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Explanation by KazAgroFinance regarding the Insurance of Pedigree Cattle

Explanation by KazAgroFinance regarding the Insurance of Pedigree Cattle 14.02.2012 The current agreement between “KazAgroFinance” JSC and the insurance companies of Kazakhstan provides the domestic cattle-breeders with the opportunity to reduce the expenditures related to the insurance of the cattle purchased on lease basis. The ground for explanation by KazAgroFinance of its position on the issues of insurance of the cattle was the message at the news ticker of the Inform Bureau KazTAG. In the widespread information they say on the meeting held in Pavlodarskaya oblast, at which the Head of one of the farms, Serik Suleimenov complained about the overstated tariffs (1-4 per cent) of the insurance companies for the cost of the cattle purchased. It stands to be reminded that KazAgroFinance became the financial operator of the pedigree cattle-breeding and its export potential development in the beginning of 2011. At that, the national leasing company undertook a number of measures aimed at reducing of the expenditures by the cattle-breeder-entrepreneurs upon implementation of their projects. Among them is the Memorandum entered into with 7 main companies operating at the insurance service market of Kazakhstan. Taking into consideration the serious risks related to the safety of the animals purchased by the farms, the insurers insisted on the insurance tariffs within 4 - 12 per cent of the cost of the subject of leasing. However, as a result the tariff made up 1% of the purchased cattle amount. Less is possible, more is impossible. This term is stipulated by the agreement and covers the whole territory of the republic. The insurance of the pedigree cattle purchased on the lease basis is the compulsory requirement of KazAgroFinance, since this term is the additional provision of the financial stability of the lessees themselves. As of today the Company made 27 leasing contracts with the various farms and agricultural entities of the country for purchasing of 9 156 heads of pedigree cattle. In the great majority the insurance is executed on the basis of 1%. The deviations in the tariffs are noticed in three cases: 0.8% for “Agrofirm “Rodina” LLP in Akmolinskaya oblast; 0.65% for “Asia-Tarangul” LLP in North-Kazakhstan oblast and 1.3% for “Aksanat Engineering” LLP in South-Kazakhstan oblast. All these cattle-breeding projects belong to the investment category and are financed by KazAgroFinance on the terms of 4% p.a. for the period of up to 9 years and 3-year grace period of repayment. Notwithstanding that the insurance is the compulsory procedure; the choice of the insurance company is the matter of interest and preferences of the entrepreneur itself. KazAgroFinance assumes that, perhaps, the Head of the Farm “Bolat” in Pavlodarskaya oblast applied to the insurer, which is not in the list of the subscribers of the Memorandum. However, they sure in the Company that this circumstance does not give a right to the entrepreneur to state the general overpricing of the insurance tariffs, and, accordingly, the omission of the interested organizations in this regard. For fairness’ sake, the fears of the insurance companies, which try to secure its business against the possible expenditures by the high tariffs for the insurance of the cattle, could be partly understood. After all in contrast to the cars, the list of the insurance cases with the animals is more extensive, and the death, loss, murrain and forced slaughter are more probable. At that, the list of reasons for the insurance cases, main of which are the various diseases (theileriosis, foot and mouth disease, emphysematous carbuncle, tuberculosis, leucosis, pasteurellosis, labour cut, hepatitis, gastroenteritis, endocarditis …) is more extensive. “KazAgroFinance” JSC is the company established by the Regulation of the Government of the Republic of Kazakhstan in 1999. The key goal is the support of the agricultural sector of the republic by providing the agricultural producers with the access to the financial funds, as well as to the agricultural machinery and technological equipment on the lease basis. It is a part of the National Managing Holding “KazAgro”. “KazAgroFinance” JSC is the operator of 14 investment trends in the agriculture of the country. The leasing company finances the prospective projects for creation of the network of large dairy farms, poultry farms, greenhouse complexes, vegetable storehouses, agricultural machinery assembly production, feed yards, meat-processing complexes, pedigree farms (reproducers), and slaughter points in the republic. Moreover, the Company provides financing for the projects related to feed production, development of the Kazakhstan grain export infrastructure and its deep processing, construction and modernization of the granaries, implementation of the drip irrigation, development of the fine wool production and processing.

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