Sovereign Wealth Fund "Samruk-Kazyna" JSC

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Introduction

Sovereign Wealth Fund «Samruk-Kazyna» JSC was established on November 3, 2008 in accordance with the Decree of the President of the Republic of Kazakhstan dated October 13, 2008. The Fund was organized to increase management’s efficiency and to optimize organizational structures in the entities in order to successfully achieve their strategic objectives set in the respective Government programs. Today, «Samruk-Kazyna» JSC plays a significant role in sustainable development of Kazakhstan’s economy. For instance, during the world economic crisis, the Government by Decree No. 1085 dated November 25, 2008 approved a Joint Action Plan of the Government, the National Bank, the Agency on the Regulation and Supervision of Financial Market and Financial Organizations of Republic of Kazakhstan on stabilization of the economy and financial system for 2009−2010 («Stabilization Plan»). The Fund I was the principal operator for the Government in implementation of this Stabilization Plan.

The area of Fund’s work is very broad that is why it is organized into organizational business units based on their products and services, and has seven reportable operating segments:

Oil and Gas segment

Transportation segment

Telecommunication segment

Energy segment

Mining and industrial segment

Financial and Innovation Institutions segment

Segment of Corporate center and projects

During my practice from 8th of July till 1st of August in 2014 I was working in energy segment that includes operations related to production and distribution of electricity, the function of oversight over the input of electricity into the energy system and consumption of imported electricity, the function of centralized operation and dispatch of facilities in the Unified Electricity System of Kazakhstan.

This report is a short description of my four weeks training practice carried out as compulsory component of the Bachelor’s degree program in economics. The purpose of this report is to present the knowledge gained on the activities of the organization (directorate where I worked), a brief analysis of performed work acquired practical skills as well as organize, consolidate and expand the theoretical knowledge.

I was mainly working with the documentation during first days in «Mining and power assets directorate». My first task was to learn how electronic document management system (EDMS) works. So, I tried to find necessary document by its number, identify who is executor of a document and check electronic signatures. Also I have analyzed company’s interim condensed consolidated financial statements for 2012 and 2013. One more task was to understand the process of registration of legal entity (JSC) and control all stages of the procedure.

Organizational and economic characteristics of SWF «Samruk-Kazyna»

Sovereign Wealth Fund «Samruk-Kazyna"JSC was established in accordance with the Decree of the President of the Republic of Kazakhstan dated October 13, 2008 № 669» On some measures to ensure the competitiveness and sustainability of the national economy «. The Fund is established in order to enhance competitiveness and sustainability of national economy and prevent any potential negative impact of changes in the world markets on economic growth of the country. The key purpose of «Samruk-Kazyna» is to manage shares (interests) of national development institutions, national companies, and other legal entities it owns to maximize their long-term value and competitiveness in the world markets. All of the Fund’s shares are owned by the State.

Financial and operating performance of the Fund is based on economic independence. The company is funded by registered capital, income generated by dividends from the national development institutions, national companies and other legal persons, stakes (interests) are owned by the Fund on the basis of ownership or trust, and other income that is not prohibited by the legislation of the Republic of Kazakhstan. The Fund has its own balance, bank account, seal that indicates the full name in Kazakh and Russian languages.

The fund can have its trademark and other symbols, examples of which are approved by the Board of the Fund and are recorded in the prescribed manner, as well as stamps in the languages of the Republic of Kazakhstan legislation on languages, letterhead and other props.

The mission of the Fund is to increase national wealth of the Republic of Kazakhstan by increasing long-term value of organizations and effective management of the assets of the group of the Fund.

The Fund’s vision by 2022 is a strategic holding that unites companies reached the best world practices, and which is a leading catalyst for the development of non-oil and gas companies and a foundation to maintain the stable functioning of the country’s economy. That is why the company operates in three strategic areas in order to achieve its vision and mission: Enhancing the long-term value of companies; Participation in diversification and modernization of the national economy; Social responsibility.

The Fund is subject to large businesses with an annual average number of employees more than 250, and the average price of assets for the year that is equal to 325 MCI. The company’s assets are $ 86, 9 billion and the number of employees of the all holding is 260 thousand people.

The Fund «Samruk-Kazyna» has 44 subsidiaries, and with affiliated entities, their total number reaches 404. The Fund owns 100 percent of shares of 29 subsidiaries (for instance such companies like «Kazakhstan Temir Zholy» and «KEGOC»), and also it owns from 1 till 75 percent of other companies' shares.

Activities of «Samruk-Kazyna» as a management company are based on the principles of modern corporate governance system. The Fund evaluates corporate governance on three major components: structure, process and transparency.

According to the approved structure of the Fund’s overall management of the company is controlled by The Board of Directors, which delegates the tasks of the current activities of the Board, headed by its Chairman. The duties and authority of the Board of Directors of the Fund is to develop and make decisions on key issues of long-term development of the company in charge of sustainable development objectives of the Fund and the relevant provisions of the Fund’s Strategy.

Since October 2009 Council of Corporate Secretaries functions in the Fund. The Council’s mission is to improve policies and practices of corporate governance in the group of companies «Samruk-Kazyna» by improving the efficiency of corporate secretaries who work in companies of the Fund.

The Fund is a code of corporate governance and code of ethics that define the company’s values and principles of its operation and external communications.

To determine the effectiveness of corporate governance in subsidiaries and affiliated companies, the Fund uses its own methods of diagnosis of corporate governance. The developed technique is based on best international standards of corporate governance practices. The aim is to improve the diagnosis of corporate governance of the Fund through a structured and consistent approach to assessing and developing their corporate governance systems based on best practices. The present method allows determining the rating of compliance with best practice corporate governance and is a tool for continuous monitoring of the process of improving corporate governance in the companies of the Fund.

The high level of corporate governance not only affects an economic performance of the company, increase transparency, usefulness of decision-making process, but also has positive effect on the perception of investors.

According to the Diagram № 1, company’s structure includes individual workers and management services, all they interact through linear and functional connections.

Diagram № 1. Organizational structure of «Samruk-Kazyna» JSC

The supreme organ of the Fund is the sole shareholder, the government of the Republic of Kazakhstan. It has an exclusive competence in some matters like for instance voluntary reorganization or liquidation of the Fund.

General management of the company is done by the Board of Directors, which consist of 12 members. The chairman of the Board of Directors is Prime Minister of Republic of Kazakhstan. The Board of Directors makes decisions on such issues like:

approval of the development plan of the Fund;

determination of the order of development, approval, monitoring and evaluation of implementation, reporting on implementation of the development plan of the Fund, as well as the requirements for its content;

monitoring and performance analysis, evaluation of the implementation of the Fund’s development;

identification of key performance indicators of the Fund within the development plan of the Fund;

approval of the annual budget of the Fund;

approve the procedure for assessment of corporate governance in the Fund;

The Chairman of the Board of Directors organizes the work of the Board of Directors, convenes meetings of the Board of Directors of the Fund and presides over them, leads and signs the minutes of the meeting.

The Chairman of the Management Board organizes the implementation of decisions of the sole shareholder, the Board of Directors and the Management Board; without power of attorney on behalf of the Fund in its relations with third parties, allocates responsibilities and areas of authority and responsibility among the members of the Board and other.

The Internal Audit Service Fund created by the Board of Directors of the Fund to exercise control over financial and economic activities of the Fund’s assessment of internal control, risk management systems, execution of documents in the field of corporate governance and counseling to improve the performance of the Fund. The Internal Audit Service reports directly to the Board of Directors about its work. Tasks and functions, rights and responsibilities and operation of the Internal Audit Service of the Fund determined by the Regulations on Internal Audit Service of the Fund, approved by the Board of Directors.

To sum up, such difficult organizational structure helps the company to do its work more efficiently, strongly distribute responsibilities and tasks between company’s employees and monitor Fund’s activities in various spheres. As a result there is a high level of corporate management in the Fund today. The company promotes the best practices of corporate governance in the companies, as well as focus on building an effective Board of Directors as a strategic body.

Financial Management of «Samruk-Kazyna» JSC

Formation of financial resources of the Fund is done by using own funds and equivalents, the mobilization of resources in the financial market and the cash flows from the financial banking system in the reallocation. The company has the statutory fund, and its sources are: equity, long-term loan and budget. Also share capital has an important role in the activity of the company, because it is a material base for many types of Fund’s activities. The share of the share capital is calculated as the ratio of the nominal value to the amount of the authorized capital stock. Share capital contributes to the redistribution of property rights throughout society, but real power over the capital is concentrated in the hands of professional managers.

The main source of financial resources for the existing plants are cost of goods sold or services rendered, various parts of which are in the process of distribution of proceeds take the form of cash income and savings. Financial resources are formed mainly due to income from its core and other activities, depreciation and amortization. Along with these sources of financial resources also are: proceeds from the sale of disposals of assets, liabilities stable, different target incomes (for example, mobilization of domestic resources in the construction). Moreover, significant financial resources are mobilized in the financial market in the form of share, dividends and other securities.

Fixed assets are cash is invested in fixed assets and non-productive direction. With a participation of fixed assets in the production process of their value bifurcates: one part of it that is equal to wear, is transferred to the finished product, and the other — expresses the residual value of existing fixed assets.

The value of the sinking fund each year is calculated by multiplying the book value of fixed assets at the rate of depreciation. Depreciation rates are reviewed periodically as to change the terms of service of fixed assets, accelerating the process of transferring their value to the product manufactured under the influence of scientific and technological progress and other factors. «Samruk-Kazyna» JSC uses straight-line method for calculating depreciation.

Profit is also a part of the company’s own financial resources used for capital investments. In addition, there are revenues from disposals of assets, resources of funds for Social Development and Housing.

The company needs not only fixed assets, but also current assets. This type of assets consumed in the production go into the sphere of circulation in the form of commodities, which then as sales of finished products goes in the form of cash. Current assets provide current needs of the company.

Turnover of working capital is a measure of the effectiveness of their use. Turnover is defined by the time during which the funds make a full turn, from the acquisition of inventory and ending with the receipt of money on account of the enterprise; duration of one turn is expressed in days. The faster turn advances current assets, the best result is achieved by using the same amount of funds produced and sold more products.

Mining and power assets directorate

The training practice was held during a month in Mining and Power Assets Directorate of the Fund. The directorate basically deals with investment activities, works on projects in business segments that include coal mining, power generation, distribution and sale of electricity. The directorate works with «Samruk-Energy» JSC that was established in May 2007 and is a part of «Sovereign Wealth Fund» Samruk-Kazyna" JSC. It includes a vertically integrated group of companies which has approximately 47% of installed capacity and provides 36, 5% of electricity generation in Kazakhstan UES, including its share in joint ventures. So the directorate monitors and evaluates operational, financial and economic activities of subsidiaries, develops new investment models and project, makes assessment of the financial stability of the company, works on optimization of the assets and so one.

All workers perform different functions and have various tasks, but at the same time they often cooperate and consult with each other. This cooperation makes their work more effective and helps to make everything faster. One of the most common position in Mining and power assets directorate, and in Company at all, is Chief expert whose task is production activities must have work experience in large production companies (preferably in the energy and mining industry, at least 5 years) and have experience in working with the public authorities and in the development and implementation of normative and technical documentation. Also he or she should be able to implement projects, evaluate performance, and analyze financial and economic indicators. Chief expert whose task is operational activities must have experience not less than 3 years in the major manufacturing companies preferably in the energy and mining industry, they work in such spheres like corporate management, human resources, budgeting, analysis of PCBs. Also workers from the directorate have following functions:

review and approval of the list of key companies' performance indicators and their methods of calculation;

examination of companies' long-term strategies, the preparation of proposals for adjustment;

examination and approval of development plans and adjustments of companies' development plans, preparation of reports and recommendations;

benchmarking and analysis for monitoring the execution of development plan with recommendations about necessary corrections;

assessment of the financial stability of companies;

monitoring of the loan portfolio of companies;

carrying out economic and financial analysis of companies and proposals for improvement;

identification and assessment of critical risks, development of key risk indicators. Development and monitoring of the implementation of plan for the critical risk management;

systemic risk analysis of projects in terms of market, industry, technical, technological, financial, operational and other risks, development of proposals for their mitigation and management measures;

improving and updating methodological framework for risk management in companies;

asset optimization and schemes of project implementation for the purchase and sale of assets;

market analysis within the framework of investment projects;

preparation of proposals for the purchase and sale of assets;

examination and the development of investment models;

search and selection of promising investment projects;

analysis of projects' financial models;

make proposals for new investment projects;

examination of investment proposals of companies;

benchmarking of the internal and external environment;

optimization of business areas;

participate in the preparation of agreements and contracts;

participate in the negotiations;

Moreover, all workers should be able to work in a team, learn new material very fast and apply new knowledge and skills into practice. In addition, directorate’s employees should have huge work experience and speak at least three languages (Kazakh, Russian and English) because the company has many foreign partners from such countries like Korea, Russia and China.

It should be emphasized that there is a high level of automated information technologies in the directorate, and in company at all. «Samruk-Energy» JSC uses different types of information technologies for various purposes. For instance, rapid communications help to increase productivity, allow for better decision-making and ease a Fund’s cooperation with other companies and countries. Email servers (Microsoft outlook), routers, internal company billboards serve as the backbone of a company’s communications. These electronically based communication systems are used to disseminate routine and critical information in a quick and efficient manner. In addition, it is used to send different reports and official papers, to update employees on critical business projects and to connect different participants of a project. All employees have a free access to the data about all workers, so for example if you need to know somebody’s number or email you just write a person’s name and you will easily get that information.

Moreover, streamlined work flow systems, shared storage and collaborative work spaces can increase efficiency in a company and allow employees to process a greater level of work in a shorter period of time. For that purpose the Fund for example uses Electronic Document Management System (EDMS). Document management systems use scanners to make digital copies of every document. These documents are coded to attach them to specific files or accounts and optical character reading, systems provide insight into the contents of each page. From the time it enters the organization; the digital version of the document is stored and filed for future use. It is very convenient because you can easy find any document you need in the system and send it to other employees by email. Also you can see the status of the document, for example was the document signed or not, and by whom and when it was signed. So every employee should know how to work with EDMS in order to make all projects and tasks faster and more efficiently.

When I had arrived at the place of my training practice, I signed a contract and an obligation on nondisclosure of confidential information; I also got a temporary pass, a desktop with a computer temporary account and email. My supervisor gave a tour of the company, told me about the unspoken rules in the directorate and about my responsibilities.

A brief description of performed work

During first days of my practice I mainly worked with the documentation and performed the following tasks:

collection of subsidiaries' documentation;

analysis and paperwork;

design and drafting of documents according to the standards and regulations (memoranda and reports);

approval of documents;

work with the Electronic Document Management System (EDMS);

preparation of documents for the registration of a new company;

Also I used Microsoft Outlook program during my practice to communicate with my coworkers and representatives of the Fund’s subsidiaries. When I helped my supervisor to make a test for devaluation of company’s assets I worked in Microsoft Excel program. In addition, I used an Information System which is called «Paragraf»; this program contains legislative documents of Kazakhstan and international law.

Description of practical tasks

During my practice in Mining and Power Assets Directorate I was working in a position of intern, so I was doing different kinds of work. First of all I got a great experience in a new business development and organization. One of the most important tasks during the practice was preparation of necessary document for the registration of a legal entity, so I was responsible for the control of the process. Now I know that it is not so easy to register a new legal entity, everything must be done according to the official rules, on time and you should pay attention to any detail in the documents.

So, I had been involved throughout the entire process of new legal entity’s registration. We can divide the process into five steps:

Step 1

The applicant calls the legal information service of the Ministry of Justice for information on the required documents for registration of legal entities relevant organizational and legal forms.

This step takes about 5−10 minutes.

Step 2

Preparation of required documents. The form of legal entity we registered was Joint-Stock Company, so for that type of company we had to submit following documents:

application for the registration;

articles of association;

minutes of the constituent assembly;

document confirming the location;

receipt or a copy of the payment order of the registration fee.

During this step we looked at Code «On taxes and other obligatory payments», Art. 456. And Law of 17. 04. 1995 № 2198 «On state registration of legal entities and registration of branches».

This step took about 2 days.

We mostly worked on the article of association; it must be done according to the Law of the Republic of Kazakhstan dated 13 May 2003, «On Joint Stock Companies». So the article of association must contain following parts:

General provisions.

Legal status of the company.

Responsibility of the Company and its shareholders.

Main types of activities.

Property and capital of the company.

Shares, bonds. Conditions for allocation of securities.

The procedure for the distribution of net income. Dividends on shares.

Governing Bodies.

Providing information by the Company.

Reorganization and liquidation of the Company.

Final Provisions.

Step 3

The applicant provides a complete list of required documents in CHS. In the case of providing a full package of documents a specialist accepts documents and issues the applicant a receipt. If it is found that the documents are not complete, a specialist does not accept documents and the applicant is required to collect the missing documents.

Step 4

A specialist transmits the documents to the registration authority (in Kazakhstan it is called the Department of Justice).

Registering Authority within one working day from the date of registration shall send a notification of the state registration of legal entities, branches and representative offices to the state statistical agencies be notified. Then the state statistical agency within one working day from the date of assignment of legal persons and other unified identification system-account code is sent to the tax authorities the notice for the state registration of the taxpayer.

The state registration of medium and large businesses that operate on the basis of a model statute — must be made no later than three working days after submission of the application with all necessary documents.

Step 5

The applicant comes in CHS on day specified in the receipt; he or she must present an identity card and receipts, and then receives: certificate of state registration of a legal entity, a certificate of the taxpayer, statistical card.

Possible reasons for refusal of registration of the legal entity:

violation of the order of creation and reorganization of a legal entity established by the legislative acts of the Republic of Kazakhstan,

mismatch of constituent documents legislative acts of the Republic of Kazakhstan

failure to act of transfer or separation balance or lack of provisions on succession of the reorganized legal entity, or the existence of a tax debt of more than one monthly estimates

if the founder is a dormant entity and (or) if the founder and (or) the head of the legal entity are the founders and (or) the heads of inactive legal entities or limited legal capacity and (or) to be missing, and (or) declared dead, and (or) convicted of a crime under Articles 192, 216, 217 of the Criminal Code of the Republic of Kazakhstan, and (or) are lost identity documents.

Finally, we had got through all these 5 steps, and finally got a certificate of state registration of the legal entity, a certificate of the taxpayer and a statistical card. My supervisor was satisfied with the work which I had done.

Secondly, I was preparing a brief summary on subsidiaries' annual report for 2013. My task was to choose most necessary and significant information from a large data stream. In order to write the summary, I made a calculation of various indicators and indexes, build an analytical table and diagrams using Microsoft Excel.

One more important task was a test for impairment of company’s assets. I got a lot of theoretical material from my supervisor to understand what is it and how to make the test. So, I spent a lot of time learning the theory, which includes presentations, some lecture notes and real examples that were made in Microsoft Excel. Then, I helped my supervisor to calculate such indexes and ratios like ROA, ROE, WACC, Net operational income and other.

Analysis «Samruk-Kazyna» JSC

I made the analysis of «Samruk-Kazyna» JSC in order to better understand company’s activity and implement knowledge that were gained in the university on practice.

It should be noticed that I used consolidated financial statements of the Fund, in other words I used financial statements that combine the financial statements of separate legal entities controlled by a parent company into one set of financial statements for the entire group of companies.

Table № 1. Data from Consolidated Statement of comprehensive income with the unit weight

In Kazakh Tenge

2012

Unit weight (in %)

2013

Unit weight (in %)

Revenue

4. 697. 225

99%

5. 048. 176

99%

Government grants

27. 857

1%

28. 996

1%

Cost of sales

(3. 390. 245)

-72%

(3. 647. 010)

-72%

Gross profit

1. 334. 837

28%

1. 430. 162

28%

General and administrative expenses

(343. 669)

-7%

(378. 782)

-7%

Transportation and selling expenses

(377. 334)

-8%

(347. 457)

-7%

Bargain purchase gain on acquisition

4. 823

0%

23. 916

0%

Impairment loss

(219. 448)

-5%

(232. 664)

-5%

Other operating income

31. 489

1%

37. 133

1%

Other operating expenses

0%

0%

Operating profit

436. 342

9%

526. 664

10%

Finance costs

(208. 751)

-4%

(230. 746)

-5%

Finance income

55. 771

1%

83. 902

2%

Share of income in associates and joint ventures

540. 513

11%

546. 342

11%

Net foreign exchange (loss)/gain

(22. 251)

0%

(36. 189)

-1%

Profit before income tax

801. 624

17%

889. 973

18%

Income tax expenses

(243. 789)

-5%

(277. 244)

-5%

Profit for the year from continuing operations

557. 835

12%

612. 729

12%

Profit from discontinued operations

580. 063

12%

(172. 972)

-3%

Profit for the year

1. 137. 898

24%

439. 757

9%

According to the table above, (Table № 1. Data from Consolidated Statement of comprehensive income with the unit weight) all indicators are approximately the same during this period; that shows an economic stability of the company.

Now, to look at the performance of the Fund in 2013 as compared with 2012 we will use following ratios:

Name

Unit of measure

2013

2012

Deviation (+/-)

Change in %

Operating profit ratio

%

9. 4

8. 5

1

12

Gross profit ratio

%

28. 2

28. 3

0

0

The first ration that is called operating profit ratio indicates the profitability of current operations. But this ratio does not take into account the company’s capital and tax structure. We can calculate it in a following way:

Operating profit margin = operating income/net sales

Where Operating income = earnings before tax and interest from continuing operations. The operating profit ratio shows improvement in profitability of companies in the Fund’s group.

The second one is gross profit ratio is a profitability ratio that shows the relationship between gross profit and total net sales revenue. So, we use the formula:

Gross profit ration= Gross profit/Net sales

Maintaining the level of gross profit ratio at the level of 2012 shows the stability of the company management’s ability to manage the production costs.

Then, to analyze assets productivity in the Fund’s we need to build following table:

Name

Unit of measure

2013

2012

Deviation

(+/-)

Change in %

Return on assets (ROA)

2. 9

7. 9

-5

-64

Capital productivity

0. 8

0. 9

0

-9

Fixed assets turnover, exploration and evaluation assets

0. 8

0. 8

0

-9

Fixed assets depreciation ratio

%

4. 8

5. 1

0

-5

Time of assets turnover

Days

119. 6

118. 6

1

1

Time of fixed assets turnover

Days

286. 5

313. 9

-27

-9

Floating capital

-3. 2

0. 0

-3

-

Current liquidity ratio

1. 7

1. 5

0

14

Quick asset ratio

1. 6

1. 4

0

13

Absolute liquidity ratio

1. 1

1. 1

0

3

So now we can conclude that the assets productivity has decreased mainly due to the reduction in the net income by 62% as a result of the recognition in 2012 of income from debt restructuring of «BTA Bank» JSC, income from the sale of «GSM Kazakhstan OJSC «Kazakhtelecom» LLP and accrual in the accounting period of losses from adjustments to fair value of the net assets of «BTA Bank» JSC, on «Temirbank» JSC, as well as reduction of the return on assets ratio, capital productivity, fixed assets turnover, exploration and evaluation assets, asset turnover period.

Despite some changes in assets in 2013 and 2012, the fixed assets have increased by 18%, and income from sales has risen by only 7. 5% in connection with which the capital productivity has decreased by 9%. The main reason is the reduction in revenues, mainly due to decrease in the spot quotes on uranium from 48. 73 USD / lb to 38.4 USD / lb.

The fixed assets turnover period has improved due to the excess in the growth of fixed assets over the growth in operating income, particularly in machinery, equipment and vehicles, oil and gas assets.

The Companies' ability to repay the current liabilities by means of the current assets in the Fund’s group has improved, i.e. the companies repaid the current commitments on loans and received goods, works and services at the expense of own working capital.

Also a slight change in the absolute liquidity ratio indicates that the Companies' financial condition has remained at the 2012 level.

Return on Equity. The ROE is useful for comparing the profitability of a company. We know that the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. So, we have the following formula:

Return on Equity = Net Income/Shareholder's Equity

For example, ROE (for 2013)=(440/7505)*100%=5,9%

One more important ratio is Return on Average Capital Employed (ROACE) that shows profitability compared to investments made in new capital:

ROACE = EBIT / (Average Total Assets — Average Current Liabilities)

Name

Unit of measure

2013

2012

Deviation (+/-)

Change in %

Return on equity (ROE)

%

5. 9

17. 3

-11

-66

ROACE

%

4. 8

10. 3

-6

-54

Floating capital

KZT bln.

1 545. 9

1 664. 7

-119

-7

Return on equity (ROE): the efficiency of utilization of the equity has decreased by 66%, mainly the reduction in the net income by 62% following the recognition in 2012 of income from debt restructuring of «BTA Bank» JSC, income from the sale of «GSM Kazakhstan OJSC «Kazakhtelecom» LLP and accrual in the accounting period of losses from adjustments to fair value of the net assets of «BTA Bank» JSC, on «Temirbank» JSC.

At that, the growth of the Fund’s average equity by 14% is observed primarily due to the increase in the retained profit following the performance for 2012.

ROACE (Return on Average Capital Employed): efficient use of the capital employed has decreased by 54%, mainly due to reduction in the net income by 62% (the main factors presented above). At that, in 2013 the obligations of «BTA Bank» JSC and «Temirbank» JSC on loans attracted by means of the Government and National banks, on attracted customer funds, on loans received, have been reclassified to liabilities associated with assets classified as held for sale.

The net working capital has decreased mainly due to the transfer of subsidiaries to the public ownership.

Liquidity

Name

2013

2012

Deviation

Net income of the cash from the operating activity

461

375

86

Net loss of the cash in the invesment activity

-1 689

-501

-1 188

Net income / (loss) of the cash in the financial activity

492

-61

553

Net growth / (decrease) of cash and their equivalents

-727

-178

-549

Cash and their equivalents as of the beginning of the period

1 468

1 647

-179

Cash and their equivalents as of the end of the period

741

1 468

-727

Cash flow from the operating activity has increased in the result of:

Increase of operating activity (183 billion) mainly due to growth of tariffs in cargo and passenger traffic, tariffs for services in transfer of the electric power, electric power outputs;

Changes in the turnover capital (KZT-78 billion), mainly due to the loans of the Government (KZT-435 billion) and loans to the clients (KZT298 billion), liabilities on the clients' funds (KZT-78 billion), other assets (KZT 77 billion), funds in the credit enterprises (KZT35 billion) due to the reclassification to the assets and liabilities, associated with the assets, available-for-sale, exit of the financial organizations and development institutes as well as repayment of the trade accounts receivable (KZT28 billion);

Increase of the volume of paid income tax (KZT-26 billion), net interest earned (KZT7 billion).

Cash flow from the investment activity has decreased in the result of:

acquisition of 29,8221% of the equity interest in the authorized capital of «Kazzinc» LLP in the amount of KZT249 bln (alternation by KZT-266 billion);? growth of acquisition of the fixed assets (KZT-216 billion);

decrease in the income from the sale of associated companies due to the sale of 49% of the equity interest in «GSM Kazakhstan» LLP to «Kazakhtelecom» OJSC (-KZT226 bln) in 2012;

growth of the volume of cash allocated onbank deposits (KZT-167 billion);

decrease of the cash flow due to the retired subsidiaries (KZT-165 billion) due to the transfer of the equity interest owned by the Fund, «Kazyna Capital Management» JSC, «Export and Credit Insurance Corporation „KazExport Garant“ JSC, „Damu“ Entrepreneurship Development Fund» JSC, «Investment Fund of Kazakhstan» JSC, «Development Bank of Kazakhstan» JSC, «SK-Pharmaceuticals» LLP to the «National Managing Holding «Baiterek» JSC, Ministry of Industry and New Technologies of RK, Ministry of Health of RK;

decrease in the income from dividends received from jointly controlled and associated companies (KZT -152 billion).

Cash flow from financial activity has increased in result of:

income on loans (net KZT 239 billion), particularly under the credit line of the China Development Bank in the amount of US$ 200 mln (aquivalent — KZT30.3 bln) for implementation of the projects of Akbastau — Kosmurun, Zhomart; placement of the of obligations by the Group in the person of «NC «KazMunayGas» JSC on the London Stock Market in the amount of US$ 3 bln (equivalent — KZT 454 bln) for implementation of the refinancing of previously attracted loans under the current program of issue of medium-term global notes; at the expense of the funds of the National Fund in the amount of KZT255 billion to acquire 29. 8221% of the equity interest in the authorized capital of «Kazzinc» LLP;

decrease in the payment on dividends to the Shareholder and minority shareholders of the subsidiaries (KZT254 billion), on operations with the Shareholder (KZT20 bln), on repayment of the shares of the subsidiaries (KZT40bln).

Conclusion

The training practice at such large and significant for the entire state organization like JSC «National Welfare Fund» Samruk-Kazyna" was a great experience for. Thanks to the company and my supervisor I got new knowledge, and implement my theoretical knowledge and skills in the real working conditions.

During the practice I got acquainted with the principles of organization and operation of the Fund, the legal framework, work and functions of employees in Mining and Power Assets Directorate. First days I mostly worked with the documentation and such computer programs like Microsoft Outlook, Microsoft Excel and Electronic Document Management System (EDMS). Then I got a task to read some laws and make a list of necessary documents for registration of new legal entity (later I was responsible for that project). Also I analyzed company’s financial statements for the last two years. In addition I worked on some agreements, memoranda and reports with subsidiaries.

This training practice has allowed me to greatly enhance the skills in my field, and more particularly meet with all the complexities, standing in the way of the young specialist. Despite the fact that the practice turned out to be radically different from the theory, basic knowledge gained in university, allowed to «drown» in the mass of financial terms, and to communicate with employees at a decent level. Going through the practice of «Samruk-Kazyna"JSC I always watched the staff work, and came to the same conclusion: that the workers in the organization are always intelligible to answer any questions, help or explain something in details, that is why I have felt a corporate spirit inside the company.

In general, my practice was held good: I did everything on time; I was able to perform tasks received from the supervisor quickly and accurately. I faced some difficulties only during analysis of the company, because the Fund is very big and it has many subsidiaries which work in various segments. Consequently, it was not easy for the beginning to understand how the company operates and what you should take into account making the analysis.

References

Business ethics code of «Samruk-Kazyna» JSC, December 12,2010

Articles of Association of JSC «National Welfare Fund» Samruk-Kazyna" dated 8th of November 2012 № 1418

Code «On taxes and other obligatory payments» of the Republic of Kazakhstan, Art. 456.

Law of 17. 04. 1995 № 2198 «On state registration of legal entities and registration of branches».

Ricketts M., (2003). The Economics of Business Enterprise. Edward Elgar

Consolidated Financial Statements, December 31,2012

Consolidated Financial Statements, December 31, 2013

Official website of of «Samruk-Kazyna» JSC:

www. samruk-kazyna. kz

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appendix 5

Appendix 6

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