Kse

Karachi Stock Exchange (G) Limited

Welcome To The Presentation On KSE 1

Karachi Stock Exchange (G) Limited

The Premier Stock Exchange of the Country • Established in September 18, 1947 - Incorporated as Company Limited by Guarantee • Initially 5 companies with a paid-up capital of Rs.37 million

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KARACHI STOCK EXCHANGE • Membership of KSE is presently fixed at 200 as per Articles

• Prospective members have to purchase a seat from the existing members • The price of the membership seat is freely negotiable between the buyers and sellers • Since June 1990, membership is open to corporate entities. Presently there are 156 corporate members of whom 10 are listed companies • Foreign investors are allowed to hold up to 100 percent shareholding in corporate brokerage houses

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Company Limited by Guarantee ? • A Company Limited by Guarantee has the following significant features: • Company is without share capital • Number of members is fixed by the articles • Membership is transferable subject to the membership criteria as laid down by the Board • Surplus funds are not distributable to the members in any manner • The funds are used only for the purpose of promoting the objectives of the company

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MANAGEMENT AFTER RESTRUCTURING in 2003 Board of Directors • Consist of 10 Members • 5 elected member directors • 4 Non Member Directors are appointed by SECP • MD is ex-officio member of the Board

Chairman of the Board • Elected by the Board out of the Non-Member Directors Management of the Exchange • As per Article, MD is responsible for the operational & administrative matters of the Exchange

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KSE – Key Facts Number of companies

655

Listed Capital

US$ in billion

8.77

Market Capitalization

US$ in billion

50.55

KSE 100 Index

11296.62

Average Daily Turnover (T+3)

Shares in million

219.32

Average Value Daily Turnover (T+3)

US$ in Million

391.62

Average Daily Turnover (Future)

Shares in million

Average Daily Turnover (Future)

US$ in Million

70.28 174.78

As of March 21, 2007 6

KSE – Indices Presently three indices are maintained:

• KSE 100 Index KSE 100 is widely reported and has representation of all sectors listed on the exchange. It is a capital-weighted index and consists of 100 companies representing about 88% of total market capitalization of the Exchange.

• KSE 30 In line with the international best practices recently KSE introduced, KSE-30 Index using the “Free-Float Market Capitalization” methodology and is live from September 1, 2006. In addition to other criteria the companies included which have minimum free-float shares of 5% of the total outstanding shares and securities traded for 75% of the total trading days. The scrip should be in the top companies, ranked on the basis of liquidity i.e., trade value of shares.

• KSE All Share Index : It is a capital-weighted index and consists of all companies. 7

KSE – Key Facts • Automation Started • In September 1997 with Computer Based Trading started in Selective Scrip under KATS • In May 1998, Open-Out-Cry System was Completely Abolished - For Fair, Transparent, Efficient & Cost-Effective Trading •

By 1999 & 2000, Trading System & Servers were Upgraded

• In-house Developed Trading System • • • •

In 2002, Implemented Home Grown TS Capability of Executing 500,000 Trades a Day Peaks Of 1,000,000 Trades Sustainable For 10-15 Minutes 2000 Plus TWS

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KSE – Key Facts Average Daily Trade 160000 134,470

140000

124,345

120000 100000

84,271 71,503

80000 60000 40000

40,639 24862

20000 0 2001

2002

2003

2004

2005

2006

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KSE – Key Facts Average Daily Turnover T+3 & Future Avg. Daily Turnover T+3

Avg. Daily Turnover Future

400

366

344

350

309

300

262

250 200

171

150 100 50

117

97 15

35

54

83

70

0 2001

2002

2003

2004

2005

2006 10

KSE – A Modern Electronic Exchange • Fully automated trading, clearing and settlement system. • KATS (Karachi Automated Trading System) can handle over 500,000 trades daily

• Internet-routed trading facility • Market information available on a real-time basis nationally as well as internationally via satellite

• Investors and fund managers can also access information through (Display Only Terminal). •

Few T.V channels also display KSE ticker. Live display boards are also available at major places like Airport.

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KSE – Key Facts • Foreign investors are at par with local investors; 100% foreign shareholding is allowed

• No permission required for setting up of any industry except alcohol, arms and ammunition •

Free repatriation of profits and principal

• No capital gains tax on purchase and sale of listed securities up to 2008 • Dividend is taxed as a separate block of income @ 10%

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Visitors / Investors

• Around 4000-5000 people visit the Exchange for trading purposes

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Legal Framework The Regulator:

• Securities and Exchange Commission of Pakistan (SECP) - regulatory body for the securities market. Setup in pursuance of the SECP Act 1997

• The Act provides administrative authority, operational and financial autonomy in carrying out regulatory and statutory responsibilities and at the same time an accountability mechanism through its Policy Board

• The Policy Board is answerable to the Parliament

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KSE’s Performance is Attributable to:

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Market Development and Operational Efficiency •

Appropriate regulatory framework and enforcement (protection of minority shareholders)

•

Efficient Clearing & Settlement system (NCCPL)

•

Availability of live market data and instant disclosure of information in general

•

Electronic settlement of deliveries (CDC)

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KSE’s Performance is Attributable to (cont.): Corporate Reforms

• Code of Corporate Governance • Timely holding of AGMs • Responsibilities of Directors enhanced • Quality audits • Quarterly financial results • Enhanced disclosure requirements 17

KSE’s Performance is Attributable to (cont.): Capital Market Reforms & Initiatives • Implementation Of T+3 Settlement System Since September 2001 •

Trades executed on a trading day are to be Settled on third day

•

Else it either goes to settlement Delivery Vs Payment (DVP)

•

Or is to be financed under CFS

• Risk Management •

Introduction of Client Level Netting from March 5, 2007

•

New VaR based Margin regime implemented from Dec-04, 2006

•

UIN Registration

•

Capital Adequacy

•

Pre-Trade Verification

•

Exposure Monitoring

•

Market Surveillance & Control

•

Circuit Breakers 18

Listed Companies Performance Paid-up Cap.

(Rs. Billion)

Sales

(Rs. Billion)

2001

2002

2003

2004

2005

% INC.

226

277

300

375

473

109

1112 1169

1329

1538 1805

62

Profit Before Tax

62

93

138

227

326

425

Taxation

29

36

47

61

93

222

Profit After Tax

33

57

91

166

233

606

Dividend Amount

41

57

63

100

140

242

(Rs. Billion) (Rs. Billion) (Rs. Billion)

(Rs. Billion) 19

KSE’s Performance is Attributable to (cont.): SECTOR-WISE DIVIDEND YIELD – 5% & above SECTORS

DIVIDEND YIELD 2005

Close End Mutual Fund

13.96

Investment Banks & Sec. Companies

11.59

Leasing Companies

9.24

Fertilizer

8.60

Modarbas

7.94

Power Generation

6.74

Engineering

6.53

Tobacco

6.15

Cable & Electrical Goods

5.93

Oil & Gas Exploration

5.29

Oil & Gas Marketing

5.22

Automobile Assembler

5.00

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Best Performing Market of the World The Karachi Stock Exchange was declared as “The Best Performing Market of the World” in the year 2002, registering an increase of 112% in the KSE 100 Index. In years 2003 and 2004, the Exchange was also amongst the Top 10 Best Performing Markets of the World and the Index increased by 65% and 39% respectively.

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KSE 100 VS Other World Markets As On December 31, 2002 EXCHANGE

INDEX

Increase in Points

%

KSE

KSE100

1428.35

112.20

Argentina

MerVal

229.56

77.71

Kuwait

KSE Index

660.40

38.63

Colombo

All Share

194.07

31.25

Bangkok

Set

52.63

17.32

Mumbai

BSE 30

114.95

3.52

New Zealand

NZSX 40

(107.87)

(5.25)

Kuala Lumpur

Composite

(49.77)

(7.15)

Australia

AORD

(384.40)

(11.44)

NYSE

Dowjones

(1679.87)

(16.76)

Brazil

BVSP

(2310.00)

(17.01)

Singapore

Straits Time

(282.57)

(17.40) 22

KSE 100 VS Other World Markets As On December 31, 2002 EXCHANGE

INDEX

Increase in Points

%

China

Shanghai Comp.

(288.32)

(17.52)

Hong Kong

Hang Seng

(2075.92)

(18.21)

Tokyo

Nikkei

(1963.67)

(18.63)

London

FTSE

(1277.00)

(24.48)

Amsterdam

AEX General

(184.05)

(36.32)

Frankfurt

Dax

(2267.47)

(43.94)

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KSE 100 VS Other World Markets As On December 31, 2005 EXCHANGE

INDEX

Increase in Points

%

Seoul

Composite

483.45

54.0

KSE

KSE 100

3338.21

53.7

Mumbai

BSE 30

2795.24

42.3

Tokyo

Nikkei

4622.67

40.2

Colombo Frankfurt

All Share Dax

415.32 1152.18

27.6 27.1

Amsterdam

AEX General

88.70

25.5

Paris

CAC 40

894.07

23.4

London

FTSE

804.50

16.7

Jakarta

Composite

161.75

16.2

Australia

AORD

655.70

16.2

Singapore

Strait Times

281.20

13.6

New Zealand

NZSX 50

306.07

10.0

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KSE 100 VS Other World Markets As On December 31, 2005 EXCHANGE

INDEX

INCREASE IN POINTS

%

Bangkok Taiwan Hong Kong NYSE Kuala Lumpur

SET T.Weighted Hang Seng NASDAQ Composite

45.63 408.65 646.29 29.88 -7.64

6.8 6.7 4.5 1.4 -0.8

China

Shanghai Composite

-105.44

-8.3

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KSE 100 VS Other World Markets As On December 31, 2006 EXCHANGE

INDEX

Increase in Points

%

China

Composite

1514.41

130.43

Jakarta

Composite

642.88

55.29

Mumbai

BSE 30

4388.98

46.7

J ’ Burg

All Share

6818.66

37.68

Argentina

MerVal

547.15

35.45

Hong Kong

Hang Seng

5088.29

34.20

Norway

OSLO

125.60

33.34

Brazil

BVSP

11018

32.93

Singapore

Strait Times

638.49

27.20

Frankfurt

Dax

1188.66

21.98

Kaula Lumpur

Composite

196.45

21.83

Taiwan

T. Weighted

1275.38

19.48

KSE

KSE 100

483.89

5.06

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KSE 100 VS Other World Markets As On December 31, 2006 EXCHANGE

INDEX

INCREASE IN POINTS

%

Seoul New Zealand BangKok

Composite NZSX 50 Set

55.09 -41.25 -33.89

3.99 -1.22 -4.75

Since January 01, 2007 the KSE – 100 Index increased by 1256 points (13%) 27

Crash & Surge CFS facility Implemented

Improvement in Indo-Pak Settlement Relations Crisis

Indo-Pak Tension

Improving Economy

New Economic Agenda 11,000.00 10,500.00 10,000.00 9,500.00 9,000.00 8,500.00 8,000.00 7,500.00 7,000.00 6,500.00 6,000.00 5,500.00 5,000.00 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00

Change of Regime

CVT Levy

Terrorists Attack in US (9/11)

Nuclear Tests

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15-Mar-06

30-Jun-05

1-Mar-05

31-Dec-04

30-Jan-04

18-Sep-03

20-May-03

17-Dec-02

23-Jul-02

28-Feb-02

28-Sep-01

30-Apr-01

23-Nov-00

4-Jul-00

9-Feb-00

10-Sep-99

20-Apr-99

18-Nov-98

26-Jun-98

14-Jan-98

S&P Upgrades Pakistan’s Rating

Crisis, D. Jones Index Average Declines & Subsequent Performance EVENT Exchange closes WW1 German invades France Korean War Eisenhower heart attack JFK Assassination

REACTION DATES

% LOSS

22 July 1914 to 24 Dec 1914 9 May 1940 to 22 June 1940 23 June 1950 to 13 July 1950 23 Sep 1955 to 26 Sep 1955 21 Nov 1963 to 22 Nov 1963

(10.20) (17.10) (12.00) (6.50) (2.90) 29

Crisis, D. Jones Index Average Declines & Subsequent Performance EVENT US Bombs Cambodia Arab Oil Embargo Nixon Resigns Financial panic 1987

REACTION DATES

% LOSS

29 Apr 1970 to 26 May 1970 16 Oct 1973 to 5 Dec 1973 7 Aug 1974 to 29 Aug 1974 2 Oct 1987 to 19 Oct 1987

(14.40) (18.50) (17.60) (34.20)

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Crisis, D. Jones Index Average Declines & Subsequent Performance

EVENT Iraq invades Kuwait Asian stock market crisis WTC & Pentagon attacks

REACTION DATES

% LOSS

2 Aug 1990 to 23 Aug 1990 7 Oct 1997 to 27 Oct 1997 11 Sep 2001 to 21 Sep 2001

(13.30) (12.40) (14.30)

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Associated Companies

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Associated Companies Central Depository Company of Pakistan

% of Equity 39.81%

CDS is an electronic book entry system to record and transfer securities. It is the system in which securities do not physically change hands, but are transferred electronically from one client’s account to another. KSE investment (As of June 2006) Rs.39.808 Million (7.5023 Million shares) Book value Rs.70.22 per share of Rs.10

National Clearing Company of Pakistan Limited

47.06%

As a part of Capital Market Development programme of Asian Development Bank (ADB) in Pakistan, the Capital Market Project Consultants (Arthur Anderson & Co.) mandated to develop recommendations for a National Clearing & Settlement System (NCSS) to replace the separate and individual Clearing Houses of three Stock Exchanges i.e. The Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE) by a single and centralized entity. NCSS is an electronic clearing & settlement system which has been developed to replace the individual clearing houses of Pakistan’s three Stock Exchanges by a single entity. KSE investment (As of June 2006) Rs.30 Million (3 Million shares) Book value Rs.36.40 per share of Rs.10 33

Investments in Associated Companies Associated Companies National Commodity Exchange Limited

% of Equity 36.36%

NCEL is a company which provide a centralized and regulated place for commodity futures to be traded in Pakistan. The exchange will deal in the trading of commodities such as gold, wheat, rice, sugar, cotton yarn, etc. Gold will be the first commodity to be traded and trading of other commodities will follow in phases. KSE investment up to DEC 2006 Rs.42.09 Million (3.636 Million shares)

JCR VIS Company limited

12.5%

JCR-VIS is a Credit Rating Co. Ltd. approved by Securities & Exchange Commission of Pakistan and State Bank of Pakistan. JCR-VIS is operating as a “Full Service” rating agency providing independent rating services in Pakistan. JCR-VIS is a joint venture between Japan Credit Rating Agency, Ltd. (JCR), Japan's premier rating agency and Pakistan’s, Vital Information Services (Pvt.) Limited (VIS) KSE investment (As of June 2005) Rs.2.5 Million (0.25 Million shares) Book value Rs.10.89 per share of Rs.10

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KSE’s International Relations

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KSE’s International Relations • KSE is a member of: – FEAS (Federation of European Association Stock Exchange) – SAFE (South Asia Federation Exchange)

• KSE is an affiliated member of: – WFSE (World Federation of Stock Exchange) – IOSCO (International Organization of the Sec. Commission)

• KSE Data Network: – KSE Index & other data is available on Reuters, Yahoo, Bloomberg, etc. – Besides this, various foreign research firms also publishes KSE Data for e.g. Standard & Poor's, Euro money, World Stock, Derivatives & Commodity Exchanges, etc. 36

Future Challenges

37

Future Challenges • Strengthening the Risk management • Investor’s education • Strengthening of human resources • Demutualization of KSE • Improve I.T. infrastructure including setting up of BCP & DRS • Increase in the Free Float • New listings through Privatization process • Promote OTC and TFC Markets • Development of Derivatives, Options, Index Markets • Encourage members to open branch offices in all major cities of Pakistan • Cross Border Listings 38

KSE At a Glance LISTED CAPITAL (Rs. in Billion)

MKT CAP (Rs. in Billion)

KSE 100 INDEX

March 21, 2007

533

3071

11296.62

2006

519

2771

10040.50

2005

470

2,747

9556.61

2004

405

1,723

6218.40

2003

313

951

4471.60

2002

291

595

2701.42

2001

235

296

1273.07

Increase

126%

937%

787%

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Working For Prosperous Pakistan Thank You 40