Mid-term Municipal Bonds
Pension Funds
Termination of Services Contracts
On September 4 2001 the government issued Regulation 1139, which sets out the rules for the issue, placement, circulation, repayment and servicing of mid-term foreign currency-denominated state securities issued by municipal (local) executive authorities.
Pursuant to the regulation, these bonds must be issued in paperless form and will be considered as coupon bonds. Registration of ownership title and other rights in relation to the bonds will be effected by maintaining records in the accounts opened with the depository or with brokers/dealers.
Both Kazakh nationals and foreigners are permitted to acquire and own such bonds. The nominal value of the bonds shall be the equivalent of $100. However, all settlements shall be made in tenge, at the exchange rate established by the National Bank of Kazakhstan. The maturity term of the bonds shall be at least 18 months, and must not exceed 10 years. The regulation also establishes specific procedures for interest payment and calculation.
A resolution of the board of the National Bank of Kazakhstan (Resolution 388, dated October 8 2001) has made certain amendments to the Rules for the Performance of Investment Activity by Pension Fund Management Companies, which were approved by a resolution of the National Securities Commission dated August 13 1998. The 1998 National Securities Commission resolution establishes an exhaustive and restrictive list of securities/financial instruments in which pension funds may invest. This list specifies the percentage of their assets which pension funds may invest in each specific financial instrument/security.
The new National Bank of Kazakhstan resolution has expanded this list. Specifically, the resolution now permits pension funds to acquire bonds of the JSC Development Bank of Kazakhstan.
Termination of Services Contracts
On May 28 2001 the board of the National Securities Commission adopted a technical resolution which establishes detailed procedures for terminating a services contract between a securities holder and the registrars, and prescribes specific acts which should be undertaken by the registrar where such a contact is terminated. The regulation aims to provide additional comfort and protection to investors on the securities market.
For further information on this topic please contact Yuriy Maltsev at White & Case by telephone (+7 3272 50 74 91) or by fax (+7 3272 50 74 93) or by email ([email protected]).