denominated liabilities to the functional contracts will occur biannually, for periods up swap ------592 23 (4 6) currency of the subsidiary which issued these to January 2018. These contracts are 37,440 (35,9 91) 24,317 (54,33 9) 42,858 (7,7 30) liabilities. The cash flows related to the designated as hedge instruments to hedge the hedging relationships will occur over the life of interest rate risk arising from the future cash the debt securities instruments which are flows of the funds raised by the Group from being hedged. international financial organizations in Included in the above are derivatives held for hedging purposes as follows: currencies other than tenge. For the year ended 31 December 2009, 31 December 2009 31 December 2008 31 December 2007 gain from hedge ineffectiveness recognized As at 31 December 2009, the fair value of Nominal Net fair value Nominal Net fair value Nominal Net fair value in net gain/(loss) on financial assets and assets and liabilities arising from the derivative value (KZT million) value (KZT million) value (KZT million) Cash flow Assets Liabilities Assets Liabilities Assets Liabilities liabilities at fair value through profit or loss financial instruments classified as hedging hedging: comprised KZT 730 million (2008: loss from instruments is KZT 11 million and KZT 105 hedge ineffectiveness of KZT 186 million, million, respectively (2008: KZT 11,995 million Interest rate swap 2,524 11 (1 05) 14,132 43 (1,6 18) - - - 2007: Nil). and KZT 33,834 million, 2007: Nil). Foreign exchange swap - - - 191,476 11,952 (32,21 6) - - -

11 (1 05) 11,995 (33,83 4) - -

134 135 17. LOANS AND ADVANCES TO BANKS AND OTHER FINANCIAL In addition, as at 31 December 2009, the certain letters of credit and derivative INSTITUTIONS Bank maintained deposits of KZT 2,036 million operations closed during 2009. As at 31 included in loans and advances to banks as December 2007, the Bank placed deposit with 31 December 31 December 31 December collateral for credit cards operations. As at 31 JP Morgan Chase Bank totaling KZT 2,536 2009 2008 2007 (KZT million) (KZT million) (KZT million) December 2008, the Bank placed deposits million to guarantee certain letters of credit Recorded as loans and receivables: with JP Morgan Chase Bank and Morgan operations. Loans and advances to banks 90,676 222 ,785 173, 759 Stanley totaling KZT 4,723 million to guarantee Correspondent accounts with other banks 46,828 19, 262 39, 661 Loans under reverse repurchase agreements 10,893 65 679

148,397 242, 112 214, 099 Less allowance for impairment losses (22) (299) (1,27 6) 18. LOANS TO CUSTOMERS 31 December 31 December 31 December 148,375 241 ,813 212,823 2009 2008 2007 (KZT million) (KZT million) (KZT million) Movements in allowances for impairment equity. As at 31 December 2009, the Recorded as loans and receivables: losses on loans and advances to banks and maximum exposure to any individual bank Originated loans 2,658,772 2,39 2,218 2,48 0,059 Net investments in finance lease 6,654 7,475 6,090 other financial institutions for the years ended amounted to KZT 33,434 million (2008: KZT Loans under reverse repurchase agreements 889 34 ,417 20 ,549 31 December 2009, 2008 and 2007 are 39,651 million, 2007: KZT 32,091 million). disclosed in Note 5. 2,666,315 2,4 34,110 2,50 6,698 Less allowance for impairment losses (505,548) (289 ,328) (140 ,363) As at 31 December 2009 the maximum As at 31 December 2009, loans and credit risk exposure on loans and advances to 2,160,767 2,14 4,782 2,366 ,335 advances to banks and other financial banks and other financial institutions institutions included accrued interest of KZT amounted to KZT 148,375 million (2008: KZT As at 31 December 2009, accrued interest ended 31 December 2009, 2008 and 2007 are 402 million (2008: KZT 1,123 million, 2007: 241,813 million, 2007: KZT 212,823 million). income included in loans to customers disclosed in Note 5. KZT 1,327 million). amounted to KZT 224,510 million (2008: KZT 98,183 million, 2007: KZT 66,827 million). The table below summarizes the amount of As at 31 December 2009, 2008 and 2007, The fair value of collateral and carrying loans secured by type of collateral, rather than the Group had no loans and advances to banks value of loans under reverse repurchase Movements in allowances for impairment the fair value of the collateral itself: and other financial institutions, which agreements as at 31 December 2009, 2008 losses on loans to customers for the years individually exceeded 10% of the Group's and 2007 comprised: 31 December 31 December 31 December 2009 2008 2007 31 December 31 December 31 December (KZT million) (KZT million) (KZT million) 2009 2008 2007 Analysis by type of collateral: (KZT million) (KZT million) (KZT million) Loans collateralized by real estate 1,167,069 914 ,265 1,03 9,685 Fair value Carrying Fair value Carrying Fair value Carrying Loans collateralized by equipment 309,245 266 ,345 20 9,168 of value of of value of of value of Loans collateralized by shares of the banks and other collateral loans collateral loans collateral loans companies 208,693 24 9,811 209,729 Bonds of the Ministry Loans collateralized by inventories 181,694 67 ,717 41,014 Loans collateralized by guarantees of enterprises 81,507 17 5,352 17 6,004 of Finance of the Republic Loans collateralized by accounts receivable 61,264 83, 884 86, 872 of Kazakhstan 8,725 7,913 39 65 12 11 Loans with collateral under the registration process Bonds of the Russian banks 1,313 1,134 - - - - (property, land, shares, guarantees, etc.) 49,503 7 7,973 152,707 Bonds of the Russian companies 812 981 - - - - Loans collateralized by cash or Kazakhstani Bonds of the executive Government guarantees 23,563 5 8,231 80,232 Loans collateralized by mixed types of collateral 14,725 122 ,956 20 9,980 bodies and subjects Loans collateralized by securities 889 34 ,417 20 ,549 of the Russian Federation 495 421 - - - - Loans collateralized by guarantees of financial Bonds of the Ministry institutions 171 2,701 8,031 of Finance of the Russian Unsecured loans 62,444 9 1,130 132, 364 Federation 494 444 - - - - Shares of Russian companies - - - - 756 668 2,160,767 2,14 4,782 2,366 ,335

11,839 10,893 39 65 768 679

136 137 Mixed collateral consists of multiple types In addition to the collateral disclosed Loans to individuals comprise the following products: of collateral including real estate, guarantees above, as at 31 December 2009, the Bank has 31 December 31 December 31 December and inventories. Loans are classified as being Eurobonds issued by its subsidiaries, 2009 2008 2007 collateralized by mixed collateral where it is Kazkommerts International B.V. and (KZT million) (KZT million) (KZT million) impractical to split this collateral into the Kazkommerts Finance II B.V with a nominal categories disclosed above. value of KZT 15,087 million (USD 102 million) Mortgage loans 183,016 197 ,663 24 7,478 as collateral for certain loans. Consumer loans 59,724 10 0,830 133, 108 Business loans 15,279 25,390 42,817

31 December 31 December 31 December Car loans 8,951 13,584 19,422 2009 2008 2007 Other 7,171 13,621 9,505 (KZT million) (KZT million) (KZT million)

Analysis by sector: 4 52,330 Real estate 306,961 14 0,901 165 ,825 274,141 35 1,088 Wholesale and retail trade 282,509 33 3,171 4 42,181 Housing construction 311,969 30 1,665 24 6,546 Individuals 274,141 35 1,088 45 2,330 As at 31 December 2009, 2008 and 2007, loans to borrowers disclosed in 2007 and 2008 Commercial real estate construction 187,171 192 ,869 228 ,165 the Group granted loans to the borrowers, may continue to be outstanding in 2008 and Hotel business 171,795 135 ,015 133, 635 shown below, respectively, which individually 2009, only those borrowers which exceed 10% Production of other non-metal materials 111,920 93, 492 5 4,840 exceeded 10% of the Group's equity. Although of equity are disclosed below. Transport and communication 106,099 9 7,576 10 6,576 Investments and finance 67,441 13 1,866 122, 744 Food industry 62, 661 60,102 5 6,730 31 December 31 December 31 December Energy 66,179 49,992 7 3,792 2009 2008 2007 Machinery construction 28,826 39 ,972 4 3,935 (KZT million) (KZT million) (KZT million) Industrial and other construction 27,889 30 ,447 40,115 - Agriculture 24,328 4 5,440 5 2,906 LLP GAS Corporation 72,875 64, 835 Production of construction materials 18,499 16,073 31, 468 JSC Visor Investment Solutions 70,674 58, 455 43, 122 Holding Vek ZhSK 66,404 50, 660 - Mining and metallurgy 15,756 13,118 11,577 LLP Capital Tower 61,806 - - Medicine 4,239 6,526 5,877 Holding Airport Almaty 51,007 - - Culture and art 402 2,437 4,945 JSC NGSK Kazstroiservice - 47, 343 - Other 108,441 83, 253 95 ,468 Group LLP CP Retail Almaty - 46, 593 - JSC Holding Build Investment - 44 ,097 - 2,160,767 2,14 4,782 2,366 ,335 LLP Ken-Sary - - 69, 714 LLP Alibi Holding - - 48, 327

322,766 311, 983 161, 163 During the years ended 31 December 2009, 2007: KZT 1,151 million) are included in other 2008 and 2007, the Group received non- assets line of the consolidated statement of financial assets by taking possession of financial position. These assets are As at 31 December 2009, significant part of to KZT 2,160,767 million (2008: KZT collateral it held as security. As at 31 December represented mostly by real estate the majority loans 82.42% (2008: 80.43%, 2007: 78.42%) 2,144,782 million, 2007: KZT 2,366,335 2009, 2008 and 2007, such assets in amount of which will be realized through auctions. of the total portfolio is granted to companies million). of KZT 2,479 million (2008: KZT 1,620 million, operating on the territory of the Republic of Kazakhstan, which represents a significant As at 31 December 2009, maximum credit geographical concentration. risk exposure on loan commitments and overdrafts extended by the Group to its As at 31 December 2009, maximum credit customers amounted to KZT 9,865 million risk exposure on loans to customers amounted (2008: KZT 9,312 million, 2007: KZT 10,382 million).

138 139 As at 31 December 2009, 2008 and 2007, the fair value of collateral and carrying value of loans The value of future minimum lease payments received from the customer under finance lease under reverse repurchase agreements comprised: as of 31 December 2009, 2008 and 2007 comprised:

31 December 31 December 31 December 31 December 31 December 31 December 2009 2008 2007 2009 2008 2007 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Not later than one year 2,985 3,393 2,264 Fair value Carrying Fair value Carrying Fair value Carrying

of value of of value of of value of From one year to five years 3,864 1,015 5,185

collateral loans collateral loans collateral loans More than 5 years 1,510 5,331 588

Notes of the National Bank of Total value of future minimum lease payments 8,359 9,739 8,037 the Republic of Kazakhstan 338 483 - - - - Bonds of Kazakhstani companies 34 342 1,711 1,981 2,534 2,871 Shares of Kazakhstani banks 21 58 139 498 419 676 Shares of Kazakhstani companies 6 6 11,189 19,803 614 636 Shares of Russian companies - - 4,165 3,800 15,998 15,081 19. INVESTMENTS 31 December 31 December 31 December Bonds of Russian companies - - 3,543 2,983 - - 2009 2008 2007

ADR of Kazakhstani AVAILABLE-FOR-SALE (KZT million) (KZT million) (KZT million) companies - - 1,642 4,338 - - Shares of Russian banks - - 519 446 499 480 Debt securities 11,444 11,755 3,034 Bonds of Kazakhstani banks - - 290 383 669 805 Equity

Bonds of the Ministry of securities 5,252 3,301 2 Finance of the Republic of Kazakhstan - - 176 185 - - 16,696 15,056 3,036

Total securities purchased under reverse repurchase agreements 399 889 23,374 34,417 20,733 20,549 Nominal 31 December Nominal 31 December Nominal 31 December interest 2009 interest 2008 interest 2007 rate rate rate The components of net investment in finance lease as at 31 December 2009, 2008 and 2007 % (KZT million) % (KZT million) % (KZT million) Debt securities: are as follows: Bonds of Kazakhstani companies 6.10-18.59 6,194 6.50-19.20 7,258 7.90-12.20 1,342 State treasury bonds of the 31 December 31 December 31 December Ministry of Finance of the 2009 2008 2007 Republic of Kazakhstan 0.5-10.10 4,345 3.35-17.94 2,882 3.75-11.08 1,400 (KZT million) (KZT million) (KZT million) Bonds of Kazakhstani banks 7.90-10.90 766 8.50-12.00 1,615 8.50-12.00 290

Minimum lease payments 8,359 9, 739 8, 037 Short-term notes of the NBRK Less: unearned finance income (1,705) (2,264 ) (1,94 7) - 139 - - - 2

11,444 11,755 3,034 Net investment in finance lease 6,654 7, 475 6, 090

Current portion 2,778 2, 310 1, 681 Long-term portion 3,876 5, 165 4, 409

Net investment in finance lease 6,654 7, 475 6, 090

140 141 Ownership 31 December Ownership 31 December Ownership 31 December On reclassification 31 December 09 31 December 08 share 2009 share 2008 share 2007 % (KZT million) % (KZT million) % (KZT million) Effective Fair Estimated Nominal Fair Nominal Fair Equity securities: interest value cash flows value value value value rate expected GDR of Kazakhstani companies 0.040 2,798 0.263 1,687 - - % to be ADR of Kazakhstani companies 3.23 1,154 0.646 930 - - recovered Shares of Kazakhstani companies 0.006-0.119 718 0.029-0.078 311 - - Debt securities: (KZT million) (KZT million) (KZT million) GDR of Russian banks 0.066 348 0.07 136 - - GDR of Kazakhstani banks 0.020 134 0.057-0.08 93 - - Bonds of Kazakhstani Shares of Kazakhstani banks 0.008-0.014 100 0.020-0.042 142 - - companies 17.6453 6,419 6,456 5,514 5,622 5,514 6,182 Shares of Kazakhstan stock Bonds of Kazakhstani exchange - - 1.33 2 1.33 2 banks 5.5054 1,556 1,846 304 307 1,504 1,405

5,252 3,301 2 Total debt securities 7,975 8,302 5,818 5,929 7,018 7,587

As at 31 December 2009, interest income amendments to IAS 39 “Financial Instruments: on debt securities amounting to KZT 478 Recognition and Measurement” (“IAS 39”) to 31 December 2009 31 December 2008 million (2008: KZT 904 million, 2007: KZT 168 permit the reclassification of financial assets Fair value on Par Fair Par Fair million), was accrued and included in out of the held-for-trading and available-for- reclassification value value value value investments available-for-sale. sale categories, subject to certain restrictions. In accordance with these amendments, during Equity securities: (KZT million) (KZT million) (KZT million)

As at 31 December 2009, there were no 2008, the Group reclassified certain debt and GDR of Kazakhstani companies 3,232 2,125 2,798 2,474 1,687 investments available-for-sale pledged under equity securities with total fair value as at 31 ADR of Kazakhstani companies 2,201 911 1,154 741 930 reverse repurchase agreements. As at 31 December 2009 of KZT 11,083 million (2008: Shares of Kazakhstani companies 621 1,067 681 790 311 December 2008, investments available-for- KZT 10,886 million) from the held-for-trading GDR of Kazakhstani banks 484 179 134 519 93 sale included bonds of Kazakhstani banks, category of financial assets at fair value Shares of Kazakhstani banks 286 380 39 369 142 pledged under repurchase agreements with through profit or loss into investments GDR of Russian banks 97 830 348 675 136 other banks with fair value of KZT 1,235 available-for-sale. Total fair value of debt and million (2007: Nil). All of the repurchase equity securities reclassified amounted to KZT Total equity securities 6,921 5,492 5,154 5,568 3,299 agreements open as at 31 December 2008 14,896 million as at the reclassification date. were settled by January 2009 (2007: none). The reclassifications were made for those As at 31 December 2009, the Management securities which have had a significant decline of the Group believes certain equity securities in volume of transactions in the financial to be impaired and loss transferred to the markets as a result of the financial crisis. In the consolidated income statement on impairment current situation the Group has revised its of shares of Kazakhstani banks, JSC investment strategy and has the intention and Kazakhtelecom and on GDRs of Russian banks ability to hold those securities for the amounted to KZT 1,060 million (2008: KZT foreseeable future. Those debt and equity 2,120 million, 2007: Nil). This amount is securities which were reclassified are recognized in the line “Net realized loss on p r e s e n t e d i n t h e t a b l e s b e l o w . investments available-for-sale” of the Reclassifications implemented before 1 consolidated income statement. November 2008 have been backdated to 1 July 2008, 1 August 2008, 1 September 2008 and 1 In October 2008, the International November 2008, as permitted by the revision Accounting Standards Board issued to IAS 39.

142 143 As at and for the year ended 31 December 2009

Amount that would have been After reclassification recognized had reclassification not occurred Movements in Income from 20. INVESTMENTS HELD TO MATURITY Interest Impairment available-for- FVTLP income/other losses sale revaluation income reserves (KZT million) (KZT million) 31 December 31 December 31 December 2009 2008 2007 Debt securities: Nominal Amount Nominal Amount Nominal Amount

interest rate (KZT million) interest rate (KZT million) interest rate (KZT million) Bonds of Kazakhstani companies 714 - (560) (560) % % % Bonds of Kazakhstani banks 114 - (1, 098) (1, 098) Debt securities: Eurobonds of HSBK Europe BV 9.25 337 - - - - Total debt securities 828 - (1, 658) (1, 658) Bonds of the Ministry of Finance of the Republic of Kazakhstan 6.75 234 6.75 229 - - Equity securities: Bonds of JSC BankCenterCredit 8.90-10.00 116 8.50-10.00 117 8.50-10.00 117 Bonds of JSC Halyk Bank 6.00-9.20 110 6.00-7.75 109 7.30-7.75 109 GDR of Kazakhstani companies - - 1,111 1,111 Bonds of JSC ATF Bank 10.90-11.00 91 8.50-11.00 92 8.50-9.80 91 ADR of Kazakhstani companies - (60 5) 224 (381) Bonds of JSC Batys Transit 9.20 49 19.20 52 - - Bonds of the Ministry of Finance of 4.04- 19.16- Shares of Kazakhstani companies - (30 6) 370 64 the Kyrgyz Republic 11.65 5 19.21 2 5.24-7.07 58 GDR of Kazakhstani banks - (39) 41 2 Bonds of JSC KazexportAstik 6.80 1 11.00 1 - - Shares of Kazakhstani banks - (90 ) (103) (193) Notes of the National Bank of GDR of Russian banks - (20 ) 212 192 Kyrgyz Republic - - 15.20-16.40 174 - -

Total equity securities - (1,0 60) 1,855 795 943 776 375

828 (1,0 60) 197 (863)

As at and for the year ended 31 December 2008 As at 31 December 2009 interest income on debt securities amounting to KZT 30 million (2008: KZT 19 million, 2007: KZT 5 million) was accrued and included in investments held to Amount that maturity. would have been After reclassification recognized had reclassification not occurred Movements in Income from Interest Impairment available-for- FVTLP income/other losses sale revaluation 21. INVESTMENTS IN ASSOCIATES income reserves (KZT million) (KZT million) The following enterprises were recorded in the consolidated financial statements using the Debt securities: equity method:

Bonds of Kazakhstani companies 854 - (237 ) (237 ) Bonds of Kazakhstani banks 45 - (151) (151) 31 December 2009 31 December 2008 31 December 2007 (KZT million) (KZT million) (KZT million) Total debt securities 899 - (388) (388) Ownership Carrying Ownership Carrying Ownership Carrying interest value interest value interest value Equity securities: % % %

GDR of Kazakhstani companies - - (1, 545) (1, 545) ADR of Kazakhstani companies - (1,27 7) (1,271) (2, 548) JSC APF Ular Umit - - 49.35 1,775 49.35 1,752 JSC OCOPAIM Zhetysu - - 50.00 - 50.00 1,433 Shares of Kazakhstani companies - (214 ) (310) (524) LLP First Credit Bureau - - - 18.40 37 GDR of Kazakhstani banks - (392) (391) (783)

Shares of Kazakhstani banks - (237 ) (144) (381) - 1,775 3,222 GDR of Russian banks - - 39 39

Total equity securities - (2,12 0) (3, 622) (5 ,742)

899 (2,12 0) (4 ,010) (6, 130)

144 145 Investments in associates, accounted for in the consolidated financial statements using the equity 23. PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS method, are presented below:

31 December 2009 31 December 2008 31 December 2007 Buildings Furniture and Intangible Construction Other Total (KZT million) (KZT million) (KZT million) and other equipment assets in equipment real estate progress 1 January 1,775 3,222 1,755 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Purchase cost - 2,172 134 At primary/revalued cost: Sales consideration (6,017) - -

Share of results of associates 345 (3,585) 1,333 31 December 2006 6,818 10 ,761 1, 529 2, 119 1, 101 22, 328 Revaluation through equity (130) 3 - Gain from sale of associates 4,027 - - Additions 2,162 5, 492 1, 630 6, 116 861 16, 261 Write-off investments in the LLP First Revaluation increase 5,245 - - - - 5, 245 Credit Bureau - (37) - Disposals (233) (65 8) (11) - (4 60) (1,362) Net foreign currency exchange 31 December - 1,775 3,222 differences 6 121 1 - 105 233

31 December 2007 13,998 15 ,716 3, 149 8, 235 1, 607 42, 705 On 10 March 2009, the Bank sold its stake in JSC APF Ular Umit and JSC OCOPAIM Zhetysu. The Additions 765 1, 953 392 1, 960 85 8 5, 928 gain on sale of the associate companies amounted to KZT 4,027 million. Transfers - (35 4) - - 35 4 - Revaluation decrease (778) - - - - (7 78) Disposals (51) (87 9) (15 ) - (239) (1,184 ) 22. GOODWILL Net foreign currency exchange differences (85) (285 ) (5 8) - (14 0) (5 68) Goodwill arising as a result of business acquisition relates to expected income from business 31 December 2008 13,849 16, 151 3,4 68 10, 195 2,4 40 46, 103 expansion from the distribution of products on new markets, raising long-term funds and expected combined activity. Additions 64 1,624 5 56 2,1 08 31 4,383 Transfers 11,891 - - (11,891 ) - - Goodwill arising as a result of a business acquisition is distributed to the companies that Revaluation decrease (2,352) - - - - (2,35 2) generate cash flows. Disposals (178) (80 1) (390 ) - (239) (1,60 8) Net foreign currency exchange differences 83 236 58 - 141 518 31 December 31 December 31 December

Companies that generate cash flows: 2009 2008 2007 (KZT million) (KZT million) (KZT million) 31 December 2009 23,357 17,210 3,692 412 2,373 47,044

JSC Grantum APF 1,281 1,281 1,281 Accumulated depreciation: JSC OCOPAIM Grantum Asset Management 1,124 1,124 1,124 31 December 2006 97 5, 318 930 - 30 2 6, 647

2,405 2,405 2,405 Charge for the year 131 1, 784 324 - -28 0 2, 519 Disposals (94) (4 76) (10) - (181) (7 61) Net foreign currency exchange As at 31 December 2009, 2008 and 2007, The Bank used forecasted cash flows for differences - 29 1 - 11 41 there was no evidence that the goodwill that revenues and expenses of Grantum APF and arose on the acquisition of JSC Grantum APF Grantum AM for the next 4 years based on the 31 December 2007 134 6, 655 1, 245 - 4 12 8,4 46 and JSC OCOPAIM Grantum Asset budgets; the revenues and expenses were Charge for the year 182 2, 323 418 - 4 56 3, 379 Management has been impaired. segregated by sources of inflows/outflows Transfers - (225) - - 225 - (e.g. commission income/expense, general Disposals (37) (7 35) (12) - (212) (996) Net foreign currency exchange As at 31 December 2009, the Group has and administrative expenses). Estimation was differences (6) (135 ) (20 ) - (30 ) (191) conducted a reassessment of goodwill made using the discounted cash flows method. 31 December 2008 273 7, 883 1, 631 - 85 1 10,63 8 attributable to Grantum APF and Grantum Calculations used discounted rates of 15.94% AM. For the estimations of cash flows, the (2008: 19.35%, 2007: 16.45%). Based on the Charge for the year 143 2,361 5 06 - 662 3,67 2 Group used the following assumptions: results of internal estimation of goodwill the Transfers - (5 6) - - 5 6 - Disposals (177) (64 9) (390 ) - (219) (1,435 ) recoverable value of shares exceeds the Net foreign currency exchange The economy is cyclical; acquisition cost. As such, the Management of differences 6 10 5 23 - 64 198 Equity market volatility; the Bank believes that there is no impairment 31 December 2009 245 9,64 4 1,7 70 - 1,4 14 13,0 73 Conservative investment strategy; of goodwill. Moreover, a sensitivity analysis Stable customer base (high salary allowing for reasonable possible changes in the Net book value: customers); key assumptions used, on which Management 31 December 2009 23,112 7,5 66 1,92 2 4 12 959 33,97 1

Favorable population indicators (expanding has based its determination of the recoverable 31 December 2008 13,576 8,26 8 1, 837 10, 195 1, 589 35,4 65 younger population); and amounts, did not cause the carrying amount of Cross-selling opportunities. goodwill to exceed its recoverable amount. 31 December 2007 13,864 9,0 61 1, 904 8, 235 1, 195 34,25 9

146 147 As at 31 December 2009, property, obtained through publications and current During the years ended 31 December 2009 banking segment in Note 35. Loss from equipment and intangible assets of the Group market data, and are adjusted based on and 2008, the Group received non-financial revaluation of such non-financial assets included fully depreciated and amortized characteristics of the valued property. assets by taking possession of collateral it held amounted to KZT 1,207 million (2008: Nil, assets on initial cost amounting to KZT 3,620 as security. For the year ended 31 December 2007: Nil). million (2008: KZT 3,176 million, 2007: KZT The carrying value of the buildings as at 31 2009, the amount of loss from sale of non- 3,497 million), of which KZT 3,217 million December 2009 amounted to KZT 23,112 current assets amounted to KZT 41 million Movements in allowances for impairment pertain to the Bank (2008: KZT 3,009 million, million (2008: KZT 13,135 million, 2007: KZT (2008: KZT 12 million, 2007: Nil). The non- losses for the years ended 31 December 2009, 2007: KZT 3,384 million). 13,319 million). If the buildings were current assets are included in the retail 2008 and 2007 are disclosed in Note 5. accounted for at historical cost restated Buildings and other real estate are revalued according to inflation indices less accumulated on a regular cyclical basis, with the last depreciation and impairment losses, their valuation being conducted on 20 August 2009 carrying value as at 31 December 2009 would 25. LOANS AND ADVANCES FROM BANKS AND OTHER FINANCIAL (2008: 7 May 2008, 2007: 30 June 2007). The be KZT 15,632 million (2008: KZT 3,278 INSTITUTIONS valuation was conducted by a local million, 2007: KZT 2,993 million). independent appraisal company and for 31 December 31 December 31 December determining of the final value on these dates, Intangible assets include software, patents 2009 2008 2007 the Group used observable prices in an active and licenses. (KZT million) (KZT million) (KZT million) Recorded at amortized cost: market for the properties. These prices are Correspondent accounts of other banks 2,680 14,267 72,028 Correspondent accounts of organizations that serve certain types of banking operations 254 386 5 Loans from banks and other financial institutions, including: 24. OTHER ASSETS Syndicated loan from a group of banks with maturity of December 2009 and interest rate of 1.1% - 36,451 36,255 Loan with maturity of October 2010 314 300 4,143 31 December 31 December 31 December Loan with maturity of June 2014 32,357 32,952 40,138 2009 2008 2007 Syndicated loan from a group of banks with maturity (KZT million) (KZT million) (KZT million) of September 2008 and interest rate of 5.815% - - 72,834 Syndicated loan from a group of banks with maturity Other financial assets recorded as loans and of December 2008 and interest rate of 3.718% - - 33,147 receivables in accordance with IAS 39: Syndicated loan from a group of banks with maturity of December 2008 and interest rate of 3.4% - - 13,235 Receivables on other transactions 10,249 13, 463 7 ,605 Syndicated loan from a group of banks with maturity Insurance agreement accounts receivable 1,598 4 ,733 1, 196 of February 2008 and interest rate of 5.51% - - 54,838 Accrued commission 983 726 1,131 Loans with other banks and financial establishments 172,093 193,764 284,267 Deposits with banks 1,424 8,745 34,780 Loans under repurchase agreements - 9,526 77,761 12,830 18, 922 9, 932

Less allowance for impairment losses (2,756) (2, 303) (323) 209,122 296,391 723,431

Total other financial assets recognized as loans and receivables in accordance with IAS 39 10,074 16, 619 9,609 As at 31 December 2009, accrued interest other banks and financial establishments, expense included in loans and advances from 2007: KZT 247,667 million or 87% of total banks and other financial institutions loans with other banks and financial Prepaid expenses 2,554 3, 030 4 ,050 amounted to KZT 1,059 million (2008: KZT establishments) consisted of 14 (2008: 23, Non-current asset held for sale 2,479 1, 620 1,151 2,238 million, 2007: KZT 5,272 million). 2007: 45) banks and financial institutions of Income tax receivable 1,972 237 386 Tax settlements, other than income tax 1,692 2, 278 2, 632 such countries as Great Britain, Austria, Inventory - 24 25 As at 31 December 2009, loans with other Russia, Luxemburg, Kazakhstan, Germany, banks and financial institutions for KZT Switzerland and China. Maturities of these Total other non-financial assets 8,697 7,189 8 ,244 162,264 million (94% of total loans with other loans range from 13 days to 97 months (2008: banks and financial establishments) (2008: 5 days to 97 months, 2007: 3 days to 101 18,771 23, 808 17 ,853 KZT 173,203 million or 89% of total loans with months). Interest rates on loans with other

148 149 banks and financial establishments varied million and maturity in January 2009, 2007: 26. CUSTOMER ACCOUNTS from 0.72% to 11.84% (2008: from 0.05% to KZT 77,761 million and maturity in February 15%, 2007: from 2.33% to 10.16%). 2008). 31 December 31 December 31 December 2009 2008 2007 As at 31 December 2009, included in loans The fair value of collateral and carrying (KZT million) (KZT million) (KZT million) and advances to banks and other financial value of loans under repurchase agreements Recorded at amortized cost: institutions are loans under repurchase as at 31 December 2009, 2008 and 2007 are Time deposits 799,880 789,780 701,854 agreements of KZT Nil (2008: KZT 9,526 presented as follows: Demand deposits 299,926 153,967 175,979 JSC National Welfare Fund “Samruk-Kazyna”, JSC Entrepreneurship Development Fund “Damu” and JSC Stress Assets Fund 175,583 35 ,110 17,049 31 December 31 December 31 December Metallic accounts in precious metals 1,075 300 - 2009 2008 2007 Loans under repurchase agreements - 296 201 (KZT million) (KZT million) (KZT million) Fair Carriyng Fair Carriyng Fair Carriyng 1,276,464 979,453 895,083 value of value of value of value of value of value of collateral loans collateral loans collateral loans

Bonds of Kazakhstani companies - - 4,359 3,611 1,750 1,501 As at 31 December 2009, customer The refinancing of large-scale businesses in Notes of the National Bank of the Republic of accounts included accrued interest expense of the manufacturing sector is conducted in Kazakhstan - - 4,209 4,000 843 802 KZT 18,943 million (2008: KZT 14,610 million, accordance with the General Agreement # 3- Bonds of Kazakhstani banks - - 1,235 1,000 - - 2007: KZT 16,516 million). 4SP signed by JSC National Wealth Fund Bonds of the Ministry of «Samruk-Kazyna», JSC distressed Assets Fund, Finance of the Republic of Kazakhstan - - 553 500 776 702 As at 31 December 2009, customer JSC Entrepreneurship Development Fund Bonds of Russian banks - - 467 415 249 219 accounts were pledged as a guarantee for «Damu» and second-tier banks dated 09 Bonds of international financial establishments - - - - 75,749 72,501 issued letters of credit and other transactions October 2009. The funds were placed with the Bonds of Russian relating to contingent liabilities of KZT 5,438 Bank and consequently used for refinancing companies - - - - 2,064 1,489 Bonds of local executive million (2008: KZT 4,736 million, 2007: KZT of large-scale businesses in the manufacturing bodies of the Russian 2,750 million). sector. The total amount of funds of the Federation - - - - 504 547 Program was KZT 5.2 billion. The Bank

- - 10,823 9,526 81,935 77,761 The Bank participates in the stabilization allocates its own funds in the proportion of program of the Government of Kazakhstan 30/70 (KZT 1.56 billion are the Bank's funds through financing and refinancing programs and KZT 3.64 billion are the funds of JSC Stress During 2009 the Group simultaneously shareholders other than dividend shares. of JSC National Wealth Fund «Samruk- Assets Fund). placed with and received short-term funds Furthermore, certain of the Group's outstanding Kazyna». The National Wealth Fund «Samruk- from banks in different currencies for a total financing agreements include covenants Kazyna» deposited KZT 24 billion under As at 31 December 2009, the customer amount of KZT 29,408 million (2008: KZT restricting the capability of the Group to create mortgage refinancing program and KZT 84 accounts of KZT 774,868 million or 60.8% 96,962 million, 2007:KZT 301,892 million). the right of pledge on its assets. The Group's billion within the real economy sector (2008: KZT 565,565 million or 57.74%, 2007: failure to observe obligations on these financing program. KZT 335,853 million or 37.52%), were due to In accordance with the contractual terms of covenants can lead to cross reduction in the 10 customers, which represents significant the loans from certain OECD based banks and maturity and a chain of defaults on the terms of As at 31 December 2009, Samruk-Kazyna concentration. The Management of the Group EBRD, the Group is required to maintain certain other financial agreements of the Group. deposited KZT 34 billion under the program on believes that in the event of withdrawal of financial ratios, particularly with regard to its completion of construction objects in Almaty funds, the Group would be given sufficient liquidity, capital adequacy and lending As at 31 December 2009, 2008 and 2007, and Astana. notice as to realize its liquid assets to enable exposures. In accordance with the terms of the Group was in compliance with the repayment. certain of those loans, the Group is also required covenants of the various debt agreements the to obtain the approval of the lender before Group has with other banks and financial distributing any dividends to the common institutions.

150 151 31 December 31 December 31 December 27. DEBT SECURITIES ISSUED 2009 2008 2007 (KZT million) (KZT million) (KZT million) 31 December 31 December 31 December Analysis by sector: Annual Maturity 2009 2008 2007 Chemical and petrochemical industry 356,415 393, 550 168, 778 Currency coupon rate date Individuals 327,622 263, 771 309, 679 % (KZT million) (KZT million) (KZT million) Public authorities 147,447 271 - Recorded at amortized cost: Distribution of electricity, gas and water 116,402 4 5,386 16, 683 Eurobonds of Kazkommerts International Investments and finance 92,916 10 5,169 146, 763 B.V.: Transport and communication 48,533 2 7,644 56, 345 Issued in May 2007 with zero coupon USD May 2008 - - - 30,0 75 Individual services 48,513 30 ,249 30, 752 Wholesale and retail trade 43,688 4 6,667 39, 867 Issued in July 2007 at the price of 100% JPY July 2009 2.56 - 33,5 00 26,7 75 Construction 35,360 24,711 36, 592 Tranche A issued in November 2004 at November the price of 98.967% USD 2009 7.00 - 36, 797 40,94 9 Education 19,002 10 ,800 27 ,261 Issued in March, 2006 at the price of Agriculture 11,019 13, 895 25, 766 99.993% EUR March 2011 5.125 50,840 49,96 5 53, 151 Mining and metallurgy 7,655 6,090 8, 402 Issued in May 2008 at the price of Health care 6,450 2,856 6,83 0 100% USD May 2011 12.00 34,146 27,7 82 - Hotel business 2,805 1,145 694 Issued in February 2007 at the price of February Public organizations and unions 1,516 519 592 99.962% GBP 2012 7.625 42,190 61, 124 84,0 49 Machinery construction 900 939 904 Issued in April 2003 at the price of Real estate 890 606 1, 704 97.548% USD April 2013 8.50 51,893 40, 471 41,4 20 Culture and art 706 770 612 Issued in April 2004 at the price of Light industry 580 1,168 1, 077 99.15% USD April 2014 7.875 38,335 46,397 47,337 Food industry 545 570 2,4 44 Issued in November 2005 at the price of November Energy - 1 1 98.32% USD 2015 8.00 45,350 60,3 95 60,1 50 Issued in November 2006 at the price of November Metallic accounts in precious metals 1,075 300 - 98.282% USD 2016 7.50 52,878 60,3 95 60,1 50 Other 6,425 2,376 13, 337 Issued in February 2007 at the price of 99.277% EUR February 2017 6.875 90,158 127,68 0 132,87 7 1,276,464 97 9,453 895,0 83 December Other Eurobonds of Kazkommerts 2012 - International B.V. USD April 2013 8.50-12.85 32,497 59,7 43 59,4 50

As at 31 December 2009, the customer The fair value of collateral and carrying 438,287 604,24 9 636,3 83 accounts included loans under repurchase value of loans under repurchase agreements (Less)/including: Discount on debt securities issued (3,162) (3,9 51) (6,28 9) agreements amounting to KZT Nil (2008: KZT as at 31 December 2009, 2008 and 2007 are Accrued interest on debt securities issued 13,588 18,23 9 19,897 296 million, 2007: KZT 201 million). presented as follows: Total issued Eurobonds of Kazkommerts International B.V. 448,713 618, 537 649,991 Issued promissory notes of 31 December 31 December 31 December LLP Moscommertsbank at the price of 2009 2008 2007 88.00-100.00% June 2013 7.00-15.00 6,124 50,34 2 78,37 0 (KZT million) (KZT million) (KZT million) Accrued interest expense on issued promissory notes of LLP Moscommertsbank 647 1,326 1,198 Fair value of Carrying value Fair value of Carrying Fair value of Carrying value Issued bonds of Moscow Stars B.V. at the February collateral of loans collateral value of collateral of loans price of 99.00% 2022 1.983-5.483 8,161 8,0 66 10,0 99 loans Accrued interest on bonds of Moscow Stars Bonds of the B.V. 11 14 30 Ministry of Finance of the Republic of 463,656 678,2 85 739,68 8 Kazakhstan - - 176 185 - - Shares of Kazakhstani banks - - 35 27 - - Shares of Russian companies - - 29 29 - - As at 31 December 2009 accrued interest Eurobonds with a maturity of April 2013, the Shares of Russian expense included in debt securities issued coupon is paid on 16 April and 16 October, for banks - - 25 25 - - Bonds of amounted to KZT 14,246 million (2008: KZT Eurobonds with a maturity of April 2014, the Kazakhstani 19,579 million, 2007: KZT 21,125 million). coupon is paid on 7 April and 7 October, for companies - - 7 30 212 201 Eurobonds with a maturity of November Total securities sold Eurobonds were issued by Kazkommerts 2009, the coupon is paid on 3 May and under repurchase International B.V., a subsidiary of the Bank, 3 November, for Eurobonds with a maturity of agreements - - 272 296 212 201 and were guaranteed by the Bank. For November 2015, the coupon is paid on 3 May

152 153 and 3 November, for Eurobonds with a Moscow Stars B.V. is the special purpose 28. OTHER BORROWED FUNDS maturity of March 2011, the coupon is paid on vehicle created for securitization of mortgage 23 March, for Eurobonds with a maturity of loans, and it is consolidated into the financial 31 December 31 December 31 December November 2016, the coupon is paid on 29 May statement of MKB in accordance with SIC 12 Currency Maturity 2009 2008 2007 and 29 November, for Eurobonds with a «Consolidation – Special Purpose Entities». (KZT million) (KZT million) (KZT million) maturity of February 2017, the coupon is paid Moore's Creek KZT February 2009 - 6,588 6,588 Cargill Financial Services Int, USA USD March 2009 - 1,939 - on 13 February, for Eurobonds with a maturity On 3 November 2009, the Bank redeemed Intesa Soditic Trade Finance LTD USD August 2009 - 246 249 of February 2012, the coupon is paid on 13 the issue of Eurobonds placed in November NLB InterFinanz AG USD August 2010 2,252 1,849 1,858 February, for Eurobonds with a maturity of 2004 of KZT 75,425 million (USD 500 million). Funding of agricultural equipment purchasing by Export Development May 2008, the coupon is paid on 16 May, for The issuer of bonds was Kazkommerts Canada USD March 2011 316 432 603 Eurobonds with a maturity of July 2009, the International B.V. Full scheduled redemption Funding by the Ministry of Finance of the Republic of Kazakhstan and by the September coupon is paid on 8 January, 8 April, 8 July and of the issue was made through own funds of Ministry of Kyrgyz Republic KZT 2011 38 58 78 8 October and for Eurobonds with a maturity the Bank. Previously, the Bank has partially November DEG-Deutsche Investitions MBH USD 2011 1,291 5,471 6,207 of December 2012, the coupon is paid on 30 repurchased Eurobonds of this issue. London Forfaiting Company LTD USD June 2012 1,485 - - May and 30 November. Deere Credit USD May 2013 275 311 251 Funding by the Ministry of Finance of During 2009 the Bank purchased from the Kyrgyz Republic USD July 2015 2 2 2 On 11 February 2010, the Bank replaced market Eurobonds issued by Kazkommerts Funding by JSC Entrepreneurship Development Fund “Damu”* KZT February 2016 19,059 2,716 12,264 Kazkommerts International B.V. as a International B.V. with book value of KZT Kazkommerts DPR Company USD March 2017 - 111,436 113,581 Eurobonds issuer. As a result, the Bank's 73,203 million (USD 493 million) which Private Export Funding Corporation USD April 2017 1,798 1,572 1,660 September guarantee is no longer effective and all of the resulted in a gain on extinguishment of KZT Societe Generale Financial Corp USD 2017 4,656 4,704 5,593 issuer's liabilities on the Eurobonds have been 23,378 million. transferred to the Bank. The issuer has been 31,172 137,324 148,934 substituted in accordance with the terms and The Group is obligated to comply with conditions of the Eurobonds; and this transfer financial covenants in relation to the debt * JSC Entrepreneurship Development Fund “Damu” is a subsidiary of JSC National Wealth Fund «Samruk-Kazyna». has no effect on the bondholders' rights. securities disclosed above. These covenants include stipulated capital ratios, debt to equity As at 31 December 2009, accrued interest was made in three series 2005A in the amount On 18 July 2007, Eurobonds were issued by ratios and various other financial performance expense included in other borrowed funds of KZT 26,796 million (USD 200 million), Moscow Stars B.V. with a maturity of ratios. The Group has not breached any of amounted to KZT 405 million (2008: KZT 564 2005B and 2005C in the amount of KZT 6,699 December 2021, the first coupon payment was these covenants in the years ended 31 million, 2007: KZT 620 million). million (USD 50 million) each. The two latter due on 16 August 2007 and subsequent December 2009, 2008 and 2007. tranches were allocated by private offering, coupon is to be paid on the 15th of each month. On 8 December 2005, the Bank launched and Series 2005A was insured by the the inaugural future flow securitization of specialized financial company AMBAC, the diversified payment rights for KZT 40,194 rate of which amounted to 3-month LIBOR million (USD 300 million) with floating interest plus 0.29%. rate and three year grace period on repayment of principal debt in the framework of the On 7 June, 2006 the Bank, in the future payment inflow securitization program framework of the future payment inflow and circulation period of 7 years. The securitization program, allocated additional transaction is a true-sale securitization of the series of bonds 2006A and 2006В, insured by Bank's dollar-denominated present and future the specialized financial companies AMBAC diversified payment rights (SWIFT USD MT100 and FGIC. The sum of the given bonds series) to Kazkommerts DPR Company (special amounted to KZT 11,999 million (USD 100 purpose vehicle created in the Cayman million) each, with a maturity of 7 years, a Islands). Kazkommerts DPR Company is three year grace period of the principal debt operated by Maples Finance Limited, which is and an interest rate of 3-month LIBOR plus incorporated in the Cayman Islands. Allocation 0.25 %.

154 155 On 12 April 2007, the Bank, in the programme's controlling parties (Ambac 30. SUBORDINATED DEBT framework of the future payment inflow Assurance Corporation, MBIA Insurance securitization program, allocated three Corporation, Financial Guaranty Insurance additional series of bonds: 2007A in the Company, the Asian Development Bank and Currency Maturity Interest 31 December 31 December 31 December date rate 2009 2008 2007 amount of KZT 18,363 million (USD 150 WestLB) to terminate the programme. As a (year) % (KZT million) (KZT million) (KZT million) million), 2007B in the amount of KZT 30,605 result of this termination, the programme's million (USD 250 million) and 2007С in the issuer, Kazkommerts DPR Company (“SPC”) Subordinated debt of Kazkommerts Finance II amount of KZT 12,242 million (USD 100 optionally redeemed all of its outstanding B.V. USD 2017 9.54 37,097 30,175 30,035 million). The bonds were issued with a notes issued under the programme. The Subordinated bonds KZT 2015 - 2019 9.00 – 9.50 31,736 29,291 20,411 maturity of 10 years, a three year grace period principal amount of KZT 127,892 million on 11 Subordinated debt of Kazkommerts Finance II of the principal debt and floating interest June 2009 (equivalent of USD 850.4 million) B.V. USD 2016 9.64 30,709 24,975 24,864 rates. The insurers of the bonds issue are and KZT 14,965 million on 16 March 2009 Subordinated debt of specialized financial companies FGIC (2007A (USD 99.6 million). Citigroup GMD AG & Co USD 2014 8.19 15,200 12,310 12,260 Perpetual bonds of series), MBIA (2007B series) and ADB (2007C Kazkommerts Finance II series). The interest rate on each series is 3- The Group is obligated to comply with B.V. USD - 9.25 14,922 12,125 12,060 month LIBOR plus the following spreads: financial covenants in relation to other borrowed Debt component of preference shares USD - - 6,747 5,490 5,221 2007A plus 0.20%, 2007B plus 0.20% and funds disclosed above. These covenants include Indexed subordinated 2007C plus 0.16%. stipulated ratios, debt to equity ratios and - bonds KZT 2009 - - 3,358 3,315 various other financial performance ratios. The On 11 June 2009 Kazkommertsbank, acting Group has not breached any of these covenants 136,411 117,724 108,166 in its capacity as originator, requested the during the years ended 31 December 2009, 2008 securitization of future payments and 2007. In the event of bankruptcy or liquidation of The Group is obligated to comply with the Bank repayment of this debt is subordinate financial covenants in relation to subordinated 29. OTHER LIABILITIES to the repayments of the Bank's liabilities to all debt disclosed above. These covenants include other creditors. stipulated ratios, debt to equity ratios and 31 December 31 December 31 December As at 31 December 2009, accrued interest various other financial performance ratios. 2009 2008 2007 expenses included in subordinated debt The Group has not breached any of these (KZT million) (KZT million) (KZT million) amounted to KZT 2,304 million (2008: KZT covenants during the years ended

Other financial liabilities: 1,928 million, 2007: KZT 1,793 million). 31 December 2009, 2008 and 2007. Payable to employees 2,514 2,714 2,851 Settlements on other transactions 1,212 941 2,109 Accounts payable on re-insurers 674 3, 464 682 Accrued commission expense 16 358 108

4,416 7,477 5,750 Other non-financial liabilities 31. SHARE CAPITAL Taxes payable 4,037 8, 648 7,276 Advances received 537 816 819 As at 31 December 2009, 2008 and 2007, authorized share capital consisted of 1,100,000,000 8,990 16, 941 13,845 (2008: 575,000,000, 2007: 575,000,000) ordinary shares and 175,000,000 (2008: 125,000,000, 2007: 125,000,000) preference shares.

156 157 As at 31 December 2009, the Group's share capital comprised the following: Companies, additional dividend payments on million). In 2009, 2008 and 2007 dividends on the preference shares cannot be less than the ordinary shares of the Bank have not been dividends paid on common shares. These declared. Authorized Authorized but Repurchased Issued share capital not issued share capital share capital shares are not redeemable.

share capital The table below provides a reconciliation of (KZT million) (KZT million) (KZT million) (KZT million) During 2009, dividends declared on the number of shares outstanding as of 31 preference shares amounted to KZT 747 December 2009, 2008 and 2007: Ordinary shares 11,000 (3,206) (7) 7,787 million (2008: KZT 598 million, 2007: KZT 604 Preferred shares 1,750 (500) (6) 1,244

12,750 (3,706) (13) 9,031 Preference shares Ordinary shares Number of shares Number of shares

As at 31 December 2008, the Group's share capital comprised the following: 31 December 2006 124,755,170 574,760,698 Issue of shares - 49,272 Sale of treasury shares 166,557 39,851 Authorized share Authorized but Repurchased Issued capital not issued share capital share capital 31 December 2007 124,921,727 574,849,821

share capital Repurchase of treasury shares (565,284) (2 34,951) (KZT million) (KZT million) (KZT million) (KZT million) 31 December 2008 124,356,443 574,614,870 Ordinary shares 7,750 (2, 000) (4) 5,746 Issue of shares - 204,338,177 Preferred shares 1,250 - (6) 1,244 Sale/(repurchase) of treasury shares 96,541 (35 1,883)

9,000 (2, 000) (10) 6, 990 31 December 2009 124,452,984 778,601,164

As at 31 December 2007, the Group's share capital comprised the following: As at 31 December 2009, the number of Kazakhstan regulations, in respect of general ordinary shares held as treasury shares is banking risks, including future losses and Authorized Authorized but Repurchased Issued 737,013 (2008: 385,130, 2007: 150,179). other unforeseen risks or contingencies. The share capital not issued share capital share capital reserve has been created in accordance with share capital Share premium reserve represents an the regulations of the Republic of Kazakhstan (KZT million) (KZT million) (KZT million) (KZT million) excess of contributions received over the that provide for the creation of a reserve for

Ordinary shares 7,750 (2, 000) (1) 5,749 nominal value of shares issued. these purposes of not less than 2% from Preferred shares 1,250 - (1) 1,249 classified assets recorded in its statutory The Group's profit distributable among accounts as defined by and in accordance with 9,000 (2, 000) (2) 6,998 shareholders is limited to the amount of its local legislative requirements. Retained reserves as disclosed in its statutory accounts. earnings include these non-distributable Non-distributable reserves are represented by reserves which are kept as a reserve fund. a reserve fund, which is created as required by During first half of 2009, 325,000,000 The preference shares carry no voting ordinary shares were authorized for issue by rights, unless preference dividends are not the shareholders of the Group. During 2007, paid, but rank ahead of the ordinary shares in 200,000,000 ordinary shares were authorized the event of liquidation of the Bank. The for issue by the shareholders of the Group. As annual dividend is determined by the at 31 December 2009, 320,661,823 ordinary preference shares issuance rules in the amount shares remain unpaid (2008: 200,000,000 of USD 0.04 per share. According to ordinary shares). Kazakhstan legislation on Joint Stock

158 159 32. COMMITMENTS AND CONTINGENCIES amount of contingent liabilities on such position. The management believes that the unused credit lines equals KZT 433,903 million potential financial risk on securities held on In the normal course of business, the As at 31 December 2009, provision for (2008: KZT 502,123 million, 2007: KZT behalf of the customers is not inherent to the Group is a party to financial instruments with losses on guarantees and contingent liabilities 774,926 million). The decision to issue further Group. off-balance sheet risk in order to meet the amounted to KZT 7,217 million (2008: KZT funds is not obligatory since the Group is needs of its customers. These instruments, 6,271 million, 2007: KZT 7,216 million). entitled to suspend or stop providing the The Group also provides depositary services involving varying degrees of credit risk, are not borrower with a credit line or deny the to its customers. As at 31 December 2009, reflected in the consolidated statement of The risk-weighted amount is obtained by borrower the credit for any reason including in 2008 and 2007 the Group had customer financial position. applying credit conversion factor and case: the borrower violates the obligations securities in its nominal holder accounts counterparty risk weightings according to the before the Group; insufficiency of the totaling: The Group's maximum exposure to credit principles employed by the Basel Committee collateral when revaluing the collateral due to loss under contingent liabilities and credit on Banking Supervision. a decrease in its pledge value or change of - on broker and dealer operations commitments, in the event of non- prices in the market; or as a result of provision 4,973,334,166 deals totaling KZT 44,744 performance or in the event of impairment by As at 31 December 2009, the credit risk on of the credit line (provision of credit) the million (2008: 17,699,975,814 deals totaling the other party where all counterclaims, contingent liabilities and credit commitments Group will violate any of the prudential norms KZT 93,102 million, 2007: 5,203,455,006 deals collateral or security prove valueless, is was covered by collateral of KZT 48,958 established by the regulatory authorities for totaling KZT 94,829 million). represented by the contractual amounts of million (2008: KZT 68,213 million, 2007: KZT the second-tier banks; without warning the those instruments. 85,640 million). The collateral includes real borrower. - on custodial operations 5,218,591,161 estate, deposits and various other financial deals totaling KZT 59,061 million (2008: The Group uses the same credit control and and non-financial assets. Capital commitments 7,881,879,257 deals totaling KZT 1,969,480 management policies in undertaking off- million, 2007: 720,874,948 deals totaling KZT balance sheet commitments as it does for on- As at 31 December 2009, 2008 and 2007, As at 31 December 2009, capital 20,929 million). balance operations. the nominal or contract amounts and risk- commitments amounted to KZT 2,272 million weighted amounts were: (2008: KZT 1,960 million, 2007: KZT 2,789 Legal proceedings million). 31 December 2009 31 December 2008 31 December 2007 Nominal Risk Nominal Risk Nominal Risk From time to time and in the normal course amount weighted amount weighted amount weighted Operating lease commitments of business, claims against the Group are amount amount amount received from customers and counterparties. (KZT million) (KZT million) (KZ T million) Contingent liabilities There were no material operating lease Management is of the opinion that no material and credit commitments outstanding as at 31 December unaccrued losses will be incurred and commitments: 2009, 2008 and 2007. accordingly no provision has been made in Guarantees issued and similar commitments 122,096 122,096 109, 550 109, 550 94,582 94,582 these consolidated financial statements. Letters of credit and other Fiduciary activities transaction related to contingent obligations 8,391 1,040 37 ,570 6, 760 90,510 15,253 Taxation Commitments on loans In the normal course of its business the and unused credit lines 9,865 9,865 9, 312 9,312 10,382 10,382 Group enters into agreements with limited Commercial legislation of the countries Commitments on loans sold to JSC Kazakhstan rights on decision making with clients for the where the Group operates, including tax Mortgage Company with management of assets in accordance with legislation, may allow more than one recourse 58 58 72 72 114 114 specific criteria established by clients. The interpretation. In addition, there is a risk of tax 140,410 133,059 156, 504 125 ,694 195,588 120,331 Group may be liable for losses or actions authorities making arbitrary judgments of aimed at appropriation of the clients' funds if business activities. If a particular treatment, such funds or securities are not returned to the based on management's judgment of the client. The maximum potential financial risk of Group's business activities, was to be The decision to issue loans to customers borrowed funds and depends on the financial the Group at any given moment is equal to the challenged by the tax authorities, the Group within open credit lines is made by the Group position of the borrower, credit history and volume of the customer's funds plus/minus may be assessed additional taxes, penalties at each request of a customer for the other factors. As at 31 December 2009, the any unrealized income/loss on the customer's and interest.

160 161 Such uncertainty may relate to the monetary measures undertaken by the 33. SUBSEQUENT EVENTS valuation of financial instruments, valuation government, together with legal, regulatory, of provision for impairment losses and the and political developments. 14 January 2010, JSC Alnair Capital Holding Kazkommertsbank. The issuer has been market pricing of deals. Additionally such has acquired additional shares of substituted in accordance with the terms and uncertainty may relate to the valuation of Ongoing global liquidity crisis JSC Kazkommertsbank. As a result of the conditions of the Eurobonds listed above and temporary differences on the provision and transaction, Alnair has increased its holding of has no effect on the bondholders' rights. recovery of the provision for impairment The financial markets, both globally and in Kazkommertsbank's common shares to losses on loans to customers and receivables, the Republic of Kazakhstan, have faced 28.565% and now owns 222,408,342 On 15 March 2010, the Bank increased the as an underestimation of the taxable profit. significant volatility and liquidity constraints common shares of the Bank. The earlier share capital of OJSC Kazkommertsbank The management of the Group believes that it since the onset of the global financial crisis, agreement between Alnair and JSC National Kyrgyzstan («subsidiary bank») in accordance has accrued all tax amounts due and therefore which began to unfold in the autumn of 2007 Wealth Fund Samruk-Kazyna, in relation to with its pre-emptive rights. On 14 October no allowance has been made in the and worsened since August 2008. A side the placement of 6.448% of the Bank's 2009, at the General Meeting of Shareholders consolidated financial statements. effect of those events was an increased common shares under the trust management of the subsidiary bank, a decision was taken to concern about the stability of the financial of Alnair, has been terminated based on the increase the share capital of the subsidiary Operating environment markets and the strength of counterparties. mutual agreement of both parties. This bank by issuing 66,036 new shares at KGS 500 As such, many lenders and institutional purchase has not resulted in any changes to per share. As a result, the share capital of the The Group's principal business activities are investors have reduced funding to borrowers, the shareholdings structure of the other major subsidiary bank increased by KGS 33,018,000 within the Republic of Kazakhstan. Laws and which has significantly reduced the liquidity in shareholders – Mr. Subkhanberdin, JSC (USD 739,233). The Board of Directors of regulations affecting the business the global financial system. Central Asian Investment Company («CAIC»), Kazkommertsbank decided to purchase environment in Kazakhstan are subject to European Bank for Reconstruction and 62,500 shares in accordance with their pre- rapid changes and the Group's assets and While many countries, including Development («EBRD») and JSC National emptive rights. On 12 March 2010, operations could be at risk due to negative Kazakhstan, have recently reported an Wealth Fund Samruk-Kazyna. Kazkommertsbank made the payment for changes in the political and business improvement of the situation in the financial issued shares of KGS 31,250,000 by means of environment. markets, a further downturn can still occur, On 11 February 2010, the Bank replaced its dividends paid by Kazkommertsbank and further state support measures might be subsidiary, Kazkommerts International B.V. Kyrgyzstan in accordance with the Although in recent years there has been a required. While the Kazakhstan government (the Netherlands) as a Eurobonds issuer. As a requirements of the law on joint stock general improvement in economic conditions has introduced a range of stabilization result, the Bank's guarantee is no longer companies of the Kyrgyz Republic. As a result in Kazakhstan, the country continues to measures aimed at providing liquidity to effective and all of the issuer's liabilities on the of acquisition of shares the Bank's ownership display certain characteristics of an emerging Kazakhstani banks and companies, there Eurobonds have been transferred to JSC share of 94.64% did not change. market. These include, but are not limited to, continues to be uncertainty regarding the currency controls and convertibility access to capital and cost of capital for the restrictions, relatively high level of inflation Group and its counterparties, which could and continuing efforts by the government to affect the Group's financial position, results of implement structural reforms. operations and business prospects.

As a result, laws and regulations affecting Management is unable to reliably estimate businesses in Kazakhstan continue to change the effects on the Group's financial position rapidly. Tax, currency and customs legislation of any further deterioration in the liquidity of within the country are subject to varying the financial markets and the increased interpretations, and other legal and fiscal volatility in the currency and equity markets. impediments contribute to the challenges Management believes it is taking all the faced by entities currently operating in necessary measures to support the Kazakhstan. The future economic direction of sustainability and growth of the Group's the country is largely dependent upon the business in the current circumstances. effectiveness of economic, fiscal and

162 163 34. TRANSACTIONS WITH RELATED PARTIES Included in the consolidated income statement for the years ended 31 December 2009, 2008 and 2007 are the following amounts which arose due to transactions with related parties: Related parties or transactions with related and its subsidiaries, which are related parties parties are assessed in accordance with IAS 24. of the Bank, have been eliminated on consolidation and are not disclosed in this Year ended Year ended Year ended In considering each possible related party note. Details of transactions between the 31 December 2009 31 December 2008 31 December 2007 relationship, special attention is directed to the Group and other related parties are disclosed (KZT million) (KZT million) (KZT million) Related party Total category Related party Total category Related party Total category substance of the relationship, and not merely below: transactions as per transactions as per transactions as per financial the legal form. Transactions between the Bank financial financial statements statements statements caption 31 December 2009 31 December 2008 31 December 2007 caption caption (KZT million) (KZT million) (KZT million) Related party Total category Related party Total category Related Total category Interest income 204 372,939 155 380,777 67 316,458 balances as per balances as per party as per financial financial balances financial Interest expense 354 (179,737) (464) (181,265) (438) (171,762) statements statements statements caption caption caption Operating expenses (730) (30,673) (1,221) (34,049) (621) (31,200) Short-term employee Loans to customers 1,140 2,666,315 1,525 2,434,110 895 2,506,698 benefits (730) (14,400) (1,221) (16,475) (621) (15,980) - entities with joint control or significant influence over Provision for impairment the entity - 3 117 losses on interest - key management personnel bearing assets, other of the entity or its parent 1,138 1,522 778 transactions, - other related parties 2 - - guarantees and other contingencies (11) (193,985) (47) (152,559) (365) (74,380) Allowance for impairment

losses 114 (505,548) 106 (289,328) 33 (140,363) Share of results of - entities with joint control or associates 345 4,372 (3,585) (3,585) 1,333 1,333 significant influence over the entity - - 17 - key management personnel of the entity or its parent 114 106 16 Key management personnel compensation As at 31 December 2009, 2008 and 2007, for the years ended 31 December 2009, 2008 the Group does not pledge any assets in Investments in associates - - 1,775 1,775 3,222 3,222 and 2007 is represented by short-term connection with guarantees issued to - to associates - 1,775 3,222 employee benefits. management. Customer accounts 7,769 1,276,464 4,661 979,453 5,495 895,083 - parent company 1,287 1,124 - entities with joint control or significant influence over the entity 106 53 1,087 - associates - 29 22 - key management personnel of the entity or its parent 3,966 3,443 4,385 - other related parties 2,410 12 1

Commitments on loans and unused credit lines 456 9,865 304 9,312 482 10,382 - key management personnel of the entity or its parent 453 304 482 - other related parties 3 - -

Guarantees issued and similar commitments 580 122,096 19 109,550 18 94,582 - key management personnel of the entity or its parent 8 19 18 - other related parties 572 - -

164 165 35. SEGMENT REPORTING Retail Corporate Investment Other Unallocated Eliminations As at and for banking banking banking the year ended 31 December Bisiness segments Liability Management activities, Group Capital 2009 and shared services. (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

The Group is managed and reported on the External interest income 48,762 312,0 53 11,32 0 80 4 - - 372,93 9 basis of four main operating segments. The Transactions between the business Internal interest income 35,869 49,67 4 177,786 - - (263,3 29) - External interest expenses (29,818) (55,84 9) (94,070 ) - - - (179,737 ) Group's segments are strategic business units segments are on normal commercial terms and Internal interest expenses (24,810) (181,7 52) (56,767 ) - - 263,3 29 - that offer different products and services conditions. Funds are ordinarily reallocated Net interest income before provision for impairment which are managed separately. between segments, resulting in funding cost losses on interest transfers disclosed in operating income. bearing assets 30,003 124, 126 38,269 80 4 - - 193,2 02 Provisions for impairment Retail banking – representing private Interest charged for these funds is based on losses on interest bearing the Group's cost of capital. There are no other assets (22,793) (171,4 11) 1,091 - - - (193,113) banking services, private customer current accounts, savings, deposits, investment material items of income or expense between NET INTEREST INCOME 7,210 (47,285 ) 39,36 0 80 4 - - 89 Net gain on financial savings products, custody, credit and debit the business segments. Internal charges and assets and liabilities at cards, consumer loans and mortgages. transfer pricing adjustments, if any, have been fair value though profit or loss - - 23,027 (234 ) - - 22,7 93 reflected in the performance of each business. Net loss on foreign Corporate banking – representing direct Revenue sharing agreements are used to exchange and precious metals operations 1,563 538 (17,322) (5 ) 20 4 - (15,02 2) debit facilities, current accounts, deposits, allocate external customer revenues to a Fee and commission business segment on a reasonable basis. income 7,513 10, 214 3,23 0 - - - 20,95 7 overdrafts, loan and other credit facilities, Fee and commission documentary credits, foreign currency and expense (801) (1,10 3) (309) (1,32 0) (11) - (3,54 4) Net realized loss on derivative products. Segment assets and liabilities comprise investments operating assets and liabilities, being the available-for-sale - - (1,079 ) 5 3 - - (1,026 ) Dividends received - - 17 1 15 - - 186 Investment banking – representing majority of the financial position, but Other income 58 225 29,43 0 4,7 64 4 9 - 34,5 26 financial instruments trading, structured excluding taxation. Internal charges and NET NON-INTEREST financing, and merger and acquisitions advice. transfer pricing adjustments have been INCOME 8,333 9,87 4 37,14 8 3, 273 24 2 - 58,87 0 reflected in the performance of each business. OPERATING INCOME 15,543 (37,4 11) 76,50 8 4, 077 24 2 - 58,95 9 Other – representing insurance operations and other activities. More specific information on the revenues OPERATING EXPENSES (15,999) (10,0 17) (2,815 ) (1,74 8) (94 ) - (30,67 3)

from external customers for each product and PROFIT BEFORE OTHER Retail Banking offers a range of personal service, or each group of similar products and OPERATING PROVISIONS AND RESULTS OF banking, savings and mortgage products and services is not available and the cost to develop ASSOCIATES (456) (47,4 28) 73,693 2,32 9 14 8 - 28,286 it is excessive. Hence the Group presents Provision for impairment services. Corporate Banking offers business losses on other banking services principally to small and mid operating segments on the basis of three main transactions - (1,334 ) 54 4 (682) - - (1,47 2) Recovery of provision for sized companies and commercial loans to products. guarantees and other larger Corporate & Commercial customers. contingencies - 60 0 - - - - 60 0 Gain from sale of Investment Banking consists of assets and Segment information about these associates - - 4,37 2 - - - 4,37 2 liabilities required to support the liquidity and businesses is presented below. OPERATING PROFIT funding requirements of the Group, Asset and BEFORE INCOME TAX (456) (48,162) 78,60 9 1,64 7 14 8 - 31,7 86

Income tax expense - - - - (12,7 63) - (12,763)

NET PROFIT (456) (48,162) 78,60 9 1,64 7 (12,61 5) - 19,0 23

Segment assets 296,136 1,897,7 48 443,05 4 16, 777 582,9 55 (648,7 97) 2,587,87 3

Segment liabilities 327,622 948,84 2 939,233 4, 118 574, 119 (620,168) 2,173,7 66

166 167 Retail Corporate Investment Other Unallocated Eliminations As at and for Retail Corporate Investment Other Unallocated Eliminations As at and for banking banking banking the year ended banking banking banking the year ended 31 December 31 December 2008 2007 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

External interest income 62,031 299,4 21 18,4 45 88 0 - - 380,7 77 External interest income 55,333 240, 792 19,5 64 582 187 - 316,4 58 Internal interest income 34,666 50, 144 148,84 0 - 62,9 09 (296,5 59) - Internal interest income 30,263 36,4 07 145,7 03 - - (212,37 3) - External interest expenses (29,066) (43,30 8) (108,891) - - - (181,26 5) External interest expenses (25,114) (30,4 77) (116,724 ) - 55 3 - (171,7 62) Internal interest expenses (34,804) (149,84 9) (49,74 9) - (62,1 57) 296,5 59 - Internal interest expenses (36,922) (135,6 32) (39,81 9) - - 212,37 3 - Net interest income before Net interest income before provision for impairment provision for impairment losses on interest losses on interest bearing assets 32,827 156,4 08 8,64 5 88 0 75 2 - 199, 512 bearing assets 23,560 111,0 90 8,7 24 582 74 0 - 144,696 Provisions for impairment Provisions for impairment losses on interest bearing losses on interest bearing assets (20,962) (128,966) (769) - - - (150,697 ) assets (9,905) (59,918) (13 3) - - - (69,9 56)

NET INTEREST INCOME 11,865 27,4 42 7,87 6 88 0 75 2 - 48,81 5 NET INTEREST INCOME 13,655 51 ,172 8,5 91 582 74 0 - 74, 740

Net loss on financial assets Net gain on financial and liabilities at fair value assets and liabilities at though profit or loss - - (28,188) (185 ) - - (28,37 3) fair value though profit Net gain on foreign or loss - - 20,7 09 (67 ) - - 20,6 42 exchange and precious Net loss on foreign metals operations 528 16 5,0 67 34 (28 ) ) - 5, 617 exchange and precious Fee and commission metals operations 2,240 747 (18,5 55) 33 7 1 - (15,4 64) income 7,141 11,15 5 3,4 49 - - - 21,7 45 Fee and commission Fee and commission income 8,567 12,229 2,899 (104) (33) - 23,558 expense (1,124) (723) (1,34 0) (1,0 01) (136) - (4,324 ) Fee and commission Net realized loss on expense (1,009) (513) (388) (791) (12) - (2,713) investments available-for- Net realized gain on sale - - (1,82 0) (218) - - (2,0 38) investments available-for- Dividends received - - 158 18 - - 176 sale - - 119 - - - 119 Dividends received Other income 11 4 16 4,35 2 4,5 43 30 - 9, 352 - - 143 2 - - 145 Other income 209 1,84 3 707 4,14 5 15 - 6,919 NET NON-INTEREST INCOME 6,556 10,8 64 (18,3 22) 3, 191 (134 ) - 2, 155 NET NON-INTEREST INCOME 10,007 14,30 6 5,634 3,2 18 4 1 - 33, 206 OPERATING INCOME 18,421 38,3 06 (10,44 6) 4 ,071 618 - 50, 970 OPERATING INCOME 23,662 65,478 14,225 3,800 781 - 107,946 OPERATING EXPENSES (16,054) (12,68 6) (3,4 81) (1,7 66) (62) - (34,0 49) OPERATING EXPENSES (15,986) (10,763) (2,681) (1,19 4) (57 6) - (31,20 0) PROFIT BEFORE OTHER OPERATING PROVISIONS PROFIT BEFORE OTHER AND RESULTS OF OPERATING PROVISIONS ASSOCIATES 2,367 25,62 0 (13,927 ) 2, 305 55 6 - 16, 921 AND RESULTS OF Provision for impairment ASSOCIATES 7,676 54 ,715 11,5 44 2,6 06 20 5 - 76, 746 losses on other Provision for impairment transactions - (4 24) (1,621) (6 73) - - (2,7 18) losses on other Recovery of provision for transactions - (126) (103) ( (1,009) - - (1,238) guarantees and other Provision for guarantees contingencies - 85 6 - - - - 856 and other contingencies - (3,186 ) - - - - (3,186) Share of results of Share of results of associates - - (3,585 ) - - - (3,5 85) associates - - 1,333 - - - 1,333

OPERATING PROFIT OPERATING PROFIT BEFORE INCOME TAX 2,367 26, 052 (19,133 ) 1, 632 55 6 - 11, 474 BEFORE INCOME TAX 7,676 51,403 12,7 74 1, 597 20 5 - 73,65 5

Income tax benefit - - - - 8,69 0 - 8,69 0 Income tax expense - - - - (15,904) - (15,904)

NET PROFIT 2,367 26, 052 (19,133 ) 1, 632 9, 246 - 20, 164 NET PROFIT 7,676 51,403 12,7 74 1, 597 (15,6 99) - 57 ,751

Segment assets 377,802 1,801,4 69 466,5 19 14,929 761,983 (807,89 7) 2,614,80 5 Segment assets 477,546 1,922,164 626,4 02 9,91 5 965,5 23 (1,004,31 8) 2,997,23 2

Segment liabilities 263,771 715,68 2 1,327,4 03 7,62 4 755, 246 (778,988 ) 2,290, 738 Segment liabilities 309,679 585,4 04 1,758,867 4, 120 961,15 3 (971,7 06) 2,647,5 17

168 169 Geographical segments Kazakhstan CIS OECD Other 31 December Countries non-OECD 2007 Countries Total Segment information for the main geographical segments of the Group is set out below for the (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) years ended 31 December 2009, 2008 and 2007.

Interest income 290,137 26,134 187 - 316,4 58 Kazakhstan CIS OECD Other 31 December Interest expense (90,152) (14,682) (66,92 8) - (171,762) Countries non-OECD 2009 Provision for impairment losses on Countries Total interest bearing assets (65,904) (4,05 2) - - (69,95 6) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Net gain on financial assets and Interest income 347,202 25,1 80 55 7 - 372,93 9 liabilities at fair value through profit Interest expense (97,989) (13,769) (67,97 9) - (179,737 ) or loss 19,358 1,284 - - 20,64 2 Provision for impairment losses on Net loss on foreign exchange and interest bearing assets (189,567) (3,54 6) - - (193,113) precious metals operations (15,721) 256 1 - (15,464) Net gain on financial assets and liabilities at fair value through profit Fee and commission income 21,740 1,818 - - 23,5 58 or loss 23,498 (70 5) - - 22,7 93 Fee and commission expense (2,341) (327) (45) - (2,7 13) Net loss on foreign exchange and Net realized gain on investments precious metals operations (15,943) 717 20 4 - (15,02 2) available-for-sale 119 - - - 119 Fee and commission income 20,016 94 1 - - 20,95 7 Fee and commission expense (3,354) (189) (1) - (3,544) Dividends received 119 26 - - 14 5 Net realized loss on investments Other income 5,956 963 - - 6,919 available-for-sale (1,028) 2 - - (1,026) Dividends received 186 - - - 186 OPERATING INCOME 163,311 11,420 (66,785 ) - 107,94 6 Other income 35,553 (1,027 ) - - 34,5 26

OPERATING INCOME 118,574 7,60 4 (67,219) - 58,95 9 External operating income has been allocated based on domicile of the company within the Group

Kazakhstan CIS OECD Other 31 December Countries non-OECD 2008 Countries Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million)

Interest income 352,601 26,7 94 1,182 20 0 380,7 77 Interest expense (165,814) (14,94 4) (50 7) - (181,26 5) Provision for impairment losses on interest bearing assets (144,935) (5,762 ) - - (150,697 )

Net loss on financial assets and liabilities at fair value through profit or loss (25,677) (2,696 ) - - (28,37 3) Net gain on foreign exchange and precious metals operations 33,947 (17 9) (28,15 1) - 5, 617 Fee and commission income 20,227 1,5 10 - 8 21,7 45 Fee and commission expense (3,775) (413) (136) - (4,324 ) Net realized loss on investments available-for-sale (2,549) 511 - - (2,038) Dividends received 176 - - - 17 6 Other income 8,374 83 895 - 9,3 52

OPERATING INCOME 72,575 4,90 4 (26,717 ) 20 8 50,97 0

170 171 36. FAIR VALUE OF FINANCIAL INSTRUMENTS 31 December 2009 31 December 2008 31 December 2007 Carrying Carrying Carrying Fair value Fair value Fair value Fair value is defined as the amount at the present value of estimated future cash amount amount amount which the instrument could be exchanged in a flows discounted at the appropriate year-end (KZT million) (KZT million) (KZT million) market rates and making adjustments for current transaction between knowledgeable Financial assets: willing parties in an arm's length transaction, credit risk of the Group or counterparty. Loans and advances to other than in forced or liquidation sale. The banks and other financial institutions 148,375 149,321 241,813 241,650 212,823 212,912 estimates presented herein are not necessarily Loans to customers – the estimate was Loans to customers 2,160,767 2,033,690 2,144,782 2,109,144 2,366,335 2,188,893 indicative of the amounts the Group could made by discounting the scheduled future cash flows of the individual loans through the realize in a market exchange from the sale of its full holdings of a particular instrument. estimated maturity using prevailing market Financial liabilities: rates as at the respective year-end. Loans and advances from banks and financial The following methods and assumptions 209,122 179,422 296,391 260,911 723,431 727,605 Debt securities issued – market values have institutions are used by the Group to estimate the fair Debt securities issued 463,656 402,996 678,285 432,778 739,688 615,520 been used, where available, to determine the value of financial instruments not carried at Other borrowed funds 31,172 22,488 137,324 86,402 148,934 148,934 fair value of debt securities traded on an active fair value: Subordinated debt 136,411 113,289 117,724 109,331 108,166 106,688 market.

Loans and advances to and from banks and other financial institutions and other Subordinated debt – market values have been used, where available, to determine the borrowed funds – for assets and liabilities Financial assets and liabilities at fair value assets and other financial liabilities and fair value of subordinated bonds issued and maturing within three months, the carrying through profit or loss and investments customer accounts approximates fair value perpetual debt of Kazkommerts Finance II B.V. amount approximates fair value due to the available-for-sale are carried at fair value in due to the short-term nature of such financial relatively short-term maturity of these the consolidated statement of financial instruments. The carrying amount of customer The fair value of financial assets and financial instruments. For the assets and position. The carrying amounts of cash and accounts approximates fair value as interest liabilities that are not carried at fair value in the liabilities maturing in over three months, the balances with national (central) banks, rates charged to customers closely consolidated statement of financial position fair value in relation to repurchase and reverse investments held to maturity, other financial approximate market interest rates. repurchase agreements was estimated as the compared with the corresponding carrying fair value of collateral pledged and received. value in the consolidated financial statements For all other loans and advances and other of the Group are presented below: borrowed funds the fair value is estimated as

172 173 37. REGULATORY MATTERS Quantitative measures established by regulation to ensure capital adequacy require the Group Capital adequacy requirements are set by the FMSA and controlled using the principles, to maintain minimum amounts and ratios of total and tier 1 capital to risk weighted assets. methods and factors identified by the Basel Committee on Banking Supervision.

31 December 31 December Change 31 December 31 December Change 31 31 December Change 2009 2008 2008 2007 December 2006 2007 (KZT (KZT (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) million) million) (KZT million) (KZT million) Composition of regulatory capitala: Tier 1 capital: Share capital (ordinary shares) 7,787 5,746 2,041 5 ,746 5,749 (3) 5,7 49 5 ,748 1 Share premium reserve 195,006 15 2,684 4 2,322 152 ,684 15 2,855 (17 1) 152,8 55 152 ,534 321 Retained earnings 161,971 14 0,762 2 1,209 140 ,762 8 4,843 55, 919 84,8 43 58 ,763 26, 080 Current income 19,423 2 1,805 (2 ,382) 21, 805 5 5,963 (34,15 8) 55,963 25 ,985 29, 978 Minority interest (223) 278 (501) 278 12,552 (12,2 74) 12,5 52 15 ,272 (2,7 20) Goodwill (2,405) (2 ,405) - (2, 405) (2 ,405) - (2,40 5) (2, 405) - Innovative instrument c 14,085 11, 965 2,120 11, 965 11,900 65 11,90 0 12 ,546 (64 6)

Total qualifying tier 1 capital 395,644 330 ,835 64 ,809 330 ,835 32 1,457 9,37 8 321,4 57 268 ,443 53, 014

Property and equipment revaluation reserve d 5,040 5,905 (865) 5 ,905 5,981 (7 6) 5,9 81 2 ,458 3, 523 Share capital (preferred shares) 1,244 1,244 - 1, 244 1,249 (5) 1,2 49 1,247 2 Subordinated debt b 97,871 95 ,005 2,866 95 ,005 86,617 8,38 8 86, 617 52 ,997 33, 620

Total qualifying tier 2 capital 104,155 10 2,154 2,001 102 ,154 93, 847 8,3 07 93,8 47 56, 702 37 ,145

Total capital 499,799 432 ,989 66, 810 432 ,989 4 15,304 17,68 5 415,3 04 325 ,145 90 ,159

Ratio of tier 1 capital adequacy 15.94% 13.53% 2.41% 13.53% 11.72% 1.81% 11.72% 12.37% (0.65)% Capital adequacy ratio 20.14% 17.70% 2.44% 17.70% 15.15% 2.55% 15.15% 14.98% 0.17%

a According to the principles applied by Basel Committee b As at 31 December 2009, 2008 and 2007, the Group included in the computation of total capital for capital adequacy purposes the subordinated debt received, which is not to exceed 50% of Tier 1 capital. In the event of bankruptcy or liquidation of the Bank, repayment of this debt is subordinate to the Estimation Description of position repayments of the Bank's liabilities to all other creditors. c Innovative instruments represents perpetual bonds. 0% Cash and balances with national (central) banks d The line “Property and equipment revaluation reserve” includes 55% of investments available-for-sale securities revaluation reserve/(deficit) (in accordance with the Basel standards). 0% State debt securities 20% Loans and advances to banks and other financial institutions for up to 1 year During the years ended 31 December 2009, 2008 and 2007, the Group complied with all set capital requirements. 100% Loans to customers 100% Guarantees The capital adequacy ratio was calculated according to the principles employed by the Basel Committee by applying the 50% Obligations and commitments on unused loans with the initial maturity of over 1 year following risk estimates to the assets and off-balance sheet commitments net of allowances for losses: 100% Other assets

174 175 38. CAPITAL RISK MANAGEMENT Credit Departments or Credit Divisions of Structure of credit committees branches and subsidiaries. The Group manages its capital to ensure The Management Board of the Bank The Group has developed policies and that entities in the Group will be able to reviews its capital structure on quarterly basis. To measure credit risk, the Group employs guidelines that are designed to preserve the continue as a going concern while maximising Based on the recommendations of the several methodologies for estimating the independence and integrity of the approval the return to stakeholders through the Management Board by making decisions on likelihood of borrower or counterparty default. and decision making of extending credit and optimisation of the debt and equity balance. the Board of Directors or shareholders Methodologies differ depending on types of are aimed at accurate assessment of credit risk meeting, the Group balances its overall capital assets (e.g. consumer loans versus corporate and its proper and timely monitoring. The The capital structure of the Group consists structure through new share issues, issues of term loan), risk measurement parameters (e.g. policy frameworks (separate for retail lending of debt, which includes subordinated and new debt or the redemption of existing debt, delinquency status and credit bureau reports and corporate lending) establish credit perpetual debt disclosed in Note 30, and and the payment of dividends. versus corporate risk rating), and risk a p p r o v a l a u t h o r i t i e s , r i s k - r a t i n g equity comprising issued capital, reserves and management and collection procedures (e.g. methodologies, credit review parameters and retained earnings as disclosed in the The Group's overall capital risk consumer lending collection center versus guidelines for management of distressed consolidated statement of changes in equity. management policy remains unchanged in centrally managed workout groups). loans. comparison with 2008 and 2007. The Group determines the level of credit The Group has been centralizing decision risk it undertakes by setting limits on the making in the Head Office over the past amount of risk accepted in relation to one several years. In particular, authorities of 39. RISK MANAGEMENT POLICIES borrower, or groups of borrowers, and to branches and regional directorates on industry and geographical segments. Limits on approval of small entrepreneurship and retail Management of risks is fundamental to the The main risks inherent to the Group's the level of credit risk by a borrower and a loans have been transferred to Decision Group's business. The risk management operations are those related to: product, by industry sector and by region are Making Centers (“DMCs”) in the Head office. functions include: approved by the Credit Committees. The Furthermore, most of branch and regional Credit risk exposure to any individual borrower is further directorate authorities on corporate loan Risk identification: The risks, which the Interest rate risk restricted by sub-limits covering on and off- approvals have also been transferred to the Group is exposed to in its daily activities, are Liquidity risk balance sheet exposures which are set by the Head Office. identified by the risk management system. Market risk Credit Committees. Measuring risks: The Group measures the Currency risk The Group currently has the following risks using various quantitative and qualitative Off-balance sheet credit commitments credit committees: methodologies, which include risk based Credit risk represent unused portions of credit in the profitability analysis, calculation of possible form of loans, guarantees or letters of credit. Head office committees. loss amounts, and utilization of specialized The Group is exposed to credit risk which is The credit risk of off-balance sheet financial - Head Office Credit Committee. This models. Measurement models and associated the risk that counterparty to a financial instruments is defined as the probability of committee is authorized to approve assumptions are periodically reviewed to instrument will fail to fulfill its obligation to losses due to the inability of the counterparty corporate loans of up to equivalent of ensure that the tools represent the risks the Group. This covers actual payment to comply with the contractual terms and USD 5 million. The committee also adequately and reasonably. defaults as well as losses in value resulting conditions. With respect to credit risk on off- a p p r o v e s r e t a i l a n d s m a l l Risk monitoring: Group's policies and from a decrease in credit quality of the balance sheet instruments, the Group is entrepreneurship loans which exceed procedures determine the processes for counterparty. potentially exposed to a loss in an amount the thresholds and authorities set for mitigating and minimizing the risks and equal to the total unused commitments. The DMCs. establish limits on various types of operations. Risk management and monitoring is actual amount of this loss is likely to be less - Commercial Directorate. There are Such limits are reviewed on a periodic basis set performed within set procedures and limits by than the total unused commitments since the eight members of the committee, forth in internal documents of the Group. the Credit Committees and Board of the commitments are contingent upon customers including the Chair person of the Group, Risk reporting: Risk reporting is performed Group. Risk management coordination is maintaining certain credit standards. The who presides, and seven Managing on a line of business and on a consolidated performed by the risk management specialist Group applies the same credit policy to Directors. The committee is authorized basis. This information is periodically or Risk Management Departments. Daily risk contingent liabilities as it does to the on- to approve loans exceeding equivalent presented to the management. management is performed by the Head of the balance sheet financial instruments. of USD 5 million.

176 177 - Board of Directors. All loans exceeding Collateral Valuation Department. The The DMC on retail is authorized to approve of the loan, collateral value and debt service of 10% of the Group's total assets as well Group requires collateral for almost all of its applications from customers with one obligor the borrower. as all transactions with related parties loans. According to Kazakh legislation, exposure of up to equivalent of USD 200,000. have to be approved by the Board of collateral valuation should be performed by The DMC on small entrepreneurship has Maximum exposure Directors. independent collateral valuation companies authorities to approve applications from (“NOKs”). Collateral Valuation Department customers with one obligor exposure of up to The Group's maximum exposure to credit North Regional Directorate Committee. reviews appraisal reports issued by NOKs and equivalent of USD 500,000. Applications with risk varies significantly and is dependent on The Group has North Regional Directorate carries out certification and monitoring of larger exposures are referred to one of the both individual risks of certain financial assets Committee, covering the north regions of NOKs. relevant credit committees in the Head Office. and general market economy risks. Kazakhstan (Astana, Kostanay, Kokshetau The DMCs conduct analysis of the applications and Petropavlovsk). The north directorate has Legal Department. The Group obtains legal exceeding their authority limits, and the The following table presents the limited authorities to grant loans. advice from the Legal Department regarding relevant credit committee takes their maximum exposure to credit risk of financial proposed loans and receives confirmation as conclusions into account in decision making. assets and commitments. For financial assets Branch Committees. Each of the Group's to the valid corporate existence of the the maximum exposure equals to a carrying branches has a credit committee. The branches potential borrower and its authority to enter Allowance for credit losses value of those assets prior to any offset or have limited authorities to grant loans. into loan transactions and collateral collateral. For financial guarantees and other agreement. The Group establishes an allowance for commitments the maximum exposure to Corporate loans impairment losses on loans and off-balance credit risk is the maximum amount the Group Security Department. The Security liabilities where there is objective evidence that would have to pay if the guarantee was While considering loan applications of Department provides information on assets, a financial asset is impaired. In order to assess called on or in the case of commitments, if corporate borrowers, the related Credit credit history and reputation of potential the quality of an asset and to classify it for the loan amount was called on. The Committees take into account the analysis and borrowers. A central credit bureau has recently provisioning purposes, a loan officer takes information in relation to financial conclusions of Risk Management Department been established in Kazakhstan and this into account a number of criteria, including guarantees and other contingent liabilities is № 1, Collateral Valuation, Legal and Security should improve the quality of information on financial performance of the borrower, terms disclosed in Note 32. Departments. the credit history of potential borrowers. 31 December 2009 Risk Management Department № 1. The Retail and small Maximum Offset Net exposure after Collateral Net exposure analytic group within the Head Office, which entrepreneurship exposure offset pledged1 after offset and collateral is divided into sub-groups according to loans (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) industry, provides advice on commercial loans Financial assets at fair value through profit or loss 114,203 - 114,203 - 114,203 based on their assessment of the borrower's Loans to retail and small entrepreneurship Loans and advances to banks business and/or the project, to which the loan loans are subject to a standardized approval and other financial institutions 148,375 - 148,375 - 148,375 relates. Their assessment takes into account a procedure. The Group has established two Loans to customers 2,160,767 (5,312) 2,155,455 (1,070,859) 1,084,596 number of industry and borrower specific new divisions in the Risk Management Investments available-for-sale 16,696 - 16,696 - 16,696 Investments held to maturity 943 - 943 - 943 factors, future cash flows of the potential Department № 2, the Decision Making Other financial assets 10,074 - 10,074 - 10,074 borrower and anticipated risk-adjusted returns Centers (“DMCs”). One DMC processes retail Contingent liabilities and 140,410 (5,372) 135,038 (43,586) 91,452 for the Group. For the purpose of the analysis, loan applications, while the second unit other credit commitments risk managers utilize the rating model makes decisions on small entrepreneurship described below. Furthermore, the loans. In order to approve or decline an Department of Risk Management № 1 is application, the DMCs analyze payment involved in the Group's loan portfolio ability and creditworthiness of a potential monitoring and in the development of borrower on the basis of standard terms, procedures and guidelines with respect to the criteria and procedures set forth by the Group's lending. Group.

178 179 31 December Credit ratings ratings from AAA to BBB. Financial assets 2008 which have ratings lower than BBB are Maximum Offset Net exposure Collateral Net exposure exposure after offset pledged1 after offset and Financial assets are graded according to the classified as a speculative grade. collateral current credit rating of international rating (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) agencies. The highest possible rating is AAA. The following table details the credit Financial assets at fair value through profit or loss 58,130 - 58,130 - 58,130 Investment grade of the financial assets have ratings of financial assets held by the Group: Loans and advances to banks and other financial institutions 241,813 - 241,813 (5,783) 236,030 Loans to customers 2,144,782 (19,390) 2,125,392 (1,471,267) 654,125 31 December Investments available-for-sale 15,056 - 15,056 - 15,056 Not 2009 AAA AA A BBB

31 December Not 2007 AAA AA A BBB

180 181 Since not all counterparties of the Group Group 1: The borrower makes interest and Impairment of financial assets have credit ratings from international rating principal payments without delay and in full. agencies, the Group has developed its own The borrower is clearly able to repay both the The following table details the carrying value of assets that are impaired: methodologies allowing it to assign internal loan principal and interest and the borrower's credit ratings. Such methodologies include a high financial efficiency is expected to 31 December rating model for corporate borrowers and continue. 2009 scoring models for retail banking clients and Financial assets Homogenous Total that have been and individually Neither past due SME. The scoring methodologies are tailor- Group 2: The borrower makes interest and assessed assessed watch nor impaired made for specific products and are applied at principal payments without delay and in full. individually for assets various stages over the life of the loan. The borrower is currently in a stable financial impairment position, however, a possible negative trend Financial assets at fair value through profit or loss 113,604 599 - 114,203 Loans to customers are classified based on may arise. Loans and advances to banks and other financial internal assessments and other analytical institutions 148,373 - 2 148,375 Loans to customers 309,855 440,013 1,410,899 2,160,767 procedures. The respective business units Group 3: The borrower makes interest and Investments available-for-sale 16,696 - - 16,696 classify loans according to their risk and the principal payments without delay and in full. Investments held to maturity 943 - - 943 exposure that they potentially present to the There is evidence of some unsatisfactory Other financial assets 10,074 - - 10,074 Group, and this classification is verified by the financial results which may affect the ability

Risk Management function. of the borrower to repay in the future. 31 December 2008 At present, the Bank uses classification as Group 4: The borrower makes interest and Financial assets Homogenous Total that have been and individually follows: principal payments with delays and/or not in Neither past due assessed assessed watch nor impaired full. There is evidence of a significant number individually for assets Homogeneous loans: Loans to customers of unsatisfactory financial results which will impairment with similar credit risk characteristics (i.e. the affect the ability of the borrower to repay. characteristics include sector of the economy, Financial assets at fair value through profit or loss 58,130 - - 58,130 Loans and advances to banks and other financial borrower activities, type of loan program, level Group 5: The borrower is unable to make institutions 236,368 - 5,445 241,813 of defaults and other factors). Collective interest and principal payments without delays Loans to customers 492,388 122,395 1,529,999 2,144,782 Investments available-for-sale 13,772 1,284 - 15,056 assessment is performed on loans that were and in full. Financial efficiency is questionable Investments held to maturity 776 - - 776 determined not to be individually significant. and there is low probability of a full Other financial assets 16,619 - - 16,619 repayment in the future.

31 December 31 December 31 December 31 December 2007 2009 2008 2007 Financial assets Homogenous Total that have been and individually Neither past due Homogeneous loans 133,615 158,114 202,582 assessed assessed watch nor impaired Group 1 308,175 456,728 922,438 individually for assets Group 2 595,156 993,734 1,093,517 impairment Group 3 817,484 337,356 58,950 Group 4 162,781 88,648 34,185 Financial assets at fair value through profit or loss 188,776 - - 188,776 Loans and advances to banks and other financial Group 5 142,667 75,785 34,114 institutions 188,806 - 24,017 212,823 Loans to customers 967,655 68,795 1,329,885 2,366,335 2,159,878 2,110,365 2,345,786 Investments available-for-sale 3,036 - - 3,036 Reverse purchase agreements 889 34,417 20,549 Investments held to maturity 375 - - 375 Other financial assets 9,609 - - 9,609 Loans to customers 2,160,767 2,144,782 2,366,335

182 183 Kazakhstan CIS OECD countries Other non- 31 December OECD countries 2008 As at 31 December 2009, the carrying value the Group's activity. The Group sets country Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) of assets that are overdue, but not impaired is limits for all countries with ratings below A- FINANCIAL ASSETS: Cash and balances with national (central) KZT 5,722 million (31 December 2008: KZT according to the Standard and Poor's banks 73,457 5,3 24 11,697 - 90,4 78 4,409 million, 31 December 2007: KZT 4,542 classification. Precious metals - - 317 - 317 Financial assets at fair value through profit million) and they are overdue for less than 3- or loss 24,815 5,84 8 27,0 96 37 1 58,1 30 month period. The Management of the Group considers Loans and advances to banks and other financial institutions 5,769 32,7 67 203, 277 - 241,813 the main segment to be the Republic of Loans to customers 1,725,020 243,648 28,626 147,488 2,144,782 Kazakhstan. Investments available-for-sale 14,920 136 - - 15,0 56 Geographical concentration Investments held to maturity 600 176 - - 776 Other financial assets 8,760 4,698 2,9 81 180 16,619 The relevant Credit Committees exercise The geographical concentration of TOTAL FINANCIAL ASSETS AND PRECIOUS control over the risk in the legislation and financial assets and financial liabilities is set METALS 1,853,341 292,5 97 273,994 148,0 39 2,567, 971 regulatory arena and assess its influence on out in tables below: FINANCIAL LIABILITIES: Loans and advances from banks and other 84,197 15,063 189,981 296,391 Kazakhstan CIS OECD countries Other non- 31 December financial institutions 7, 150 Customer accounts 938,376 19,5 89 16,5 91 4,89 7 979,4 53 OECD countries 2009 Financial liabilities at fair value through Total profit or loss 149 - 53,868 322 54,339 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Debt securities issued 365 51,5 55 626, 251 114 678,2 85 FINANCIAL ASSETS: Other borrowed funds 3,420 2 133,9 02 - 137,324 Cash and balances with national (central) Dividends payable - 5 - - 5 banks 84,566 5,9 51 16 - 90,5 33 Other financial liabilities 6,917 475 82 3 7,4 77 Precious metals - - 1,20 9 - 1,20 9 Subordinated debt 38,318 - 79,4 06 - 117,7 24 Financial assets at fair value through profit or loss 69,232 5,8 68 39, 061 42 114,20 3 Loans and advances to banks and other TOTAL FINANCIAL LIABILITIES 1,071,742 86,6 89 1,100,0 81 12,4 86 2,270,9 98 financial institutions 14,886 4,218 128,480 791 148,375

Loans to customers 1,780,993 201,871 36,304 141,599 2,160,767 NET POSITION 781,599 205,9 08 (826,087 ) 135,5 53 Investments available-for-sale 16,348 34 8 - - 16,696 Investments held to maturity 938 5 - - 943 Other financial assets 2,388 6,7 29 769 188 10,0 74 Kazakhstan CIS OECD countries Other non- 31 December TOTAL FINANCIAL ASSETS AND PRECIOUS OECD countries 2007 METALS 1,969,351 224,9 90 205,8 39 142,62 0 2,542,80 0 Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) FINANCIAL LIABILITIES: FINANCIAL ASSETS: Loans and advances from banks and other Cash and balances with national (central) financial institutions 16,976 9, 179 177, 137 5,8 30 209, 122 banks 144,174 7,868 16,10 6 - 168,14 8 Customer accounts 1,240,089 17,814 10,8 80 7, 681 1,276,4 64 Financial assets at fair value through profit Financial liabilities at fair value through or loss 66,429 11,261 110,9 23 163 188,7 76 profit or loss 11 60 35,92 0 - 35,991 Loans and advances to banks and other Debt securities issued - 1,38 5 462, 197 74 463,65 6 financial institutions 28,401 45,38 0 139,0 42 - 212,823 Other borrowed funds 19,097 2 12,0 73 - 31, 172 Loans to customers 1,855,687 303,936 46,011 160,701 2,366,335 Dividends payable - 15 - - 15 Investments available-for-sale 3,036 - - - 3,0 36 Other financial liabilities 3,354 35 5 25 6 451 4,4 16 Investments held to maturity 317 58 - - 375 Subordinated debt 47,493 - 88,918 - 136, 411 Other financial assets 4,264 1,5 17 3,7 37 91 9,6 09

TOTAL FINANCIAL LIABILITIES 1,327,020 28,810 787,381 14,0 36 2,157,24 7 TOTAL FINANCIAL ASSETS AND PRECIOUS METALS 2,102,308 370,0 20 315,819 160,9 55 2,949,10 2 NET POSITION 642,331 196,18 0 (581,54 2) 128,5 84 FINANCIAL LIABILITIES: Loans and advances from banks and other financial institutions 118,412 46,84 4 551,5 34 6,64 1 723,4 31 Customer accounts 770,799 32,5 48 82,24 8 9,4 88 895,0 83 Financial liabilities at fair value through profit or loss 3,078 37 4,4 45 17 0 7,7 30 Debt securities issued - 70,14 2 667,37 2 2,17 4 739,68 8 Other borrowed funds 12,928 2 136,0 04 - 148,934 Dividends payable - 2 - - 2 Other financial liabilities 1,324 1,5 74 2,8 46 6 5,7 50 Subordinated debt 29,125 - 79,0 41 - 108,1 66

TOTAL FINANCIAL LIABILITIES 935,666 151,14 9 1,523,4 90 18,4 79 2,628,7 84

NET POSITION 1,166,642 218,87 1 (1,207,67 1) 142,4 76

184 185 The banking industry is generally exposed organized monthly. Operational asset and To manage structural interest rate risk agreements. At the same time the loan to credit risk through its financial assets and liability management questions including ALMC monitors and analyzes re-pricing gap agreements allow the Group to change the contingent liabilities. Main credit risk exposure trading portfolio performance and liquidity and earnings at risk as well as interest rate interest rate thus allowing the Group to of the Group is concentrated within the management are considered at the weekly margins. This helps the Group mitigate decrease interest rate risks. Republic of Kazakhstan. The exposure is meetings. At the monthly meetings ALMC exposure to the structural interest rate risk and monitored on a regular basis to ensure that the discusses more strategic questions including maintain positive interest rate margin. The Risk The following table presents an analysis of credit limits and credit worthiness guidelines balance sheet structure management. Various Management Department monitors financial interest rate risk. Effective interest rates are established by the Group's risk management reports are presented to ALMC's attention activity of the Group regularly assessing its presented by categories of financial assets and policy are not breached. including but not limiting to trading portfolio exposure to changes in interest rates and liabilities to determine interest rate exposure reports, open currency positions, liquidity income impact of the changes. and effectiveness of the interest rate policy Asset and Liability Management Risks gaps, cash flows, stress tests, etc. ALMC is used by the Group. lead by the chairperson of the bank and As for the moment most of the loans Effective assets and liabilities management includes nine permanent members: the extended by the Group are at fixed rate is fundamental to the Bank, which allows the Chairman of the Board, seven Managing Bank to offer competitive products in the Directors and head of the Treasury market while maintaining the risk and Department. 31 December 2009 31 December 2008 31 December 2007 % % % % % % % % % profitability balance on the level creating in KZT in USD in other in KZT in USD in other in KZT in USD in other additional value for shareholders. Structural currencies currencies currencies interest rate risk ASSETS: Financial assets at fair value The following are defined by the bank as through profit or loss 3.50 1.91 12.61 8.62 6.31 8.96 9.39 4.99 5.07 key areas within asset and liability This year as a result of a ALM and MRM Loans and advances to banks and other financial management: consultancy project the Group adopted a new institutions 0.56 4.01 1.91 11.01 2.83 2.21 6.54 6.73 3.98 Structural risk management: structural approach to define and manage overall Loans to customers 13.86 13.70 11.59 15.94 15.19 15.22 14.16 13.69 14.27 interest rate and currency risks; Investments available-for- interest rate risk of the Group. The approach sale and held to maturity 7.34 - 7.37 13.45 0.87 15.54 9.04 - 6.30 Liquidity risk management; implies distinguishing interest rate risk in Market risk management in trading trading portfolio from structural interest rate LIABILITIES: Loans and advances from portfolio; risk since they impact capital and profit and banks and other financial Capital management. loss differently. These two subtypes of the risk institutions 3.49 5.10 7.76 7.81 5.73 9.73 6.93 6.61 3.73 are now measured and managed separately. Customer accounts 5.91 6.95 6.81 7.29 6.89 8.04 7.83 7.77 4.22 Debt securities issued - 8.71 6.72 - 8.26 6.76 - 7.98 6.66 The Group's Assets and Liabilities This section covers structural interest rate risk. Other borrowed funds 7.66 1.88 - 7.49 3.00 - 9.84 6.29 - Management Committee (the “ALMC”) is Interest rate risk in trading portfolio is Subordinated debt 7.52 8.47 - 7.69 8.45 - 7.50 8.67 - responsible for managing risks the bank is measured and managed by the bank as a part exposed to while managing assets and of market risks. liabilities. The Group uses derivative financial changes in market interest rates and their instruments to mitigate the interest rate risk influence on the Group's profitability. If Structural interest rate risk is a risk of and control the interest rate margin by types necessary, the Risk Management Department ALMC is responsible of making strategic possible decline in interest income generated of products. Management monitors the suggests decreasing the relevant risk levels to and operational decisions with respect of on balance and off-balance sheet positions interest rate margin of the Group and believes the ALMC of the Group. managing asset and liabilities with purpose of: accounted at amortized cost as a result of that the Group is not exposed to significant Maintaining and further increasing net changes in market interest rates. Thus risk of change in interest rates and related During 2009 the Group had changed its income while keeping risk exposure at an managing structural interest rate risk implies cash flow interest rate risk. risk management policy in relation to interest acceptable level; managing exposure of the Bank's net interest rate risk sensitivity analysis and methods of Ensuring continuity of the bank operations. income and hence capital to market interest Interest rate risk sensitivity analysis calculation. During 2009 in calculating and rate changes with the purpose of limiting and analyzing sensitivity of net profit of the In order to fulfill the objectives set above, controlling possible income reductions or The Risk Management Department Group to structural interest rate risk, the short meetings of the ALMC take place on a losses and ensuring optimal and stable interest periodically estimates the Group's sensitivity to Group applies the earnings at risk ratio (EaR). weekly basis while extended meetings are income inflow.

186 187 EaR is based on re-pricing gap and measures EaR is calculated based on the assumption 31 December 2008 31 December 2007 (KZT million) (KZT million) the potential fluctuations in earnings over a that each interest rate gap will be reassessed given time interval under normal market at a new interest rate. US dollar Other currencies All currencies conditions and based on the following +10 bp -10 bp +100 bp -100 bp +100 bp -100 bp Assets: assumptions: As at the reporting date, in calculating EaR, Financial assets at fair value as reasonably possible, the Group applied the through profit or loss: the period when possible losses are range of interest rate fluctuations in 200 bp Bonds (3) 3 (571) 596 (1,338) 1,423 incurred, is one year. One year is viewed as a across the yield curve. Derivative financial instruments 332 (335) - - 947 (958) period, within which the Group may raise new Instruments with floating rates: funding or restructure its assets and liabilities The following table presents the sensitivity Loans and advances to banks 24 (24) - - 18 (18) with a purpose of returning and keeping its of the Group's consolidated income statement Loans to customers - - 52 (52) 566 (566) risks level within its risk appetite; to the above changes to interest rates, in Investments held-to-maturity: which all other parameters are assumed to be Instruments with floating rates - - 3 (3) 3 (3) constant: Liabilities: Instruments with floating rates: (266) 266 (94) 94 (3,030) 3,030 Loans and advances from 31 December 2009 Earnings at risk (EaR) banks (50) 50 (335) 335 (5,621) 5,621 (KZT million)

Earnings at risk (EaR) as a result of parallel shift in the yield curve Net effect on profit before tax 37 (40) (945) 970 (8,455) 8,529 Earnings at risk (EaR) as a result of upward movement in rates by 200 bp per 1 year 3,694 Earnings at risk (EaR) as a result of downward movement in rates by 200 bp per 1 year (3,694)

At the reporting date, the Group's equity is During 2008 and 2007, sensitivity of the Possible losses from a change in the result of greatly widened credit spreads) for not sensitive to interest rate fluctuations, since consolidated income statement represents interest rate within the range, provided all most financial instruments in the Group's the interest rate swaps became ineffective in fluctuations of interest income due to changes other parameters remain fixed, amount to less portfolio its sensitivity to changes in interest 2009 and, accordingly, changes in fair value in interest rates for the period of one year, than 1% of the Group's consolidated capital, rates significantly weakened. Hedging using of these instruments are recognized in the estimated on the basis of interest-bearing which is considered as permissible and does interest rate swaps has also helped reduce the consolidated income statement. instruments of the trading portfolio, and not require a further change in the Group's volatility of the Group's profit as a assets and liabilities with floating interest strategy and policy. The reduction in sensitivity consequence of interest rate movements. During 2008 and 2007, the Group used rates. compared to the previous year is due to the two interest rate variation ranges as fact that in 2008 the volume of interbank The sensitivity of capital to feasible reasonable in relation to the sensitivity of its The following table presents the sensitivity loans with floating interest rates and securities variations in interest rates at 31 December financial instruments: 10 basis points (“bp”) of the Group's consolidated income statement portfolios fell significantly. In addition, due to 2008 and 2007 has been provided in the for those in USD and 100 bp for those in other to the above changes in interest rates, in considerable increase of yield to maturity (as a following table: currencies, as opposed to the previous year which all other parameters apart from interest when the Group applied 100 bp to yield curves rates are assumed to be constant. 31 December 2008 31 December 2007 in all currencies. (KZT million) (KZT million)

US dollar Other currencies All currencies +10 bp -10 bp +100 bp -100 bp +100 bp -100 bp Assets

Investments available-for-sale: Bonds - - (73) 77 (73) 76 Derivative financial instruments 117 (118) - - - -

Net effect on profit before tax 37 (40) (945) 970 (8,455) 8,529 Change in equity 154 (158) (1,018) 1,047 (8,528) 8,605

188 189 The possible changes in capital due to associated with financial instruments as they Up to 1 1 month to 3 months to 1 year to Over 5 Maturity 31 December applied shifts in interest rates are less than 1% actually fall due. month 3 months 1 year 5 years years undefined 2009 of the Group's equity, which is considered Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) acceptable by the Group. Since hedging ALMC controls these types of risks by began, the effective part of the revaluation of means of weekly liquidity gap analysis and FINANCIAL ASSETS: Debt securities and swap transactions has had an effect on capital taking appropriate decisions to reduce liquidity derivatives in the financial provisions as at 31 December 2008 due to a risk. Current liquidity is managed by the assets at fair value movement in interest rates. The sensitivity Treasury Department through the deals in the through profit or loss 6,076 17,618 32,108 19,574 35,748 - 111,124 Loans and advances to analysis does not take into account the tax money markets, with placement of available banks and other financial effect on equity. funds in liquid securities in line with institutions 89,440 531 52,080 5,907 15 - 147,973 instructions of ALMC. Loans to customers 19,363 53,437 534,511 886,195 442,751 - 1,936,257 The management of the Group periodically Debt securities included in investments available- monitors the interest rate margin of the Group The Group maintains the compliance to for-sale 3 100 5,453 4,557 853 - 10,966 and believes that the Group is not exposed to regulatory requirements, including term Investments held to significant risk of fluctuations in interest rates liquidity ratios and foreign exchange liquidity maturity - 194 11 558 150 - 913 and the corresponding risk of changes in cash limits. The Management of the Group Total interest bearing flows. considers these requirements to be strict, and, assets 114,882 71,880 624,163 916,791 479,517 - 2,207,233 as such, this measure guarantees maintaining The Group considers the above sensitivity appropriate liquidity level. Cash and balances with to structural interest rate risk as reasonable. national (central) banks 89,584 - - - 949 - 90,533 The following tables provide an analysis of Precious metals 1,209 - - - - - 1,209 Equity securities in the Liquidity risk financial assets and liabilities grouped on the financial assets at fair basis of the remaining period from the value through profit or Liquidity risk refers to the risk of availability reporting date to the contractual maturity loss - - - - - 2,638 2,638 Equity securities in the of sufficient funds to meet deposit date. The presentation below is based upon investments available-for- withdrawals and other financial commitments the information provided internally to key sale - - - - - 5,252 5,252 management personnel of the Group. Accrued interest income on interest-bearing assets 47,126 30,219 88,003 60,452 61 - 225,861 Other financial assets 5,958 516 3,145 435 20 - 10,074

TOTAL FINANCIAL ASSETS 258,759 102,615 715,311 977,678 480,547 7,890 2,542,800

190 191 Up to 1 1 month to 3 months to 1 year to Over 5 Maturity 31 December Up to 1 1 month to 3 months to 1 year to Over 5 Maturity 31 December month 3 months 1 year 5 years years undefined month 3 months 1 year 5 years years undefined 2009 2008 Total Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) FINANCIAL ASSETS: FFIINNANANCICALIA LASSET S: LDIAebtBIL secuITIEritiSes: and Debt securities and derivatives in the financial derivatives in the assetsLoan ats afnaidr avalduvae nces financial assets at fair thfrrooumgh b pranokfist oarn dlo ssot her 6,076 17,618 32,108 19,574 35,748 - 111,124 value through profit or financial institutions 24,656 4,752 42,296 133,463 2,896 - 208,063 loss 1,127 6,647 26,489 13,592 8,407 - 56,262 Loans and advances to banCustks oanmder o thacerc ofuninantsci al 369,466 54,037 458,544 324,50 1 50,973 - 1,257,52 1 Loans and advances to institutions 89,440 531 52,080 5,907 15 - 147,973 banks and other financial Debt securities issued 314 684 2,246 248,86 2 197,304 - 449,410 institutions 181,044 14,210 39,658 1,051 4,727 - 240,690 Loans to customers 19,363 53,437 534,511 886,195 442,751 - 1,936,257 Other borrowed funds - 23 674 4,946 25,124 - 30,767 Loans to customers 69,388 94,480 484,754 861,803 536,174 - 2,046,599 Debt securities included inSub investmenordinattse dav daielablbt e- - - - 14,836 112,524 6,747 134,107 Debt securities included for-sale 3 100 5,453 4,557 853 - 10,966 in investments available- for-sale 106 - 822 4,292 5,631 - 10,851 InTvoestmental inttser heseltd btoea ring maturity - 194 11 558 150 - 913 Investments held to liabilities 394,436 59,496 503,760 726,60 8 388,821 6,747 2,079,868 maturity 174 6 2 105 470 - 757

ToFitalna inncteriaestl lia bearbilitiesing at assets 114,882 71,880 624,163 916,791 479,517 - 2,207,233 fair value through Total interest bearing profit or loss 174 137 594 26,36 1 8,725 - 35,991 assets 251,839 115,343 551,725 880,843 555,409 - 2,355,159 CashDivi danedn dbals anpacesyab wile th - - 15 - - - 15 national (central) banks 89,584 - - - 949 - 90,533 Accrued interest Cash and balances with Precious metals 1,209 - - - - - 1,209 national (central) banks 90,478 - - - - - 90,478 expense on interest- Equbeaityr isecung liaritibesilit iiesn t he 6,078 6,278 15,153 560 8,888 - 36,957 Precious metals 317 - - - - - 317 financial assets at fair valOtueh erth rfiounghan cpriaolf it or Equity securities in the lolssia bilities 769 - 3,4-70 100 - 77 - - - 2,-63 8 42,,463168 financial assets at fair value through profit or Equ ity securities in the loss - - - - - 1,276 1,276 inTvOTestmenALFINts ANavaiCIAlableL- f or- salLIABILIe TIES 401,457- 69,381- 519,622- 753,60- 6 406,43-4 6,75,24572 2,1557,2,2542 7 Equity securities in the investments available-for- Accr ued interest income sale - - - - - 3,301 3,301 onLi qinuitedrestity -gbearap ing assets (142,47698,126 ) 3033,,22319 4 188,95,068039 22604,4,0572 2 74,11613 - 225 ,861 Accrued interest income Oth er financial assets 5,958 516 3,145 435 20 - 10,074 on interest-bearing assets 30,866 23,345 43,105 3,504 1 - 100,821 Interest sensitivity gap (279,554 ) 12,38 4 120,403 190,183 90,696 Other financial assets 8,828 1,824 4,980 987 - - 16,619 TOTAL FINANCIAL AS SETS 258,759 102,615 715,311 977,678 480,547 7,890 2,542,800 Cumulative interest TOTAL FINANCIAL sensitivity gap (279,554) (267,170 ) (146,767 ) 43,416 134,112 - ASSETS 382,328 140,512 599,810 885,334 555,410 4,577 2,567,971

Cumulative interest sensitivity gap as a percentage of total assets (11.0%) (1 0.5%) (5.8% ) 1.7% 5.3% - Co ntingent liabilities - and credit commitments 11,508 12,213 52,530 54,095 86 55 -

192 193 Up to 1 1 month to 3 months to 1 year to Over 5 Maturity 31 December Up to 1 1 month to 3 months to 1 year to Over Maturity 31 December month 3 months 1 year 5 years 5 years undefined month 3 months 1 year 5 years years undefined 2008 2007 Total Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) FINANCIAL ASSETS: FINANCIAL ASSETS: FINANCIAL LIABILITIES: Debt securities and Debt securities and Lderoanisv atianvdes adv in anthcese from derivatives in the financial banfinanks cianald assets other atfin fanaicir al assets at fair value value throughi nprstiotufitti onr s 75,572 21,38 8 92,7 77 93,7 27 10,68 9 - 294,15 3 through profit or loss 10,459 129,347 31,817 - - - 171,623 loss Customer accounts 383,1,127076 32,6,647 970 316,26,44895 0 22913,,5890 25 8,2,470 227 -- 96 546,,84262 3 Loans and advances to banks and other financial LoanDebts an secud advritianesces issu toed 487 8,4 05 90,22 0 260,093 299,5 01 - 658,70 6 banks and other financial institutions 158,420 26,415 6,918 18,572 1,171 - 211,496 instiOthtuertio bons rrowed funds 181,0442 147,,2104 16 39,8,6875 86 81,1,04 5751 38,4,79 2791 -- 241306,,67609 0 Loans to customers 121,342 160,508 449,367 858,742 709,549 - 2,299,508 Loans Stoubo curstodinmerateds debt 69,388- 94,480 - 4843,,73375 4 861,80 3- 59536,,0170 45 17,45 4- 2,011546,,579699 Debt securities included in Debt securities included investments available-for- sale - 3 179 1,535 1,147 - 2,864 in inTovestmental intertsest av bearailablineg- for-sale liabilities 459,101376 69,99 -9 511,82266 0 6645,,29210 0 4465,,90631 8 17,45 4- 2,17100,,285 581 Investments held to maturity - 24 34 104 208 - 370 Investments held to Financial liabilities at fair maturity 174 6 2 105 470 - 757 value through profit or loss 426 229 720 37,524 15,44 0 - 54,339 Total interest bearing assets 290,221 316,297 488,315 878,953 712,075 - 2,685,861 Total inDiterviestden beards payabling e - 5 - - - - 5 assets 251,839 115,343 551,725 880,843 555,409 - 2,355,159 Accrued interest expense on interest-bearing Cash and balances with national (central) banks 168,148 - - - - - 168,148 Cash and balancesliabi wilitithes 3,476 15,97 3 16,312 3,15 8 - - 38,9 19 nOatithoernal f in(cenancitralal l)iabi banlitikses 904,4,33178 1,4 7-3 1,664 - 9- -- -- 907,,4 787 Equity securities in the financial assets at fair Precious metals 317 - - - - - 317 value through profit or Equity TOsecuTALriti FesINANCIAL in the loss - - - - - 15,647 15,647 financial assetsLIABIL at faiITIESr 467,370 87,67 9 530,35 6 705,7 91 462,34 8 17,45 4 2,270,998 Equity securities in the value through profit or investments available-for- loss - - - - - 1,2 76 1,2 76 sale - - - - - 2 2 Equity securLitiiquesi diinty t hgape (85,042) 52,833 69,45 4 179,54 3 93,0 62 Accrued interest income investments available-for- on interest-bearing assets 34,227 19,371 10,687 5,219 331 - 69,835 sale - - - - - 3,301 3,301 Interest sensitivity gap (207,298) 45,34 4 40,065 215,74 3 108,5 01 Other financial assets 1,513 4,771 1,752 1,573 - - 9,609 Accrued interest income on interest-bearing assets 30,866 23,345 43,105 3,504 1 - 100,821 OtherCu finmaunlciatialv eassets inter est 8,828 1,824 4,980 987 - - 16,619 TOTAL FINANCIAL ASSETS 494,109 340,439 500,754 885,745 712,406 15,649 2,949,102 sensitivity gap (207,298) (161,95 4) (121,889) 93,85 4 202,3 55 -

TOTALCu FmINANCIALulative in terest ASSETsenS sitivity gap as a 382,328 140,512 599,810 885,334 555,410 4,577 2,567,971 percentage of total assets (8.1%) (6. 3%) (4 .7%) 3.7% 7.9% - Contingent liabilities and - credit commitments 4,927 30,80 6 52,999 57,84 4 490 5 4 -

194 195 Up to 1 1 month to 3 months to 1 year to Over Maturity 31 December Up to 1 1 month to 3 months to 1 year to Over 5 years Maturity 31 month 3 months 1 year 5 years 5 years undefined 2007 month 3 months 1 year 5 years undefined December Total 2009 Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT FINANCIAL ASSETS: (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) million) FINANCIAL LIABILITIES: Debt securities and FINANCIAL LIABILITIES: derLiovanatisv esan din advthean ficesnan fciralom Loans and advances assetsban ksat anfaidr ovthaluere financial from banks and other through profit ori nlostisstu tions 10,14451,9216 129,16034,767 6 31,230817,0 12 166,-7 15 19,5-4 0 - - 1771,18,62315 9 financial institutions 24,656 4,752 42,296 133,463 2,896 - 208,063 Customer accounts 320,227 127,5 09 203,4 74 225,0 57 2,3 00 - 878,5 67 Customer accounts 369,466 54,037 458,544 324,501 50,973 - 1,257,521 Loans and advances to Debt securities issued 314 684 2,246 248,862 197,304 - 449,410 banks and other financial Debt securities issued 1,964 11,0 60 35,28 8 280,9 96 389,25 5 - 718,5 63 Other borrowed funds - 23 674 4,946 25,124 - 30,767 institutions 158,420 26,415 6,918 18,572 1,171 - 211,496 Other borrowed funds - 5 85 - 43,231 104,4 98 - 148,314 Subordinated debt - - - 14,836 112,524 6,747 134,107 Loans to customers 121,342 160,508 449,367 858,742 709,549 - 2,299,508 Subordinated debt - - - 3,29 3 103,08 0 - 106,37 3 Debt securities included in Total interest bearing investments available-for- financial liabilities 394,436 59,496 503,760 726,608 388,821 6,747 2,079,868 sale Total interest bearing - 3 179 1,535 1,147 - 2,864 Financial liabilities at fair liabilities 463,407 299,83 0 468,7 74 719,29 2 618,67 3 - 2,569,97 6 value through profit or Investments held to loss 174 137 594 26,361 8,725 - 35,991

matuFinrianty cial liabilities at fair - 24 34 104 208 - 370 Accrued interest expense value through profit or loss 331 7,399 - - - - 7,7 30 on interest-bearing 18,72 84,8 141,19 72,85 Dividends payable - 2 - - - - 2 liabilities 9,755 6 26 3 9 - 327 ,359 Total interest bearing Other financial liabilities 769 3,470 100 77 - - 4,416 assetsAccr ued interest expense 290,221 316,297 488,315 878,953 712,075 - 2,685,861 Contingent liabilities and on interest-bearing other credit liabilities 7,111 20,614 14,321 1,4 45 1,83 5 - 45,32 6 Cash and balances with commitments 11,508 12,213 52,530 54,095 86 55 130,487 natioOnthaler (cen finantralci)al ban liabiksli ties 168,142,8321 1,60- 0 1,-7 17 -112 - - - - 168,514,78 5 0 TOTAL FINANCIAL Equity securities in the LIABILITIES 416,642 94,042 641,810 948,334 470,491 6,802 2,578,121 financial assets at fair TOTAL FINANCIAL value through profit or LIABILITIES 473,170 329,4 45 484,812 720,84 9 620,50 8 - 2,628,784 loss - - - - - 15,647 15,647 Equity securities in the investments avaiLilquabildie-tyfo gapr- 20,939 10,9 94 15,94 2 164,896 91,89 8 sale - - - - - 2 2 Up to 1 1 month to 3 months to 1 year to Over 5 years Maturity 31 month 3 months 1 year 5 years undefined December Accrued interest income Interest sensitivity gap (173,186) 16,4 67 19,5 41 159,6 61 93,4 02 on interest-bearing assets 34,227 19,371 10,687 5,219 331 - 69,835 2008 Total

Other financial assets 1,513 4,771 1,752 1,573 - - 9,609 (KZT Cumulative interest (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) million) sensitivity gap (173,18 6 ) (156,719) (137,17 8) 22,48 3 115,8 85 - FINANCIAL LIABILITIES: TOTAL FINANCIAL ASSETS 494,109 340,439 500,754 885,745 712,406 15,649 2,949,102 Loans and advances Cumulative interest from banks and other sensitivity gap as a financial institutions 75,572 21,388 92,777 93,727 10,689 - 294,153 percentage of total assets (5.87%) (5.31%) (4 .65%) 0.76% 3.93% - Customer accounts 383,076 32,790 316,450 229,805 2,722 - 964,843 Debt securities issued 487 8,405 90,220 260,093 299,501 - 658,706 Contingent liabilities and - Other borrowed funds 2 7,416 8,876 81,475 38,991 - 136,760 credit commitments 170,815 1,267 5,8 60 5,784 87 3 4 93- Subordinated debt - - 3,337 - 95,005 17,454 115,796

Total interest bearing financial liabilities 459,137 69,999 511,660 665,100 446,908 17,454 2,170,258 Based on prior experience, the Group considers it A further analysis of the liquidity is presented in Financial liabilities at fair the following tables in accordance with IFRS 7. The value through profit or highly unlikely that all customer accounts seek loss 426 229 720 37,524 15,440 - 54,339 repayment on maturity. Historically the majority of amounts disclosed in these tables do not correspond Accrued interest expense such deposits are rolled over. The Group is aware of to the amounts recorded on the consolidated on interest-bearing the importance of maintaining the stability of these statement of financial position as the presentation liabilities 56,233 76,215 190,354 489,600 195,914 333 1,008,649 Other financial liabilities 4,331 1,473 1,664 9 - - 7,477 deposits. In order to achieve this it is essential that below includes a maturity analysis for financial Contingent liabilities and the Group ensures depositor confidence in the liabilities that indicates the total remaining other credit Group's liquidity, by continuing to position itself as contractual payments (including interest payments), commitments 4,927 30,806 52,999 57,844 490 54 147,120 the depositor of choice in local markets and a leading which are not recognized in the consolidated TOTAL FINANCIAL financial institution in both the Republic of statement of financial position under the effective LIABILITIES 525,054 178,722 757,397 1,250,077 658,752 17,841 3,387,843 Kazakhstan and abroad. interest rate method.

196 197 result of changes in foreign exchange of the Group using data generated by the Up to 1 1 month to 3 months to 1 year to Over 5 years Maturity 31 December month 3 months 1 year undefined rates. The Group is exposed to the effects of Prudentials Monitoring and Credit Reporting 5 years 2007 fluctuations in foreign currency exchange Division on a daily basis. Total (KZT rates on its open currency positions and (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) million) trading portfolio. The FMSA sets strict limits on open FINANCIAL LIABILITIES: currency positions. This measure also limits the Loans and advances The ALMC controls currency risk by currency risk. In addition, the Treasury from banks and other managing its open currency positions on the Department uses various hedging strategies financial institutions 141,216 160,676 230,012 166,715 19,540 - 718,159 basis of macroeconomic analysis and including cross currency swaps in order to Customer accounts 320,227 127,509 203,474 225,057 2,300 - 878,567 exchange rate forecasts, which give the Group mitigate currency risks. Debt securities issued 1,964 11,060 35,288 280,996 389,255 - 718,563 an opportunity to minimise losses from Other borrowed funds 43,23 104,4 - 585 - 1 98 - 14 8,314 significant currency fluctuations. Similar to As at 31 December 2009 the Group's Subordinated debt 103,0 liquidity risk management, the Treasury exposure to foreign currency exchange rate - - - 3,293 80 - 10 6,373 Department manages open currency positions risk is presented in the table below:

Total interest bearing financial liabilities 463,407 299,830 468,774 719,292 618,673 - 2,569,976 KZT USD EUR RUR Other CCY 31 December 2009

Financial liabilities at fair Total value through profit or (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) loss 331 7,399 - - - - 7,730 FINANCIAL ASSETS: Accrued interest expense on interest-bearing Cash and balances with national liabilities 31,548 79,781 162,263 451,145 283,070 322 1,008,129 (central) banks 61,450 7,75 3 16,34 5 2,913 2,07 2 90,533 Other financial liabilities 2,321 1,600 1, 7 17 112 - - 5,750 Precious metals - - - - 1,20 9 1,20 9 Contingent liabilities and Financial assets at fair value other credit through profit or loss 91,413 35 9 10,64 7 5,196 6,588 114,20 3 commitments 170,815 1,267 5,860 5,784 873 493 185,092 Loans and advances to banks and other financial institutions 13,253 120,76 2 6,06 5 3,94 3 4,35 2 148,37 5 Loans to customers 773,155 1,338,637 10,17 2 37,77 0 1,033 2,160,767 TOTAL FINANCIAL LIABILITIES 668,422 389,877 638,614 1,176,333 902,616 815 3,776,677 Investments available-for-sale 12,262 4,434 - - - 16,696 Investments held to maturity 938 - - - 5 94 3 Other financial assets 3,138 87 6 5 2 5,58 5 423 10,07 4

TOTAL FINANCIAL ASSETS 955,609 1,472,8 21 43,281 55,40 7 15,682 2,542,80 0 Market risk rate risk, equity risk etc.). This allows the FINANCIAL LIABILITIES: Group to analyze exposure to each risk factor Loans and advances from banks The Group defines market risk as currency, and make further decisions to mitigate a and other financial institutions 4,959 178,337 9,93 9 15,84 6 4 1 209,12 2 equity, commodity and interest rate risks particular exposure. For internal reporting Customer accounts 632,542 549,936 75,77 2 14,414 3,80 0 1,276,464 purposes, in addition to VAR analysis Financial liabilities at fair value related to its trading and available-for-sale through profit or loss 30,111 5,82 0 - 60 - 35,991 portfolios, as well as currency positions. discussed above, the Bank also performs Debt securities issued - 269,78 3 148,57 6 25 4 45,04 3 463,65 6 sensitivity analysis on its currency risk and Other borrowed funds 19,097 12,07 5 - - - 31,17 2 Dividends payable - - - - 15 15 The Risk Management Department interest rate exposures. This sensitivity analysis Other financial liabilities 2,363 333 64 6 634 44 0 4,416 measures the risks and generates treasury is presented in these financial statements. Subordinated debt 31,736 104,67 5 - - - 136,4 11 position reports, which are presented to the ALMC of the Group. Risk Management Currency risk TOTAL FINANCIAL LIABILITIES 720,808 1,120,95 9 234,93 3 31,20 8 49,339 2,157,24 7 Department calculates VaR to measure the OPEN POSITION 234,801 351,862 (191,652) 24,199 (33,657 ) market risk on equity, fixed income and Currency risk is defined as the risk of taking currency positions and breaks it down to losses from open currency positions and individual risk factors (currency risk, interest financial instruments in foreign currencies as a

198 199 Derivative financial instruments and spot contracts Derivative financial instruments and spot contracts

Fair value of derivative financial instruments and spot contracts are included in the currency Fair value of derivative financial instruments and spot contracts are included in the currency analysis presented above and the following table presents further analysis of currency risk on analysis presented above and the following table presents further analysis of currency risk on derivative financial instruments and spot contracts as at 31 December 2009: derivative financial instruments and spot contracts as at 31 December 2008:

KZT USD EUR RUR Other 31 December KZT USD EUR RUR Other 31 December CCY 2009 CCY 2008

Total Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Accounts payable on spot Accounts payable on spot and and derivative contracts (892) (304,125 ) - (4,599 ) - (309,616) derivative contracts (120,432) (294,25 4) (16,14 3) - (5,87 2) (436,7 01) Accounts receivable on spot Accounts receivable on spot and derivative contracts 28,017 5,463 192,55 5 5,05 3 83,860 314,94 8 and derivative contracts 50,780 135,3 91 168,9 51 1,64 4 75,4 01 432,167

NET SPOT AND DERIVATIVE NET SPOT AND FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL POSITION (69,652) (158,863 ) 152,80 8 1,64 4 69,5 29 INSTRUMENTS POSITION 27,125 (298,662) 192,55 5 45 4 83,860

As at 31 December 2007 the Group's exposure to foreign currency exchange rate risk is As at 31 December 2008 the Group's exposure to foreign currency exchange rate risk is presented in the table below: presented in the table below: KZT USD EUR RUR Other CCY 31 December 2007 KZT USD EUR RUR Other CCY 31 December Total 2008 (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Total (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) FINANCIAL ASSETS:

FINANCIAL ASSETS: Cash and balances with national (central) banks 57,840 46,58 8 3,465 6,17 1 54,084 168,14 8 Cash and balances with national (central) banks 40,444 9,627 2,723 3,599 34,08 5 90,47 8 Financial assets at fair value through profit or loss 59,371 97,04 7 8,44 5 17,896 6,0 17 188,77 6 Precious metals - - - - 317 317 Financial assets at fair value Loans and advances to banks and through profit or loss 35,299 3,30 2 9,54 6 5,510 4,47 3 58,130 other financial institutions 12,968 125,37 0 56,086 11,527 6,87 2 212,823

Loans and advances to banks and Loans to customers 891,041 1,369,863 24,95 5 79,54 8 928 2,366,33 5 other financial institutions 4,499 164,90 5 62,30 2 4,77 9 5,328 241,813 Investments available-for-sale 3,036 - - - - 3,03 6 Loans to customers 725,185 1,340,34 7 12,024 66,17 1 1,05 5 2,144,782 Investments held to maturity 317 - - - 5 8 37 5 Investments available-for-sale 12,209 2,84 7 - - - 15,05 6 Other financial assets 3,621 3,216 1,55 5 60 2 615 9,60 9 Investments held to maturity 600 - - - 17 6 77 6

Other financial assets 7,126 2,44 7 1,368 5,17 7 50 1 16,619 TOTAL FINANCIAL ASSETS 1,028,194 1,642,084 94,50 6 115,74 4 68,57 4 2,949,10 2

TOTAL FINANCIAL ASSETS 825,362 1,523,47 5 87,963 85,236 45,93 5 2,567,97 1 FINANCIAL LIABILITIES:

FINANCIAL LIABILITIES: Loans and advances from banks and other financial institutions 31,993 576,394 22,682 14,7 21 77,64 1 723,4 31 Loans and advances from banks Customer accounts 542,353 290,24 1 33,37 2 27,80 8 1,30 9 895,083 and other financial institutions 16,512 244,09 0 11,211 23,84 7 731 296,3 91 Financial liabilities at fair value Customer accounts 443,862 481,64 0 39,467 12,50 5 1,97 9 979,45 3 through profit or loss 2,831 4,861 - 25 13 7,730 Financial liabilities at fair value Debt securities issued - 363,35 8 194,52 6 57,12 0 124,684 739,68 8 through profit or loss 52,306 2,033 - - - 54,339 Other borrowed funds 18,929 130,00 5 - - - 148,934 Debt securities issued - 359,27 1 188,53 5 22,727 107,75 2 678,285 Dividends payable - - - - 2 2 Other borrowed funds 9,362 127,962 - - - 137,32 4 Other financial liabilities 949 1,384 1,14 9 1,57 5 69 3 5,75 0 Dividends payable - - - - 5 5 Other financial liabilities 4,438 2,396 8 582 5 3 7,47 7 Subordinated debt 28,929 79,237 - - - 108,166 Subordinated debt 38,139 79,58 5 - - - 117,724

TOTAL FINANCIAL LIABILITIES 625,984 1,445,48 0 251,729 101,24 9 204,34 2 2,628,784 TOTAL FINANCIAL LIABILITIES 564,619 1,296,97 7 239,221 59,661 110,52 0 2,270,998 OPEN POSITION 402,210 196,60 4 (157,223) 14,495 (135,768 ) OPEN POSITION 260,743 226,49 8 (151,258 ) 25,57 5 (64,585 )

200 201 31 December 2007 Derivative financial instruments and spot contracts (KZT million) KZT/USD KZT/EUR KZT/RUB Fair value of derivative financial instruments and spot contracts are included in the currency +10% -10% +10% -10% +10% -10% Impact on analysis presented above and the following table presents further analysis of currency risk on 4,190 (4,190) 160 (160) 2,606 (2,606) derivative financial instruments and spot contracts as at 31 December 2007: profit or loss Impact on ------equity KZT USD EUR RUR Other 31 December CCY 2007

Total The table shows the possible effect on the movements in the tenge exchange rate. Thus, at a (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) (KZT million) Group's consolidated profit and equity if one of 25% tenge devaluation at the reporting date the

Accounts payable on spot and the above foreign currencies strengthens or positive effect on the consolidated income derivative contracts (200,473) (312,485) (1,240) (6,992) (605) (521,79 5) Accounts receivable on spot and weakens by 10% at the current date to all other statement of the Group would be KZT 32,098 derivative contracts 70,626 159,739 160,870 14,846 140,394 546,4 75 currencies represented in the Group's million (2008: KZT 24,004 million) and at a 35% consolidated statement of financial position. In tenge devaluation it would amount to KZT NET SPOT AND DERIVATIVE FINANCIAL INSTRUMENTS the event of the strengthening or devaluation of 44,936 million (2008: KZT 33,657 million). The POSITION (129,847) (152,746) 159,630 7,854 139,789 the tenge, open positions on all foreign currencies breakdown of these tenge devaluation effects could have an impact on profit, while value of the are given in the following table: cross-currency swaps is not sensitive to

Currency risk sensitivity analysis consolidated equity. This is due to the fact that 31 December 2009

as at 31 December 2009 these were the main (KZT million)

The Group estimates the possible effect of currencies in which the Group had open KZT/USD KZT/EUR KZT/RUB KZT/Other Total a 10% fluctuation in foreign currency rates on positions. A 10% fluctuation is determined as -25% -35% -25% -35% -25% -35% -25% -35% -25% -35% the consolidated income statement and a “reasonably possible change in the risk Impact on 12,052 16,872 162 227 7,313 10,238 12,571 17,599 32,098 44,936 consolidated equity based on the sensitivity variable” by the management of the Group. All profit or loss analysis of the internally prepared open other parameters were assumed to be currency position report, which includes constant. Negative and positive amounts in 31 December 2008 derivative financial instruments. the table reflect the potential probable effect (KZT million)

on the consolidated income statement and KZT/USD KZT/EUR KZT/RUB KZT/Other The analysis is based on the calculation of consolidated equity of such fluctuations. The Total the impact of possible fluctuations in US Group hedges cash flow on its foreign -25% -35% -25% -35% -25% -35% -25% -35% -25% -35% Impact on profit 14,764 20,720 300 420 7,672 10,741 1,268 1,776 24,004 33,657 dollar, Euro and Russian Ruble currency rates currency liabilities using cross-currency swaps. or loss on the consolidated income statements and 31 December 2009 Limitations of sensitivity analysis fluctuations. In instances where there are

(KZT million) significant or unexpected changes in market KZT/USD KZT/EUR KZT/RUB The above tables demonstrate the effect of a conditions, management actions could include +10% -10% +10% -10% +10% -10% change in a key risk factor while all other things selling investments, changing investment Impact on (26,950) 26,899 22,360 (22,360) 2,925 (2,925) held constant. In reality, there is a correlation portfolio allocation and taking other protective profit or loss Impact on between the assumptions and other factors. It action. Consequently, the actual impact of a ------equity should also be noted that these sensitivities are change in the risk factors may be different from non-linear, and larger impacts should not be those shown above. 31 December 2008 extrapolated from these results.

(KZT million) Other limitations in the above sensitivity KZT/USD KZT/EUR KZT/RUB The sensitivity analyses do not take into analyses include the use of hypothetical market +10% -10% +10% -10% +10% -10% consideration that the Group's assets and movements to demonstrate potential risk that Impact on 8,583 (8,525) 445 (445) 3,069 (3,069) liabilities are actively managed. Additionally, the only represent the Group's view of possible near- profit or loss Impact on financial position of the Group may vary term market changes that cannot be predicted (3,356) 3,442 3,489 (3,489) - - equity depending on any actual market movements, with a fair degree of certainty; and the since the Group's financial risk management assumption that all interest rates move in an strategy aims to manage the exposure to market identical fashion.

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