RESOLUTION OF BOARD OF NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN

of September 21, 2012 No. 292

About the basic principles of asset management in foreign currency and precious metals

For the purpose of implementation of the Law of the Republic of Kazakhstan of July 5, 2012 "About modification and amendments in some legal acts of the Republic of Kazakhstan concerning the organization of activities of National Bank of the Republic of Kazakhstan, regulation of the financial market and the financial organizations" the Board of National Bank of the Republic of Kazakhstan DECIDES:

1. Determine the basic principles of asset management in foreign currency and precious metals in edition, according to appendix to this resolution.

3. This resolution becomes effective from the date of acceptance.

4. To department of monetary transactions (Baymagambetov A. M.):

1) in seven-day time from the date of adoption of this resolution to notify the Ministry of Justice of the Republic of Kazakhstan on recognition invalid the resolution specified in Item 2 of this resolution;

2) to bring this resolution to the attention of the interested divisions of central office of National Bank of the Republic of Kazakhstan.

5. To impose control of execution of this resolution on the Chairman of National Bank of the Republic of Kazakhstan Marchenko G. A.

Appendix

to the resolution of Board of National Bank of the Republic of Kazakhstan of September 21, 2012 No. 292

The basic principles of asset management in foreign currency and precious metals

The basic principles of asset management in foreign currency and precious metals (further - the Principles) are developed according to the Law of the Republic of Kazakhstan of March 30, 1995 "About National Bank of the Republic of Kazakhstan" for the purpose of ensuring stability and convertibility of national currency of the Republic of Kazakhstan, financial system and establish the principles of implementation of the operating activiies connected with asset management in foreign currency and precious metals which include determination of structure of portfolios, risk management, establishment of limits, procedure for decision making and authority delegation, and also the procedure of establishment of dealing and correspondence relations of National Bank of the Republic of Kazakhstan (further - National Bank).

1. General provisions

1. Assets in foreign currency and precious metals are created and used for the purpose of ensuring internal and external stability of national currency of the Republic of Kazakhstan and implementation of payments according to obligations of the Republic of Kazakhstan, are one of forms of national wealth of the Republic of Kazakhstan.

2. Assets in foreign currency and precious metals are created from:

1) the gold and foreign exchange reserves classified according to methodology of the International Monetary Fund;

2) the international financial assets and precious metals which are not classified according to methodology of the International Monetary Fund as reserve assets including the assets transferred by National Bank JSC National Investment Corporation of National Bank of Kazakhstan (further - JSC NIK) in trust management;

3) the Kazakhstan currency assets included in internal portfolio of National Bank for the purpose of realization of the state monetary policy and ensuring financial stability.

3. Gold and foreign exchange reserves, other international assets and precious metals, including the assets delivered by National Bank JSC NIK in trust management, specified in subitems 1) and 2) of Item 2 of the Principles constitute gold and exchange assets of National Bank (further - ZVA).

4. For ensuring profitability in the long term part of ZVA is delivered by JSC NIK in trust management for investment into the alternative financial instruments differing in high risk and low level of liquidity.

5. Control of ZVA is exercised of division of monetary transactions of National Bank according to the resolution of Board of National Bank of the Republic of Kazakhstan of October 27, 2006 No. 105 "About approval of the Investment strategy on management of gold and exchange assets of National Bank of the Republic of Kazakhstan".

6. Trust management of part of ZVA invested in alternative financial instruments is performed by JSC NIK according to the Investment strategy on portfolio management of the ZVA alternative tools approved by Board of National Bank.

7. Transactions with assets of internal portfolio of National Bank are performed according to Regulations on the internal portfolio of National Bank of the Republic of Kazakhstan approved by Board of National Bank.

8. Determination of parameters of risk for ZVA is performed by division of development and risk management of National Bank.

2. Structure and types of management of ZVA

9. The structure of ZVA is determined proceeding from need of ensuring liquidity, increase in profitability for average and long-term outlook, and also for maintenance of sufficient level of diversification of ZVA.

The board of National Bank determines structure of ZVA and their placement for the purpose of ensuring the principles of safety, liquidity and profitability in the long term.

Depending on purpose of portfolios of ZVA parameters of the Investment strategy are determined by management of ZVA and, if necessary, benchmark portfolios (benchmarks) for the corresponding portfolios of ZVA.

10. Differentiate the following types of portfolio management concerning the established standard (benchmark):

1) the passive type of management is type of management in case of which value of variability of variation of portfolio return (tracking error) does not exceed 0,5 (zero whole five tenth) percent;

2) the active type of management is type of management in case of which value of variability of variation of portfolio return (tracking error) can exceed 0,5 (zero whole five tenth) percent.

The choice like portfolio management concerning standard (benchmark) is determined by Board of National Bank.

Depending on chosen like portfolio management the corresponding parameters of the Investment Strategy are determined by management of ZVA.

3. Types of risks and management of them when carrying out transactions with ZVA

11. Carrying out transactions with ZVA is integrated to the following main types of risks:

1) credit risk: the risk connected with possibility of failure to carry out by the counterpartner/issuer of the undertaken obligations on transaction/payment for financial instruments in the appointed time owing to the insolvency or bankruptcy;

2) market risk: downside risk of cost of ZVA owing to change of rates, the prices and rates of remuneration. The market risk is subdivided into the following types of risks:

- currency risk: the risk of emergence of losses connected with change of the foreign exchange rates;

- price risk: the risk of emergence of losses connected with the change in price of precious metals, securities and other financial instruments when implementing transactions on their purchase and sale;

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