INTRODUCING KAZAKHSTANSTOCK EXCHANGE INC. (KASE)

Hong Kong2006, December

COEVAL OF TENGE …

KASE was established at November 17, 1993 under the name of Kazakh Interbank Currency Exchange, two days after the launching of tenge – new legal tender of Kazakhstan.

Now, that day (November 15) is celebrated as the official annual holiday "The Day of Financiers".

"New" tenge (since 2006)

"Old" tenge (1993–2006)

YOUNG AND SINGLE …

KASE – non-commercial joint-stock company with the 59 shareholders – National Bank of Kazakhstan (the largest shareholder), banks, brokerage firms, asset management companies, pension funds and other professional financial institutions. All of them have only one vote each*.

* Today, there are plans to commercialize ("de-mutualize") KASE and to capitalize it with the funds of the existing shareholders and the Government in order to administrate the Special trading site of the Almaty Regional Financial Center.

YOUNG AND SINGLE … (2)

Today KASE is the single universal financial exchange in Kazakhstan with the brief but bright history:

1993 – first trades with the foreign currency (US dollars)

1995 – first trades with the T-bills

1996 – first trades with the derivatives (KZT/USD exchange rate futures)

1997 – first trades with the listed equities

1997 – first trades with the government stacks of shares

1997 – first trades with the non-listed corporate securities

1998 – launching of the OTC securities market within KASE

YOUNG AND SINGLE … (3)

1998 – first trades with the eurobonds of Kazakhstan

1999 – first trades with the listed corporate bonds

1999 – first trades with the municipal bonds (since 2005 the issuance of these bonds is prohibited)

1999 – launching of the direct repo market

2001 – first trades with the supranational (IFO) bonds

2001 – launching of the automatic repo market (the most massive and active sector of the KASE market)

2002 – first trades with the promissory notes

YOUNG AND SINGLE … (4)

2003 – first trades with foreign T-bills (Russia 2028 & Russia 2030 )

2006 – first trades with foreign corporate bonds (JP Morgan and Merrill

Lynch)

2006 – IPO of KazMunayGas Exploration–Production shares with the use of KASE settlement system

2006 – secondary distribution of KAZAKHMYS PLC (UK) shares with the use of KASE settlement system

IMPRESSIVE DYNAMICS …

0

20

40

60

80

100

120

140

160

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(11m)

Other

Repo

Corporate securities

Public securities

Derivatives

Currencies

144.8USD bln

0

20

40

60

80

100

120

140

160

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(11m)

Other

Repo

Corporate securities

Public securities

Derivatives

Currencies

144.8USD bln

IMPRESSIVE DYNAMICS … (2)

0

20

40

60

80

100

120

140

160

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(11 m)

0

20

40

60

80

100

120

140

160

KASE, USD bln

% to GDP

GDP, USD bln

143.9%

0

20

40

60

80

100

120

140

160

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(11 m)

0

20

40

60

80

100

120

140

160

KASE, USD bln

% to GDP

GDP, USD bln

143.9%

UNIVERSAL EXCHANGE … (2006, 11 months)

In total, repo (money) market takes 69.6% of general KASE turnover

144 774.1USD mil

52.4%

23.9%

3.4%

3.1%

4.6%

11.7%

Autorepo with public securities,

75 795.5 USD mil

Currencies,34 616.0 USD mil

Corporate securities,4 549.1 USD mil

Public securities,4 882.5 USD mil

Direct repo with corporate securities, 6 641.3 USD mil

Autorepo with corporate securities, 16 924.6 USD mil

Direct repo with public securities, 1 364.8 USD mil (0.9%)

144 774.1USD mil

52.4%

23.9%

3.4%

3.1%

4.6%

11.7%

Autorepo with public securities,

75 795.5 USD mil

Currencies,34 616.0 USD mil

Corporate securities,4 549.1 USD mil

Public securities,4 882.5 USD mil

Direct repo with corporate securities, 6 641.3 USD mil

Autorepo with corporate securities, 16 924.6 USD mil

Direct repo with public securities, 1 364.8 USD mil (0.9%)

UNIVERSAL EXCHANGE … (2)

KASE serves the markets of:direct and automatic repo with public and corporate securities foreign currencies (US dollar, euro, russian rouble)public securities of Kazakhstan issued by the National Bank,

municipalities and Ministry of Finance (including international bonds of Kazakhstan)

supranational bonds and foreign T-billspromissory notesequities corporate bonds …

VARIETY OF CORPORATE BONDS …

"regular" domestic bonds (nominated in tenge or foreign currencies, with discount or coupon, with fixed or floating coupon)

international bonds of Kazakhstan issuersagency bonds (with the tax regime equal to the tax regime of

T-bills) infrastructural bonds (secured by the government guarantee)bonds of foreign issuers (previously registered outside

Kazakhstan) soon: bonds of foreign issuers (registered in Kazakhstan)

DOMINATION OF REPO AND FOREX MARKETS

KASE repo market is specially designed for domestic purposes – to satisfy the needs of local pension funds and banks in short-term money borrowings and lendings.

KASE foreign currencies market – the basic trading site for the National Bank of Kazakhstan to regulate the exchange rate of tenge.

KZT/USD: the KASE exchange rate today = official exchange rate tomorrow.

"PURE" CORPORATE SECURITIES MARKET

Total KASE turnover for the 11 months of 2006 with the equities – 1 775.9 USD mil,with the corporate bonds – 2 773.2 USD mil

0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (11 m)

Equities

Corporate bonds

Turn

over

, USD

bln

"PURE" CORPORATE SECURITIES MARKET (2)

In Jan.–Nov., 2006 году average daily KASE turnover with the equities – 6,8 USD mil,with the corporate bonds – 11,6 млн USD.

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 2004 2005 2006 (11 m)

Equities

Corporate bonds

Daily

turn

over

, USD

mil

"PURE" CORPORATE SECURITIES MARKET (3)

The main problems are:• lack of free-float equities (the heritage of case-by-case

privatization)• conservative policy of main domestic investors ("buy bonds

and hold till maturity")

Nevertheless ..

CHAMPION GROWTH (in few months of 2005–2006)

Index KASE_Shares demonstrated the rapid growth: 11.1 times (for the period Jan.05, 2005 – Apr.19, 2006) and 4.1 times (for the period Nov.30, 2005 – Nov.30, 2006), due to the appearance of new investors’ class – mutual funds and individual persons.

KASE_Shares

0

500

1 000

1 500

2 000

2 500

01.0

1.05

01.0

3.05

01.0

5.05

01.0

7.05

01.0

9.05

01.1

1.05

01.0

1.06

01.0

3.06

01.0

5.06

01.0

7.06

01.0

9.06

01.1

1.06

2 086.78(30.11.06)

2 393.58(19.04.06)

216.34(05.01.05)

512.63(30.11.05)

1 628.61(19.05.06)

KASE_Shares

0

500

1 000

1 500

2 000

2 500

01.0

1.05

01.0

3.05

01.0

5.05

01.0

7.05

01.0

9.05

01.1

1.05

01.0

1.06

01.0

3.06

01.0

5.06

01.0

7.06

01.0

9.06

01.1

1.06

2 086.78(30.11.06)

2 393.58(19.04.06)

216.34(05.01.05)

512.63(30.11.05)

1 628.61(19.05.06)

ADVANCED TECHNOLOGIES…

KASE uses it’s own trading platform:on-screen based electronic "Server – Client" system remote accesselectronic signature and electronic documents circulation traffic encryptionon-line data saving

Central Depository is the KASE subsidiary:DVPT+0 settlement basis

IN THE FUTURE …

• Waiting for the IPO of the largest Kazakhstan banks and producers (according to the Securities Law, at least 20% of the local shares being placed must be suggested at the domestic market for purchase)

• Preparing to administrate the Special trading site of the Almaty Regional Financial Center (set-up to attract foreign issuers and investors)

• Welcoming the new listing companies• Waiting for the IFOs to place their bonds in Kazakhstan• Ready to introduce T+n settlement basis for the foreign

operators (only for eqities)

CONTACT US …

Internet: www.kase.kz

e-mail: kase@kase.kz

phone: (+7 327) 272 98 98, 272 06 00

fax: (+7 327) 272 09 25

address: 67, Aiteke bi street, Almaty, 050000, Kazakhstan