Lecture Leasing for short term investment finance Now in connection with formation and development of market relations

in Republic Kazakhstan the major role in activity of commercial banks is occupied with rendering of credit services. Leasing becomes the flexible and promising economic lever capable to involve the investment, to promote domestic production lifting, to involve the capital in the vital branches of national economy, to provide real support to small-scale business, to provide the long-term and reliable income for commercial banks. Urgency of the given theme have defined a number of the reasons. First, the market of leasing services in Republic Kazakhstan is rather young and is not mastered. Secondly that by means of leasing necessary investments can be really directed to the most needing links of the Kazakhstan economy. Leasing operations of bank remain profitable, but also simultaneously risky operations. The bank problem, and according to its leasing management, as much as possible to lower leasing risk, that is risk of a non-return of the credit and percent on it. Therefore working out and application of bank leasing is an actual problem for today. Bank workers, financiers frequently consider leasing as the form of financing, capital investments, investments into fixed capital and also as the new form of the credit (along with the bank credit), had last decade the big development in the industrial countries, carrying it at classification to bank investment services. Recently it began to be realized by power structures and has led to acceptance of some important decisions. The law About financial leasing opens the basic concepts and the definitions inherent in leasing operations, defines participants of leasing relations. Here the rights and duties of the parties are formulated; the basic conditions of the leasing contract are given; an order of insurance of leasing property; an order of a resolution of disputes between the parties, including at the international leasing; the structure and structure of leasing payments is established; requirements of licensing of leasing activity. The given Law provides the state guarantees for realization of leasing projects, granting to participants of leasing operations is right to define independently terms of amortization of the equipment, clearing of tax payments within one year after company creation, a number of tax privileges for the leasing companies working in certain branches. The term paper purpose is studying of features of development of leasing in Republic Kazakhstan, research of the mechanism of leasing operations, revealing of problems, and the offer of ways of their decision. Consideration of advantages of leasing in comparison with traditional forms of financing, and also the description of versions of leasing operations, an order of their carrying out. For object in view achievement it is necessary to solve a number of problems: - To open essence and necessity of leasing; - To characterize the organization of leasing operations; - To carry out the analysis of economic efficiency of leasing on an example of activity of the leasing company. As object of research has served JSC Leasing company "Astana-Finance". Leasing activity of the given company became an object of research. The term paper consists of the introduction, three heads, the conclusion and the list of the used literature. As theoretical and methodological base works of the Kazakhstan and foreign scientists which in the works have made definition of leasing operations have served, have considered efficiency of use of leasing, its basic advantages and lacks; legislatively-statutory acts of the Republic of

Kazakhstan, and also materials of the financial reporting of joint-stock company "Astana-Finance" for 2007, 2008 and 2009.

1 THEORETICAL BASES OF LEASING 1.1 Economic essence of leasing Leasing - the word of an English origin derivative of a verb to lease - to take or hand over property in temporary using. Most precisely reflecting essence of the term "leasing", is following definition: Leasing represents investment of temporarily free or involved financial assets at which leasing grantor undertakes to get in the property the property caused by the contract at the certain seller and to give this property leasing receiver, i.e. for a certain payment in temporary using with the right of the subsequent repayment. For a fuller appreciation we will bring some more concepts of leasing: Leasing - a long-term car lease and the equipment, bought by the lessor for the tenant for the purpose of their industrial use, at preservation of the property right to them for the lessor for all term of the contract. Leasing - a kind of the enterprise activity directed on investment of temporarily free or involved financial assets when under the contract of financial rent (the leasing contract) one person undertakes to get in the property the property caused by the contract at the certain seller and to give this property to other person for a payment in temporary using for the enterprise purposes.

Leasing is an acquisition of the equipment with its granting in rent to the organizations (leasing receiver) in exchange for leasing payments. Leasing provides possibility of the repayment of the equipment after period of validity of the leasing contract or ahead of schedule at residual cost. Unlike the purchase and sale contract on which the property right to the goods passes from the seller to the buyer, at leasing the property right about rent remains for the lessor, and leasing receiver gets is only right on its time use. After term of the leasing contract leasing receiver can get object of the transaction at the agreed price, to prolong the leasing contract or to return the equipment to the owner. Thus, leasing is the unique investment tool which allows to get necessary means of production at the expense of external long-term financing. Thus the basic maintenance for the leasing company is not pledge, and its property right to the property transferred in leasing. Leasing gives the chance to the enterprise to receive the necessary equipment without considerable single expenses. As objects (subjects) of leasing any not consumed things used for enterprise activity act, i.e. object of leasing can be movable and the real estate concerning fixed capital of the enterprise (buildings and constructions, cars and the equipment, the ground areas, the transport and any other basic means used in the course of manufacture), and also software and the working tools providing functioning of fixed capital transferred in leasing. The object of leasing thus is the property of the leasing company (bank) during leasing validity. Also it is necessary to notice that securities, natural resources, the property used for personal (family) needs cannot act in a role of object of leasing. Now we will pass directly to subjects of leasing transactions. Some subjects usually participate in leasing: - leasing grantor; - leasing receiver; - The seller of property; - Bank or any other leasing company. Also in the market of leasing services it is possible to allocate and special subjects such as, for example, the insurance companies. We will consider each category in more details. Leasing receiver represents the person possessing or getting the property (at the expense of involved or own money resources) for the purpose of its further granting as a leasing subject . In the role of leasing grantor the leasing companies which in many cases represent affiliated companies of big banks usually act. Thus banks supervise also the independent leasing companies, giving them credits. Giving resources and participating in the capital of the leasing companies, banks indirectly participate in leasing operations. However commercial banks can and participate directly in leasing operations, for this purpose they form leasing services in the structure. Introduction of banks on the market of leasing services is connected, first, by that leasing is a capital-intensive kind of business, and banks are the basic holders of monetary resources. Secondly, leasing services are closely connected with bank crediting. In a role leasing receiver or the user of property acts physical or the legal body who according to the leasing contract accepts a leasing subject (the basic means or other property) in time using. As leasing receivers usually act the persons, needing additional basic means. The seller of property (supplier) represents physical or the legal body who according to the contract of purchase and sale with leasing grantor sells to the leasing grantor in the caused term the property made or purchased by it which are a subject of leasing. The seller (supplier) is obliged to transfer a leasing subject leasing grantor or leasing receiver according to purchase and sale treaty provisions.

The bank (or other credit institution) is presented by the subject of leasing relations who gives financial (credit) means for acquisition of a subject of leasing. The insurance companies carry out insurance of the every possible risks arising at the leasing transaction: property insurance leasing grantor; the credits given to leasing grantor by credit institution, from possible risks of non-payments and many other things. We will consider risks which can arise at leasing operations, and also their insurance. As well as any bank operations, leasing operations are brave. For prevention of the given risks their insurance is provided. Let's consider what kinds of risks in general can to arise and with what help of tools it is possible to neutralize them. Marketing risk. The given kind of risk means by itself risk not to find the tenant on all available equipment. It is inherent basically in operative leasing. The basic ways of insurance of marketing risk are: - Increase in the brave award in leasing payment; - Use for transactions of the most popular kinds of the equipment and other techniques; - Sale of object of the transaction upon termination of the leasing contract taking into account market condition. Risk of the accelerated obsolescence of object of the transaction. As objects of leasing transactions production of the high technology branches, as a rule, acts, hence, they often are subject to influence of scientific and technical progress. The basic way of minimization of this risk is the establishment of the irrevocable period of leasing, i.e. the period during which the leasing contract cannot be cancelled. The price risk means by itself risk of potential loss of the profit, connected with change of the price of object of the leasing transaction during period of validity of the leasing contract. Leasing grantor loses potential profit in case of rise in prices for objects of the leasing transactions concluded at the old prices. Leasing receiver incurs losses at falling of the prices for the equipment rented at the old prices. Mutual minimization of this risk is carried out by an establishment of the fixed sum of each leasing payment throughout all period of leasing. Risk of destruction or impossibility of the further operation. In the name of the given risk its essence is put. Its minimization is carried out by insurance of object of the transaction. Risk of unbalanced liquidity. Here possibility of the financial losses arising in a case, when leasing grantor not in a condition to refinance the active operations terms of payments on which have not come, at the expense of attraction of means in the market of loan capitals is designated. Minimization of the given risk is reached by a way: - Coordinations of streams of money resources in time and on volumes; - Creations of reserve fund; - Diversifications of passive operations. Risk of non-payment, i.e. risk of non-payment by leasing receiver of leasing payments. Minimization is based on the financial position analysis ; limitation of the sum of one leasing contract; reception of guarantees from the third parties; insurance of risk of nonpayment. Percentage risk, i.e. danger of the losses resulting excess of interest rates, paid by the leasing company under bank credits, over the rates provided by the leasing contract. Decrease is carried out by purchase and sale of financial futures or the transaction conclusion a percentage swap. Currency risk - possibility of losses as a result of fluctuation of rates of exchange. Are minimized like percentage risk. Political and legal risks are closely connected among themselves. Are most brightly shown at realization of the international leasing operations. At political risk there is a danger of the financial losses connected with change of a political situation in the country, strikes, change of the state economic policy, etc.

The legal risk is connected in due time with the losses resulting change of acts. In general, speaking about insurance of risks in leasing activity, it would be desirable to notice that it is made on a voluntary basis and it is obligatory for participants of leasing only in cases if such condition is directly provided in the contract. Almost all insurance organizations and banks of the second level have the right to insurance carrying out. The national bank of Kazakhstan as supervising body has not the right to interfere with operative activity of banks and the insurance organizations, including under the transactions, connected with leasing. However with a view of the further development of mechanisms of crediting, optimization of financial streams and maintenance of their transparency, perfection of payment system, the National bank is ready to participate in discussion of problems of leasing. But, despite all appeal and simplicity, leasing nevertheless needs a number of protective measures, and the most reliable and effective is insurance protection. Insurance of leasing operations allows to order essentially financial and legal mutual relations between participants of the leasing transaction. Insurance guarantees, on the one hand, provide a continuity of reproduction in the field of leasing activity, and on the other hand, compensate losses and raise solvency of all participants of the leasing transaction. Let's consider advantages of leasing relations. Leasing is interesting to all subjects of leasing relations: to the equipment consumer, the investor which representative in this case is the leasing company, to the state which can use leasing for a direction of investments into priority branches of economy, and, at last, to bank which as a result of leasing can count on confident long-term profit. The basic advantages of leasing, the most actual taking into account features the economic situation which has developed in Kazakhstan at the given stage, consists in the following: For the state At the developed economic situation and a severe need in revival of investment activity the problem of development of leasing gets a special urgency for the state. - This financial tool promotes mobilization of financial assets for investment activity. - Provides by means of the mechanism the guaranteed use of investment resources on the purpose of re-equipment of manufacture. - The state, encouraging leasing activity and using for this purpose, for example, tax privileges, can essentially reduce budgetary assignments for financing of investments, is effective operate process of perfection of their branch structure, promote development of commodity manufacture and sphere of services, export potential increase, reduction of outflow of the private capital on the West, to creation of additional workplaces, especially in sphere of small business, to the decision of other essential social and economic problems. For leasing receiver - In the presence of the profitable project the consumer has possibility to receive the equipment and to begin this or that manufacture without large single expenses. It is especially actual for beginners of small and average businessmen. - Reduction of the sizes of the tax by property of the enterprises as cost of objects of leasing though it and is not obligatory, but in most cases, is reflected in a balance active leasing grantor . At realization of operative leasing the leasing subject is considered on balance of leasing grantor . - It agree the Republic Kazakhstan Law About financial leasing to all kinds of the personal estate making object of leasing and carried to an active part of fixed capital it is authorized to apply the mechanism of the accelerated amortization with factor not above 3. - Leasing receiver's accounting as on the basic means, amortization charge, payment of a part of taxes and management of a debt the account is carried out by the leasing company becomes simpler.

- In the leasing contract it is possible to provide use of more convenient, flexible schemes of repayment of debts. - To all listed cases it is possible to add and a variant at which the bank becomes leasing receiver. It is rather favorable to bank since the balance of bank is thus facilitated that in turn is positively reflected in the economic indicators characterizing bank activity. For example, at leasing work in progress cost gradually joins in the cost price and "capital" and, hence, on calculations of obligatory economic specifications of activity of the credit organizations will fatally not influence a category. For leasing grantor - For the leasing companies as investors leasing provides necessary profit on the invested capital at lower risk (in comparison with usual crediting) at the expense of effective protection against insolvency of the client. - Before finishing payment leasing grantor remains the legal proprietor of the equipment so in case of failure of calculations can claim for this equipment and realize it for repayment of losses. - In case of bankruptcy of leasing receiver the equipment also without fail comes back the leasing company. - leasing grantor transfer to leasing receiver not monetary resources, control over which use is not always possible, and is direct means of production. - Clearing of payment of the profit tax which is received from realization of contracts of financial leasing with period of validity not less than three years. - leasing grantor partially released from payment of the customs duties and taxes concerning Republic Kazakhstan of production which is object of the international leasing temporarily imported on territory. For sellers of leasing property. In leasing development are interested not only leasing receivers as equipment consumers, but also operating manufactures as at the expense of leasing the commodity market of the equipment made by them extends. The income of realization of spare parts to the leasing equipment, realization of its service and modernization increases. 1.2 Organization of leasing operations By means of the mentioned below scheme we will consider, what mutual relations arise between all participants of the leasing transaction. The typical leasing transaction looks as follows.

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Picture 1. Leasing transaction 1. The Leasing receiver informs the leasing company, what equipment is necessary for it, provide all specifications. 2. The Leasing company, having convinced of liquidity of the project, buys this equipment from firm-manufacturer, either another legal, or the physical person selling property, being object of leasing. 3. The Leasing company (lessor), becoming the proprietor of the equipment, transfers it in time using with the right of the further repayment (it is defined by the contract) to the leasing receiver, receiving in exchange leasing payments. Equipment delivery is carried out by the manufacturer (seller) of property. Insurance of object of leasing is carried out at the expense of the leasing receiver. 4. The Leasing receiver after payment of all leasing payments and the leasing expiry of the term becomes the owner of the leasing equipment. As well as any other transaction, the leasing agreement is accompanied by certain document circulation. The expert of commercial department of the leasing company (bank) informs the client on an order of the conclusion of the leasing transaction, transfers the list of necessary documents: 1. The Letter-inquiry addressed to the general director of the leasing company; 2. The Original of the inquiry from tax committee, and also from serving bank about absence of debts; 3. The Copies of documents confirming registration of the individual businessman, the legal person; 4. The Preliminary contract on property purchase; 5. The Feasibility report; 6. Notarially certified samples of signatures;

7. Documents of the financial reporting for last three years (the report on movement of funds, the report on profit and losses, the balance sheet). The demand of the leasing receiver for granting in property leasing should be signed the head of the organization and is assured by the press. After reception of the letter-inquiry and consideration of the necessary documentation the preliminary schedule of leasing payments which goes to the client (leasing receiver) with the covering letter pays off. The preliminary schedule forms a basis for calculations of the feasibility report on the leasing transaction which together with other documents generated according to the list, is transferred for consideration to the lessor (bank). The analysis of documents is thus carried out commercial, financial and legal by departments. Schematically given stage looks as follows.

Picture 2. Documents analysis Simultaneously with the analysis of documents the lessor carries out visit to the client for the purpose of acquaintance to the organization (capacities, premises, the equipment and office, and also is carried out an estimation of prospective pledge). The expert of commercial department carries out visiting of the leasing receiver together with the expert in an estimation. Further the expert of commercial department the conclusion which is taken out on session of working group of the lessor on which the decision on financing of the represented leasing project and preparation of projects of contracts is made prepares. The lessor, the leasing receiver and the seller (supplier) of the equipment will co-ordinate treaty provisions of delivery and sign it. Simultaneously the lessor and the leasing receiver sign the leasing contract, and also, in case of need, other documents accompanying the transaction. After decision-making by the lessor on financing, the package of documents under the leasing transaction is given in credit committee of bank. After credit agreement registration under the given transaction, the Lessor informs the leasing receiver on necessity of entering of advance payment on the settlement account of the leasing company. The size of advance payment is defined depending on liquidity of property, solvency of the leasing receiver, presence of additional maintenance under the contract of leasing, an order of payment to the supplier of property, etc. and can make an order of 30-50 % from property cost. In case of possibility to pay advance payment on leasing payments less than the percent established by the leasing company, or not quite convincing solvency of the leasing receiver, actual becomes additional maintenance of leasing payment in which quality pledge and the guarantee can be considered in various combinations. As a rule, as pledge the subject of leasing (taking into account the price of its realization in the secondary market) acts. Also variants of pledge of the equipment, vehicles and other liquid property, securities, real estate are possible. As the guarantor can act legal or the physical person with whom the lessor concludes the guarantee contract. The lessor lists advance payment to the seller of the equipment who carries out delivery within the limits of the concluded contract.

After reception of the equipment by the parties of the contract of leasing the equipment delivery-acceptance certificate in leasing subscribes and the leasing receiver acquires the right to equipment operation. The contract on fulfillment of the leasing transaction can be bilateral, concluded between bank (lessor) and the leasing receiver (tenant), or tripartite when the supplier of the equipment participates in the contract. The basic sections of the contract about the leasing agreement consist in the following: The parties contracts (participants) In a role of participants of the contract the lessor who is the proprietor of the goods (bank), and also the leasing receiver accepting in using object of the transaction acts. The contract subject (object of leasing) is defined or individual signs (type, model and etc.), or engineering specifications. The name of the supplier, term to which last undertakes to put object of the transaction to the leasing receiver Here is underlined. Period of validity of the leasing contract The contract comes into force, as a rule, from the date of input of object of the transaction in operation and operates during a target date. Quite often in practice the irrevocable period, i.e. term during which the contract is not subject to cancellation in the absence of infringement of its conditions by the contract parties is established. The rights and duties of the parties. Here duties of the lessor at a preparatory stage of the transaction and its right in validity are defined. Also all necessary guarantees of the leasing receiver which it should present to the lessor are specified. Conditions of leasing payments In this section the form, the size, a kind and a way of payment under the transaction is defined. Kinds of leasing payments can be various (payment by advance payment of 15-20 percent, the fixed sum of payment or the sum established in percentage of volume of realization, a price index and other conditions). Ways of payment can be single and with periodically decreasing, increasing or certain sums of payment. Insurance of object of the transaction Depending on a kind of the transaction insurance in the right to carry out or the lessor (operative leasing), or the leasing receiver (financial leasing). Order of cancellation of the contract The contract can be terminated ahead of schedule for following reasons: - The leasing receiver has not provided a condition of acceptance of object of the transaction; - Has not made installation and commissioning the equipment when due hereunder; - Out of time carries out rent payments; - The leasing receiver has concluded the new contract with the same lessor; - There were force-major circumstances. At preschedule cancellation of the contract the leasing receiver is obliged to return object of the transaction and to pay damages to the lessor. In the leasing contract also it is provided that all notices and other contracts are carried out only in writing. All changes brought in the contract, are made out only in writing. Treaty provisions can be changed or cancelled only with the consent of the parties. There is a set of leasing operations of participants different from each other on structure, property type, term of rent, recoupment degree, to volume of services and other signs. We will consider each of them. Depending on structure of participants distinguish direct and indirect leasing. At direct leasing the proprietor of property (supplier) independently, without participation of the third parties, hands over object in leasing, i.e. the two-way deal here is traced. At indirect leasing, accordingly,

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assignation in rent is carried out with attraction of the intermediary, one - bank or the leasing company or several intermediaries that represents the multilateral transaction. As property distinguish: real estate leasing; personal estate leasing; leasing of the property which was in the use. On degree of a recoupment of property: - Leasing with a full recoupment i.e. when during period of validity of one contract there is a full payment to the lessor of cost of rented property; - Leasing with an incomplete recoupment. Here means that during period of validity of one contract pays off the part of cost of rented property (is paid) only. Besides, leasing is subdivided also on volume of the rendered services: - Pure leasing assumes that all service of rented property is incurred by the leasing receiver; - Leasing with a totality of services - when full service of property is assigned to the lessor; - At leasing with a partial set of services the part of functions is assigned to the lessor on property service (that it is necessary to discuss in details in the leasing contract) only. If all participants of the leasing agreement represent one country such leasing is called internal if at least one of participants is the representative of other country such leasing already is called as international. It is necessary to notice also that leasing can be accompanied by granting of following services: - Technical which are connected with the organization of transportation of object of leasing, installation and adjustment of the leased equipment, maintenance service and equipment operating repair; - Consulting, i.e. services in questions of the taxation, registration of the transaction, etc. Let's consider available kinds of leasing, each of which is characterized by the specific features, i.e. it: the operative; financial, including returnable and share; direct leasing; subleasing. Operative or service leasing (operating lease). The given kind of leasing represents the agreement on current rent. As a rule, term of such agreement is less than period of full amortization of a rented active (for example, the equipment). Thus, the rent does not cover an active overall cost that causes to hand over it in leasing some times. Schematically given kind of leasing looks as follows.
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Picture 3. Operating lease Quickly becoming outdated kinds of the equipment concern the basic objects of operative leasing (computers, the copy and multiplying techniques, various kinds of office equipment etc.), and also technically difficult equipment demanding constant service (cargo and cars, airliners, railway and sea transport). The given kind of leasing possesses certain lacks, namely: here there is higher, than at other forms of leasing, a rent; requirements of the lessor about entering of advance payments and advance payments; presence in contracts of points on payment of penalties in case of the preschedule

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termination of rent; the other conditions, called to lower and partially to compensate risk of owners of property. Financial (capital) leasing (Financial lease) represents the long-term agreement providing full amortization of the rented equipment at the expense of a payment, brought by the tenant. At this form of leasing all expenses on installation and property routine maintenance it is assigned, as a rule, to the tenant (leasing receiver). Often similar agreements provide the right of the tenant to the repayment of property after contract term at preferential or residual cost. Objects of financial leasing concern real estate (the earth, buildings and constructions), and also long-term means of production (cars, the equipment). We will consider financial leasing on the scheme.
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4.

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Picture 4. Financial lease Financial leasing forms base for formation of two other forms of long-term rent - returnable and share (with third party participation). Returnable leasing represents system from two agreements at which the owner sells the equipment in the property to other party with the simultaneous conclusion of the contract on its long-term rent at the buyer. As a result of carrying out of such operation the proprietor of the equipment changes only, and its user remains former, having received in the order additional means of financing. The investor, as a matter of fact, finances the former owner, receiving as maintenance of the property right to its property. The scheme of returnable leasing looks so.

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Picture 5. Returnable leasing In share leasing participation in the third party transaction - the investor in which quality the bank, the insurance or investment company usually acts is provided. In this case leasing firm, preliminary having concluded the contract on long-term rent of some equipment, gets it in the property, having paid a part of cost at the expense of extra means. As maintenance of the received loan are used the got property (as a rule, on it it is made out the mortgage) and the future rent payments, a corresponding which part it can be paid by the tenant to directly investor. Direct leasing. At direct leasing the tenant enters into with leasing firm the agreement on purchase of the demanded equipment and the subsequent delivery to it in rent. The scheme of direct leasing looks simply enough.

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1. 2.

Picture 6. Direct leasing The agreement on rent is frequent can be concluded directly with firm-manufacturer (i.e. on a straight line) the Largest manufacturers giving production on the terms of leasing, such known firms, as IBM, Xerox, GATX, and also many aviation, ship-building and automobile companies are. Subleasing (sub-lease) is a special kind of the relations arising in connection with a cedation of rights of use by a subject of leasing to the third party that is made out by the subleasing contract. In this case the person who is carrying out subleasing, accepts a subject of leasing at the lessor under the contract of leasing and transfers it in time using to the leasing receiver under the subleasing contract.
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2.

Picture 7. Sub-lease As a whole, moving results of given chapter it is possible to notice that leasing is an investment of temporarily free or involved financial assets at which the lessor undertakes to get in the property the property caused by the contract at the certain seller and to give this property to the leasing receiver for a payment in time using with the right of the subsequent repayment and which at present gets the increasing distribution in Republic Kazakhstan.

2 ANALYSIS OF ACTIVITY OF THE LEASING COMPANY (ON EXAMPLE OF JSC LEASING COMPANY "ASTANA-FINANCE") 2.1 Characteristic of leasing operations of joint-stock company Leasing company" Astana-Finance"

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Joint-stock company Leasing companies" Astana-Finance "(further joint-stock company" Astana-Finance "within the limits of the license which have been given out by Agency RK on regulation and supervision of the financial market and the financial organizations is the brokerdealer company on a securities market with the right of conducting accounts of clients as the nominal holder. Also the Company is not bank financial institution which is carrying out separate kinds of bank operations within the limits of the license of Republic Kazakhstan given out by National bank. Shares and Company bonds are included in official sheet of the Kazakhstan Stock exchange on a category "And". Joint-stock company "Astana-Finance" the issue rating of Va1 from the International rating agency Moody's Investors Service is appropriated. The international rating agency Fitch Ratings has appropriated a long-term credit rating of joint-stock company "Astana-Finance" at level "BB +" with the stable forecast. Besides it the agency has appropriated joint-stock company "Astana-Finance" a short-term credit rating at level "B", individual - "D/E" and a support rating - "3". The company has the state licenses: Agencies RK on regulation and supervision of the financial market and the financial organizations on employment of broker-dealer activity on a securities market with the right of conducting accounts of clients as nominal holding. Agencies RK on regulation and supervision of the financial market and the financial organizations on employment by activity on management of an investment portfolio. National bank of Republic Kazakhstan on carrying out of bank and other operations in tenge and foreign currency Agencies on registration of real estate and legal bodies of the Ministry of Justice of Republic Kazakhstan on the right of realization of activity according to real estate The Company purposes: - Expansion of financial service and a spectrum of rendered services, creation of unique model of financial institution - Maintenance of an issue rating at level of the leading companies of Kazakhstan - A diversification and business re-structuring - Increase of efficiency of activity of the company - A gain of leading positions The main policy of the Company - exclusively high standards of corporate governance, a transparency and professionalism, flexibility, mobility, speed of decision-making and an individual approach to each client. The primary goals: Expansion of a complex of given services, working out and introduction of new products, the further development of operations on a securities market and the credit market, realization of new projects. The basic lines of activity: Broker service Release and placing of securities Extra operations - granting of credits in the monetary form (in tenge and foreign currency) Property estimation Property tenancy, with preservation of the property right of the lessor, on leased property on all period of validity contracts (leasing) Factoring operations: acquisition of the rights of the requirement of payment of the buyer of the goods (works, services) with acceptance of risk of non-payment Registration operations: the account (discount) of bills and other promissory notes legal and

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physical persons Granting of guarantees and guarantees Key competitive advantages: Long-term experience on a securities market Successful experience of realization of many programs and capital projects Presence of an extensive and various corporate network of services Command of the highly skilled experts possessing high administrative skills and having solid experience The steady generated communications and contacts in the capital market Joint-stock company "Astana-Finance" gives financing for acquisition in leasing of the equipment, vehicles and real estate with the following provisions (tables 1, 2) Term of consideration of documents and decision-making - till 14 days. Equipment leasing Joint-stock company "Astana-Finance" gives any equipment used in enterprise activity and meeting following requirements in leasing: Term of useful operation of such equipment should exceed leasing term twice at least. The equipment should be to proof to moral and physical ageing. For this reason the leasing portfolio consists basically from polygraphic, flexographic, packing, wood-working, metalcutting, agricultural, overworking, autoservice and other wearproof kinds of the equipment, and also vehicles and a special equipment. 1 60 $10.000 70-85% 15-30% 16-23 % , ( 6 ) / : , /: / 2 $10 000 12 60 85% 30 % 16 23% , , -

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 - - : - Presence of the secondary market for equipment realization is necessary. It should be claimed in region where it is supposed to be used. The equipment should not be unique or rare. There should be also a technical possibility of dismantle of the equipment, its transportation and repeated installation without essential loss of its cost. Presence in Kazakhstan service base for such equipment is necessary. For the company it is important, that the supplier carried obligations on warranty service of the equipment and could provide out-of-warranty service. There should be a possibility of operative debugging, replacement of knots, grantings of regular consultations etc. the Company is interested in that leasing receivers did not have problems with the equipment. Equipment use in territory of Kazakhstan should be authorized corresponding state structures. The equipment should correspond to the ecological requirements. For transfer of the second-hand equipment to leasing it is necessary to receive preliminary the inquiry from the specialized technical appraiser with confirmation of cost, a technical condition of the equipment, remained resource, and also that term of useful operation of the equipment exceeds term of leasing a minimum twice. Let's consider on a concrete example an order of accounting of leasing operations. The example is made so that to cover existing difficulties in qualification of operations at decisionmaking on an order of their reflexion in the account. Example Leasing treaty provisions Leasing subject - an auto-loader. Contract cost (total sum of leasing payments) - 6 000 000 tenges, including the VAT - 1 000 000 tenges The schedule of payments: 12 payments on 500 000 tenges, including the VAT - 83 333 tenges 1 payment - on March, 31st, 2006, 2 payment - on June, 30th, 2006, 3 payment - on September, 30th 2006, 4 payment - on December, 30th, 2006 and etc. Contract term - three years. Additional conditions The lessor has got an auto-loader on January, 10th, 2006 in cost 4 200 000 tenges, including the VAT - 700 000 tenges The acceptance-assignation certificate in leasing is signed on February, 2nd, 2006. In I quarter 2006 the leasing receiver has carried out following payments: On January, 30th, 2006 - 300 000 tenges taking into account the VAT; On April, 4th, 2006 - 200 000 tenges taking into account the VAT, further - under the schedule. Upon termination of period of validity of the contract the auto-loader carries over the leasing receiver. For calculation of the profit tax the lessor and the leasing receiver apply a charge method. The registration policy under the VAT - on payment. At a choice of norms of amortization for the accounting and tax account the lessor and the leasing receiver are guided by the Classification of the basic means confirmed by governmental

16

order of the RK according to given classification the code number of an auto-loader 14 2915070, term of useful use - from 5 till 7 years (it is confirmed 6 years). As appears from example conditions, the leasing receiver has listed the first leasing payment not when due hereunder. Thus the first part of payment has been listed till the assignation moment in the leasing, the second - with delay. In a considered situation it is necessary to solve, whether is the sum 300 000 tenges advance payment or it is the high-grade leasing payment attracting reflexion of operation of realization at the lessor and inclusion of the specified sum of expenses of the leasing receiver. Besides, it is necessary to specify, for what date it is necessary to reflect operations on payment for the sum 200 000 tenges Obligations of the leasing receiver on payment of leasing payments come from the moment of the beginning of use by the leasing receiver of a subject of leasing if other is not provided by the leasing contract. The right of use of a subject of leasing appears at the leasing receiver, as a rule, from the moment of signing of the certificate of acceptance-assignation in leasing. In a considered example the acceptance-transfer certificate is signed on February, 2nd, 2006 while the first payment is carried out on January, 31st, 2006. Thus, the sum 300 000 tenges is advance payment and does not attract obligations of the parties on reflexion in the account of the operations connected with leasing payment. The decision of the second question on an order of the account of the sum 200 000 tenges is represented to the following. All economic operations in accounting are reflected in the basis of primary documents. By the leasing contract it is not established obligations of the lessor on exhibiting to the leasing receiver of certificates on each leasing payment. However in the contract the accurate schedule of calculations on leasing payments in this connection the primary document for reflexion in the account of operations of reception of the income the lessor and realization of the expense by the leasing receiver will be is established direct the leasing contract. Proceeding from an assumption of time definiteness of the facts of the economic activities, all operations in accounting are reflected in that period in which they took place, irrespective of actual time of receipt or payment of money resources. Thus, both the lessor, and the leasing receiver should reflect in accounting operation on income reception (expense realization) on leasing payment for the sum 500 000 tenges on March, 31st, 2006.

2.2 Analysis of financial activity of joint-stock company Leasing company "AstanaFinance" During activity the Company has carried out five issues of shares. The first issue for the sum of 100 million tenge in 1999 has been completely placed in the closed way among the unique founder of the company - Akimat of the city of Astana. The subsequent releases which have been carried out from 1999 for 2006, have allowed the Company to increase essentially a share capital and to expand base of shareholders. In Picture 8 the structure of holders of shares of company as of January, 1st, 2010 is presented

17

Picture 8. Structure of holders of shares of company as of January, 1st, 2010 With a view of the further strategic development by General meeting of shareholders of the Company in December, 2008 the decision on increase in the declared authorized capital stock of the Company and additional issue of 1,5 million pieces of shares was accepted. The share issue prospectus has been registered in February, 2009 in Republic Kazakhstan Agency on regulation and supervision of the financial market and the organizations, and on the end of fiscal year has been placed more than 932 thousand pieces of shares for a total sum of 1,4 billion tenge. The total amount of issues of shares for December, 31st, 2009 has made 3,7 million pieces of shares, of them amount of the placed shares - 2,9 million pieces of simple shares, number of holders of shares - 490, including legal bodies - 23, physical - 467. According to the consolidated financial reporting for 2009, share capital volume has increased to 3,6 billion tenge and on 96 % has exceeded an indicator of 2008. Decisions on payment of dividends are accepted by General meeting of shareholders on the basis of confirmed dividend politicians of the Company which main principles are optimum distribution of a net profit and a constancy of payments of dividends to shareholders of the Company. Following the results of 2008 the total sum of payments under dividends makes 66 million tenge. The company has successfully finished 2009, having shown high rates of increase of the basic financial indicators (table 3). The increase in actives in 2009, in comparison with 2008, has occurred on 39 %, own capital has increased by 114 %, the size of net profit in 3,3 times has exceeded an indicator of 2008. Table 3 Rates of increase of the basic financial indicators of joint-stock company "AstanaFinance" 2007-2009 .

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 01.01.2008 01.01.2009 21 388 463 31 404 227 .. 6 105 034 10 687 650 2 447 162 2 633 586 .. 1 876 343 2 200 000 18 516 178 28 247 825 425 123 522 816 249 907 324 110 (ROA) 1,36 1,23 (ROE) 10,76 12,76 , 133 173 : - 2007-2009.

01.01.2010 43 538 095 25 945 399 5 646 463 3 598 267 37 630 713 260 919 1 078 077 2,88 26,04 478

Overall performance of the company is reflected also by indicators of profitableness of actives and profitableness of the capital. Profitableness of actives in 2009 has made 2,88 %, in comparison with 1,23 % in 2008. Profitableness of the capital has increased from 12,76 % in 2008 to 26,04 % in 2009. Following the results of 2009 the profit on the share has made 478 tenges and in 2,7 times has exceeded level of 2008. In structure of actives of the company in 2009 there were considerable changes - the share of profitable actives from 34 % in 2008 to 75 % in 2009, including at the expense of growth of a loan portfolio and the actives intended for trade has increased, and from 66 % the share of gainless actives has decreased to 25 % accordingly (table 4). For January, 1st, 2010 the volume of a loan portfolio of the Company has made 25,9 billion tenge that in 2,4 times has exceeded level on January, 1st, 2009. In structure of actives the increase in a share of a loan portfolio which on the end of 2009 has made 60 %, in comparison with 34 % in 2008 (Picture 9) also is observed. Table 4 Joint-stock company "Astana-Finance" Actives , , , , - , 01.01.2008 21 388 463 717 711 6 105 034 1 126 671 69 960 4 932 473 3 020 430 4 359 778 538 713 517 693 01.01.2009 31 404 227 887 011 10 687 650 1 102 795 193 404 6 894 011 4 650 242 5 503 924 625 434 859 756 . 01.01.2010 43 538 095 1 038 791 25 945 399 1 078 919 95 245 315 172 6 639 905 4 476 037 2 693 680 530 165 724 782

: - 2007-2009.

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In accounting year the Company has increased the actives intended for trade (debt securities and shares) which, as of January, 1st, 2010, have made 6,6 billion tenge. , .

2006 2007 2008 2009 Picture 9. Dynamics of growth of a loan portfolio of joint-stock company "Astana-Finance" Sale of branches of joint-stock company "Astana-real estate", joint-stock company "Atyraureal estate" and joint-stock company "" has lowered indicators of actives of the Company on objects of building on 95 % in comparison with 2008 and trading debts and advance payments given out on 51 % accordingly. To adequately growth of actives in 2009, there were changes in passives the companies (table 5). The increase in an indicator of own capital has occurred on 114 %, obligations - on 33 % (Picture 10). Table 5 - Company Passives , 570 819 18 516 178 3 229 215 3 485 361 5 195 150 3 185 549 2 219 839 1 201 064 01.01.2008 2 447 162 1 876 343 01.01.2009 2 633 586 1 828 675 -371 325 804 911 28 247 825 3 086 056 9 424 880 7 505 470 4 032 308 2 219 839 1 979 272 . 01.01.2010 5 646 463 3 598 267 -20 231 228 1 816 988 37 630 713 2 636 468 13 012 354 11 684 401 531 529 8 962 299 803 662

: - 2007-2009.

20

2006

2007

2008

2009

Picture 10. Own capital and joint-stock company "Astana-Finance" obligations Own capital of the Company for January, 1st, 2010 has made 5,6 billion tenge. Indicator change has occurred at the expense of increase in the declared authorized capital stock at 97 % and profit capitalizations. In 2009 of the obligation of the Company have grown on 33 % and have made 37,6 billion tenge, in comparison with 28,2 billion tenge in 2008 (Picture 11). , %

2007

2008

2009

Picture 11. Structure of obligations of the Company The increase in obligations has occurred, mainly, at the expense of release indexed subordinated bonds of the Company the general face-value of 8 billion tenge and for repayments in

21

2015. Indicator growth of subordinated debt of the Company debt in 2009 in 4 times has exceeded level of 2008 and for January, 1st, 2010 has made 8,96 billion tenge. In 2009, in comparison with 2008, the Company has increased release of debt securities by 56 % to 11,7 billion tenge, including, at the expense of release of bonds in January, 2009 for a period of 5 years (4,8 billion tenge) and in June, 2009 for a period of 7 years (1,6 billion tenge), and also release of bills for the sum of 2 billion tenge. Within 2009 the Company has increased an indicator of attraction of credits of the Kazakhstan and international banks. For January, 1st, 2010 credits of banks have made 13 billion tenge that on 38 % has exceeded an indicator of 2008. The greatest volume in structure of obligations of the company by results of 2009, credits of banks (35 %), debt securities (31 %) and occupy subordinated debt (24 %). In comparison with 2008 considerable decrease in a share in the advance payments received (from 14 % in 2008 to 1 % in 2009) and to other obligations (about 7 % to 2 % accordingly) is observed. By results of 2009 the indicator of net profit of the Company has made 1078 million tenge that in 3,3 times has exceeded level of 2008 (table 6). The high profit level is caused by increase in volume of pure percentage incomes which following the results of 2009 in 6 times has exceeded level of 2008 and has made 683,3 million tenge. Table 6 Financial results of joint-stock company "Astana-Finance" 2007 1 052 872 610 910 441 962 2008 1 364 909 1 067 490 297 419 -189 599 107 820 1 113 696 1 388 516 89 741 554 485 55 532 97 584 324 110 . 2009 2 918 402 1 994 291 924 111 -240 779 683 332 1 597 467 1 613 380 -209 381 708 051 150 444 -62 432 1 078 077

101 826 340 136 2 235 731 1 934 396 7 610 -140 848 212 161 30 945 249 907 : - 2007-2009.

The percentage income for 2009 has increased by 113,8 % and has made 2918 million tenge, in comparison with 1365 million tenge in 2008. The given increase is connected with growth in 2009 of the percentage actives which basic volume is occupied with loans and the means given to clients - 94 % of total amount of percentage incomes in 2009 (Picture 12). In structure of percentage actives considerable growth of incomes under loans of banks and trading securities also is observed. .

22

2007

2008

2009

Picture 12. Dynamics of a loan portfolio and the percentage income, million tenge Expansion of a spectrum of credit services and favorable credit conditions promote increase in volumes of a loan portfolio that proportionally increases the future percentage incomes. Percentage expenses for 2009, in comparison with 2008, have increased by 87 % and have made 1994 million tenge. The increase in percentage expenses is connected with growth of percentage obligations under the let out debt securities which, following the results of 2009, have made 1208 million tenge and on 93 % have exceeded level of 2008. In 2009 the indicator of reserves on possible losses on percentage actives has made 240,8 million tenge and has increased in comparison with 2008 by 27 % that also is connected with increase in volume of a loan portfolio. The increase in volumes of loan of banks in 2009, has accordingly increased percentage expenses under the loans given by banks on 92 % in comparison with 2008. For January, 1st, 2010 the indicator of percentage expenses under loans of banks has made 733 million tenge. Pure not percentage incomes include the pure operational income of primary activity of affiliated companies, the income of sale of the basic means, net profit on operations with the actives intended for trade and other incomes. For 2009 the indicator of pure not percentage incomes has made 1597 million tenge and has increased, in comparison with 2008, on 43 %. The greatest volume in structure of pure not percentage incomes for January, 1st, 2010 is occupied with the pure operational income of primary activity of affiliated companies (43,5 %) and net profit on operations with the actives intended for trade (30 %). The analysis of structural changes of incomes of the Company shows steady dynamics of growth of a share of percentage incomes from 45 % in 2008 to 55 % in 2009 and decrease in a share of not percentage incomes from 37 % to 31 % accordingly. The greatest relative density in a loan portfolio of the Company have the loans directed on agriculture (29,8 %), building (24,3 %), trade (16,1 %) and operations with real estate (11,9 %) (Picture 13). Thus the share of credits for building has increased from 1,8 % in 2008 to 24,3 % in 2009, credits to the trading companies have grown from 8,54 % to 16,1 % accordingly The share of credits in agriculture in structure of a loan portfolio in 2009 has decreased from 36,9 % to 29,8 %, however in absolute value, in comparison with previous year, the indicator increase has made 3,8 billion tenge (growth on 95 %). The basic volume of the given credits of the Company legal and to physical persons on the end of the accounting period has been directed on acquisition of the basic means and replenishment of turnaround actives, the share in a loan portfolio has accordingly made 41 % and 20 %. The increase in not percentage expenses in the accounting period also has occurred at the expense of growth of percentage expenses of affiliated companies on 86,3 million tenge and a miscellaneous cost for 27,7 million tenge. .

23

2008 2007

2009 2008 2009

Picture 13. Structure of a loan portfolio on economy sectors Operational expenses of the Company in 2009 have made 1613 million tenge and on 16 % have exceeded level of 2008 (Picture 14). , %

2007 2008 2009 Picture 14. A percentage ratio of operational expenses to average actives The indicator of the relation of operational expenses to average actives in 2009 has made 4,3 %, in comparison with 5,3 % in 2008. The greatest volume in structure of operational expenses is occupied with administrative expenses which following the results of 2009 have made 1257 million tenge and have increased in comparison with 2008 by 10 %. Despite increase in absolute value of administrative expenses, their share in structure of expenses annually decreases. Following the results of 2009 administrative expenses have made 35 % of total amount of expenses. Formation of a qualitative credit portfolio, diversified on a branch accessory of clients, terms and crediting kinds was the basic priority of a credit policy of the Company in 2009. The structure of the given out credits is presented by following directions: business crediting, mortgage loans and leasing operations. In structure of a loan portfolio on products for January, 1st, 2010 of 57 % occupy business credits, 31 % leasing and 12 % mortgage loans.

24

For 2009 the Company has given out credits for the sum of 15,8 billion tenge, including: 7,9 billion tenge on business crediting; 2,7 billion tenge on mortgage lending; 5,2 billion tenge on leasing operations. Within 2009 the Company had been realized the programs providing granting of credits as for the enterprises, working in sphere of real manufacture, and for the companies involved in trade area and service.

3 ESTIMATION OF EFFICIENCY OF LEASING OPERATIONS Leasing is difficult enough transaction meaning that its conclusion leads to change of structure, an orientation and the size of monetary streams, for example at comparison with other ways of financing. Also it is necessary to construct so the leasing transaction to receive the maximum total inflow of money resources for both parties. Certainly, the leasing transaction can be more effective in comparison with the credit as last does not possess such flexibility as leasing. Value of the leasing transaction consists as that she allows to receive as certain tax privileges, and that in the leasing transaction is possible interweave other contracts and financial tools and also to dispose of tax privileges more flexibly, as allows to receive from its use the maximum return. Whether the leasing transaction however allows to receive the maximum benefit and to use leasing as the tool in the maximum image? To lay the foundation for the further reasonings we will accept for an axiom the following position, concerning the taxation of any leasing transaction: If the lessor and the leasing receiver are in a group of persons with identical rates of the taxation any outflow of a cash for the lessor turns around inflow for the leasing receiver and on the contrary. That is if the given condition that transfer of profit to the taxation is satisfied will not allow to receive additional benefit and therefore in this case construction of the leasing transaction should be made by other principles. This situation can be described as follows: The leasing company at equality of rates of the taxation can receive benefit only at the expense of the leasing receiver, but both of them can win, if their rates of the tax are various. Let's assume that one party pays the smaller sum of the tax, than another in this case transfer to it gains will allow to save that to both parties, at contract signing, the sum equal to product of this gain on a difference of percent, as will be cash inflow. Distribution of the given benefit between two parties is defined by the contract, as a rule, the party received additional benefit transfers to its other party through the certain mechanism. Last depends on a situation, but for leasing most typically, for example, transfer of additional benefit received by the lessor to the leasing receiver through the lowered leasing payments that is characteristic for the western countries or on the contrary when the additional benefit received by the leasing receiver is reflected in the raised leasing payments to the lessor that is characteristic for the RK. Other prominent aspect of reduction of tax payments is optimum distribution of tax boards and privileges. That is and privileges the tax rate which will be more favourable to transfer a tax board to the party at which falls under the given tax board or a privilege above. The size of benefit here is defined to similarly previous variant. As a special case resulted above a principle it is possible to result the maximum use of tax privileges and boards. That is the maximum benefit can be received by both parties if in excess supply much a tax board or a privilege will be transferred the party which tests their lack. Position at

25

which the available tax board or a privilege allow to deduce from under the taxation the sum big is meant surplus, than available that can turn out at not enough high profit of one party. Certainly there is nobody not a secret that this mutual benefit occurs at the expense of the government. On the one hand, the government receives benefit from the leasing contract as it can tax leasing payments. On the other hand, the leasing contract allows one party, for the RK it, as a rule the leasing receiver, to use amortization and leasing tax boards which other party cannot use or which use does not allow to receive the maximum effect that is characteristic for the lessor. However, with application of the accelerated amortization and reference of leasing payments on the cost price, the government suffers dead loss as a result of leasing, at an estimation from the point of view of current cost. So, from all above told it is possible to draw a conclusion that that both parties could receive the big return from the leasing transaction, that is for increase of its economic efficiency, it is necessary that their rates of the tax were various. It is necessary to notice that the real conditions to resulted above are closer, the the big benefit can be received with use of the tool of leasing. To move we will result examples of leasing transactions as much as possible answering to the given perfect conditions further and we will show, how received benefit is formed and pays off. In the given schematical leasing transactions the lessor - the leasing company and the leasing receiver - business concern "And" takes part two parties. We will consider changes in monetary streams caused only the concluded leasing contract. As, for comparison, we will consider a variant at which the leasing receiver buys the equipment at the expense of own means. Conditions of the leasing transaction: Firm "And" is going to buy in 1000 thousand equipment in cost tg. It will serve 5 years and then will leave on a dump. Firm "And" is assured that capital investments in the new equipment are favorable also it can get considerable profit on use of the given equipment. However there are some ways of financing of purchase of the equipment, among which purchase at the expense of own means, at the expense of the credit and leasing. Also firm "And", being engaged in the commercial activity, surtax at a rate of 30 % pays. The leasing company pays the profit tax at a rate of 20 %. Further changes in movement of a cash for following variants are considered: At purchase of the equipment at the expense of own means At signing of the leasing contract Variant 1 Purchase of the equipment by firm "And" at the expense of own means. In table 7 consequences of movement of a cash are reflected at equipment purchase, that is signing of the contract of purchase and sale. These consequences the following: At purchase of the equipment firm "And" has paid 1000 thousand tg. Also at purchase of the equipment the firm has paid the VAT at a rate of 140 thousand tg. However the given sum of calculation does not undertake as the firm can keep the given sum from the VAT received from buyers, that is will return itself the paid sum of the VAT. At rough calculation the given tax will not lead to change in a cash stream as outflow of money now will be compensated inflow later. At more exact calculation it will be necessary it is taken into account a difference in time between payment of the VAT and its returning, discounted the given sum to calculate change in cost between the today's paid money and tomorrow's received on offset. The given time rupture depends on a situation and in the given example is not considered. Table 7 cash Movement at purchase of the equipment by firm "And" at the expense of own means . 1 2 3 4 5

26

 , . tg. , . tg. ( ) ( ), . tg. , . tg.

-1 000 75 -140

75

75

75

-925

75

75

75

As firm "And" owns the equipment it can charge on it deterioration, that is carry on amortization its cost. Thus that the tax rate for firm "And" makes 30 % a tax board of amortization (that is the sum deduced from under the taxation by the profit tax, increased by the rate that is cash inflow) will make 45 thousand tg. Annually at the amortization rate of equal 25 % annually. Also the column "Privilege" is resulted. In the given column with the greatest probability the sum carried on the cost price as a capital investment, however the given privilege should be reflected is not always accessible and for the given example we will admit that firm "And" cannot receive it. Other taxes (the VAT, the tax to property and etc.) are not taken by me into account as the main task to compare structures of monetary streams (to be exact to tell distinctions generated in them) for defined above variants and because the given taxes are inherent in all these variants or do not play a considerable role that them it is possible to exclude from consideration. Variant 2 The conclusion of the leasing contract firm "And" In this case equipment purchase will be made by the leasing company. And as leasing cost on a straight line depends on cost of used monetary resources for its reduction the leasing company will use the cheapest resources. Here the most perspective direction the variant when firm "And" money resources are involved is represented. This variant is perspective that many firms which consider possibilities of investments into development of manufacture do not take into consideration leasing as the tool allowing to receive greater effect from an investment of means. When firm "And" though has free money resources, but however there is other cheaper source that and the leasing company will accordingly borrow means from the last. So, as more perspective we take the first variant which is represented in Picture 15.

Picture 15. A perspective variant Further, as well as in the previous case we will consider two tables of movement of a cash for the leasing company and firm "And" of the leasing receiver. The first will present the table of the leasing company as in it values of some variables which are used further in the table of the leasing receiver are counted up. To begin with, as a base condition, we set level of profitableness for the leasing company and considering relative simplicity and non-risk for it we will set 10 thousand tg. In a year from the given transaction. It is as a result obtained given below-mentioned tables 8. Table 8 - Movement of a cash for the leasing company

27

 , . tg.

1 -1 000 -140

1200 % -1199 -1 1 261,25 13,75 () 140 0 , . tg. - 252,25 -2,75 , . tg. 10 10 0 0 0 In table 8 consequences of movement of a cash for the leasing company are reflected at signing of the leasing contract with firm "And". These consequences the following: For equipment purchase the leasing company used the involved means at a rate of 1200 thousand tg. Simultaneously with credit reception the leasing company concludes the contract of purchase and sale and according to it pays cost of the equipment of 1000 thousand tg. And the 200 thousand VAT tg. On conditions of the concluded credit contract of payment are carried out in two stages. At the first stage the leasing company returns the basic part of a debt of 1199 thousand tg. And on second 1 thousand tg. Also under treaty provisions the percent is not paid for the involved resources. Leasing payments pay off so that to cover all costs of the leasing company, namely return of the credit resources involved with it, tax payment which leasing company should pay and provide to it profit after the taxation at a rate of 10 thousand tg. By the leasing company together with leasing payments has been listed the VAT from which it accordingly subtracts the sum of the VAT of the equipment paid at purchase. Other taxes are not taken into account. (Point 5) see the previous table. In table 9 consequences of movement of a cash for the leasing receiver are reflected at signing of the leasing contract. Table 9 Movement of a cash for the leasing receiver - firms "And" , . , . , . tg. ( ) , . tg. , . tg. 1 -1 200 1 199 -1 261 -252,3 378,38 225 -658,9 2 1 -13,75 -2,75 4,125 75 66,375 0 0 0 0 0 0 3 4 5

On many points cash movement are identical both to the leasing receiver and for the lessor, but with different signs. In a final variant these consequences the following: The loan at a rate of 1200 thousand tg. has been granted to the leasing company. For equipment purchase.

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On conditions of the concluded credit contract return is carried out in two stages. At the first stage the leasing company returns the basic part of a debt of 1199 thousand tg. And on second 1 thousand tg. Also under treaty provisions the percent is not paid for the involved resources. Firm "And" according to conditions of the concluded contract should pay two leasing payments. The first leasing payment at a rate of 1261 thousand tg. And the second at a rate of 13,75 thousand tg. Firm "And" also pays the VAT at a rate of 14 % from the sum of leasing payment. However the given sum of calculation does not undertake as it can be read out the leasing receiver later at reception of the corresponding sums of the VAT at realization. Leasing payments exclude the profit tax. That is at 30 % tax level the tax board at a rate of 378,38 thousand tg. is formed. In the first year and 4,125 thousand tg. On the second year. Amortization charges operate by the same principle, as leasing payments and too accordingly generate a tax board at a rate of 225 thousand tg. In the first year and 75 thousand tg. on the second year. So, after have carried out calculation of direct streams of a cash resulting purchase of the equipment by firm "And" at the expense of own means and the direct streams of a cash arising at the lessor and the leasing receiver of same firm "And" it is necessary to estimate them. Direct stream of a cash usually consider rather not as a risky stream which investors could discount under approximately same rate, as well as payments under the provided loan. For our case it is especially true, as risks can be almost excluded. A unique exception are tax boards for which discounting rate can be raised, as they in character possess other degree of risk. It is natural as for example in our case there is no doubt that the firm can receive leasing payments, the credit also will be returned, the VAT is paid and read out, but there is no guarantee that the necessary profit will be got to apply tax boards. Basically it is possible to use various rates of discounting for every line in tables where each rate will be chosen so that to correspond to risk of a stream of a cash of this line. We will arrive on another, namely we will consider that the risk for all streams of a cash is identical and minimum. Further we will describe conditions at which given above-stated statement truly and accordingly we take one rate of discounting for all streams and we will accept it as for the credit with the minimum risk. It is the most logical to take its interest rate equal to level on which the firm could take the provided credit. We will assume that the rate of loan percent is equal 40 %. Now, when the discounting rate is established, we will count up current cost of a stream of a cash. For this purpose we discount the sum of results of all tables on 40 %. The received result is resulted in table 10. Table 10 Pure current cost (an estimation of monetary streams for the leasing receiver) . 1 2 3 4 5 -925 75 75 75 0 -805,8 -658,9 66,375 0 0 0 -611,4 ( ) 10 10 0 0 0 17,142 Apparently from the table the gained effect at the conclusion of the leasing contract at comparison with purchase of the equipment by firm "And" at the expense of own means reaches considerable size. Namely as a result of the used scheme economic benefit at a rate of 211,512 thousand tg. both party is received. The mechanism of the concluded contract has provided distribution of the received benefit (prevalence of inflow over outflow of money resources) between the parties in size:

29

17,142 thousand tg. The leasing company (according to 10 thousand in the first year and 10 thousand tg. has received. In the second) 194,367 thousand tg. Firm "And" has received (accordingly inflow of a cash to the first year has made 266,1 thousand tg., in the second year outflow of a cash at a rate of 8,625 thousand tg., in the third and the fourth on 75 thousand) As a conclusion it is possible to notice that the leasing contract concluded under the scheme 2 allows to get considerable profit in comparison with purchase of the equipment at the expense of own means. However it represents ideal and not always an achievable variant. The result that will be closer to maximum, than real conditions to described above are closer. Namely, before the leasing company it is necessary to find a problem as it is possible greater number of firms answering to perfect conditions and to convince them to conclude the leasing contract which in turn will allow both parties to receive the maximum benefit. Also here it is possible to draw a conclusion that with other things being equal, the potential income for the leasing receiver and the lessor is more, when following conditions are met rate of the profit tax for the leasing receiver is more than rate of the lessor; the amortization tax board is received at an early stage of action of the leasing contract; the discounting rate is high; possibility of reception of additional tax privileges in connection with the conclusion of the leasing contract.

30