Karachi Stock Exchange Yesterday

Incorporated on March 10, 1949 Premier Stock exchange of the country Started with 5 companies that had a paid up capital of Rs. 35.71 million Trading was done through an open-out-cry system The first index was the KSE 50 Index

Karachi Stock Exchange Today

Exchange owned by 200 members 590 companies listed

4 indices
$36.96 billion market capitalization Modern Risk Management System
Var Based Margin Calculation Pre Trade Margin Verification Client Level Margining System

KSE is FIX Compliant Electronic Trading through KATS

Technology Built with Leaders

With continual investment, the KSE has one of Pakistans most advanced technology platforms Key Technology Partners include:

Real-time Data Recovery System in place (Business Continuity Protocols at KSE Server and KSE Network level in development)
1+1 Redundancy Sophisticated IT architecture to facilitate speedy execution of trades Inhouse development of all trading platforms and systems
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Karachi Stock Exchange Tomorrow

Broad based investor participation

Publicly Listed Company with strategic investor Cross border listings of companies Opening up of branches in other cities and in the region

The KSE has an independent Board of Directors with representation from the Members & the Corporate Community
Consists of 10 members 5 elected member directors 4 non member directors appointed by SECP Represent leaders of the corporate community Managing Director is ex-officio member of the board Chairman is elected by board out of non member directors The BOD meet once a month to debate policy and review performance A number of Board committees also meet on a regular basis to advise management on adopting best practices

Stock market regulatory authorities actively monitor market

The Securities and Exchange Commission is the regulatory authority in Pakistan which vigilantly monitors and control the market.

To develop a fair, efficient and transparent regulatory framework, based on international legal standards and best practices for the protection of investors and mitigation of systemic risk. On site inspections Analyzes compliance of brokers and agent Brokers to provide net capital balance and other material informations Companies registered with SECP requires to full fill post incorporation statutory and legal requirements

No Restriction or Penalties on Repatriation of Capital and Income for International Investors

Most liberal Foreign Investment Regulations in the world. Government undertook a comprehensive program of radical economic reforms including liberalization, privatization, and deregulation to bring the economy into a fully market-oriented system for capturing the potential of the private sector in all areas of economic activity. Foreigners are at with the domestic investors. Foreigners at any time repatriate the currency from which the investment was originated including profits.

Creditors of an industrial undertaking may repatriate foreign currency loans and interest thereon

Fair and non-prejudicial Treatment of Minority Shareholders

minority shareholders are sufficiently protected under various provisions of the Companies Ordinance, 1984 and Listing Regulations shareholders holding 20% of the issued share capital may file complain with the registrar of companies about the conduct of the company which is in violation of the memorandum of the company, the registrar may make an application to the Court by petition for an order of winding up of the company. shareholders / acquirer, holding at least 12.5% voting shares, may request SECP for holding fresh election of directors. application of members holding not less than 20% of the voting power in the company the Court may within thirty days of the date of election, declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto. Under Code of Corporate Governance, representation of minority interest on the Board of Directors is encouraged. Minority shareholders as a class are facilitated to contest election of directors by proxy. At the time of listing of new companies, Exchange ensure sufficiency of public interest and also the minimum requirement of listing / public offer of shares is fulfilled, which at present ranges in between 25% to 50% of the paid up capital of the companies 8

No Restriction on foreign ownership

No restrictions of acquiring 100% ownership of a company by foreigners. All sectors are open to FDI with equal treatment of local and foreign investors. 100% foreign equity allowed, and royalties, franchise fees, capital, profits, dividends etc all fully re-patriable. World Bank in its report Doing Business 2007 has ranked Pakistan at 74th, for ease of doing business Pakistan has had considerable success in attracting FDI in FY06, a large part of the FY06 FDI comprised receipts from privatization of public sector assets. The Government of Pakistan, in the cases of dis-investments and privatization of govt. owned companies, dis-invested the shares with change of management in favour of foreign investors.

Free and well-developed Equity Market

Equity market is well developed and totally free & restriction-less for all investor local as well as foreigners. having fully automated trading system with separated Central Depository and clearing company KSE is FIX Compliant.

state-of-the-art computerized trading system known as Karachi Automated Trading System (KATS).
Internet based routed trading facility each and every order/ trade is duly logged & recorded, with pre-trade clientwise margins verification system effective at order level. Unique Global Identification Number (UIN) has also been introduced

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Free and well-developed Foreign Exchange market

Banks and leading Brokerage Houses are active players in the inter-bank foreign exchange market

provide comprehensive foreign exchange products and services through their network.
Foreign exchange business in Pakistan is governed / regulated under Foreign Exchange Regulations. Exchange Policy Department (EPD), of the State Bank of Pakistan is responsible for overall stability of the foreign exchange market

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Custody and Settlement

Settlement Rare incidence of failed trades

Custody sufficient competition to ensure high quality custodian services

Central Depository Company of Pakistan provides complete and secure system to its clients, ensures smooth and risk free settlement of security transactions in an efficient and cost-effective manner comparable to best international practices.
Experts of the renowned international firm Price Waterhouse conducted the study, sponsored by the United States Agency for International Development (USAID).

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Securities Lending is permitted

Leverage product Securities lending and borrowing is available through the clearing company .

Settlement Free delivery Custody Omnibus account facilities available to international investors

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Dealing Landscape
Brokerage Sufficient competition - ensure high quality broker services

Exchange Members / brokerage houses offer highly competitive services to investors/clients world wide. Many providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. Good corporate governance, professionalism, and comprehensive code of ethics are overseen in many firms by an independent compliance manager

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Transaction costs reasonable and competitive Brokers commissions on transactions are freely negotiable between the brokers and clients.

Transaction costs have been significantly lowered after on-line trading was introduced. Due to the price competition, brokerage commissions for on-line trading continued to be lowered.
Stamp duty: 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.

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Short sales permitted

Short selling is permitted under the regulations for short selling under ready market, 2002, of the Karachi Stock Exchange (guarantee) Limited

Off exchange transaction permitted

Off- Market transactions are permitted. However, same-day reporting to the exchange of these off-market trades is mandatory

Transparency market depth information/ visibility and timely trade reporting

Market depth information is available to all KATS terminal, showing the list of best bids and offers and full depth of the order book without disclosing the market participants. KATS provide three distinct windows to gauge the depth of the order book, namely Market by Price (MBP), Market by Order (MBO) and Market by Symbol (MBS). 16

Derivatives
Developed Derivative market Single Stock Futures Contracts have been traded successfully in KSE since 2001. Single stock Cash-settled Contracts are also introduced. Stock Index future contract also introduced from November 5 2007. Trade able sector indices Options on index and single stock will be introduced shortly. ETF
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Dispute Resolution
Dispute resolution mechanism is provided by the Exchange through well defined Arbitration Process enshrined in the General Regulations of the Exchange. Any disputes between Members between any of the Members and their constituents/clients, or between any of the Members and their authorized agents or between authorized agent(s) and their constituents/clients in connection with the trade or transaction at the Exchange and is not otherwise settled amicably, are to be referred to arbitration under General Regulations of the Exchange

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2008-2009: Recapping Performance

In 2008 KSE, in line with global markets, saw a significant decline in returns as world markets crashed.
Countr Japan United Kingdom India Pakistan China Index Nikkei 225 FTSE 100 Sensex 30 KSE 100 Shanghai January December 2008 Return -42.1% -52.4% -52.4% -58.3% -65.4%

Showcasing its resilience KSE rebounded in 2009 in line with global and regional markets
Country India China Pakistan Index Sensex 30 Shanghai KSE 100 January December 2009 Return 81.03% 79.98% 60.05%

United Kingdom
Japan

FTSE 100
Nikkei 225

21.78%
19.04%

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KSE in 2011E vis--vis other markets

Country Thailand United Kingdom Pakistan Japan China India

Index Set FTSE 100 KSE 100 Nikkei 225 Shanghai Sensex 30

January Dec 2011 -0.72% -5.55% -5.61% -17.34% -21.68% -24.64%

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2010: Performance
2010 Regional Market Comparison

Country Tokyo Pakistan India United Kingdom Japan China

Index Nikkei KSE 100 Sensex 30 FTSE 100 Nikkei 225 Shanghai

January Dec 2010 Return 40.6% 28.08% 17.43% 9.79% -3.01% -14.31%

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2012: Performance
2012 Regional Market Comparison

Country KSE BANGKOK US BOMBAY CHINA SINGAPORE

Index 100 INDEX SET NASDAQ COMP. BSE 30 SHANGHAI COMP. STRAIT TIMES

January June 08, 2012 Return 19.48% 9.93% 8.67% 8.18% 3.73% 3.46%

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Strong Affiliates to develop the Capital Markets

In order to continue to strengthen the capital markets in Pakistan, over the years, the KSE has undertaken significant strategic investments with key Capital market institutions
KSE Shareholding Central Depository Company National Clearing Company National Commodity Exchange JCR-VIS Credit Rating Company JCR-VIS Pakistans leading Depository and Custodian of Shares Pakistans centralized Clearing and Settlement company Pakistans first electronic commodity exchange Pakistans premier credit rating agency 39.81%

47.06%

27.12%

12.50%

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Agreements with leading Regional Exchanges

Cooperation between exchanges is essential in order to help resolve global liquidity and risk management issues

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International Relations
In order to have a co-ordinated approach to resolve global liquidity and risk management issues and engage in knowledge transfer programs, the KSE is also a part of the following international organizations and associations:
World Federation of Exchanges South Asian Federation of Exchanges Federation of Euro-Asian Exchanges International Organization of Securities Commissions

KSE also held Chairmanship of the South Asian Federation of Exchanges for 2009-10
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The Exchanges ongoing commitment to you

We are committed to supporting you every step of the way and for this purpose, we have a team of experienced individuals to assist you with any queries that you may have.

Visit our website at

Contact us: Email Address:

www.kse.com.pk
+9221-111-001-122 info@kse.com.pk

Mailing Address:
The Karachi Stock Exchange (Guarantee) Limited, Stock Exchange Building, Stock Exchange Road, Karachi