Fitch Ratings - London/Moscow - 25 January 2007: Fitch Ratings has today affirmed Kazakhstan-based Astana Finance’s ratings at foreign and local currency Issuer Default ‘BB+’,  Short-term foreign currency ‘B’, senior unsecured ‘BB+’, National Long-term ‘A+(kaz)’, Individual ‘D/E’ and Support ‘3’. The Outlooks on the Issuer Default and National Long-term ratings are Stable.

AF’s Issuer Default, National and Support ratings reflect Fitch’s opinion that there is a moderate likelihood that support would be made available to it from the municipality of Astana (not rated) or potentially the Kazakhstani sovereign (rated foreign currency Issuer Default ‘BBB’/Positive Outlook), in case of need.

The municipality of Astana has been supportive of AF to date in terms of equity injections, subsidised funding, and first refusal on investments, among others. A letter of comfort from the municipality of Astana has been included in each eurobond prospectus of AF. However, the municipality of Astana itself has relatively limited funds specifically set aside that might be used to support AF. Consequently, sovereign support could be necessary, should more significant support be needed by AF than can be diverted at short notice from other municipal resources. Given, among other factors, the moral obligation the comfort letter creates on the country’s flagship capital city to support AF, Fitch views there also to be a moderate probability that support might flow through from the Kazakhstani sovereign.

Any movement in AF’s Issuer Default rating would likely reflect a change in Fitch’s opinion regarding the propensity of the municipality of Astana and/or the Kazakhstani sovereign to provide timely support to AF. AF took a substantial position in a Russian fund in 2006 (it has since closed the position at a substantial profit) and has periodically opened large FX positions. The propensity for either authority to provide support may be weakened should AF incur losses in such ‘non-core’ activities (i.e. those activities not related to financing or providing other financial services to businesses and individuals in Astana and the Akmola region). AF has assured Fitch that it does not intend to take material speculative positions (like the one in the Russian fund) again. However, should ‘non-core’ positions arise more frequently or there be material speculative trading in local securities over and above moderate positions required to support brokerage activities, the risk of losses on ‘non-core’ activities may increase. In turn, Fitch’s views on the likelihood of support being forthcoming may change, which could negatively affect AF’s ratings.

AF’s Individual rating of ‘D/E’ reflects its small size, potentially volatile profitability, substantial concentrations and high leverage. Its loan book is very concentrated, both by name and on the agriculture and construction/real estate sectors. While asset quality has been adequate to date, the loan book has been growing fast, so impaired loans could rise as loans season.

AF was created in 1997 by the municipality of Astana to facilitate development finance (loans, leasing and equity) for Astana, the rapidly growing new capital of Kazakhstan and for the surrounding Akmola region. It has since diversified geographically and into certain aspects of investment banking. AF is 25.5%-owned by the municipality of Astana.