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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 TAKASBANK ISE SETTLEMENT AND CUSTODY BANK INC. AFFILIATE MEMBER Emin Catana President and CEO Takasbank is honored to be an Affiliate Member of the Federation of Euro-Asian Stock Exchanges. First of all, I would like to thank the FEAS Membership for their initiative to embrace Central Securities Depositories (CSDs) and Clearing & Settlement Institutions as “Affiliate Members”. Functional Titles of the Affiliate Member • Central Securities Depository of Turkey, • Clearing and Settlement Institution for ISE markets, • Clearing House for the Turkish Derivatives Exchange, • National Numbering Agency of Turkey, • Custodian for the Mutual Funds and Pension Funds incorporated in Turkey. Services Provided • Execution of corporate actions, • Safekeeping of physical securities, • Custody and transfers of securities in book-entry form, • Web based monitoring service for the investor sub-accounts, • Central clearing and settlement for the organized market (based on multilateral netting), • Real time gross DvP “member to member” settlement, • Settlement and custody for foreign securities, • Cash settlement and transfer facilities CONTACT INFORMATION PAGE 78 I believe the inclusion of Central Securities Depositories (CSD) and Clearing & Settlement Institutions will complement all the hard work that the Stock Exchanges have endeavored to accomplish for the sake of our markets. I believe, this new initiative will bring enriched expertise and knowledge into FEAS, in the areas of clearing, settlement and custody, which are vital components of organized securities markets. The inclusion of CSDs and Clearing & Settlement Institutions should also be expected to complement all the hard work that the member exchanges have endeavored to accomplish, since the inception of this organization and for the sake of FEAS markets. (domestic and cross-border), • Takasbank Money Market, • Securities Lending and Borrowing, Cash Credits, • Allocation of ISIN for securities issued in Turkey. Type of Commercial Entity Private sector for-profit company (non-deposit taking banking institution) Ownership Istanbul Stock Exchange (ISE): 26% Banks (20): 40% Brokerage Houses (70): 34% Board of Directors (11 members) Istanbul Stock Exchange: 4 Capital Markets Board: 1 Banks: 3 Brokerage Houses: 2 and the President and CEO of Takasbank Regulated by Capital Markets Board Banking Regulation and Supervision Board Central Bank of Turkey. Contact Name Mr. Osman Gunsel Topbas E-mail gtopbas@takasbank.com.tr Website www.takasbank.com.tr I am pleased to say that Takasbank will be excited and ready to share the experience and knowledge it has accumulated in Turkey and in the international markets for a relatively long period of time, with its peers at FEAS. Last but not the least, I would like to thank the President of FEAS, the Secretariat and all members for their trust and friendship in accepting us as an affiliate member to the FEAS family. Form of Securities Physical, bearer, immobilized. Form of Settlement Book-entry. Settlement Period Equities: T+2 Bonds and Bills: T+0 Does the CSD act as a central counter party? Yes (However, settlement is not fully guaranteed. Default procedure is applied.) Size of Guarantee Fund (as of March 2005) ISE Equities Market: US$ 24.1 million ISE Bonds and Bills Market: US$ 37.6 million Memberships to International Organizations: Association of National Numbering Agency (ANNA), International Securities Services Association (ISSA), Society for Worldwide Interbank Telecommunications (SWIFT).
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 KARACHI STOCK EXCHANGE Muhammad Yasin Lakhani Chairman The Karachi Stock Exchange (KSE) has achieved another milestone as the KSE 100 Index crossed the level of 6000 points and closed at 6218.4 points on December 31, 2004 and the market capitalization increased from US$ 16.6 billion to US$ 29.0 billion. The record-breaking performance of the KSE during the last five years is attributed to the positive and consistent policies of the government and a number of measures implemented by the Exchange including stringent risk management. The consistent policies and measures adopted by the Exchange was instrumental in the Exchange being declared as “The Best Performing HISTORY AND DEVELOPMENT The KSE has been declared as the “Best Performing Stock Market of The World For the year 2002”, as declared by the international magazine “Business Week”. Similarly the US newspaper, USA Today, termed Karachi Stock Exchange as one of the best performing bourses in the world. As of December 31, 2004, 661 companies were listed with the market capitalization of US$ 29.0 billion having listed capital of US$ 6.8 billion. The KSE 100 Index reached 6,218.4 on December 31, 2004. The KSE came into existence on 18 September 1947. It was later converted and registered as a company limited by guarantee on 10 March 1949. Although as many as 90 members were licensed at that time, only half a dozen were active as brokers. Initially, only five companies were listed with a paid-up capital of Rs 37 million (US$ 0.62 million). In 1991 the secondary market was opened to foreign investors on an equal basis with local participants. This measure, along with a policy of privatization, has resulted in rapid growth of the market since 1991. Privatization has been adopted as a philosophy, and activities that were previously reserved for the public sector have now been opened to the private sector. The change is most marked in the financial sector where a number of commercial banks, investment banks, discount institutions, leasing companies, life insurance companies, Modarabas and mutual funds have been created by private initiatives. The KSE has taken a number of measures to increase investor’s confidence by making the Exchange more transparent and introducing modern technology in order make the market truly modern and efficient. Market of the World” for the year 2002 by international magazine “Business Week” and a US newspaper “USA Today”. The KSE has taken a number of measures to increase investor’s confidence by making the Exchange more transparent and introducing modern technology in order to convert the market into a truly modern and efficient one. In this regard Internet based trading has started from December 6, 2004. Margin Financing has also been introduced from October 08, 2004 and phasing out of existing COT companies would be completed by June 30, 2005. In addition, corporate The regulatory agency is the Securities & Exchange Commission of Pakistan (SECP), formed on 1 January 1999 by dissolving the Corporate Law Authority that was established in 1981. The SECP administers the compliance of the Companies Ordinance, 1984, the Securities and Exchange Ordinance, 1969, the laws governing Modarabas, leasing companies, NBFIs and other corporate laws, and is run by five commissioners under the chairman. The Asian Development Bank’s Capital Market Restructuring Plan envisages the conversion of the CLA into the SECP as an autonomous regulatory authority. The new system provides autonomy to the SECP, and at the same time an accountability mechanism through the establishment of the Securities and Exchange Policy Board. All policy decisions are made by the Board on recommendation of the SECP, which is also empowered to take suo moto action and is answerable to the Parliament. governance is now the part of KSE’s listing regulation. Transparency has been enhanced with the implication of quality audits, quarterly financial reports and timely dividend payouts. Out of 23 offerings in year 2004, three were of state owned entities whose shares were allotted under government's privatization program and the government offloaded additional shares of SSGC and PIA whereas PPL's shares were offered for the first time to the market participants. The PPL offering received a record 755,000 applications for its 15% public offering. FUTURE OUTLOOK The coming period is expected to be very challenging and the KSE is contemplating the initiation of further projects and initiatives to ensure that the KSE should remain one of the premier growing stock exchanges of the world. The future goals are as follows: • listing of companies on the OTC counter to pave way for the smaller companies to raise financing through the stock exchange; • introduction of new derivative products including Index Futures; • introduction of cross border listings; • introduction of new indices, which are more market reflective & representative; • increase in the free float by bringing more companies to the KSE and also to encourage the already listed companies to increase their capital and / or to make their shares available in the market; • educate the investors and guide and train the brokers and their staff; • publish guides on investment in equity in local languages; • promote quality research and to encourage careers in this important area; • strengthen the existing monitoring of compliance with the code of Corporate Governance by listed companies; • strengthen the Market Monitoring and Surveillance Department; and • consolidation of the existing Exchange Rules & Regulations in a single Rule Book. 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