Assignment On

HOW STOCK EXCHANGE WORKS

Submitted To

Submitted By

INSTITUTE OF MANAGEMENT SCIENCES Peshawar

Preface
Pick up any newspaper read scholarly analytical studies about stock exchange .you will find that Karachi stock exchange during the past two or three years boost up very high until above than 10000 points. Now-a-days is the era of business based on IT, everyone should be well aware from dealings, rules and regulations of the stock exchange, if anyone wants to earn more in less time in effective and efficient manner using their best thinking because previously scenarios were very black of Economy of Pakistan, but now a days it is very different .It is the time for investment which will help in our economy and for independent people to get their goal, but risk takes place which the medium minded people takes and earn more or takes loss. I also recommend that I have collected data from so many sources if anyone will read this concentratively, no doubt that he be well aware and can deal in stock exchange for their own investment. I am thankful to all those who helped me and gave me guidance for this assignment making in schedule, I have mentioned their names in bibliography at the last of this report. I am thankful to IMSciences specially to Mr.. which gave us opportunity to write on stock exchange to improve our skills, we got a lot of information about those factors which are related to stock exchange. 9th MAY 2005

Table of contents
Topic name no Preface Introduction What is stock exchange Formation of stock exchange Economic function of stock exchange How business is transacted Types of speculators Getting to know stock exchange Nasdaq stock exchange Investor protection Pakistan stock exchange What is the role of stock exchange Stock exchanges in Pakistan Trading and settlement The KSE-100 index Performance of KSE-100 Recomposition of KSE-100 index Divisor changes Market capitalization Membership Notice period for transfer membership What are shares Tips for investing wisely Glossary of stock market term The listing regulations of KSE guarantee ltd Board of directors Form of application form for submission of payment of fees form of undertaking Criteria guidelines for listing of companies on exchange Uphil journey of KSE Boom in kse why? Accord to end market prices page (i) 1 1 1 2 3 6 6 10 18 24 24 25 25 26 27 30 32 32 33 36 37 38 42 42 42 61 63 64 64 68 68 69

Market outlook January to march 2005 Bibliograhy

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INTRODUCTION Everyone today appreciates the need to save whether for a house, for childrens education, a wedding, or for use after retirement. All these goals can be realized through excellent financial planning. An intelligent plan entails investing your money in an appropriate combination of assets with potential to generate the income needed to achieve your goals. If you invest wisely, you can maximize the earning on your investments. There are many investment avenues available, but a wise investor does not invest on impulse, a hot tip or follow the herd. An investor should discriminate between information, casting away irrelevant and illogical pieces of information, and checking for opportunities and facts before making an intelligent choice of investments. WHAT IS THE STOCK EXCHANGE? securities market is studied under two heads. a). The new issue market: The new issue market is concerned with the purchase of newly issued shares of public company. b). Stock exchange: The stock exchange is a market for the resale of second hand securities. Stock exchange is an organized and regulated market for the purchase and sale of listed shares for investment or for speculative purposes. For example Mr. Hamid invests Rs One lakh on the purchase of ten thousand shares of Rs 10 each newly floated public company XYZ. Mr. Hamid sells these shares to Mr. Rashid through a broker in stock exchange. Mr. Rashid through a broker in stock exchange. Mr.Rashid makes an investment in the shares of public XYZ Company in

transaction i.e. second-hand shares. The stock exchange is concerned with the resale of second hand securities of a public company registered on the stock exchange. Stock exchange thus is a market where listed securities are bought and sold either for investment or for speculative purposes. In the works of Garg, A Stock exchange is an association of persons engaged in the buying and selling of stocks, bonds, shares for the public on commission and are guided by certain rules and regulations. The securities Contact Act defines stock exchange as any body of individuals whether incorporated or not constituted for the purpose of assisting regulating or controlling the business of buying, selling or dealing in securities. Formation of Stock Exchange 1) The stock exchange is a corporate body having the liability of the members limited by guarantee in Pakistan. 2) Each stock exchange frames its own rules for the conduct of business and the government duly approves them. 3) A Committee of Management or a Board of Directors manages the affairs of the stock exchange. 4) The Membership of stock exchange is open to those persons who are citizens of the country, possess sound credit standing and have a sound knowledge of the stock exchange business. The enrolled members are only permitted to do the stock exchange business. The members can act as stockbrokers or stockjobbers but they cannot perform both the duties at the same time. 5) The stock exchange is required to maintain the following books and documents (1) Minute book (2) Register of members (3) Register of authorized clerks (4) Register of authorized assistants (5) Record of security deposits (6) Ledgers (7) Journals (8) Cash Book (9) Bank Pass Book. Economic Functions of Stock Exchange Stock exchange plays a very important role in the capital market of a country. The main functions and importance of the stock exchange are as follows. 1. Organized ready market: Stock exchange provides an organized ready market where the shares of enlisted joint stock companies are freely brought and sold through brokers and jobbers. It facilities the marketability of shares. 2. Turning investment into cash: When a person purchases shares he wants assurance than in time of need his investment will be turned into cash at short notice. The stock exchange provides this facility to the security holders to cash their investment at a short notice. The easy marketability of shares increases the value of shares.

3. Proper canalization of capital: The stock exchange is the central source of information on market activity and trends in securities. The general index of share prices motivates the investors to purchase securities in order to earn a regular income from their savings. 4. Aid to capital formation: The economy of every country moves on the wheels of capital. The establishment of efficient and economic business units requires large amounts of capital. The joint stock companies pool the resources of large number of individuals with the liability limited to the extent of their shares. The persons who have invested in the securities are sure that their investment can be tuned into cash through the stock exchange. The resources of the people are thus mobilized for carrying on the productive activity on a large scale. Stock exchange thus contributes considerably to the capital formation. 5. Proper evaluation of securities: The prices of the shares are determined by the forces of demand and supply in the share market. The function of the stock exchange is to exhibit daily the prices of securities for the information and guidance of buyers and sellers. 6. Profitable use of capital: The market data of value of the securities provided by the stock exchange enables the investors to shift the capital from non profitable concerns to the profitable ones. This is really a great service from the investors point of view provided by the stock exchange. 7. Loan opportunity: The securities purchased through the stock exchange can be used as security for taking loans from the commercial banks. 8. Investment by banks: The stock exchange also provides opportunity to the commercial banks to invest their funds in the purchase of shares. As these securities are easily marketable and can be cashed at any time the banks are therefore able to maintain profitability as well as liquidity. 9. Riba free mode of investment: The equity investment is a riba free mode of investment. As such there is a growing popularity of equity in all the countries of the world now. It is considered a hedge against inflation because the yield on equity investment is comparatively higher than on prevailing deposit rates. 10. Facilities of speculation: Stock exchange enables genuine speculators to speculate and earn profit through fluctuations in prices. How business is transacted at the stock exchange The purchase and sale of securities on stock exchange is different from that of produce exchange. In case of produce exchange the goods are mostly bought and sold directly by the buyers and sellers.

Selection of broker: As regards the buying and selling of securities on stock exchange client cannot take part I the dealings of a stock exchange. If he wishes to buy or sell shares he shall have to approach a stockbroker. The stockbroker who is expert on the purchase and sale of securities will make a bargain on behalf of the client and gets commission on fixed scale. The stockbrokers who are the members of stock exchange are of two types. (1) Brokers (2) Jobbers. (1) Brokers: The stockbrokers buy or sell shares on behalf of ther general public. They contact the intending clients outside the follor of the stock exchange building provide them all necessary information and advice in connection with investment affairs. If authorized by the clients they act as agents and contact the jobbers for the purchase or sale of securities. On the completion of transactions the clients pay brokerage according to a fixed scale. The stockbrokers normally do not transact business with their own account. They only act as agents of the buyers and sellers of securities. The stockbrokers are forbidden to advertise. (2) Jobbers: The jobbers are bonafide members of Joint Stock Company who are buyers and sellers in securities. The stockjobbers work inside the stock exchange house and purchase and sell securities of their own account. They are solely responsible for the profits and losses in the transaction of securities. The stockjobbers cannot approach the clients directly. The brokers will act as agents and deal with the jobbers in the sale or purchase of shares at a fair price. Each firm of a jobber usually specializes in dealing with particular type of shares and has most up to date information about their prices. The profit of the jobber thus depends upon the difference between his bid price and his office price for a particular type of security. Making the contract: The stockbroker prepares a Contract Note one copy of which is given to the client. The second one to the jobber the third remains with the stockholder. The Contract Note generally contains the following information (1) name and address of the stockbroker (2) the name and address of the jobber (3) the type and the price of the share (4) the commission of the broker (5) the date of transaction. Settlement:

The purchase or sale of the securities is made either on cash or on account basis. In case the transaction is settled on cash basis the payment will be made within 7 days of bargain. If the transaction has been conducted on account basis the payment is normally made transactions the jobber will always honour his commitments, as the motto of the jobber is My word is My Bond. The broker on the completion of transaction is paid commission according to a fixed scale by the clients.

Types of Speculators Stock exchange is an organized market for the purchase and sale of securities. The buyers and sellers of securities may be wither investors or speculators. The investors purchase securities for earning an income. The speculators do not take or give delivery of the securities. They deal in securities to earn quick profits from anticipated changes in the prices of the securities. Types of speculators: The main types of speculators on the stock exchange are (1) Bulls (2) Bears (3) Stags and (4) Lams duck. These names are taken from the animal kingdom. The name give to each kind is based on the behavior of the animals chosen. 1. Bulls: Bulls are those persons who take an optimistic view of business trends. They anticipate the prices of the securities to rise in the future. They without paying any money but the securities on account basis. If before the end of accounting period the prices of the securities rise, they sell out the securities. The speculators pocket the difference between buying and selling rates of securities less expense. If the prices of the securities fall before the settlement day then the speculators will have to pay the difference as a loss. In short bulls are speculators who purchase securities for forward delivery in the hope of being able to sell them at a profit before the expiry of accounting period. 2. Bears: Bears unlike the bulls take a pessimistic view of business trends and expect a fall in the prices of securities. They there fore sell the securities which they posses on a contract basis. If the prices of the shares fall before the date of delivery of securities they sell shares which are not in their possession and make profit on the transaction. If contrary to the expectations of the speculators the prices of the securities rise up before the end of accounting period then the speculators who contract to sell forward delivery of shares which short are the speculators who contract to sell forward delivery of shares

which short are the speculators who contract to sell forward delivery of shares which they do not posses in the hope of making profit before the date of settlement. For example: no November 1,2004. Rashid sells 300 shares @ Rs.100 each for forward delivery till November 15,1995. The selling price totals Rs.30000 (300*10). No purchases 300 shares @ Rs.75 per share and pays before the date of settlement at the contracted price of Rs.100 per unit. The total purchased price is Rs.22500 (300*75). The profit of the speculator then is Rs.7500 (30000-22500). 3. Stage. Stag are the speculators who purchase the shares of a newly floated company with the sole objective of selling them through the stock exchange at a premium. Stag purchase the shares, which are likely to be oversubscribed. As the shares earn premium they sell them in the market and earn profit. Stag are therefore called premium hunters. 4. Lame duck: When a bears find it difficult to meet its commitments he is named as a lame duck. The main advantage of the existence of speculators is that they stabilize the prices of the securities. The genuine investors gain less in boom and lose less in slump. If ignorant speculators enter into the stock market they may shake the nerve centre of the capital market. Causes of Fluctuations in Security Prices The prices of securities are determined by the forces of demand for and supply of shares in the stock market. The factors, which affect the demand for and apply of securities resulting in their price fluctuations, are to follows. 1. Political conditions: The prices of shares are directly affected by the political developments taking place both at home and abroad. The political instability in the country the fear of war with neighboring countries the danger of spreading war on international level bring a set back in prices of securities. If there is political stability at home and abroad the prices of shares move up. 2. Business conditions: Political stability brings economic stability in the country. If a government carries on economic policies in a planned a manner it then establishes strong industrial base in the country the prices of the shares tend to move up. In case there are rapid changes in the economic policies and budgets are announced and revised time and again the prices of the securities go down.

Getting to Know Stock Exchanges

By David Harper, (Editor In Chief - Investopedia Advisor)

September 24, 2004

A stock exchange does not own shares. Instead, it acts as a sort of high-tech flea market where buyers connect with sellers. Every public stock trades on one of several possible exchanges such as the New York Stock Exchange (NYSE) or American Stock Exchange (AMEX). Although you will most likely trade stocks through a broker, it is important to understand the relationship between exchanges and companies and the ways in which the requirements of different exchanges provide protection to investors. How Does It All Start? The primary function of an exchange is to provide liquidity; in other words, to give sellers a place to "liquidate" their share holdings. Stocks first become available on an exchange after a company conducts its initial public offering (IPO). In an IPO, a company sells shares to an initial set of public shareholders (a.k.a. the primary market). After the IPO "floats" shares into the hands of public shareholders, these shares can be sold and purchased on an exchange (a.k.a. the secondary market). The exchange tracks the flow of orders for each stock, and this flow of supply and demand sets the price of the stock. Depending on the type of brokerage account you have, you may be able to view this flow of price action. For example, if you see that the "bid price" on a stock is $40, this means somebody is telling the exchange that he or she is willing to buy the stock for $40. At the same time you might see that the "ask price" is $41, which means somebody else is willing to sell the stock for $41. The difference between the two is the bid-ask spread. Auction Exchanges--NYSE and Amex The NYSE and AMEX are both primarily auction based, which means specialists are physically present on the exchanges trading floors. Each specialist "specializes" in a particular stock, buying and selling the stock in a verbal auction. These specialists are under competitive threat by electronic-only exchanges that claim to be more efficient (that is, execute faster trades and exhibit smaller bid-ask spreads) by eliminating human intermediaries. The NYSE is the largest and most prestigious exchange. Collectively, its listed companies represent about $18 trillion in market capitalization. Listing on the NYSE affords companies great credibility because they must meet initial listing requirements and also comply annually with maintenance requirements.

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For example, to remain listed, NYSE companies must keep their price above $1 and their market capitalization (number of shares x price) above $50 million. Furthermore, investors trading on the NYSE benefit from a set of minimum protections. Among several of the requirements that the NYSE has enacted, the following two are especially significant: 1. Companies must get shareholder approval for any equity incentive plan (for example, stock option plan or restricted stock plan). In the past, companies were allowed to sidestep shareholder approval if an equity incentive plan met certain criteria; this, however, prevented shareholders from knowing how many stock options were available for future grant. 2. A majority of the members of the board of directors must be independent. However, each company has some discretion over the definition of "independent" (which has caused controversy). Furthermore, the compensation committee must be entirely composed of independent directors, and the audit committee must include at least one person who possesses "accounting or financial expertise." AMEX is a smaller but quite prestigious exchange. AMEX also has a history of innovating: it pioneered the concept of exchange traded funds (ETFs) and it has the second largest options trading market. Nasdaq (an Electronic Exchange) The Nasdaq, an electronic exchange, is sometimes called "screen-based" because buyers and sellers are connected only by computers over a telecommunications network. Market makers, also known as dealers, carry their own inventory of stock. They stand ready to buy and sell Nasdaq stocks, and they are required to post their bid and ask prices. Among several high-technology sections, Nasdaq lists the most companies. Although the NYSE has a far greater total market capitalization, Nasdaq has surpassed the NYSE in the number of both listed companies and shares traded. Nasdaq has listing and governance requirements that are similar but slightly less stringent than those of the NYSE. For example, a stock must maintain a price of $1 and the value of the public float (number of traded shares multiplied by stock price) must be at least $1.1 million. If a company does not maintain these requirements, it can be "de-listed" to one of the OTC markets discussed below. Nasdaq Small Cap Nasdaq has a separate "tier" for small capitalization companies; the average market cap of the 685 companies listed in this tier at the end of 2003 was about $60. This is an excellent exchange for investors interested in smaller companies because the

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Nasdaq Small Cap also has listing and governance requirements. Electronic Communication Networks (ECNs) ECNs are part of a class of exchange called alternative trading systems (ATS). ECNs trade Nasdaq-listed stocks, but they connect buyers and sellers directly. Because they allow for direct connection, ECNs bypass the market makers. You can think of them as an alternative means to trade stocks listed on the Nasdaq and, increasingly, other exchanges as well (such as the NYSE or foreign exchanges). There are several innovative and entrepreneurial ECNs, and they are generally good for customers because they pose a competitive threat to traditional exchanges, and therefore push down transaction costs. Currently, ECNs do not really serve individual investors; they are mostly of interest to institutional investors.
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There are several ECNs, including INET (the result of an early 2004 consolidation between the Instinet ECN and Island ECN) and Archipelago (one of the four original ECNs that launched in 1997). Over-the-Counter (OTC) OTC refers to markets other than the organized exchanges described above. OTC markets generally list small companies, and often (but not always) these companies have "fallen off" to the OTC market because they were de-listed from Nasdaq. Some individual investors will not even consider buying OTC stocks due to the extra risks involved. On the other hand, some strong companies trade on the OTC. In fact, several strong companies have deliberately switched to OTC markets to avoid the administrative burden and costly fees that accompany regulatory oversight laws such as the Sarbanes-Oxley Act. On balance, you should be careful when investing in the OTC if you do not have experience. There are two OTC markets: Over-the-Counter Bulletin Board (OTCBB) is an electronic community of market makers. Companies that fall off the Nasdaq often end up here. On the OTCBB, there are no "quantitative minimums" (no minimum annual sales or assets required to list). Companies that list on the Pink Sheets (i.e. less than 300 shareholders) are not required to register with the SEC. Liquidity is often minimal. Also, keep in mind that these companies are not required to submit quarterly 10Qs.

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Summary To be traded, every stock must list on an exchange, a central "flea market" where buyers and sellers meet. The two big U.S. exchanges are the esteemed NYSE and the fast-growing Nasdaq; companies listed on either of these exchanges must meet various minimum requirements and baseline rules concerning the "independence" of their boards. But these are by no means the only legitimate exchanges. Electronic communication networks (ECNs) are relatively new, but they are sure to grab a bigger slice of the transaction pie in the future. Finally, the OTC market is a fine place for experienced investors with an itch to speculate and the know-how to conduct a little extra due diligence.

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The top performing investor in each region will win 5,000 at the end of the regional phase of the competition.

The winner of the National final will enjoy a prize of 40,000 and the two runner up finalists will win 5,000 each.

NOW THE IMPORTANT STOCK EXCHANGES OF THE WORLD

Introduction to the Nasdaq Stock Exchange By Bruce Krogstad Director, Nasdaq Market Services
The Nasdaq Stock Market Solicits Comment on Proposed Changes to Nasdaq Listing Requirements On November 6, 1996, the Board of Directors of The Nasdaq Stock Market, Inc. approved changes to further strengthen both the quantitative and

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qualitative standards for issuers listing on Nasdaq. This would materially enhance the threshold criteria necessary to qualify for listing. The listing criteria for the Nasdaq National Market ("National Market") and The Nasdaq SmallCap Markets ("SmallCap Market") would be substantively improved, and corporate governance requirements applicable to the National Market would, for the first time, be extended to the SmallCap Market. The alternative to the $1 minimum bid price would be eliminated. In addition, 'Nasdaq is evaluating whether to impose a requirement that auditors of Nasdaq-listed companies be subject to peer review. The Nasdaq Stock Market is soliciting comment from investors, issuers, market participants, and others on the proposed changes and the possible imposition of a peer review requirement. Background Nasdaq qualification requirements for inclusion of securities on the National Market and SmallCap Market were last revised in 1989 and 1991, respectively. Since that time, the Nasdaq Stock Market has witnessed significant growth in the size and number of listings and volume of transactions. Accompanying this growth has been an increase in participation of individual investors and heightened public awareness and expectations for Nasdaq-listed companies. Nasdaq recognizes that along with this growth and the changes in the market, there is also an obligation to maintain a commensurate level of quality and protection for investors. Nasdaq believes it is extremely important not only to ensure that all Nasdaq companies warrant listing by virtue of their compliance with the applicable qualifications requirements, but also that the qualification requirements themselves are in fact appropriate and designed to foster the protection of investors. Given Nasdaq's objective of providing necessary safeguards to public investors in Nasdaq securities, the growth and changes in the market, the structural enhancements to the Nasdaq Stock Market now underway, and the time that has passed since the listing standards were last changed, Nasdaq determined to undertake a thorough review of its qualification requirements. In conducting this review, Nasdaq carefully sought to balance its role in facilitating legitimate capital formation for issuers, with Nasdaq's responsibility to provide the appropriate protection in its markets and to

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maintain the trust and confidence reposed in The Nasdaq Stock Market generally. While Nasdaq recognizes that certain companies may not be able to meet the more stringent standards contemplated, it is important to note that companies not in compliance will have the opportunity to initiate appropriate corporate action to rectify their status to remain listed on Nasdaq. In addition, for those companies that are unable to achieve compliance with the new standards, a meaningful alternative is available through their eligibility for quotation in the 0TC Bulletin Board' ("OTCBB"). The OTCBB is a quotation medium used by NASD members to reflect quotations in nonNasdaq securities. Securities quoted in the OTCBB are subject to real-time trade reporting and thus have a level of transparency not present when the listing standards were last revised. After extensive evaluation, on November 6, 1996, the Board of Directors of The Nasdaq Stock Market, Inc., approved the proposed changes, subject to public comment. After a 30-day comment period, the Board will consider any comments, make changes to the proposal if warranted, and file the appropriate rule changes with the Securities and Exchange Commission for final approval. Summary of Proposed Changes 1. Elimination of the Alternative to the $1 Minimum Bid -Price Under the existing standards, issuers with securities trading below:; I may remain listed on the Nasdaq National and SmallCap Markets if they meet an alternative test. Elimination of the alternative to the $1 bid price requirement should provide a safeguard against certain market activity associated with low-priced securities, and also enhance the credibility of the market. 2. Corporate Governance Standards for SmallCap Issuers The National Market corporate governance standards currently require: (1) a minimum of two independent directors; (2) an audit committee, a majority of which are independent directors; (3) an annual shareholder meeting; and (4) shareholder approval for certain corporate actions. It is suggested that these same standards be required of SmallCap issuers, thereby affording investors in this market a means to become more actively involved in corporate affairs. The shareholder approval requirement should serve as a barrier to stock issuances currently being executed in the SmallCap Market without the prior

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knowledge of investors. The audit committee, independent director, and annual meeting requirements will provide additional safeguards to the investing public. 3. Increase in the Quantitative Standards for both the SmallCap and National Markets Increases to the quantitative standards are believed to be appropriate given the passage of time since the standards were last adjusted, and the concomitant increases in the growth of the market and the rate of inflation. These increases will strengthen the financial criteria in a manner consistent with the goal of increasing the quality and stability of Nasdaq companies, while preserving the ability of qualified Nasdaq companies to raise capital. 4. Market Capitalization Test for National Market Consistent with the reputation of Nasdaq for facilitating capital formation for growth companies, it was determined that there was a need for an accommodation for companies that may fail to comply with the National Market net tangible asset test as a result of accounting for goodwill associated with various merger and acquisition activities, or as in the case of the telecommunications industry, significant depreciation charges. The suggested changes provide access for Nasdaq National Market caliber companies that would otherwise not qualify due to accounting conventions associated with certain business combinations and specialized industries. Peer Review In addition, Nasdaq is soliciting comment to further its evaluation of whether to impose a requirement that auditors of Nasdaq-listed companies be subject to peer review. Currently, companies whose shares are publicly traded are not required to have auditors subject to such reviev,. Nasdaq is considering a requirement that auditors for Nasdaq-listed companies be subject to practice monitoring under a program such as the AICPA SEC Practice Section peer review program, which provides that a firm's quality control system be peerreviewed every three years. After reviewing any comments on this requirement, Nasdaq will consider including this as part of the proposed changes to the listing criteria. Request for Comment

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Nasdaq believes that the proposed listing standards will further the protection of investors while enhancing the quality of The Nasdaq Stock Market. Nasdaq encourages all investors, issuers, market participants, and other interested parties to comment on the proposed changes. Comments must be received by December 20, 1006. Comments should be forwarded to: Perry Peregoy, Vice President, Listing Qualifications. Via E-Mail:listing.standards@nasdaq.com; Via Fax: 202-496-2698; Via Phone: 202-496-2578; Via Mail: The Nasdaq Stock Market, Inc., 1735 K Street, NW, Washington, DC, 20006-1500. The Following Corporate Governance Standards currently exist for the Nasdaq National Market. As reflected below, these standards would be extended to The Nasdaq SmallCap Market. (a) Applicability No provisions of this Rule shall be construed to require any foreign issuer to do any act that is contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or that is contrary to generally accepted business practices in the issuer's country of domicile. The Association shall have the ability to provide exemptions from the applicability of these provisions as may be necessary or appropriate to carry out this intent. (b) Distribution of Annual and Interim Reports (1) Each Nasdaq SmallCap Market (SCM) issuer shall distribute to shareholders copies of an annual report containing audited financial statements of the company and its subsidiaries. This report shall be distributed to shareholders a reasonable period of time prior to the company's annual meeting of shareholders and shall be filed with the Association at the time it is distributed to shareholders. (2) Each SCM issuer which is subject to SEC Rule l3a-13 shall make available copies of quarterly reports including statements of operating results to shareholders either prior to or as soon as practicable following the company's filing of its Form 10-Q with the Commission. If the form of such quarterly report differs from the Form 10-Q, the issuer shall file one copy of the report with the Association in addition to filing its Form 10-Q pursuant to Rule 4310(c)(14). The statement of operations contained in quarterly reports shall disclose, as a minimum, any substantial items of an unusual or nonrecurrent nature and net income before and after estimated federal income taxes or net income and the amount of estimated federal taxes.

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(3) Each SCM issuer which is not subject to SEC Rulel3a-13 and which is required to file with the Commission, or another federal or state regulatory authority, interim reports relating primarily to operations and financial position, shall make available to shareholders reports which reflect the information contained in those interim reports. Such reports shall be made available to shareholders either before or as soon as practicable following filing with the appropriate regulatory authority. If the form of the interim report provided to shareholders differs from that filed with the regulatory authority, the issuer shall file one copy of the report to shareholders with the Association in addition to the report to the regulatory authority that is filed with the Association pursuant to Rule 4310(c)(14). (c) Independent Directors Each SCM issuer shall maintain a minimum of two independent directors on its board of directors. For purposes of this section, "independent director" shall mean a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. (d) Audit Committee Each SCM issuer shall establish and maintain an Audit Committee, a majority of the members of which shall be independent directors. (e) Shareholder Meetings Each SCM issuer shall hold an annual meeting of shareholders and shall provide notice of such meeting to the Association. (f) Quorum Each SCM issuer shall provide for a quorum as specified in its by-laws for any meeting of the holders of common stock provided, however, that in no case shall such quorum be less than 33 1/3 percent of the outstanding shares of the company's common voting stock. (g) Solicitation of Proxies

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Each SCM issuer shall solicit proxies and provide proxy statements for all meetings of shareholders and shall provide copies of such proxy solicitation to the Association. (h) Conflicts of Interest Each SCM issuer shall conduct an appropriate review of all related party transactions on an ongoing basis and shall utilize the company's Audit Committee or a comparable body for the reviews of potential conflict of interest situations where appropriate. (i) Shareholder Approval (1) Each SCM issuer shall require shareholder approval of a plan or arrangement under subparagraph (A) below or, prior to the issuance of designated securities under subparagraph (B), (C), or (D) below: (A) when a stock option or purchase plan is to be established or other arrangement made pursuant to which stock may be acquired by officers or directors, except for warrants or rights issued generally to security holders of the company or broadly based plans or arrangements including other employees (e.g. ESOPs). In a case where the shares are issued to a person not previously employed by the company, as an inducement essential to the individual's entering into an employment contract with the company, shareholder approval will generally not be required. The establishment of a plan or arrangement under which the amount of securities which may be issued does not exceed the lesser of 1% of the number of shares of common stock, 1% of the voting power outstanding, or 25,000 shares will not generally require shareholder approval; (B) when the issuance will result in a change of control of the issuer; (C) in connection with the acquisition of the stock or assets of another company if; (i) any director, officer or substantial shareholder of the issuer has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more; or

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(ii) where the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, other than a public offering for cash, if the common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock, or the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares or common stock outstanding before the issuance of the stock or securities or (D) in connection with a transaction other than a public offering involving: (i) the sale or issuance by the issuer of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or substantial shareholders of the company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance; or (ii) the sale or issuance by the company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock. (2) Exceptions may be made upon application to the Association when: (A) the delay in securing stockholder approval would seriously jeopardize the financial viability of the enterprise; and (B) reliance by the company on this exception is expressly approved by the Audit Committee of the Board or a comparable body. A company relying on this exception must mail to all shareholders no later than ten days before issuance of the securities a letter alerting them to its opinion to seek the shareholder approval that would otherwise be required and indicating that the Audit Committee of the Board or a comparable body has expressly approved the exception. (3) Only shares actually issued and outstanding (excluding treasury shares or shares held by a subsidiary) are to be used in making any calculation provided for in this paragraph (i). Unissued shares reserved for issuance upon conversion of securities or upon exercise of options or warrants will not be regarded as outstanding.

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(4) Voting power outstanding as used in this Rule refers to the aggregatee number of votes which may be cast by holders of those securities outstanding which entitle the holders thereof to vote generally on all matters submitted to the company's security holders for a vote. (5) An interest consisting of less than either 5% of the number of shares of common stock or 5% of the voting power outstanding of an issuer or party shall not be considered a substantial interest or cause the holder of such an interest to be regarded as a substantial security holder. (6) Where shareholder approval is required, the minimum vote which will constitute shareholder approval shall be a majority of the total votes cast m the proposal it - person o2r by proxy

Investor Protection
Nearly 400 of the largest securities firms in America are members of the New York Stock Exchange (NYSE). These firms service 92 million customer accounts, or 90 percent of the total public customer accounts handled by broker-dealers, with total assets of $3.28 trillion. They operate from 19,000 branch offices around the world and employ 146,000 registered personnel. To protect investors, the health of the financial system, and the integrity of the capital-formation process, the U.S. Securities and Exchange Commission (SEC) has designated the NYSE as the examining authority for its members and member firms. The NYSE believes that public confidence in the integrity of the market and in the securities professionals who serve the investing public is essential to its continued vitality. NYSE Regulation Recently, there have been changes in the regulatory program at the New York Stock Exchange. In December 2003, a new governance structure for the NYSE was approved by the U.S. Securities and Exchange Commission. The new structure calls for:

the board of directors to be comprised solely of persons independent of any regulated member firm. The only exception is the inclusion of NYSEs chief executive officer operation of the regulatory organization to be separate from the business side, and

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a new position of chief regulatory officer that reports directly to the board of directors through a new regulatory oversight committee.

As a result, NYSE Regulation:

is insulated from potential influence from NYSE members and member firms, and is independent in its decision-making from the business side.

NYSE rules include detailed regulations regarding members' and member organizations' operations, both on and off the floor. For example, specialists are heavily regulated by NYSE Regulation and are required to maintain a fair and orderly market with tight spreads and, if necessary, commit their own capital to provide market continuity and stability. NYSE trading rules ensure that customer orders always are given priority. Rules regulating short selling also protect the investing public. Other rules require NYSE listed companies to embrace premier standards of financial and corporate accountability and transparency. Self-regulation in the securities industry begins with the broker-dealer, but the NYSE plays a critical role in monitoring and regulating the activities of its members, member firms, and listed companies, as well as enforcing compliance with NYSE rules and federal securities laws. The SEC oversees these activities. Nearly 700 people, or more than 40 percent of the Exchanges staff, work for NYSE Regulation, which consists of four divisions: Listed Company Compliance, Market Surveillance, Member Firm Regulation and Enforcement. Enforcement The Enforcement division investigates and prosecutes violations of NYSE rules and federal securities laws. Hearings on cases brought against NYSE members, member firms and their employees are conducted before a NYSE Hearing Panel, which operates much like a court. Witnesses testify under oath and are subject to crossexamination. Enforcement cases include customer-related sales practice violations, breaches of financial and operational requirements, books and records deficiencies, reporting and supervisory violations, misconduct on the trading floor, insider trading, market manipulation and other abusive trading practices. Sanctions range from a censure or fine to a suspension, expulsion or bar. There is no dollar limit on the amount of fines that can be imposed in disciplinary proceedin Appeals of panel decisions can be made to the NYSE Board of Directors and, thereafter, the SEC, the U.S. Courts of Appeal and U.S. Supreme Court. In 2004, Enforcement prosecuted 195 cases, comprised of 145 actions against individuals and 50 against member firms. The total monetary sanctions imposed in

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2004, in connection with enforcement actions brought during the year, more than doubled to $25.6 million from $12.6 million in 2003. The NYSE Constitution authorizes the Exchange's Board of Directors to adopt rules necessary to govern and regulate NYSE members, member firms and their employees, and delegates the authority to investigate and prosecute violations of the Securities Exchange Act of 1934 and Exchange rules to the Enforcement division. Cases outside the NYSE's jurisdiction are referred to the SEC or other regulatory agencies. Market Surveillance Market Surveillance is the division responsible for monitoring trading activities on the Floor and trading by member firms of NYSE-listed securities, both on a real-time basis and after the fact. The division surveils transactions to see whether auctionmarket principles are being fairly maintained, including checking for abusive or manipulative trading practices and insider trading. It also develops rules and evaluates specialist performance. The division uses sophisticated computer technology to detect any unusual or violative trading patterns. Surveillance staff maintains a presence on the floor. The Stock Watch unit of Market Surveillance combines the human judgment of analysts with electronic data-mining and pattern-detection systems, links to news and research, as well as public databases of listed company officers, directors and other insiders to detect possible insider trading. Market Surveillance recommends disciplinary action for certain rules violations, and refers matters warranting disciplinary action to the Enforcement Division, or the SEC, for matters outside NYSE jurisdiction. Member Firm Regulation This division conducts ongoing surveillance and examinations of the more than 380 NYSE member firms (some 250 that deal with the public, and 130 floor brokers, specialist firms and registered traders that do not deal directly with the public) for financial, operational and sales-practice compliance. NYSE staff review and visit member firms and their branch offices to monitor their financial condition, operations and sales practices, and examine their compliance with SEC and NYSE regulations such as capital and customer-protection rules, customer suitability, floor-trading requirements, maintenance of required books and records, credit regulation, and anti-money laundering provisions. In 2004, MFR staff conducted 469 field examinations, including:

239 regular financial/operations exams 5 proposed new member exams 97 floor broker exams 22 specialist exams

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75 sales practice exams 1 proposed member sales practice exams 16 special financial/operations exams, and 14 special sales practice exams.

Member firms are required to file regular reports of detailed financial and operational information. MFRs computer programs apply some 300 formulae to the reports to identify possible emerging problems Listed Company Compliance To maintain the quality of its list, the NYSE requires its listed companies to meet original listing criteria and maintain continued listing standards that are among the highest of any market in the world. Meeting these requirements signifies that a company has achieved leadership in its industry in terms of business and investor interest and acceptance. The Listed Company Compliance division is comprised of two components: Financial and Corporate Compliance. Financial Compliance reviews a companys reported financial results both at the time of joining the Exchange and throughout its listing to ensure that it meets original listing and continued-listing requirements. Criteria include earnings, cash flow, numerical standards relating ton distribution of a company's shares, trading volume, market value and share price, as well as other criteria. When a company falls below any criterion, the Exchange notifies the company and reviews the appropriateness of continued listing. Once notified, in many cases a company has the opportunity to submit a plan to return to compliance within eighteen months. If the Exchange accepts the plan, it monitors the company's performance throughout the plan period. If the company fails to achieve stated goals in a timely manner, the Exchange will move to suspend the security and remove it from the list. If the Exchange does not accept the recovery plan, it will move to immediately suspend the companys security and remove it from the list. Corporate Compliance ensures that listed companies adhere to the highest standards of accountability and transparency, including enhanced governance requirements for configuration of corporate boards, director independence and financial competency on audit committees. The Exchange has taken a leadership role in setting standards for corporate governance practices for over a century and has periodically amended and supplemented its standards with a constant focus on investor protection. The governance rules implemented in 2003 and 2004 empower independent directors as representatives of shareholders. They also require enhanced disclosure by listed companies so investors are fully informed with regard to the governance and ethics of companies in which they invest. Timely Alert Policy

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The NYSE's Timely Alert Policy requires listed companies to issue a news release when disclosing material information so that all market participants are provided the opportunity to make informed investment decisions. Companies are required to contact the Exchange ten minutes prior to announcing material news that could have an impact on trading in their securities during market hours of 9:30 a.m. to 4:00 p.m. Eastern Time. The Exchange makes a determination, in consultation with the company, whether or not to delay or halt trading in that company's shares until the news has been disseminated. Exchange staff reviews news releases to determine when the full story has been disseminated. The fact that trading in a stock is halted results in the reopening being considered a new opening, enabling investors to participate at the new opening price. Stocks can be halted because of sell or buy imbalances, news pending, or news dissemination. When unusual trading is detected by a senior official on the floor or by the Exchange's Stock Watch unit, the Exchange will contact the listed company and request it to issue a news release that addresses the unusual market activity. If there is material corporate news to account for the activity, trading will be interrupted on a "news pending" basis. If the listed company declines to issue a news release, the NYSE will issue its own release stating the companys position. The re-opening process will begin with the public dissemination of an indication of interest to bring supply and demand more closely in balance. U.S. Regulatory Framework A comprehensive network of safeguards, from individual broker-dealers all the way up to the U.S. government, serves to protect market participants.

The federal government is the top of the regulatory pyramid. The SEC was established as an independent federal agency in 1934. Congress adopts laws governing the securities industry and is responsible for ensuring that the SEC functions effectively. The SEC is the federal agency overseeing the U.S. securities markets, as well as every securities firm participating in the securities markets. The NYSE is the leading national securities exchange. As a self-regulatory organization, it operates with its own strict rules and codes of conduct. Violations of NYSE rules and federal securities laws are prosecuted by the NYSE's Division of Enforcement or referred to the SEC or U.S. Attorney's office.

NYSE member firms must meet rigorous industry standards and their employees are highly trained. Firms are obliged to monitor their compliance with applicable rules and regulations, and to monitor for possible violations. Each year, the NYSE examines every firm that does business with the public to determine whether these A comprehensive network of safeguards, from individual broker-dealers all the way up to the U.S. government, serves to protect market participants.

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The federal government is the top of the regulatory pyramid. The SEC was established as an independent federal agency in 1934. Congress adopts laws governing the securities industry and is responsible for ensuring that the SEC functions effectively. The SEC is the federal agency overseeing the U.S. securities markets, as well as every securities firm participating in the securities markets. The NYSE is the leading national securities exchange. As a self-regulatory organization, it operates with its own strict rules and codes of conduct. Violations of NYSE rules and federal securities laws are prosecuted by the NYSE's Division of Enforcement or referred to the SEC or U.S. Attorney's office.

NYSE member firms must meet rigorous industry standards and their employees are highly trained. Firms are obliged to monitor their compliance with applicable rules and regulations, and to monitor for possible violations. Each year, the NYSE examines every firm that does business share including the SEC and U.S. Attorney's office, and belongs to a group of with the public to determine whether these requirements are met. The Exchange also works with other government and law-enforcement agencies domestic and non-U.S. markets and agencies that regulatory and financial information. U.S. Securities Regulation and NYSE Rules

the Securities Act of 1933 ("the 1933 Act") and the Securities The trading of securities in the U.S. is subject to vigorous regulation. The principal laws are Exchange Act of 1934 ("1934 Act"). To administer these laws, Congress created the SEC, with overall responsibility to protect the public. The 1933 and 1934 Acts require the registration of new securities, the timely and accurate release of pertinent information by issuing companies. The laws also have stringent anti-fraud provisions. The 1934 Act requires the NYSE to be registered as a national securities exchange; the SEC supervises all national exchanges, investment companies, brokerage firms, and participants in the securities markets. The SEC also recommends that Congress create new legislation. Among the principal objectives of the 1934 Act are to maintain a system of providing investors with significant financial and other information about securities traded on exchanges, and to regulate the markets, including controlling the amount of credit. The 1934 Act prohibits insider trading and market manipulation. It also requires corporate insiders and certain beneficial owners to file statements of their holdings and changes in those holdings. Individuals or organizations that violate the SEC's rules are subject to penalties that include fines, suspension and permanent expulsion from the securities industry. 3

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NYSE rules, which apply to all NYSE members and member firms, are designed to protect investors and maintain the firms' financial and operational viability, regulate their sales practices and foster fair dealings with customers. NYSE

highest standards. For example, one important rule is that all NYSE member firms are required to "know your customer"; i.e., the firms are obliged to obtain essential facts about the customer that are important for the customer's investment decisions. Under NYSE rules, firms are prohibited from recommending securities transactions that are not appropriate for the customer. Other key rules seek to prevent misappropriation of customer funds and excessive and unauthorized trading in customer accounts. Member firms receive timely notification of changes in or new NYSE rules, which are filed publicly with the SEC and, as part of that process, are open to public comment.

Federal Reserve Board rules with respect to the U.S. securities industry apply to the entire banking sector, for the regulation of borrowing and lending requirements. Individual states in the U.S. have their own state securities laws; any offering of securities in the U.S. must be made in accordance with state as well as federal regulations.

Pakistans Stock Market There are three stock exchanges in Pakistan (1) Karachi Stock Exchange (KSE) (2) Lahore Stock Exchange (LSE) (3) Islamabad Stock Exchange (ISE). The numbers of enlisted companies with the Karachi Stock Exchange are 700 in (1.4.1994). Lahore Stock Exchange has 566 listed companies and Islamabad Stock Exchange has 194 listed companies. Capital: The total capital listed on the three stock exchanges as on 1.4.1994 stood and Rs.72.23 billion. Greater Mobilization of Resources: During the past few years there is a growing popularity in the equity-based investment in and outside our country. The surplus investment funds in the western financial markets are being floated for investment in Pakistans equity market. The main reason is that the yield on equity investment is

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higher than the prevailing deposit rates. Equity investment is considered now a best hedge against inflation.

What is the Role of the Stock Exchange?

The stock exchange admits companies for trading at their securities. It provides a market for raising capital by companies.

It provides a market place for shares of listed public companies to be bought and sold, by bringing companies and investors together at one place. The exchanges role is to monitor the market to ensure that it is working efficiently, fairly and transparently.

Stock Exchanges in Pakistan: There are three stock exchanges in Pakistan:

Karachi Stock Exchange (Guarantee) Ltd. Lahore Stock Exchange (Guarantee) Ltd. Islamabad Stock Exchange (Guarantee) Ltd.

Of these, Karachi Stock Exchange is the biggest exchange in the country. Trading and Settlement: The stock exchanges have introduced a computerized trading system to provide a fair, transparent, efficient and cost effective market mechanism to facilitate the investors. The trading system comprises of four distinct segments, which are:

T+3 Settlement System; Provisionally Listed Counter; Spot Transactions; and

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Futures Contracts.

T+3 Settlement Systems: In the T+3 settlement systems, purchase and sale of securities is netted and the balance is settled on the third day following the day of trade. Benefits of T+3 Settlement Systems

It reduces the time between execution and settlement of trades, which in turn reduces the market It reduces settlement risk, as the settlement cycle is shorter.

risk.

Provisionally Listed Counter: The shares of companies, which make a minimum public offering of Rs.100 million, are traded on this segment from the date of publication of offering documents When the company completes the process of dispatch/credit of allotted shares to subscribers, through CDC it is officially listed and placed on the T+3 counter. Trading on the provisionally listed counter then comes to an end and all the outstanding transactions are transferred to the T+3 counter with effect from the date of official listing. Spot/T+1 Transaction: Spot transactions imply delivery upon payment. Normally in spot transactions the trade is settled within 24 hours. Futures Contract: A Futures contract involves purchase and sale of a financial or tangible asset at some future date, at a price fixed today.

THE KARACHI STOCK EXCHANGE 100-INDEX Karachi Stock Exchange is the biggest and most liquid exchange and has been declared as the Best Performing Stock Market of The World For the year 2002. As on September 01, 2004, 663 companies were listed with the market capitalization of Rs. 1,439.10 billion (US$ 24.50 billion)

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having listed capital of Rs. 379.71 billion (US$ 6.46 billion). The KSE 100 Index touched at 5320.38 on September 01, 2004. KSE has been well into the 3rd year of being one of the Best Performing Markets of the world 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. The market performance during the period June 1998 to August 2004 is given under. DECADEWISE PROGRESS LISTED NO. OF CAPITAL YEAR LISTED (RS. IN COMPANIES MILLION) 1950 15 117.3 1960 81 1,007.7 1970 291 3,864.6 1980 314 7,630.2 1990 487 28,056.0 2000 762 236,458.5 PERFORMANCE The market performance during the period June 1998 to July 2004 is given under. KSE 100 INDEX

MARKET CAPITALISATION (Rs. in million) 1,871.4 5,658.1 9,767.3 61,750.0 382,730.4

GROWTH & PROGRESS

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Today KSE has emerged as the key institution of the capital formation in Pakistan with: Listed companies 663, securities listed on the exchange 697: ordinary share 663, Preference shares 9 and debt securities (TFC's) 25. Listed capital Rs. 379,709.28 million (US$ 6,464.24 million). Market capitalization Rs.1,439,096.80 million (US$ 24,499.43 million). Average daily turnover 370.06 million shares with average daily trade value Rs. 17,656.67 million (US$ 300.59 million). Membership strength at 200. Corporate Members are 106 out of which 9 are public listed companies. Active Members are 152. Fully automated trading system with T+3 settlement cycle. Deliveries through central depository company. National Clearing and Settlement System in place

Market Indices: KSE began with a 50 shares index. As the market grew a representative index was needed. On November 1, 1991 the KSE-100 was introduced and remains to this date the most generally accepted measure of the Exchange. The KSE-100 is a capital weighted index and consists of 100 companies representing about 86 percent of market capitalization of the Exchange. In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to provide the basis of index trading in future. On August 29, 1995 the KSE all share index was constructed and introduced on September 18, 1995. ARBITRATION KSE has devised procedures for resolution of investors complaints against members and between inter stock exchanges members. Disputes between investors and members of the Exchange are resolved through the deliberations of the Arbitration Committee of the Exchange TRADING The Karachi Stock Exchange has introduced an state-of-the-art computerised trading system known as Karachi Automated Trading System (KATS) to provide a fair, transparent, efficient and cost effective market for the investors.

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Currently, the exchange conducts one trading session from Monday to Thursday and two sessions on Friday. The Trading is divided into four distinct segments, each of which has its own clearing and settlement procedure. These are: T+3, Provisionally Listed Companies, Spot (T+1) Transactions and Future Contracts. T + 3 Counters: Transaction in this segment are settled through the Clearing House that nets out the purchases and sales and the financial obligations thereon of each member/firm for the notified clearing period and issues instructions for deliveries of netted outstanding business. Payment from and to members are routed through the Clearing House. For the securities declared to be eligible securities by the Central Depository Company the Clearing House procedure remains the same as outlined above except that the KSE does not permit their physical settlement. In order to handle the clearing of all the three stock exchanges of the country under one roof, the National Clearing and Settlement System (NCSS) has been introduced. NCSS is managed by Central Depository Company of Pakistan Limited. Futures Trading in Provisionally Listed Companies: The shares of companies which make a minimum public offering of Rs. 150 million are traded on this segment from the date of publication of offering documents. The period of contracts of each scrip is notified by the Exchange. The outstanding contracts carried out under the provisionally listed companies are settled on the settlement date and members are not allowed to transfer their positions to the Ready Clearing Board or any other Board. On formal listing, the trading in the shares of the company are shifted to the Ready Board Counter under T+3 Settlement System from the date of formal listing. Spot / T+1 Transaction: For about 5 days before the closure of shares transfer book notified by the company, transactions are settled on T+1 basis.

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For non-CDC securities the delivery and payment is settled through the Clearing House of the Exchange, however, delivery is tendered directly between the buying and selling members as per the instruction of the Clearing House. Future Contracts: Under the Regulations Governing Future Contracts, trading in Future Contracts started in July 2001. Presently 13 companies are traded under Future Contract and the Contract is fixed for a period of one month. Transaction Costs: 1. Brokerage on transactions is freely negotiable between the brokers and clients. 2. Stamp duty: Stamp duty is charged at 1.5% of the face value of the shares under the physical form of transfer. There is no stamp duty for transfer settled through the Central Depository System; however, there is a one-time stamp duty at the rate of One Paisa per share at the time of deposit of securities in the CDS. RECOMPOSITION OF THE KSE-100 INDEX Maintenance of the index over time will require an on-going semi-annual recomposition process, internal and external- buffer files of shares that exceed (shares outside the index) or fall below (shares inside the index) the above criteria will be maintained under the jurisdiction of the recomposition committee. Maintaining adequate representation of the under-lying stock market through all of its future development and changes is dependent upon the establishment of an appropriate recomposition process. Recomposition rules fall into two general categories: Sector rules and market capitalisation rules.

Sector Rules Sector rules govern the selection (or deletion) of companies on the basis of being the top capitalisation stock in each of the 34 KSE sectors. Two rules are recommended to undertake selection in this area-one, a time based rule and the other a value-based rule. Application can be triggered by compliance with either rule.

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Time-based rule: A company (not in the index) which becomes the largest in its sector (by any amount of value) will enter the index after maintaining its position as largest in the sector for two consecutive recomposition periods (i.e., one year). Value-based rule: A company (not in the index) which becomes the largest in its sector by a minimum of 10% greater in capitalisation value than the present largest in the sector (in the index) will enter the index after one recomposition period (i.e., 6 months). Capitalization Rule Capitalisation rules govern the selection (or deletion) of companies on the basis of being among the largest capitalisation companies in the stock market. Only one rule applies here-time based rule.

Time-based rule: A company (not in the index) may qualify for entry if it exceeds the market cap value of the last stock in the index selected on the basis of market cap for two recomposition periods (i.e. one year). A qualifying company automatically pushes out the lowest cap selected stock in the index. Rules for new issues: A newly listed company or a privatized company shall qualify to be included in the existing index (after one recomposition period) if the market capitalisation of the new or privatized company is at least 2% of the total market capitalization. Recomposition Time table The recomposition committee will meet semi-annually, with meetings scheduled to take place at least two weeks before the end of the last trading day of the month in which they occur. This is to allow for a minimum announcement period of two weeks, commencing the day following the recomposition meeting, when the results of the meeting are made public, at the end of the last trading day of the month, when changes are implemented into the index.

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Recomposition Committee The recomposition committee has two broad functions: 1. Overseeing implementation of the index rules at the semi-annual recomposition sessions. 2. Reviewing the index rules and altering them as necessary. AN EXAMPLE OF THE RECOMPOSTION OF THE KSE100 The base divisor adjustment process can easily be understood by an example mentioned below. It is important to understand that all divisor adjustment is made after the close of trading. DIVISOR CHANGES KSE-100 Index as on Day 2 = 1100 Index Market Capitalization on Day 2 = 11,000,000,000.00 Divisor as on Day 2 = 10,000,000,000.00 Revised Market Capitalization due to addition and Deletion of companies on the basis of Sector Base Rule and Market Capitalization Rule.- Say = Rs. 12,000,000,000.00 As mentioned earlier the Revised Market Capitalization are the market capitalization of those companies which would constitute the KSE-100 Index on the next day (Day 3). The Revised Market Capitalization calculated after the end of closing of trading session of Day 2 by using closing prices of the same day. The key to making this adjustment, as with any divisor adjustment, is that the index value is temporarily 'frozen' at the close of trading, while the divisor is adjusted for the increase or decrease in market value of the numerator in the formula. As the Formula for KSE-100 Index is:

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Market Capitalization Index = x 1000 Divisor Therefore, in order to get the new divisor than formula is reframed as: Revised Market Cap. New Divisor = x 1000 Index (Day 2) 12,000,000,000 = x 1000 1100 = 10,909,090,909

MEMBERSHIP Membership of KSE is limited and fixed at 200 and prospective members have to purchase a seat from existing members. The price of the membership seat is freely negotiable between the buyers and sellers which varies according to the interaction of the forces of demand and supply. The KSE does not interfere with these transactions. However, the membership is allowed subject to fulfillment of criteria and qualification laid down by the Board. Since June 1990, membership has been opened to corporate entities. Corporate members are required to have a minimum paid up capital of Rs. 20 million and are also subject to criteria fixed by the Board. The Membership of KSE is also available to foreign entities provided that the Nominee Director of the company is a citizen of Pakistan Criteria for Individual Membership: 1. No person shall be eligible to be admitted as Member, if:

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a. He/she is less than 21 years of age; b. He/she is not a citizen of Pakistan; c. He/she has been adjudicated a Bankrupt; or a Receiving Order in Bankruptcy has been made against him/her, or he/she has proved to be insolvent even though he/she has obtained his/her final discharge; d. He/she has compounded with his/her creditors, unless he/she has paid hundred paisas in the rupee; e. He/she has been convicted of an offence involving fraud or cheating or dishonesty or any other indictable criminal offence; f. He/she is associated with, or is a member of, or subscriber to, or shareholder or debenture holder in, or connected through a partner or employee with any other Organization, Institution, Association in Karachi where dealings in Securities are carried on; g. He/she has been at any time expelled or declared a defaulter by any Stock Exchange or Trade Association in Pakistan; h. He/she has been previously refused admission to the membership of any Stock Exchange unless a period of six months has elapsed from the date of such refusal; 2. The applicant should be an income tax or wealth tax assesses or borne as an assessee on the register of income tax/wealth tax. 3. The minimum qualification for an applicant for the Membership shall be "Graduation". (In the case of a person holding at least 5 years experience of working as an agent with any of the members of the KSE or a former member of the KSE who had resigned on voluntary basis without any cause of complaint or claim, may be allowed waiver of this requirement by the Board). 4. The applicant should have sufficient knowledge of stock market business. 5. Reference from a scheduled bank in addition to other references as disclosed in the Membership form.

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6. In the case of an active member filing his/her/their transfer application/nomination, such member shall also submit a bank guarantee or a guarantee by one of the existing members of the Exchange or a guarantee by the incoming member or any equivalent security in the manner as may be prescribed by the Exchange to the extent of Rs. 2.5 million valid for a period of 2 years from the date of transfer of membership in order to indemnify the Karachi Stock Exchange against all claims of replacement of shares received after the transfer of membership as per Rule 26(a) of Ready Delivery Contracts. Criteria for Corporate Membership: 1. The Corporate Body applicant for membership must; a. Be a company or a statuary corporation or a body corporate; b. Have a minimum issued and paid-up capital of Rs. 20 million. 2. In case of statuary corporation or a body corporate to which section 183 of the companies Ordinance 1984 applies; the membership application shall be accompanied by a "no objection" from the Federal or Provincial Government, as the case may be; 3. The Nominee Director representing Corporate Membership must be a citizen of Pakistan. Such nominee shall not be a member of the Exchange, nor shall be a nominee of any other Corporate Member of the Exchange. 4. At least two Directors of the corporate membership including the Chief Executive must have a minimum academic qualification of "Graduation". Provided that in the case of conversion of an individual to Corporate Membership the requirement of minimum qualification for the Chief Executive shall not apply, where the same individual member continues as Chief Executive of the Corporate Membership. (In case the Chief Executive of the Company is a member of the Exchange and the Nominee Director has the stock market experience of at least 5 years as an agent with any of the members of the Exchange may be allowed waiver of the academic qualification by the Board). 5. In the case of an active member filing his/her/their transfer application/ nomination, such member shall also submit a bank guarantee or a guarantee by one of the existing members of the Exchange or a guarantee by the incoming member or any equivalent security in the manner as may be prescribed by the Exchange to the extent of Rs. 2.5 million valid for a period

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of 2 years from the date of transfer of membership in order to indemnify the Karachi Stock Exchange against all claims of replacement of shares received after the transfer of membership as per Rule 26(a) of Ready Delivery Contracts. 6. The membership application shall be accompanied by an auditors certificate confirming that the company maintains a net capital balance/net assets value of at least Rs. 2,500,000/- (excluding the value of membership card). 7. The qualification of nominee Director shall be his holding of qualification shares in the company to the extent provided under the Articles of the nominating corporate membership. 8. 50% of the total number of Directors subject to a minimum of two Directors of the corporate membership, including the Chief Executive and Nominee, must have a minimum academic qualification of "Graduation". Provided that in the case of conversion of an individual to Corporate Membership the requirement of minimum qualification for the Chief Executive/Nominee shall not apply, where the same individual member continues as Chief Executive/Nominee of the Corporate Membership. (In case the Chief Executive of the Company is a member of the Exchange and the Nominee Director has the stock market experience of at least 5 years as an agent with any of the members of the Exchange may be allowed waiver of the academic qualification by the Board). 9. The Chief Executive and Nominee Director must have at least 3 years stock market experience. 10. In case the equity of the company is subscribed by foreign participants; No Objection Certificates from State Bank of Pakistan and Ministry of Finance; is to be furnished. NOTICE PERIOD FOR TRANSFER OF MEMBERSHIP 1. In relation to inactive member, who has applied for transfer of his/her/their membership; the notice period for the purpose shall be 15 days for inviting objections/claims after the issue of notice. Provided that an active member, who has been inactive for a period of at least 2 years from the date of filing the transfer application/nomination and, has

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also filed a declaration to this effect, shall be treated as an inactive member for the purpose of notice period of 15 days. 2. In relation to active member (including those who are members of the Clearing House), the notice period for inviting objections/claims from the members shall be 90 days after the issue of notice. Provided that in the event of an undertaking given by the incoming member (on the prescribed format) to settle all the objections/claims/liabilities of throughout going member, the Board may even before expiry of the 90 days notice period consider and accept the membership application. NOC OF THE CENTRAL DEPOSITORY COMPANY OF PAKISTAN LIMITED In case the outgoing member is a participant of Central Depository Company of Pakistan Limited, he/she is required under the Regulations of CDC to notify the CDC about his/her application made to the Exchange for transfer of membership and shall also submit to the Exchange, NOC of the CDC in this behalf. WHAT ARE SHARES? Each share represents a small stake in the equity of a company. You can buy large or small lots to match the amount of money you want to invest. A companys share price can rise or fall as a result of its own performance or market conditions. Once the shares are brought and transferred in your name your name will be entered in the companys share register, which will entitle you to receive all the benefits of share ownership including the rights to receive dividends, to vote at the companys general meetings to receive the companys reports. If you decide to sell your shares you will need to deliver share certificates to the broker in time for the transaction to be completed. With the introduction of the Central Depository System (CDS), an investor can have shares in paper form or can own shares in an electronic book- entry form at the Central Depository Company (CDC). Why Do Companies Issue Shares? Companies issue shares to raise money from investors. This money is used for the development and growth of businesses of companies. A Company can issue different types of shares such as ordinary shares, preference shares, shares without

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voting rights or any other shares as are permissible under the law. These give shareholders a stake in the companys equity as well as a share in its profits, in the form of dividends, and a voting right at general meetings of shareholders. Why Do Investors Buy Shares? Studies have shown that over a twenty-year span, investment in shares has provided greater returns than most other forms of savings. Shares can provide you with a regular stream of income through dividends as well as the potential for your investments to grow in value. If the prices of shares go up, you can sell them for more than you paid. This is called capital gain. What are Dividends? Dividends are returns paid to shareholders out of the profits of the company. Returns can be in the form of cash or additional shares of the company called bonus shares. Dividends are usually paid once or twice a year depending upon the companys profit distribution policy. What is Capital Growth? This is one of the ways in which shares differ from deposit accounts. The principal amount of money you put in a bank or any fixed income savings scheme always stays the same e.g. if you start with Rs.100,000 you will always have Rs.100,000 (other than any interest earned).changes in value according to the performance of the company. With good management, the value of your investment in shares of a company can grow over time so that your shares are worth more than you paid for them. This is capital growth. Risks and Rewards: Buying shares can offer advantages over saving in deposit accounts: your investment may increase in value besides paying you dividends. You share the rewards when the company does well and the price of the shares goes up. But if the company performs badly, the share price may go down and the value of your investment will be reduced. Other factors, such as the performance of the stock market as a whole and the general economic climate, may also affect the price of your shares. Investment in shares is therefore investment in risk capital. The shareholders can be rewarded for taking this risk and the potential return on your money can be higher than that on other investments. You can reduce your risks with careful planning.

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TIPS FOR INVESTING WISELY Know What Investment Products are Available: The following types of securities are available on the stock market for investment:

Ordinary shares of listed companies Unit trust schemes Mutual funds certificates Corporate bonds i.e., Term Finance Certificates (TFCs)

Government securities i.e., Federal Investment Bonds (FIBs), Pakistan Investment Bond (PIBs) and Special US Dollar Bonds. Know Your Investment Profile: A wise investor chooses an investment product not only according to his goals and the amount of capital available but also according to his tolerance for risk. All investments carry a certain degree of risk. You have to determine whether you are a risk-taker or a risk-averse person. Depending on the extent of risk you intend to take, you should pursue an investment strategy (aggressive, moderate or conservative) that fits your risk profile.

Do Your Homework Before You Invest: Dont put in your money until you have understood all relevant information regarding the investment. Prepare yourself for the vigorous homework of analyzing companys annual reports, accounts and other statements while keeping abreast of whats happening in the industry, country and elsewhere that may affect your investment. Consult your investment adviser/broker to get latest market information about shares you intend to buy or sell. Be skeptical of any thing picked up from rumors, particularly if you cannot rationally explain their choice. Think Long-term:

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Bear in mind that even in the best of securities/shares, there can be short-term aberrations. It is important to have the power to hold your investments for longer periods. Studies have shown that investments properly timed and based on strong fundamentals have been very profitable for investors in the longer term.

Avoid Putting All Your Eggs In One Basket: The best way to minimize risk is to diversify your investments across various investment products. If equities are your sole investments, it makes sense to diversify between different companies and sectors. In this way, loss made on some investments can be absorbed by gains made in others, keeping the overall return on investments positive. You can also diversify your investment by investing in open-end funds managed under various unit trust schemes. While investing in mutual funds check the rating of the instruments. Similarly while investing in any security please check the rating if any available. Beware of Scams: You should always ensure that the stockbroker you choose is licensed by the Securities and Exchange Commission of Pakistan (SEC) to trade. Prefer stock brokerage firms with good track record. As a shrewd investor, you should know your rights and responsibilities and should beware of the rules that govern your investments as well as the legal recourse available, in case things go wrong. You can report abuse to the SEC, whose mission is to ensure the development of a fair, efficient, and transparent securities and futures market. Although its main function is regulatory in nature, the SEC has the ultimate responsibility to protect the investor through market supervision and ensuring that its laws and regulations are complied with. Stock exchanges are the frontline regulators; they must play a proactive role. Send all your complaints in writing to the respective stock exchange(s) with full details, including the complainants name, address and telephone number etc. In case you do not get a response to your complaint, please contact the Complaint Cell in the SEC. INVESTOR PROTECTION: You should always ensure that the stockbroker you choose is licensed by the Securities and Exchange Commission of Pakistan (SEC) to trade. Prefer stock brokerage firms with good track record. As a shrewd investor, you should know your rights and responsibilities and should beware of the rules that govern your investments as well as the legal recourse available, in case things go wrong. You can report abuse to the

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SEC, whose mission is to ensure the development of a fair, efficient, and transparent securities and futures market. Although its main function is regulatory in nature, the SEC has the ultimate responsibility to protect the investor through market supervision and ensuring that its laws and regulations are complied with. GLOSSARY OF STOCK MARKET TERMS Bear an investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price. Blue Chip A large well-established company with a history of profitable operation. Bonds Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principal at maturity. Bull An investor who anticipates a rising market and, therefore, buys the security in the hope of selling it later at a higher price. Capital Gains Tax Tax payable on profit arising from appreciation in value of investment, realized at the time of selling or maturity of investment. Carry-over Trades Equity repurchase transactions, better known, as Badla; these are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers. Dividend That part of a companys profits which is distributed among shareholders, usually expressed in rupee per share or percentage to paid up capital. Earnings per share (EPS) A profitability indicator calculated by dividing the earnings available to common stockholders during a period by the average number of shares actually outstanding at the end of that period. Equity The owners interest in a companys capital, usually referred to by ordinary shares. Floatation The occasion when a companys shares are offered on the stock market for the first time. Fund managers A company, which invests and manages investors money, with the aim of maximizing capital growth. Initial Public Offering (IPO) The offering of equity shares of a company to the general public for the first time. Insider trading The purchase or sale of shares by someone who possesses inside information on a companys performance which information has not been made available to the market and which might affect the share price. In Pakistan, such deals are a criminal offence. Investment companies A company, which issues shares and uses its capital to buy securities and shares in other companies. Listed company A company whose securities are admitted for listing on a stock exchange. Long position - When an individual purchases securities of a company he is said to have a long position in the companys shares. For example an owner of shares in PTCL is said to be "long PTCL" or "has a long position in PTCL." If you are long, you would like the share price to go up. Market capitalization The total value of a companys equity capital at the current market price. Nominee A person or company holding securities on behalf of others, but who is not the owner of such securities.

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Option The right (but not the obligation) to buy or sell securities at a fixed price within a specified period. Ordinary shares The most common form of shares, which entitle the owners to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors. Portfolio A collection of investments Price/earning ratio (P/E ratio) The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors has in a company. It is calculated by dividing the current share price by the last published earnings per share. Primary market Where a company issues new shares, either for the first time, or at the time of issuing additional securities. Privatization Conversion of a state-owned company to a public limited company (plc) status. Private company A company that is not a public company and which is not allowed to offer its shares to the general public. Public limited company (PLC) A company whose shares are offered to the general public and traded freely on the open market and whose share capital is not less than a statutory minimum. Rights Issue The issue of additional shares to existing shareholders when companies want to raise more capital. Securities A broad term for shares, corporate bonds or any other form of paper investment in capital market instruments. Settlement Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller. Short Selling- The act of borrowing stock to sell with the expectation of price reduction with the intention of buying it back at a cheaper price. Stockbroker A member of the stock exchange who deals in shares for clients and advises on investment decisions. Stock Market The market place where shares of publicly listed companies are bought and sold. Unit trust An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time. Yield The aggregate return earned on an investment taking into account the dividend/interest income and its present capital value. THE LISTING REGULATIONS OF THE KARACHI STOCK EXCHANGE (GUARANTEE) LIMITED 1. PRELIMINARY' 1. Short title and extent of applicability: (1) These Regulations may be called the "Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited." 2. The Regulations shall apply to all companies, and securities applying for listing and those listed on the Exchange.

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2. (1) In the Regulations, unless there is anything repugnant in the subject or context: i) "Authority" means the Corporate Law Authority; ii) "Board" means the Board of Directors of the Exchange;

Company Information
CDC Board of Directors
Mr. Mohammad Basheer Janmohammed Chairman
Nominee of The Karachi Stock Exchange (Guarantee) Limited

Mr. Agha Saeed Khan Director

Nominee of Citibank Overseas Investment Corporation

Mr. Ayaz Ahmed Director

Joint Nominee of Habib Bank Limited and Pakistan Industrial Credit & Investment Corporation Limited

Mr. Dawood Jan Mohammad Director

Nominee of The Karachi Stock Exchange (Guarantee) Limited

Mr. Hamid Mustahsin Imtiazi Director

Nominee of Lahore Stock Exchange (Guarantee) Limited

Mr. Jahangir Siddiqui Director

Nominee of International Finance Corporation

Mr. Mohammad Hanif Jakhura Chief Executive Officer

Central Depository Company of Pakistan Limited

Mr. Moin M. Fudda Director

Nominee of The Karachi Stock Exchange (Guarantee) Limited

Ms. Nausheen Ahmad Director

Nominee of Securities and Exchange Commission of Pakistan

Mr. Shehzad Chamdia Director

Nominee of The Karachi Stock Exchange (Guarantee) Limited

Mr. Tariq Iqbal Khan Director

Joint Nominee of National Investment Trust Limited and Investment Corporation of Pakistan

Mr. Tariq Rafi Director

Nominee of Muslim Commercial Bank Limited

Shareholding
Sr.# Shareholders Total No. of % of Shares Held Shareholding

1. The Karachi Stock Exchange (Guarantee) Limited 3,980,800 39.80% 2. Lahore Stock Exchange (Guarantee) Limited 1,000,000 10.00% 3. Citibank Overseas Investment Corporation 1,000,000 10.00% 4. Muslim Commercial Bank Limited 1,000,000 10.00% 5. Habib Bank Limited 634,600 6.35% 6. National Investment Trust Limited 634,600 6.35% 7. Investment Corporation of Pakistan 500,000 5.00% 8. International Finance Corporation 500,000 5.00% 9. Pakistan Industrial Credit & Investment Corporation Limited 500,000 5.00% 10. Islamabad Stock Exchange (Guarantee) Limited 250,000 2.50% Total 10,000,000 100%

Company Secretary
Kamran Ahmed Qazi

Registered Office

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8th Floor Karachi Stock Exchange Building Stock Exchange Road Karachi - 74000

Bankers
Metropolitan Bank Limited Bank Al Habib Limited Habib Bank Limited Muslim Commercial Bank Limited Standard Chartered Bank Citibank NA State Bank of Pakistan

Auditors
Anjum Asim Shahid Rahman, Chartered Accountants

Legal Advisors
M/s Bawaney & Partners, Advocates & Investment & Corporate Advisors M/s Orr, Dignam & Co., Advocates M/s Mandviwalla & Zafar, Advocates M/s Sayeed & Sayeed, Advocates and Legal Consultants Amhurst Brown, Barristers & Advocates

(iia) "CDC" means the Central Depository Company of Pakistan Limited; (iib) "CDS" means the Central Depository System established and operated by the Central Depository Company of Pakistan Limited; (iic) "Eligible Security" means a security which the CDC has declared to be eligible for deposit with the CDS; iii) "Defaulters' Counter" means a Separate counter set up by the Exchange in the trading hall for trading of listed securities for such listed companies who have committed irregularities mentioned in pares (a) to (g) of Regulation No. 32(1), and to whom an opportunity of being heard has been given: iv) "Exchange" means the Karachi Stock Exchange (Guarantee) Limited; v) listed company" means a company or a body corporate or other body which has been listed in accordance with the regulations and whose securities are listed and include a provisionally listed company under these regulations for trading in provisionally listed companies of the Exchange; vi) "listed security" s4hall include any share, scrip, debenture, participation term
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certificate, modaraba certificate, mushariqa certificate, term finance certificate, bond, pre-organisation certificate or such other instruments as the Federal Government may by notification in the Official Gazette specify for the purpose and which is accepted for listing on the Exchange in accordance with the Regulations; vii) "Ordinance' means the Companies Ordinance, 1984 (XLVII of 1984); ix) "Regulations" means these Listing Regulations of the Exchange for the time being in force; x) "Secretary" means the Secretary to the Exchange; xi) "Securities & Exchange Ordinance" means the Securities & Exchange Ordinance, 1969 (XVII of 1969). (2) Words or expressions defined in the Ordinance and the Securities & Exchange Ordinance shall, except those defined herein or where the subject or the context forbids, bear the same meanings as in those Ordinances or either of them and in the case of word or expression bears different meanings under both the Ordinances, that meaning which is carried or included in the Companies Ordinance, 1984 shall prevail and have preferred application. II. LISTING OF COMPANIES & SECURITIES 3. (1) No dealings in securities of a company shall be allowed on the Exchange, either on the Ready Quotation Board or Cleared List, unless the company or the securities have been listed and permission for such dealing has been granted in accordance with the Regulations. (2) The permission under sub-regulation (1) may be granted upon an application being made by the company or in respect of the securities in the manner prescribed. The Exchange, in granting such permission will consider among other things, sufficiency of public interest in the company or the securities. (3) The Exchange shall decide the question of granting permission within a maximum period of three months from the date of receipt of listing application. In case the permission is refused, the reasons thereof will be communicated to the applicant and the Authority within two weeks of the decision. (4) The Board will be the sole authority to grant, defer or refuse such permissio5n and may for that purpose, relax any of these regulations subject only to two-third majority of the directors present at such meeting of the Board and so resolving.
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4. (1) The application for listing shall be made by the applicant company or on behalf of the security in the prescribed form and will be accompanied by the fees, specified in the Regulations. (2) The Board may require additional evidence declarations, affirmations and information as also other forms to be filled up and all such requisitions shall be deemed to be prescribed requisitions for the purpose of a proper application for consideration by the Board for listing. (3) If an application together with the additional information referred to in subregulation (2) is not submitted, the Board may defer consideration or decline to consider it in which case such application will stand disposed off as refused. However, the applicant may move a fresh application after six months from the date of refusal unless the Board other wise decides. (4) An applicant company or security applying for listing shall furnish full and authentic information in respect thereof and such other particulars as the Board or the Exchange may require from time to time. All routine particulars may be called for by the Secretary. III. UNDERTAKING 5. (1) No listing of a company, securities shall be permitted unless the company or the authorised representative on behalf of the securities has provided an undertaking under a common seal and authorised signature to abide by these regulations. (2) The Company and/or the authorised representative in respect of securities, as the case may be, shall further undertake:i) that the securities shall be quoted on the Ready Quotation Board and/or the Cleared List at the discretion of the Exchange; ii) that the Exchange shall not be bound by the request of the company to remove its securities from the Ready Quotation Board and/or the Cleared List; iii) that the Exchange shall be authorised and have the right, at any time and without serving notice if it be deemed proper, to suspend or to remove any shares or securities from the Ready Quotation Board and/or the Cleared List for any reason which the Exchange considers sufficient in public interest subject, however, to the procedure laid-down in Section 9 of the Securities and Exchange Ordinance; iv) that such provisions in the articles of association of a company or in any
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declaration or basis relating to any other security as are or otherwise not deemed by the Exchange to be in conformity with the Regulations shall, upon being called upon by the Board, be amended forthwith and until such time as these amendments are :; made, the provisions of these Regulations shall be deemed to supersede the articles of association of the company or the nominee relating to the other securities to the extent indicated by the Board for purpose of amendment. v) that the company or the security may be de-listed by the Board in the event of noncompliance and breach of undertaking given hereunder. 6. The following documents and particulars duly certified by the company or the company presenting the security shall be submitted to the Exchange at the time of application for listing or any time on demand by the Exchange: i) Application for listing as per Form I; ii) Memorandum & Articles of Association;
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iii) Copy of the Certificate of Incorporation;

iv) Copy of the Certificate of Commencement of Business; v) Copy of the Feasibility Report in case of a new project; vi) Copy of the Permission for setting up the Industrial Units; vii) Copies of the title deeds of the land; viii) Copies of all material contracts and agreements entered into or exchanged with foreign participants, machinery suppliers and any other financial institutions; ix) Copies of Letter(s) of Credit established in favour of Machinery Suppliers, if linked with the public issue; x) Copy of Consent Order issued by the Controller of Capital Issues; xi) Copy of authorisation for flotation of Modaraba by the Registrar of Modaraba Companies; xii) Names of Directors along with directorship of other companies listed on the Exchange;
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xiii) Draft Prospectus/Offer for Sale; xiv) Auditors' Certificate for the amount subscribed by the promoters/directors/associates; xv) Copies of the agreements relating to issue of securities for consideration other than cash, if any; xvi) Copy of underwriting agreement (if any) and No objection Certificate from the underwriters to publish the prospectus (Underwriting public issue is not compulsory for listing on the Exchange); xvii) Statement of audited accounts for the last 5 years or for a shorter number of years if the company is in operation only for such period; xviii) Statement showing the cost of project and means of finance; xix) Copies of the approval application under section 41(1)(f) and 106 of the Income Tax Ordinance 1979; xx) Copies of the Consent Letters from Bankers to the issue; xxi) Application for submission of Undertaking and payment of fees as per Form II; xxii) Copy of approval of prospectus/offer for sale from Corporate Law Authority; and xxiii) Any other documents/material contract and such other particulars as may be required by the Exchange. III A. OFFER OF CAPITAL BY COMPANIES/MODARABAS TO THE PUBLIC 6 A. (1) In case capital of company is up to two hundred million rupees, at least fifty percent of such capital shall be offered to the public. (2) In case capital of the company is beyond two hundred million rupees, public offer shall be at least one hundred million rupees or twenty five percent of the capital, whichever is higher. (3) Allocation of share capital to overseas Pakistanis shall not exceed t8wenty percent of the public offer.
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(4) Allocation of share capital to employees of a company shall not exceed five percent of the public offer. (5) In the case of a Modaraba applying for listing on the Exchange, 30% of the total Paid-up capital shall be subscribed by the sponsors or their associates or friends, relatives and associated undertakings and the balance of 70% shall be offered to the General Public. (6) The stock exchange, if it is satisfied that it is not practicable to comply with the requirements of any of the above regulations in a particular case or class of cases; the exchange may, for reasons to be recorded relax the regulations subject to approval of the Authority. IV. PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES 7. (1) No company will be listed unless it is registered under the Ordinance as a public limited company or has been setup under a statute and its minimum paid-up capital is Rs.50 million. (2) Companies registered in Northern areas and Azad Jammu and Kashmir will be eligible for listing and will be treated at par with Companies registered in Pakistan. (3) Despite receiving the application for listing and any preliminary actions thereon, no company shall be listed unless it has made a public issue which is subscribed by not less than 500 applications. (4) The requirements of sub-section (1) or (3) shall not apply to listing of securities other than shares of companies unless any law so requires or the Federal Government in the exercise of its powers under the Securities & Exchange Ordinance so directs.
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(5) Companies may make a public offer of securities to be eligible securities in the CDS. 8. (1) The prospectus or offer for sale shall be submitted to and cleared by the Exchange before an application for its approval is made to the Authority. The Exchange may require additional information, data, certification or requirement to be included in the prospectus or the offer for sale. If any applicant fails to comply with such requirements, the Exchange may refuse to issue clearance under these Regulations. (2) The prospectus or the offer for sale shall conform to and be in accordance with the
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requirements and provisions of the ordinance and/or the Securities and Exchange Ordinance and any other law or legal requirement for the time being applicable. The application made to the Authority shall amongst other things, be accompanied by the clearance given by the Exchange under sub-regulation (1). (3) Without prejudice to the foregoing, the prospectus or the offer for sale shall fulfill all requirements of the law and instructions of the Authority as well as the 10criteria for listing and the guidelines laid down by the Exchange form time to time, not being inconsistent with law or instructions of the Authority. (4) The prospectus or offer for sale with the proforma application form shall 'be published by the company in one newspaper each at Karachi, Lahore, Rawalpindi and Islamabad, or as the Exchange may in addition require, at least 7 (seven) days in advance but not more than 30 (thirty) days before the date of the opening of the subscription list. (5) The issuer shall make available to the Exchange and to bankers to the issue for distribution printed copies of prospectus or offer for sale and application forms in the quantity to be determined by the Exchange and the bankers. The company shall also accept applications on identical forms. (6) The Applications for shares shall be accepted only through bankers to the issue, whose names shall be included in the prospectus or the offer for sale. (7) The directors or the offerers, as the case may be, shall not participate in subscription of shares offered to the general public. 8 A. The share certificates shall be issued in such marketable lots or in any other manner as may be determined or approved by the Exchange. 8 B. The application money shall be refunded, within such time as is prescribed in regulation 9(4), if the company is not listed on the Exchange for any reason whatsoever or the listing is refused. 9. (1) The company shall inform the Exchange of the subscription received which information shall be communicated in writing under the hand of an authorised person with certificate(s) from bankers to the issue, within three working days of the closing of subscription. (2) The company shall take a decision within 10 days of the closure of subscription list as to which applications have been accepted or are successful.
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(3) The company shall refund the application money in case of unaccepted or unsuccessful applications within 10 days of the date of such decision. (4) In case the application for listing is refused by the Exchange, for any or whatsoever reasons, the company shall forthwith pay without Surcharge all moneys received from applicants in pursuance of the prospectus or the offer for sale and any such director of the company shall be, jointly and severally, liable to repay that money with surcharge at the rate of one and half percent for every month or part thereof from the expiration of the fifteenth day. (5) In case of over-subscription, the company, or the offerers, as the case may be, shall immediately submit to the Exchange copies of the ballot register of successful applications. (6) The company shall despatch all shares certificates, in marketable lots, within 30 days of the closing of subscription list to all the successful applicants under intimation to the Exchange. Pr11ovided that where the security has been declared to be an eligible security, share certificates shall be issued by the company and deposited directly into the CDS in such manner as may be prescribed by the CDC. (7) Any company which makes a default in complying with the requirements of these Regulations, or any of its sub-regulation, shall pay to the Exchange a penalty of Rs.500/- (Rupees Five Hundred only) for every day during which the default continues. The Exchange may also notify the fact of such default and the name of the defaulting companies. (8) Any action under these Regulations shall be without prejudice to the action or steps taken by any other person or Authority. 10. The company or the offerers shall, within 30 days of closing of subscription list, pay brokerage to the members of the Exchange at the minimum rate of one per cent of the value of the shares actually sold through them. 11. (1) The company shall split allotment letters and letters of right into marketable lots within seven days of receipt of such application. (2) The company shall consolidate or split, as may be required by a holder in writing, share certificates into marketable lots within 45 days of receipt of such application.
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The company may charge an amount, which shall not exceed Rs. 10/= for each share certificate, except in the case of those issued or to be issued in marketable lots. Provided that the requirements of sub-regulation (1) & (2) shall not apply where the security has been declared an eligible security and held in the name of CDO. In such oases, the procedure as prescribed by the CDC shall be complied with. 12. Deleted 13. (1) The company shall verify the signature of shareholders within 48 hours of such a request. (2) The company shall complete shares transfer and have ready for delivery the share certificates lodged for registration of transfer within 45 days of the application for such transfer and its registration. Provided that this regulation shall not apply in case of eligible securities deposited into the CDS In such cases the procedure as prescribed by the CDC shall be complied with. 14. (1) The company shall give a minimum of 21 days notice to the Exchange prior to closure of Share Transfer Books for any purpose. Provided that companies quoted on Cleared List shall give two months notice for closure of Share Transfer Register subject to prior approval of dates by the Exchange. (2) The company shall treat the date of posting as the date of lodgment of shares for the purpose for which shares transfer register is closed, provided that the posted documents are received by the company before relevant action has been taken by the company. (3) The company shall issue transfer receipts immediately on receiving the shares for transfer. (4) The company shall not charge any transfer fee for transfer of shares. (5) The company shall provide a minimum period of 7 days but not exceeding 15 days at a time for closure of Shares Transfer Register, for any purpose, not exceeding 45 days in a year in the whole. 15. No listed company shall exercise any lien whatsoever on fully paid 12shares and
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nor shall there be any restriction on transfer of fully paid shares. The same shall apply to all listed securities. V. DIVIDENDS AND ENTITLEMENTS 16. (1) Every listed company shall advise and keep advised by appropriate writings to the Exchange of all dividends and entitlement in respect of its listed securities immediately upon recommendations by its directors through a letter to be delivered under a sealed cover during trading hours of the Exchange. (2) Listed companies, holding their board meetings outside Karachi, shall advise the Exchange and convey full particulars as in sub-regulation (1) including the place, address and time, during its trading hours by telex followed by a letter of confirmation. (3) Intimation of dividend and of all other entitlements shall be sent to the Exchange not later than 21 days prior to commencement of the book closure. 17. Every listed company shall send to the Exchange its financial results, both in the case of half yearly and annual accounts, in such form as may be prescribed by the Exchange as soon as these are approved by the directors of the company. 18. (1) The company shall send to the Exchange 300 copies each of statutory report, annual report and audited accounts not later than 21 days before a meeting of the shareholders is held to consider the same. (2) The company shall send to the Exchange copies of all notices as well as resolutions prior to their publication and despatch to the shareholders and also file with the Exchange certified copies of all such resolutions as soon as these have been adopted and become effective. (3) The company shall send to the Exchange 300 copies of half yearly accounts as soon as the same are printed and/or published. 19. (1) Every listed company shall :i) despatch the interim dividend warrants to the shareholders concerned within 45 days from the date of commencement of closing of share transfer register for purpose of determination of entitlement of dividend; ii13) despatch the final dividend warrants to the shareholders concerned within 45 days from the date of General Meeting in which the same has been approved;
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iii) intimate the Exchange immediately as soon as all the dividend warrants are posted to the shareholders; iv) despatch interim and final dividend warrants to the shareholders by registered post unless those entitled to receive the dividend require otherwise in writing. (2) All dividend warrants, in addition to the place of the Registered Office of the issuing companies, shall be encashable at Karachi, Hyderabad, Sukkur, Quetta, Multan, Lahore, Faisalabad, Islamabad, Rawalpindi and Peshawar for a period of three months from the date of issue. (314) A listed company, which makes a default in complying with the requirements of this Regulation, shall pay to the Exchange penalty of Rs.500/= (Rupees five hundred only) for every day during which the default continues. The Exchange may also notify the fact of such default and the name of defaulting company by notice and also by publication in the Official Quotation List of the Exchange. (4) The Board may suspend or if it so decides, delist any company which makes a default in complying with the requirements of this Regulation. (5) Any action under this Regulation shall be without prejudice to the action or steps taken by any other person or authority. Vl. ANNUAL GENERAL MEETINGS, ETC. 20. (1) A listed company shall hold its annual general meetings and lay before the said meetings balance sheet and profit and loss account within six months following the close of its financial year. (2) A company may apply to the Exchange for extension in time under sub-regulation (1) and shall pay the following extension fees with such application: (i) Extension for the 1st month or part thereof (ii) Extension for the 2nd month or part thereof (iii) Extension for the 3rd month or part thereof Rs.5,000/= Rs.7,500/= Rs. 10,000/=

Provided that the above extension shall be allowed subject to and upon production of a letter of approval from the Corporate Law Authority allowing a similar extension.
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15

(3) Upon receipt of the application, with the fee corresponding to the extension applied for, the Board may, in its sole discretion, grant or refuse the extension. In the event of refusal the fee paid with the application shall be refunded. (4) Failure to obtain extension from the Exchange or if the annual general meeting is not held within time or the extension is refused, shall make the company liable to penalty at double the rate of extension fees provided above. (5) No further extension beyond the maximum period under sub-regulation (2) shall be granted. In the event of default continuing after the final extention provided herein above, the company shall be liable to an additional penalty at the rate of Rs. 500/= per day for every day of the default and to action of suspension or delisting as may be decided by the Exchange. The Exchange may also notify the fact of such default and the name of the defaulting company by notice and also by publication of the same in the Official Quotation List of the Exchange. (6) The Board may suspend/delist any company which makes a default in complying with the requirements of this Regulation and/or fails to pay the penalty payable hereunder or imposed by the Exchange. 21. (1) The company shall furnish copies of minutes of its annual general meeting and of every extraordinary general meeting to the Exchange within 60 days of such meeting. (2) The company shall furnish a complete List of all its shareholders as at 31st December in each calendar year, duly affirmed to be correct as and upto that date, within 30 days thereof Failure to comply in the said behalf shall be deemed to be violation of these Regulations and, in addition, such company shall be liable to pay a sum of Rs.500/- per day for each day of default until it continues. VII. INCREASE OF CAPITAL & ALLIED ISSUES 22. Every listed company shall immediately advise the Exchange of all decisions taken by its board of directors regarding any change in authorised, issued or paid-up capital, by issue of bonus shares, right shares or refund of capital, etc. 23. (1) A listed company shall issue entitlement letters or right offers to all the shareholders within a period of forty-five days from the date of re-opening of share transfer register of the company closed for this purpose. Provided that this regulation shall not apply in case of eligible securities deposited into the CDS. In such cases, the procedure as prescribed by the CDC shall be
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complied with. (2) The com16pany shall pay the following fees for extension granted by the Exchange with regard to issuance of entitlement letters, etc. (i) for the first 15 days (ii) for the next 15 days Rs. 100/= per day Rs. 200/= per day

Failure to seek extension from the Exchange shall make the company liable to a penalty at double the rate of extension fee provided above. (3) No extension shall be granted beyond the period in sub-regulation (2). In the event of the default continuing after the final extension, the company shall be liable to an additional penalty at the rate of Rs.5,000/= per day for each day of default and also to action of suspension or otherwise delisting by the Exchange. (4) No company which has been suspended or de-listed, as the case may be shall be restored and its shares re-quoted on Exchange until it has paid the full amount of penalty for the days of the default and receives the assent of the Board for the restoration. 24. (1) A listed company shall issue bonus shares certificates within a period of fortyfive days from the date of re-opening of the share transfer register closed for this purpose according to the following time table:(i) the bonus share certificates shall be despatched to the shareholders concerned by registered post unless those entitled to receive the bonus share certificates require otherwise in writing; (ii) the Exchange shall be immediately intimated as soon as the bonus share certificates are posted to the shareholders; (iii) the company shall pay extension fee for the balance of the period upto 90 days from the date of re-opening of Share Transfer Register at the rate of Rs. 1000/= per day; (iv) no extension beyond that provided in the preceding clause shall be granted; (v) in the event of the default continuing after the final extension the company shall be liable to a penalty at the rate of Rs.500/= per day the default continues and also to
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action of suspension or de-listing by the Exchange; Provided that this regulation shall not apply in case of eligible securities deposited into the CDS. In such cases, the procedure as prescribed by the CDC shall be complied with. (2) No listed company, which has been suspended or de-listed, shall be restored and its shares re-quoted on the Exchange until it pays penalty for the days of the default and receives the assent of the Board for restoration. VIII. LISTING OF SUBSIDIARY COMPANY & OTHER MATTERS 25. (1) A listed company distributing shares of its unlisted subsidiary company in the form of specie dividend, right shares or any similar distribution shall get such subsidiary company listed on the Exchange within a period of 120 days from the date of approval of such distribution by the shareholders at a meeting of such company. (2) In case of failure of such subsidiary company to apply for listing or refusal by the Exchange for such listing on account of insufficient public interest, or for any other reason whatsoever, the company distributing specie dividend shall encash the shares of the subsidiary company at the option of the recipients at a price not less than the current break-up value, 17or face value, whichever is higher, within 30 days from the expiry of 120 days or from the date of refusal of listing whichever is earlier, failure in which behalf shall be default in which event the trading in the shares of the listed company be suspended by the Board or the company de-listed. 26. Every listed company shall notify the Exchange immediately regarding changes in its board of directors by addition or removal by death, resignation, or disqualification. 27. A listed company shall obtain prior clearance of the Exchange for any amendment proposed to be made in its memorandum and articles of association before the same are placed for the approval of the shareholders. 28. A listed company shall immediately inform the Exchange of any material contract entered into by the company or of any material change in the nature of its business including change of management, sale or purchase of major operating assets, franchise, brand name, goodwill, royalty, financial plan, etc., and all relevant information such as consideration, terms of payment, period of use of such facilities and projected gains to accrue to the company. 29. Every listed company shall advise the Exchange of:17

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(a) the decision to issue Participation Term Certificates and the purpose thereof notwithstanding that application is to be made to the authorities later; (b)submit copy of the application made to authorities with relevant details and certified copy of the consent order. (c) All material particulars of the Participation Term Certificates including conditions governing the issue, details of guarantee/securities, trustees and name of the subscribing institution(s). 30. All listed companies shall obtain prior approval of the Exchange in respect of the date and time of holding of its annual general me. 31. All listed companies shall notify the Exchange in advance the date and time of its board meeting specially called for consideration of its accounts and for declaration of any entitlements for the shareholders. IX. DE-LISTING, SUSPENSION AND DEFAULTERS' COUNTER 32. (1) A listed company may be de-listed, suspended or placed on the Defaulters' Counter, for any of the following reasons:(a) if its securities are quoted below 50 per cent of face value for a continuous period of three years. Provided that if the shares of the company quoted at 50 percent or above of their face value then such a rate is maintained for a continuous period of thirty working days. (b) if it has failed to declare dividend or bonus:(i) for five years from the date of declaration of last dividend or bonus; or (ii) in the case of manufacturing companies, for five years from the date of commencement of production; and (iii) for five years from the date of commencement of business in all other cases. (c) if it has failed to hold its annual general meeting for a continuous period of three years. (d) if it has gone into liquidation either voluntarily or under court order; (e) if it has failed to pay the annual listing fees as prescribed in these regulations payable to the Exchange for a period of 2 years of penalty imposed under these

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regulations or any other dues payable to the Exchange;

18

(f) if it has failed to comply with the requirements of any of these regulations;

(ff) If the company for any reason whatsoever refuses to join the CDS after its securities have been declared eligible securities by the CDC. (g) no company which has been de-listed or suspended shall be restored and its shares re-quoted until it removes the causes of de-listing/suspension and receives the assent of the Board for the restoration. (2) No company will be de-listed or placed on Defaulters' Counter, under these Listing Regulations, unless such company has been given an opportunity of being heard. Provided, however, placement of a company on the Defaulters' Counter for reasons mentioned in sub-regulation (1) above, shall not impair the power of the Exchange to de-list such company subsequently, if the causes mentioned in paras (a) to (g) of subregulation (1) are not removed within a reasonable time, or if in the opinion of the Board, such causes will not be removed by the company within a reasonable time, and/or de-listing of such company becomes necessary in the public interest: 33. Where no trading has taken place on the Exchange in the securities of a listed company for a continuous period of 180 days, the Exchange, if it is satisfied that the prices quoted are not in accordance with the market realities, may except in cases where the earlier quotation is below par value and, with the prior approval of the Authority, quote such companies at par from the one hundred and eighty first day irrespective of the price earlier prevalent. X. LISTING AND ANNUAL FEES 34. (1) A company applying for listing on the Exchange, shall pay an initial listing fee equivalent to one seventh of one percent of the PAID-UP-CAPITAL subject to a maximum of rupees two million and five hundred thousand. Provided that in case of debt instruments the initial listing fee shall be charged at the rate of one tenth of one percent of the amount of total debt instrument subject to a maximum of rupees two million. (2) Whenever, a listed company increase the paid-up capital of any class or classes of its shares, or securities listed on the Exchange, it shall pay to the Exchange a fee equivalent to one seventh of one per cent of such increase.
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(3) Every listed company shall pay, in respect of each financial year of the Exchange, commencing from 1st July and ending on 30th 19June next, an annual listing fee, which shall be payable by or before the 30th September in each calendar year, as per following schedule: COMPANIES HAVING PAID-UP-CAPITAL Upto Rs. 50 million Above Rs.50 million & upto Rs.200 million Above Rs. 200 million RATE OF FEE Rs. 25,000 per annum Rs.50,000 per annum Rs.100,000 per annum

Provided that the Board may revise the above fees or any of the slabs or add new slabs with the approval of the Authority. Provided further that every company applying for listing shall pay annual listing fee for the entire financial year of the Exchange along with the listing application irrespective of the date of its listing during the financial year (4) The above Listing fee or any other sum fixed by the Board shall be payable by 30th September in advance for every financial year. (5) Failure to pay the annual fee by 30th September shall make the company liable to pay a surcharge at the rate of 1.5 per cent (one and a half per cent) per month or part thereof, until payment. However, if reasonable grounds are adduced for non payment or delayed payment of annual fee, the Exchange may, reduce or waive the surcharge liability. (6) A company applying for enlistment on the Exchange shall, in addition to other fees, pay a sum or Rs.25,000 as Service Charges. 35. (1) All Exchange dues shall be paid by cheques, pay orders or bank drafts payable to the Exchange at any Bank Branch located in Karachi. (2) Without prejudice to the action which the Exchange may take under these Regulations in the event of default in payment of its dues, nothing shall prevent the Exchange from recovering such dues through posting defaulters names on the notice board of the Exchange or by invoking the process of law and obtaining order of a
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competent court. 36. (1) Without prejudice to various specific or other penalties provided or available under these Regulations the Exchange shall have powers to suspend, delist or place a company on the "Defaulters' Counter", if in the opinion of the Exchange, such company has defaulted or contravened any Listing Regulations: (2) The suspension, de-listing or placement of a company on the Defaulters' Counter under Regulations No. 32 or the preceding sub-regulation shall be communicated to such company and simultaneously no20tified to the trade, inter alia by posting it on the notice board of the Exchange and publishing it, if deemed necessary, in the Official Quotation List or by a circular or intimation issued by the Exchange. (3) Trading in the securities of a suspended or de-listed company shall forthwith cease and shall not be commenced until the suspension is withdrawn or the de-listing is restored by the order of the Board. (4) Trading in the securities of a company placed on Defaulters' Counter, shall be effected separately and the prices shall also be quoted separately in the Official Quotation List until such company is removed from the Defaulters' Counter and restored to regular counter of the Exchange by the order of the Board. FORM I FORM OF APPLICATION UNDER SECTION 9 OF THE SECURITIES AND EXCHANGE ORDINANCE 1969 FOR LISTING A SECURITY ON A STOCK EXCHANGE To: The General Manager Karachi Stock Exchange (Guarantee) Limited Karachi Dear Sir, We hereby apply for the listing of our----------------------------------------------on your Stock Exchange (name of company) 2. Necessary information and documents as required in the annexure to this form are furnished.

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Yours faithfully, SIGNATURE & ADDRESS c.c. to: The C.L.A. ISLAMABAD. ANNEXURE TO FORM I The following particulars and documents shall be annexed to the listing application, namely: 1. Memorandum and Articles of Association and, in case of Participatory Redeemable Capital, a copy of the trust deed; 2. Copies of prospectus issued by the Company in respect of any security already listed on the Stock Exchange; 3. Copies of balance sheets and audited accounts for the last five completed years or for a shorter number of years if the company has been in existence only for such years; 4. A brief history of the company since incorporation giving details of its activities including any re-organisation, changes in its capital structure and borrowings. 5. A statement showing: (a) cash dividends and bonuses paid during the last 10 years or such shorter period as the company may have been in existence; (b) dividends or interest in arrears, if any. 6. Certifie21d copies of agreements or other documents relating to arrangements with or between: (a) vendors and/or promoters. (b) underwriters. (c) brokers. 7. Certified copies of agreements with:
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(a) managing agents. (b) selling agents. (c) managing director and technical directors.

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8. A statement containing particulars, dates of and parties to all material contracts, agreements (including agreements for technical advice and collaboration), concessions and similar other documents except those entered into in the normal course of the company's business or intended business together with a brief description of the terms of such agreements. 9. Certified copies of the agreements with the NIT, ICP, PICIC, IDBP and any other financial institution.
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10. Names and addresses of the directors and persons holding ten per cent or more of any class of equity security as on the date of application together with the number of share or debentures held by each. 11. Particulars of security for which listing is sought. 12. Additional information/documents that may be called by the Exchange. FORM -II FORM FOR SUBMISSION OF PAYMENT OF FEES The General Manager Karachi Stock Exchange (Guarantee) Limited Karachi. Dear Sir, Re: LISTING ON THE STOCK EXCHANGE With reference to our Listing application under Section 9 of the Securities and Exchange Ordinance, 1969, we enclose herewith the following: (1) An unconditional undertaking under the Common Seal of the company duly signed in accordance with the provisional contained in our Articles of Association. (2) A cheque of Rs.--------- towards initial Listing Fees at the rate of one seventh of one per cent of the Paid-up Capital of Rs.---------------. (3) A cheque of Rs.---------towards annual Listing Fee as per your Listing Regulations.

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Yours faithfully, SIGNATURE FORM-III FORM OF UNCONDITIONAL UNDERTAKING UNDER LISTING REGULATION NO. 5 ON NON-JUDICIAL STAMP PAPER DATED:----/--- /---The Governing Board of Directors Karachi Stock Exchange (Guarantee) Limited KARACHI. UNDERTAKING We undertake, unconditionally, to abide by the Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited which presently are, or hereinafter may be in force. We further undertake: (1) That our shares and securities shall be quoted on the Ready Quotation Board and/or the Cleared List at the discretion of the Exchange; (2) That the Exchange shall not be bound by our request to remove the shares or securities from the Ready Quotation Board and/or the Cleared List; (3) That the Exchange shall have the right, at any time to suspend or remove the said shares or securities for any reason which the Exchange consider sufficient in public interest. (4) That such provisions in the articles of association of our company or in any declaration or agreement relating to any other security as are or otherwise not deemed by the Exchange to be in conformity with the Listing Regulations of the Exchange shall, upon being called upon by the Exchange, be amended to supersede the articles of association of our company or the nominee relating to the other securities to the extent indicated by the Exchange for purposes of amendment and we shall not raise any objection in relation to a direction by the Exchange for such amendment; and (5) That our company and/or the security may be delisted by the Exchange in the

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event of non-compliance and breach of this undertaking. Yours faith24fully (Signature of Authorised Person) Common Seal of the Company CRITERIA/GUIDELINES FOR LISTING OF COMPANIES ON THE EXCHANGE (1) Every listing application must accompany: i) All relevant Land Acquisition documents, ii) Feasibility Report in case of a new project, iii) Copies of the Letters of Credit established for the purpose of import of all machinery, if linked with the public issue. (2) The Exchange shall not entertain listing application of such company whose "Chief Executive" has been found to have violated the Listing Regulations or any other/listed companies on the Exchange of which he had been the Chief Executive. (3) In all the prospectuses/offer for sale, the following disclosures must be made:i) No financial statements shall be incorporated in the prospectus/Offer For Sale which is not audited and certified by the auditors and which is not accompanied by the accounting policies. ii) The Audited Accounts incorporated in the Prospectus/Offer For Sale shall not be older than 6 months time before the application of Listing is made to the Exchange. iii) A profile of the Chief Executive alongwith academic qualifications and experience in the field on Industry. iv) Break-up value of the shares on the basis of the latest audited account supported by a certificate from the auditors. v) In the financial plan, the amount of interest/mark/up/financial charges during preproduction period should be shown separately. vi) Any other disclosure which the Exchange may require for the benefit of the investors. (4) A running company for one full year or more, reflecting losses in their last audited
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accounts, shall not qualify for listing if its equity is eroded by 40% or more. (5) The companies applying for listing on the Exchange should have a paid-up capital of not less than Rs. 50 million. (6) In the case of Modaraba Companies, 30 % of the paid-up capital shall be subscribed25 by the Sponsors their Friends Associates and Associated Companies and balance 70 % shall be offered to General Public including N.I.T. Additionally, the management should have sufficient experience of finance and its management with supporting documents, as submitted to the Registrar Modaraba Companies. 7) No company should be allowed listing whose promoters/sponsors/controlling directors are also promoters/sponsors/controlling directors in other listed companies, which are in default of any Listing Regulation of the Exchange. However, this will not apply to nominee directors of the Government and Financial Institutions. The company should also provide a list of Controlling Directors. 8) No company shall be allowed listing which is a Wholly owned subsidiary company of any other listed company which has violated the Listing Regulations of the Exchange and is still in default of any Listing Regulation. 9) No company shall be allowed listing until it has achieved financial close. 10) A certificate signed by all the directors and principal sponsors of the company should be submitted, confirming that the machinery has been purchased at most competitive rates and the same should be disclosed in the prospectus/offer for sale for information of the prospective subscribers. 11) A brief write-up of each controlling directors shall be submitted in order to assess their performance and the same should form part of the prospectus/offer for sale. CRITERIA/GUIDELINES FOR LISTING OF COMPANIES ON THE EXCHANGE (1) Every listing application must accompany: i) All relevant Land Acquisition documents, ii) Feasibility Report in case of a new project, iii) Copies of the Letters of Credit established for the purpose of import of all machinery, if linked with the public issue. (2) The Exchange shall not entertain listing application of such company whose "Chief Executive" has been found to have violated the Listing Regulations or any
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other/listed companies on the Exchange of which he had been the Chief Executive. (3) In all the prospectuses/offer for sale, the following disclosures must be made:i) No financial statements shall be incorporated in the prospectus/Offer For Sale which is not audited and certified by the auditors and which is not accompanied by the accounting policies. ii) The Audited Accounts incorporated in the Prospectus/Offer For Sale shall not be older than 8 months time before the application of Listing is made to the Exchange. iii) A profile of the Chief Executive alongwith academic qualifications and experience in the field on Industry. iv) Break-up value of the shares on the basis of the latest audited account supported by a certificate from the auditors. v) In the financial plan, the amount of interest/mark/up/financial charges during preproduction period should be shown separately. vi) Any other disclosure which the Exchange may require for the benefit of the investors. (4) A running company for one full year or more, reflecting losses in their last audited accounts, shall not qualify for listing if its equity is eroded by 40% or more. (5) The companies applying for listing on the Exchange should have a paid-up capital of not less than Rs. 50 million. (6) In the case of Modaraba Companies, 30 % of the paid-up capital shall be subscribed by the Sponsors their Friends Associates and Associated Companies and balance 70 % shall be offered to General Public including N.I.T. Additionally, the management should have sufficient experience of finance and its management with supporting documents, as submitted to the Registrar Modaraba Companies. (7) No company should be allowed listing whose promoters/sponsors/controlling directors are also promoters/sponsors/controlling directors in other listed companies, which are in default of any Listing Regulation of the Exchange. However, this will not apply to nominee directors of the Government and Financial Institutions. The company should also provide a list of Controlling Directors. (8) No company shall be allowed listing which is a wholly owned subsidiary company of any other listed company which has violated the Listing Regulations of

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the Exchange and is still in default of any Listing Regulation. (9) 'No company shall be allowed listing until it has achieved financial close. (10) A certificate signed by all the directors and principal sponsors of the company should be submitted, confirming that the machinery has been purchased at most competitive rates and the same should be disclosed in the prospectus/offer for sale for information of the prospective subscribers. (11) A brief write-up of each controlling directors shall be submitted in order to assess their performance and the same should form part of the prospectus/offer for sale.
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Uphill journey of Karachi Stock Exchange On November 1999 President General Pervez Musharraf invited Mr. Shaukat Aziz to take charge of the Ministry of Finance. He very quickly assembled a team of highly trained economists and extremely talented civil servants and set forward four major policy objectives on economic front. To stabilize the countrys debt situation with a view to restoring macroeconomic stability. To revive economic growth and restore investor confidence. To arrest the rising trends in poverty. To improve governance.

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Brochure of Taurus securities ltd corporate member of Karachi stock exchange .

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Boom in KSE index. WHY? There are some factors involved: External Factors:

Weak dollar rate after 9/11 incident, and WTO policies. After September 11, 2001 The Pakistanis have been sending money back home because the FBI treats their legitimate investments abroad with suspicion. Pakistans policy for War against terrorism. Easing of relations with India.

Internal Factors:

Privatization in selective sectors. The market reacted positively to the announcement for the release of onebillion-rupee as second tranche/portion by the finance ministry for compensation to Oil Marketing Companies against surge in international oil prices. The governments decision to announce the early privatization of the Pakistan Telecommunication Company Ltd (PTCL) without breaking it up into smaller companies was a major boost to the index.

No Elections have been held till now, because every government changes its economical policies.

External Factors are the key factors for the uphill journey of Karachi Stock Exchange

Accord to end stock market crisis

By Dilawar Hussain KARACHI, April 21: The exasperating issue of COT (carryover trade) mode of financing in the country's stock exchanges was settled with both the SECP and KSE reaching an agreement on Thursday.

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Minister of State for Finance Omer Ayub Khan brokered the talks between Chairman SECP Dr Tariq Hassan and Commissioner (Securities Market) Shahid Ghaffar, representing the 'apex regulator' (SECP), and the board of directors of Karachi Stock Exchange, representing 'the frontline regulator' (KSE). The announcement that all contentious issues were resolved was made by the Managing Director KSE, Mr Moin Fudda, minutes before the close of trading on Thursday. Investors greeted the development with relief, hoping the crisis which had gripped the stock market ever since the KSE-100 index hit its life-time high of 10,313 points on March 15 this year would end. The index rose by 71 points on Thursday and brokers said that much of the rally was in anticipation of a positive outcome of the talks that lasted three hours. The following conclusions were made on the COT phase-out issue: (1) Freezing date of April 29, 2005, for COT position stood withdrawn pursuant to the request made by the board, management and members of KSE; (2) the extended date for COT phaseout would be August 26, 2005, instead of August 3, 2005, as notified earlier; (3) the weekly reduction of outstanding COT positions would be 8.25 per cent instead of 12.5 per cent w.e.f. June 8, 2005; and (4) revised list of eligible securities for May 2005 futures contracts was to be announced on Thursday evening. The KSE board is said to have assured the SECP and the government that there would be no further request for COT extension and that COT would not be dependent on margin finance. All parties, however, agreed to make concerted efforts to promote margin finance.

Market Out look Quarter review Jan to March 2005 The 1st quarter of 2005 marked the most bullish phase in the history of market. The market made phenomenal gains for most of the quarter and the KSE -100 index rose 65.6% or 4084 points to reach a record high of 10303points before the sharp correction Latter half of March brought the market earthward. Overall the market still gained 1552points B/T Jan 1 and March 31 2005 to close at 7770 Points.

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12000 10000 8000 6000 4000 2000 31-Dec-04 1-Mar-05 1-Feb-05 0

1200 1000 800 600 400 200 0 turnover Column 3 index

The index gained healthy 529points in the months of Jan and became over heated in Feb when speculative really led by OGDCL saw the index up 1512 points that months. The index that gained 2043poits in the 1st 2 week of March alone & to any thought full investor this was warning enough that the bulls had the gotten out of hand and a sharp correction was due. STEEP CORRECTION, CRISES AVERTED When the correction came the drop was sudden and caught many investor of guard. the KSE -100 index last 2595 points over 8 panic stricken days, before the SECP & KSE management move into halt the slide .they were aided in there efforts by help by some key market players .once the market fall head begin, most of the major scraps would hit their lower limits at the start of the day, preventing investor from off loading there positions. This was a disastrous scenario for leveraged investor, the market was extremely heavily leveraged at the time of correction .Badla financing and OGDCL alone stoode at Rs.7.7b (43m shares) at the time. The section was exacerbated by futures market ,which had become to see greater volume then the ready market, and faced a settlement crises as the market fail and future investor were unable to found buyers to settle there open position. most of the difficulty arose in the march futures contract OGDCL.OGDCL head led the bull run ,but its share pries at over Rs.180per share was almost 100 rupees more then could be justified and when its pries collapsed ,there were no buyers in sight .in either the future of the ready market. there was a very real fear of a default in the future market, which could in turn have led to a system-wide pandemic.essently the market head to be bailed out the buying the market regulator .the settlement crises was elleviated by majors taken by the SECP,which eased badla restriction & allowed the additional funds into the market from institutions, so a major default was avoided .A consortium of institutions led by NIT-The state-owned mutual fund- were encourage to provide

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funding and behind the scenes, support was avoided by sum of the larger broker to brokerage houses that were facing liquidity problems. THE INDEX IS MIS LEADING: While the KSE-100 index gained 65% since the start of the year to reach its high, this was for higher the most company share prices. The KSE-100 Index is not always accurate in repressing the over all market BCz it is heavily weighted by blue-chips, particulary OGDCL & PTCL, which together account for about half of the index. During the Bull Run, both PTCL &GDCL saw steep gains-PTCL rose 99% and OGDCL raised 153% B/W the start of the year and the onset of the market corrections and resultantly the index gained 300points are more in a day on some days. Investor understandably read the index as a proxy for the market, A steeply resign index leads market participants to think the over all market is resign accordingly. This was not the case in the FEB & March 2005.However when there was a steep rise a few key scraps but most shares saws the more moderate gains. Since investor sentiment takes .its cue to a great extands From moments in the KSE100 index the heavy weightage of a few scrips also leaves room for mkt manipulated to influence the index and therefore the mkt.This may be a part of the reason OGDCL saw such sharp gains during the quarter, as its recent price gains cannot be explained or justified by the companys fundamentals. In new sensitive price index (SPI) has been proposed by the mgt of the KSE consisting of thirty heavy weight stock .this may be launched may 2005.at the same time the weightage of stocking KSE-100 index will be determined by the companys free float shares tradable on the exchange after excluding owners stakes which are usually not traded rather than total mkt capitalization to make the KSE-100 more representative of the mkt. 10,000 WILL NOT BE ACHIEVED AGIANST SOON: The KSE-100 index was able to cross the 10000 level BZ of spectacular gained by OGDCL, but OGDCL is expected to reach the highs its showed again. Share prices for most of other major companies will once again reach level attended in earlier MARCH 2005, but not OGDCL. Without OGDCL, the market will not reach 10000 for a very long time. that is not say the mkt will not rise it will end many companies will shows new highs before the year is out , but without the moves made by OGDCL , gains in index as steep as those seen in the last quarter can be ruled out , and that is good thing in ur opinion . OUTLOOK: Disaster was narrowly averted, but the SECP will now looks very closely into the risk mgt, mechanisms in the place and new rules are expected .The SECP had already announced changes in margin and risk management rules for ready and future mkt

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early in MARCH, and had the amended rules already been in force, the mkt crises in the MARCH futures contract would never have developed. There are some calls to do away with the future mkt altogether .derivatives mkt are riskier than the ready mkt the world over, and investors have just learnt that, but derivatives mkts also added in the element of mkt flexibility and completeness that is present in all developed / mature mkts .doing away with futures mkt in our view is not right solution, and besides, the risk mgt rules already announced by the CESP early in MARCH should take care of a large part of the problem. Going forward attractive valuation is opening up and it may be time for accumulation. We recommend investors to say away from E&P stocks and concentrate investor have been ignored recently show earnings growth such as cement , banking , value added textile, gas distribution an auto assembly .the mkt is still volatile though ,and further weakness cannot be ruled out investor sentiment has been deeply bruised and foreign funds that had began considering investing in the pakistan mkt have been scared away .nonetheless, the downward spiral should be spiral the mostly behind us now ,and investor should keep a keen eye out for he right time to reenter.

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Brochure of Taurus securities ltd corporate member of Karachi stock exchange

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