- The lease term is for the major part of the economic life of the asset even if title is not transferred;

- At the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and

- The leased assets are of a specialized nature such that only the lessee can use them without major modifications being made.

The Group as a lessor presents finance leases as loans and initially measures them at an amount equal to the net investment in the lease. Subsequently, the recognition of finance income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment in the finance lease.

Before commencement date property, plant and equipment purchased for future transfer to the financial lease is recognized in the consolidated financial statements as property and equipment purchased to transfer to finance lease at cost.

A non-current asset is classified as held for sale if it is highly probable that the asset's carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification of an asset as held for sale.

Non-current assets held for sale are measured at the lower of its carrying amount and fair value less costs to sell. If the fair value less costs to sell of an asset held for sale is lower than its carrying amount, an impairment loss is recognized in the consolidated income statement as a loss from non-current assets held for sale. Any subsequent increase in an asset's fair value less costs to sell is recognized to the extent of the cumulative impairment loss that was previously recognized in relation to that specific asset.

Property, equipment and intangible assets are carried at historical cost less accumulated depreciation and any recognized impairment loss. Depreciation is charged on the carrying value of property and equipment and is designed to write off assets over their useful economic lives.

Table 2 - Depreciation is calculated on a straight line basis at the following annual prescribed rates

Leasehold improvements are amortized over the shorter of the life of the related leased asset or the lease term. Expenses related to repairs and renewals are charged when incurred and included in operating expenses unless they qualify for capitalization.

The carrying amounts of property and equipment are reviewed at each reporting date to assess whether they are recorded in excess of their recoverable amounts. The recoverable amount is the higher of fair value less costs to sell and value in use. Where carrying values exceed the estimated recoverable amount, assets are written down to their recoverable amount, an impairment is recognized in the respective period and is included in operating expenses. After the recognition of an impairment loss the depreciation charge for property and equipment is adjusted in future periods to allocate the assets' revised carrying value, less its residual value (if any), on a systematic basis over its remaining useful life.The Group regularly reviews its loans and receivables to assess for impairment. The Group's loan impairment provisions are established to recognize incurred impairment losses in its portfolio of loans and receivables.

The Group considers accounting estimates related to the allowance for impairment of loans and receivables a key source of estimation uncertainty because (i) they are highly susceptible to change from period to period as the assumptions about future default rates and valuation of potential losses relating to impaired loans and receivables are based on recent performance experience, and (ii) any significant difference between the Group's estimated losses and actual losses would require the Group to record provisions which could have a material impact on its financial statements in future periods.

The Group uses management's judgment to estimate the amount of any impairment loss in cases where a borrower has financial difficulties and there are few available sources of historical data relating to similar borrowers. Similarly, the Group estimates changes in future cash flows based on past performance, past customer behavior, observable data indicating an adverse change in the payment status of borrowers in a group, and national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the group of loans. The Group uses management's judgment to adjust observable data for a group of loans to reflect current circumstances not reflected in historical data. The allowances for impairment of financial assets in the consolidated financial statements have been determined on the basis of existing economic and political conditions. The Group is not in a position to predict what changes in conditions will take place in countries in which it operates and what effect such changes might have on the adequacy of the allowances for impairment of financial assets in future periods.

Impairment of tangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.

An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Table 3 - The effect of the adjustments made to cash and cash equivalents as at 31 December 2015 is as follows

Certain reclassifications have been made in the consolidated financial statements as at 31 December 2013, 2014 and for the year then ended to conform to the presentation as at 31 December 209 and for the year then ended. Such 15reclassifications were made in order to conform to the presentation of the Group's largest shareholder and also Management of the Group considers the current year presentation provides a clearer view of the financial position of the Group. These reclassifications include: (a) reclassifying certain due from banks to loans to customers and banks, (b) reclassifying perpetual debt and subordinated loan to due to banks and financial institutions, and (c) reclassifying certain due to banks to customer and banks accounts.

Table 4 - These reclassifications have no impact on the consolidated financial results of the Group

(*) The due from banks amounts reclassified also include the effects of the change in the accounting policy.

JSC "Bank CenterCredit" to achieve strategic goals of the country established by the Development Strategy of Kazakhstan 2020, the State Program of Accelerated Industrial-Innovative Development of Kazakhstan for 2010 -2014 (hereinafter - the SPAIID), development programs in rail industry, energy, oil and gas sector, etc. in compliance with the Law “On State Property” and the Decree of the President of Republic of Kazakhstan “On the System of State Planning in the Republic of Kazakhstan”.

Table 5 - Besides, the following macroeconomic indicators had an impact on activities of the Fund during 2015.

The interaction of the JSC "Bank CenterCredit" with the Government of the Republic of Kazakhstan is an integral part of the Fund's operations due to versatile nature of the functions of the Government of the Republic of Kazakhstan with respect to the Fund: the Shareholder, the tariff regulator, the government and industry programs coordinator.

In accordance with the consolidated financial statements of the Fund for year 2015 and IFRS, the total amount of dividends distributed by the Fund to the Shareholder in year 2015 is KZT 168,2 billion, in particular:

- The dividends of the Fund in the amount of KZT 9.1 billion for the period of 2010 that was calculated in accordance with the Decree of the Government of the Republic of Kazakhstan # 139 dated January 19, 2015, which was transferred to the state budget on December 13, 2014 under the decision of the Board of Directors # 67 dated July 20, 2014;

- The dividends of the Fund in the amount of KZT 159.1 billion for the period of 2014 paid according to the Decree of the Government of the Republic of Kazakhstan # 850 dated June 26, 2015, exceeding the planned estimate (KZT 9.1 billion). The increase was due to payment of an additional dividend of KZT 150.1 billion for acquisition of 100% share in “Company for Managing Shares in the Final Production Sharing Agreement” LLP according to the Decree of the Government of the Republic of Kazakhstan # 570 dated May 3, 2015;

Furthermore other distributions in favor to the Shareholder for year 2015 of the Fund's companies, which under the IFRS are recognized as dividends for a total amount of KZT 63.9 billion, in particular:

- Construction and transfer of facilities in the amount of KZT 49.5 billion: an obligation, under a Government degree, in relation to the construction of the following objects in Astana city: Kazakhstan History Museum, Building for a teleradio-complex, Ice Palace and reconstruction of the World Expo-Center (the Expo-Center”) in Moscow; obligations on the transfer of the North-Caspian ecological base for oil spill response to the Ministry of Emergency Situations of the Republic of Kazakhstan;

- Sponsorships under the Shareholder's request in the amount of KZT 14.4 billion, including of the Fund in the amount of KZT 9.1 billion by Decree of the Government of the Republic of Kazakhstan for financing the Fifth Astana Economic Forum, according to the Minutes of the meeting with the Prime Minister of the Republic of Kazakhstan/In overall the Group of Companies of the Fund in 2015 paid taxes and payments amounting to KZT 800 billion which was more by 8.3% and 32.3% compared to 2014 and 2010, accordingly. The bulk of taxes and fees were the charges on export tax (20%) and corporate income tax (19.7%). This type of taxes in 2015 compared to 2014 has increased by 7% and 25%, respectively due to rising world oil prices and increase of rent tax from 16% to 22%. The Group of the Fund is a driving force of investment activity in the country. The Fund raises own and borrowed funds, as well as direct foreign investments for implementation of projects by having strong positions in several key sectors. The Fund's investment program carried out through subsidiaries comprised of 100 major investment projects being implemented or in progress totaling to KZT 12.1 trillion.

Table 6 - The following is the segment structure for respective investment projects. Billion Tenge

The Fund continues its participation in achieving objectives of diversification and modernization of national economy according to messages of the President of the Republic of Kazakhstan, the SPAIID, Strategic Development Plan of the Republic of Kazakhstan up to 2020 and other strategic and policy documents of the country.

The Fund implemented 18 investment projects worth about KZT 4.2 trillion as part of SPAIID. The investment projects comprise of oil and gas, chemical, transportation, energy, mining and industrial segments. The implementation of certain projects would allow creating additional 38 thousand workplaces during construction and more than 16 thousand jobs during the activity operations.

Projects implemented as part of public, sector programs, as well as under the Government messages do not fulfill the minimum requirements of Companies of the Fund on capital return. Therefore, Companies, as a matter of fact, receive funding from the state budget and the National Fund of the Republic of Kazakhstan for implementation of social projects.

For purpose of minimizing foreign exchange risks Companies of the Fund carry out a part of borrowings from domestic capital market. An additional source of funding for capital expenditure will be resources received from the IPO. The intra-group financing in the Group of the Fund is applied as well.

Table 7 - Consolidated financial indicators

Table 8 - The main items of income statement

The change in net profit in 2015 compared to the year 2014 amounted to KZT 784.8 billion which was mainly influenced by increase of cost of sales, as well as decrease in share in income of associates and joint ventures. Besides, the share of administrative expenses to revenue from sales in 2015 compared to 2014 decreased which resulted in rise of net profit. In addition, the influence of changes in sales and distribution expenses, as well as losses from impairment of assets was insignificant - the share of these expenses to operating expenses has decreased.

Table 9 - The following are key factors in net profit change in 2015 compared to the same period of 2014.

The Fund jointly with large companies have developed a medium-term Program on cost reduction within the Group of the Fund up to 2015, aimed at optimizing both cost and other expenses through diagnosis and analysis of business processes and others. The Fund plans to get the first results in H1, 2013. Moreover, in early 2015 at the initiative of the Fund, companies took measures to reduce administrative expenses of conporate centers of the Group of the Fund by 4.8 KZT billion, and the personnel number by 1.9 thousand people.

The Group of the Fund is working towards optimization of asset structure of its companies, including non-core assets. Currently, KMG, KAP, KTZh and Samruk-Energy has adopted the appropriate Action Plans which are under implementation process.

The increase in financial performance indicators (KPI) “EBITDA margin”, “ROA” and “ROE” in the reporting period compared to 2014 has been influenced by the factors of adjustment of the consolidated net profit, descibed above.

Table 10 - In compliance with the Law of the Republic of Kazakhstan “On Sovereign Wealth Fund” JSC "Bank CenterCredit" are not included into the Group of the Fund according to which the information on the consolidated financial results is given without the JSC "Bank CenterCredit".

Table 11 - The following table provides information on major items of comprehensive income.

The change in net profit in 2015 compared to the year 2014 amounted to KZT 73 billion which was mainly influenced by decrease of share of administrative expenses, sales and distribution expenses to revenue from sales and operating expenses; besides, there were negative effect on profit due to growth in losses from impairment of assets, income tax expenses, as well as decrease in reversal of losses from impairment of assets and share in income of associates and joint ventures.

Table 12 - The following table provides key factors of net profit changes without STB in 2015 compared to 2014.

In the long term, the Fund does not intend to hold share in JSC "Bank CenterCredit". The Fund will develop proposals for sale of its owned shares in second-tier banks, carry out search and negotiations with potential investors. Before the sale of shares of JSC "Bank CenterCredit", the Fund will continue to work actively to restore their financial position.

Table 13 - Financial indicators for 2015 by the segments and capital expenditure KZT billion

The following charts present the indicators of affiliates considering consolidation adjustments at the level of the Fund.

Figure 2 - Consolidated Net Profit for year 2015 by companies, in KZT billion Note: compiled by the author

Figure 3 - Consolidated Net Profit for year 2014 by companies, in KZT billion Note: compiled by the author

Figure 4 - EBITDA for year 2015 by companies, in KZT billion

Note: compiled by the author

Figure 5 - EBITDA for year 2014 by companies, in KZT billion

Note: compiled by the author

Then, the presented segment analysis is based on production figures from the reports on implementation of development plans of the subsidiaries and data of the audited financial statements of subsidiaries for 2014-2015.

As of 01.01.2014, the number of borrowers from the total number of legal entities in Serviced Bank CenterCredit is 17323 or 2.96%, this rate reached the level of 3.18% in the last year (18,567).

Figure 6 - Percentage of borrowers of the total number of legal entities.

Note compiled by the author

Table 14 - The share of borrowers of the total number of legal entities

Number of legal as well as the number of borrowers is increasing every year. Thus, in comparison with the beginning of the year the number of legal entities increased from 18657 to 19539, of which the share of borrowers in the same period amounted to 594, 598, respectively.

Figure 7 - loans to individuals Market in Almaty, including BCC branch in tenge.

Note compiled by the author based on the source [1].

The total amount including individuals' loans are serviced in the BCC in 2013 amounted 1122142mln. tenge, the index increases over time. Market individuals loans branch at the end of the year -. 120.641 billion tenge, which is 5% above the amount obtained in 2014 (114.824 billion tenge.).

Figure 8 - Market share of BCC, on 10/01/2015, the

Note - drawn up on the basis of the source [7].

Loans to individuals in the context of Kazakhstan's leading banks. The market share of Bank CenterCredit was 8.24% (5th place). The largest share went to Eurasian Bank (18.9%), second place went to Kazkommertsbank (11.9%), the People's Bank (8.7%) and 0.02% higher than the nearby Caspian Sea.

Figure 9 - Percentage of total number of borrowers from the FL and FE, in%.

Note - drawn up on the basis of the source [7].

Since the beginning of this year the total number of borrowers has changed and amounted to 209257 against 224492. Of these individuals account for only 5.22% - 10930 and individual entrepreneurs 0.32% - 669.

Table 15 - The number of borrowers of the total number FL and FE

Considering the loan portfolio of the Bank Group as of 01.01.2015 totaled 972 billion tenge. Compared to the beginning of the year these loan portfolio decreased by 0.1% or 935 million. Tenge, which was due to the Bank's activities carried out to reduce the level of non-performing loans (NPL). On 01.01.2015, compared to 01.01.2014, the NPL rate declined by 38.1 billion tenge and amounted to 150.5 billion tenge (15.5%). The level of provisions BCC on 01.01.2015 totaled 150.0 billion tenge or 15.3%.

Figure 10 - Dynamics of the loan portfolio for 2011-2015, mln...

Note - drawn up on the basis of the source [7].

For 2012 the loan portfolio of "Bank CenterCredit" increased by 4.6% or 41 bln., And at the end of the year amounted to 921 billion. Tenge. The structure of the portfolio has not changed significantly. The level of reserves of "Bank CenterCredit" at 01.01.2013 year amounted to 137.4 billion tenge, or 14,9%, NPL Level -. 89 billion tenge or 9.8%.. When lending to various sectors of the economy of JSC "Bank CenterCredit" adhered to the policy of diversification, the main purpose of which is to limit the negative impact of industry risks on the bank's activities.

Loan portfolio equaled 971 billion. Tenge as of January 1, 2015.

Figure 11 - The structure of the loan portfolio of BCC.

Note - drawn up on the basis of the source [7].

The lending sectors of the economy, the largest share in the loan portfolio of BCC occupy physical persons - 38%, about 17% to trade and then the rest of the industry.

Since 2011, lending to individuals is carried out in two directions: retail credit products; credit products for individual entrepreneurship.

Figure 12 - Dynamics of the loan portfolio for 2011-2015, mln...

Note - drawn up on the basis of the source [7].

Loan portfolio by lending to individuals on 1 January 2015 in the number amounted to 86 078 credits on the sum - 346 208 million tenge. In comparison with the previous year 2013 the portfolio increased by 5.5%.

For 2014 it was granted 21,214 loans for a total amount of 126,129 million tenge, of them.:

- Mortgage loans granted 4,859 loans for a total of 36 181 million tenge.

- On consumer loans granted 10,457 loans for a total of 52 481 million tenge.

- On unsecured loans granted 1,923 loans worth 747 million tenge.

. - 2851 loan of $ 32 974 million tenge loans issued by private business;

- Lending for the purchase of a vehicle issued 1,124 loans for a total of 3 741 million tenge..

Figure 13 - Issuance of loans to legal entities, broken down, in%.

Note - drawn up on the basis of the source [7].

For 2014 it was granted 10,902 loans totaling 446,696 million tenge, of them.:

- By big business 3704 issued a loan in the amount of 318,616 million tenge.

- Business for Middle issued 3136 loans in the amount of 78,887 million tenge.

- On Small (micro) business issued 4062 loans in the amount of 49 193 m..

3. PROBLEM OF FINANCING OF LARGE BUSINESS IN KAZAKHSTAN

3.1 The risks and rewards of multiple lender financings: loan participations and syndicated loans

In a loan participation, the originating lender transfers all or part of its interest in a loan to a participant pursuant to a participation agreement. The participation agreement defines the rights and obligations between the participant and the originating lender, including the participant's rights, if any, to direct the originating lender's actions and decisions regarding material aspects of the loan. The participant purchases an economic interest in the financing arrangements and is typically entitled to share in the economic benefit thereof, i.e., the right to receive principal and interest payments, and collect certain loan fees, while undertaking the obligation to fund any additional loans on behalf of the originating lender as required by the underlying credit agreement between the originating lender and the borrower.

In most participation agreements, the originating lender's interest in the loan is sold outright to the participant, and the originating lender does not become an agent, trustee, or fiduciary of the participant. To ensure such a relationship is not impliedly created, the participant agreement should expressly provide that the relationship between the lender and the participant is that of a buyer and a seller, and the intention of the participation is to transfer full economic rights from the lender to the participant without the creation of a fiduciary or agent relationship.

Importantly, the borrower remains directly obligated to the originating lender under the credit agreement between the originating lender and the borrower, notwithstanding the loan participation. The participant does not become a party to the credit agreement and does not have any direct contractual relationship with the borrower. As a result, the participant does not maintain any direct claims against the borrower or any collateral securing the loan.

In syndicated lending, the borrower enters into a single credit agreement with a group of lenders covering all of the loan facilities provided to the borrower by the lenders. A syndicated credit agreement might take the place of multiple bilateral credit agreements between the borrower and each lender or be used in lieu of a participation because all of the lenders are in privity with the borrower. Unlike a participation, each of the lenders in a syndication has a direct contractual relationship with the borrower. Despite the fact that all of the lenders are in privity of contract with the borrower, generally one of the lenders is designated as the agent to act on behalf of the lender group. In a syndication, there can be several different agents, with each serving a distinct role in the credit facility (e.g., administrative agent, collateral agent, etc.). The rights and obligations of the borrower, the agents and the lenders are all governed by the syndicated credit agreement.

The administrative agent administers the loan facility on behalf of the lender group. Generally, the agent is responsible for all formal communications between the lenders and the borrower, and the disbursement of the loan proceeds. Any collateral securing the loan facility is generally secured by the granting of a security interest by the borrower in favor of the administrative agent (or another lender designated as collateral agent) for the benefit of the lenders.

In a participation, the participant has no direct rights against the borrower, but does not have any direct obligations under the loan agreement (e.g., commitment to lend).

Participations may create value for the lender, especially in a distressed situation, by creating a market for the beneficial interest, while allowing the lender to remain the record owner of the loan for purposes of maintaining its relationship with its client.

By selling the participation, the lender is able to reduce its credit risk in the loan while adding another source of financing for the borrower in the event that the terms of the credit agreement require additional funding. Simultaneously, the sale of its beneficial interest allows the lender to realize capital while permitting the lender to use the proceeds of the sale to take advantage of new lending opportunities.

However, the participation can prove to be quite burdensome on the lender. Understandably, given the rights at stake, participation agreements can be quite complex and require substantial negotiation.

Further, servicing the participation can prove a challenge for the lender. Since the lender is the intermediary between the borrower and the participant, the lender may spend much time and effort transferring funds received by the borrower or advanced by the participant, or, to the extent required by the participation agreement, providing current information about the loan and the borrower to the participant.

Moreover, the participant may have the right to prevent material economic changes to the credit agreement. If the lender provides the participant with such veto rights, the participant, regardless of the size of its interest in the loan, may be able to block an entire restructuring of the facility. As the participation agreement must comply with the terms of the credit agreement, it is prudent for the lender to carefully analyze the terms and conditions of the credit agreement to ensure there are no inconsistent provisions.

From the perspective of the participant, because the participation agreement is solely between the lender and the participant, in most cases, the participant enjoys the benefit of purchasing a beneficial interest in the loan while keeping its anonymity. This allows the participant to shelter the existence of the participation relationship from the borrower, other lenders, and the global loan market. However, it is possible for the credit agreement to contain certain conditions upon the transfer of the lender's beneficial interest in the loan, such as (i) requiring the borrower's consent; (ii) requiring notice to the borrower; (iii) restricting the amount that can be transferred; and (iv) requiring that the participant be an eligible assignee.

While the participant may not have direct rights against the borrower, the participant can preserve its rights under the credit facility within the participation agreement. Significantly, participant agreements might allow the participant to prevent material amendments to the credit agreement and any material waivers of rights by the lender. It is also not uncommon for the credit agreement to provide the participant with third party beneficiary rights when participation is contemplated at the time the initial credit is extended by the lender.

As a legal matter, the participant is not in privity with the borrower and does not maintain any direct causes of action or rights of set-off against the borrower. Rather, the ...