Ownership Equity Calculation

Calculation of normative indicators of the adequacy of own funds of Zaman as of 01.01.2020

The following was Approved by the Government of the Kyrgyz Republic

on 15 August 2011,

REGULATION N°467

Norms for capital adequacy established for professional securities market participants.

• General regulation

• Indicators for ownership equity adequacy

• General regulation

• The present regulation has been developed in accordance with the Law of the Kyrgyz Republic on « Securities market » and sets the necessary norms for capital adequacy; these are to be maintained by professional participants of the securities market.

• Maintaining the norms for capital adequacy is necessary for the following reasons:

–          Creating a base for sustainable and profitable growth ;

–          Limiting risks related to operations with securities ;

–          Timely coverage of losses and potential damage associated with activities of professional market participants:

–          Increasing investor trust in professional securities market participants.

• Aside from the norms set herewith by the present Regulation, the relevant government agency overseeing the securities market will take into consideration other factors such as:

–          Quality of management

–          Keeping up with securities market legislation

–          Liquidity

–          General economic viability.

• Calculation of capital adequacy norms is performed by the participants, in accordance with international accounting standards and presented on a quarterly basis to the relevant government agency overseeing the securities market.

• Ownership equity/capital adequacy indicators.

Ownership equity – is a net asset value of the company, defined as a difference between the value of its assets and its liabilities.

Ownership equity is comprised of:

–          Fully paid-in registered capital;

–          Additional paid-in capital;

–          Retained earnings;

–          Reserve capital;

–          Shareholders’ surplus

• At the time of the application submission for a license to conduct a professional activity on the securities market and during the entire period of the license validity, ownership equity norms as defined in section 7 of the present Regulation must be in accordance with the rules established in section 9 of this Regulation.

• Ownership equity for professional securities market participants must in no case be smaller than the minimal size of the registered capital as defined in section 8 of the present Regulation for each type of professional activity exercised on the securities market.

• The minimal size of the registered capital for professional securities market participants must in no case be smaller than the following estimated indicators (e.i.) established by the legislation of the Kyrgyz Republic:

–          Depository activity – 15000 e.i.

–          Clearing activity – 15000 e.i.

–          Organizing securities market trades (stock exchange) – 170000 e.i.

–          Asset management activity – 10000 e.i.

–          Dealership activity – 7500 e.i.

–          Brokerage activity – 5000 e.i.

–          Registrar of securities owners – 3000 e.i.

–          Investment fund activity – 15000 e.i.

• In cases where more than one type of securities market activities are being conducted on a combined basis, the minimal size of the registered capital is defined in accordance with the activity for which the highest minimal size is required.

• The liquidity ratio (LR) is determined for the purposes of evaluation and provision of sufficient liquid assets. This ratio is defined as a relationship of highly liquid assets to the sum of short-term liabilities and expressed as below:

LR = LA / SR, where:

LA is the sum of highly liquid assets and includes:

• 1)Cash

• 2)Bank deposits

• 3)Government securities

SL is short-term liabilities combining:

• 1)Creditor debt

–          Tax debt

–          Accrued wages/withholdings

–          Social services debt

–          Other creditors

• 2)Short-term bank loans.

Short-term liquidity ratio must not be lower than 0.5.

• Professional securities market participants must maintain combined liabilities at a level not exceeding five times ownership equity.

Combined liabilities include:

–          Bank loans;

–          Other credit lines;

–          State budget payments;

–          Social insurance payment;

–          Wages payment;

–          Advance payments from clients;

–          Dividend payment;

–          Other payables

• Professional securities market participants must create a reserve fund of a size no smaller than 5% of the combined debt payable.