Iran FaraBourse

1

Iran FaraBourse

06 May 2012

Certificate of Mortgage Right

MASKAN BANK

1. INTRODUCTION

The life of Iran Capital Market could be divided into four periods:

1) 1967-1978: Since the beginning of TSE activity until  revolution

The number of companies increased to 105 (22 private banks, 2 insurance

companies, and 81 industrial corporations). Most of this development

activity was due to the ratification of ownership development of

manufacturing units' stocks and tax exemption for the listed companies'

laws.

2) 1979-1988: Since revolution until the end of war

In the second period of TSE activities, two important events i.e. the Islamic

revolution and war invasion were reduced exchange activities severely. The

exiting number of listed companies decreased to 55 companies.

2

CONT…

3) 1989-2005: Since the end of war until ratification of new Securities

Market Law

In this period, TSE was taken into account as one of the most important

mechanisms for national economy optimization in order to facilitate the

contribution of the private sector in the productive activities through

transferring some of the state duties to the private sector.

4) 2005-Now: Since the ratification of the new Law until now

In this period due to changes in the structure of the capital market and

changes in regulatory and trading systems, the market growth in all fields

easily can be seen.

3

CONT… Under the new Act, the Securities & Exchange High Council(Council) and

the Securities and Exchange Organization(SEO) was introduced and

created as regulators of Iran capital market

The Council is the highest official executive organ of the securities market,

is responsible for setting the macro policies of the market.

The Securities and Exchange Organization (SEO) as second highest

official executive organ, is responsible to protect the rights of investors, to

organize, operate and develop a transparent, just and efficient securities

market, and to supervise a proper execution of the Securities Law.

4

REGULATORY FRAMEWORK OF IRAN CAPITAL MARKET

ESTABLISHMENT OF IRAN FARABOURSE

Based on Paragraph (8) Article 1, and Article 28 of the Securities Market

Law, and after obtaining permission from the Securities and Exchange

High Council, Iran FaraBourse was established in November 2008.

Iran FaraBourse officially began its activities in the second half of the

Iranian calendar year (28 September 2009). During the first 6 months,

only four companies were listed and today, after 2 and a half years, the

market has evolved into an exciting and growing marketplace where

individual and institutional investors trade securities of over 100

companies with the market capital of US$27billion.

6

FARABOURSE STATUS

Items 2010-11 2011- 12 %Changes

Market Cap- US$ Million 9,788 26,917 +170

Turnover-US$ Million 5,022 7,083 +41

Volume-Million shares 17,035 18,806 +10

Number of Trades 457,874 1,713,665 +274

Number of Buyers 208,910 448,402 +115

Total Number of Trading Symbols

20 109 +225

7

FARABOURSE MARKET STRUCTURE

8

Iran FaraBourse

First Market Second Market Block Trading Market Basic Market

Registered Capital ≥ $815,660

Free Float ≥ 10%

Life ≥ 2 Years

New Financial Instrument

Market

Equity/Asset ≥ 15%

Registered Capital ≥ $81,566

Free Float ≥ 5%

Life ≥ 1 Years

Amount ≥ $8 Million

Due ≥1 Year

Market Maker ≥ 1

CONT…

FaraBourse Markets

Second Market

Third Market

Stock Market

New Financial Instruments Market

First Market

Basic Market

Certificate of

Mortgage Right

Islamic Bond

Sukuk

Bank Certificates

Debt Market

MASKAN BANK Maskan Bank is a specialized bank in housing and construction sector. The

history of the Maskan Bank dates back to the year 1938, when Iran Rahni

Bank was established to support the construction of new housing in urban

areas. Iran Rahni Bank was established through a joint initiative of the

Ministry of Economic Affairs and Finance and Bank Meli Iran. Primary

aimed at financing Iran’s housing and construction sector, it began offering

real estate secured housing related loans, in order to facilitate the purchase,

construction, and repair of housing units.

Expanding its filed of activity, Bank Rahni was embarked directly on

construction operation in 1944, and has accomplished numerous large-scale

construction projects ever after. 10

CONT… On June 7, 1979 Maskan Bank, classified as state-owned, was established

through merger of Bank Rahni Iran, Bank Sakhteman (Building &

Construction Bank), Iranian Banks Construction Investment Company, and

other savings and mortgage associations around the country.

The registered capital of the Bank is now $1.7 billion, and the network

comprises of 1,214 branches.

To further support the monetary section of the country, Maskan Bank

included all available commercial banking services on its filed of activities.

The Bank is the unique financial arm of Iranian government in execution of

Mehr Housing Scheme. This scheme is designed in 2007 to provide the

majority of Iranian people with the opportunity of becoming housing owner.

The process of granting facilities to this scheme is accelerated during

recent years.11

MASKAN BANK STATUS

Items 2010 2011 %Changes

Total Assets- US$ Million 24,532 42,562 +73

Total Liabilities-US$ Million 23,367 40,784 +74

Shareholders' Equity-US$ Million

1,165 1,778 +52

Total Revenue- US$ Million 937 1,567 +67

Total Expenses- US$ Million 865 1,463 +69

Net Profit- US$ Million 53 86 +62

12

PRIVILEGED INVESTMENT DEPOSIT ACCOUNT

Maskan Bank as the only specialized bank in the housing sector, in

achieving its goal of providing housing for various sector of society,

especially low-income communities, has designed a "Privileged

Investment Deposit Account".

Depositors in this account, in addition to receiving a reasonable

profit, may also benefit from certificates of mortgage facilities.

These certificates give depositor the advantage of applying for a

house loan without having to wait long time.

13

CONT… Since these certificates can be conveyed to others, an informal

market has been created to exchange these certificates in recent

years.

Expansion of the informal market, showed the necessity of

organizing transactions of the certificates more than ever before.

The Maskan Bank as a custodian of the housing market in the

country, has put on its agenda creating a transparent and efficient

market for transactions of these certificates.

The Bank has recognized that the best way to do this is to convey

the transactions from informal markets to an official OTC market.

The instruments has examined and confirmed by the Sharia

Committee in SEO. 14

THE PRIVILEGED ACCOUNT CONDITIONS

This account is in the form of a short-term investments deposit account.

The Bank defined three types for this account; Individuals (code;8726),

legal entities (code;8728), and certain individuals (code;8727).

Legal entities for its employees or others and certain individuals with

charity aims in order to enjoy the certificates need to have contract with

the Bank. Their minimum deposit amount should not be less than 270

MIRR ($22,000) in any time during the term of contract. The Bank

would separately calculate and allocate the certificates to these

accounts. The allocation is usually based on 30 to 45 percent of the

average account balance during the year.

15

CONT… For individuals, the initial amount to open the account and also the

minimum amount during at least 6 months, is 50,000 IRR ($40).

The depositor can withdraw or deposit money in this account

frequently, provided that the minimum amount hold.

Opening more than one account by a depositor in different branches

is possible.

The profit calculations are performed at the end of each month and

will be paid on the first day of following month.

The Bank Obligations towards individuals depositors in this account

is only to pay the profit equivalent to the short-term investments

interest rate. 16

THE ALLOCATION PROCESS OF CERTIFICATES

Allocation of the certificates is possible only to a limited number of

accounts. Each year, based on the status of the resources, the Bank

determine how much percentage should be applied to the Privileged

accounts balance. It is between 15 and 45 percent.

The allocation of certificates will be done according to the amounts and

terms of the deposit accounts and will be based on pointing system. To be

considered into the system, the bases is completion of 6 months of opening

the account or the last allocation. Allocation of certificates to an account

with this method is possible frequently.

The certificates are valid for a period of two years. After the validity period,

the Bank does not have any commitment to the holder. The first series of

certificates issued on April 04, 2006.

Allocation of certificates to accounts are based on the following table.

17

THE ALLOCATION SYSTEM

18

Minimum waiting period

Coefficient(The average account balance)

Maximum Certificates- Million IRR

Maximum Certificates- US$

6 0/5 120 9,787

9 0/75 125 10,195

12 1 130 10,603

18 2 140 11,419

24 3 150 12,234

30 4 160 13050

36 5 170 13,866

THE MORTGAGE The depositors who receive certificates have the right to apply for the loan to

build or buy a housing unit or to sell the certificates.

Youth housing deposit account can be used along with the certificates to get the loan in order to buy or build a house.

The loan Interest rate would be 12 and 13 percent, if the certificates are used

for buying or building a house, respectively.

The loan amount for buying a house that the issuance date of building permit

is less than 12 years, is US$16,313. The amount is US$8,156 if the permit

older than 12 years and maximum 20 years.

Since each certificate bears 408 USD Loan, if someone is willing to buy an

apartment without holding any deposit in Maskan Bank, easily can buy 40

certificates from the market and apply for the maximum loan amount.19

CONT… Maximum repayment term is determined as follow:

20

Loan Amount- Million IRR

Loan Amount- US$

Repayment term- Year

Loan≤120 Loan≤9,787 12

120-150 ≤12,234 15

150-180 ≤14,681 18

180-200 Max=16,313 20

Maximum loan payable to a person on a house is US$16,313.

TRADING THE CERTIFICATES Each month, Technology Department of Maskan Bank send an electronic

file consists of list of the new certificates holders to the CSDI through a

secured telecommunication line. The file include the profile of accounts’

holders along with the number of allocated certificates.

CSDI first check the profiles with “Office of Civil Registration” and

“Companies Registration Office”. For individuals; First name, Family

name, Father name, Date of birth, Place of birth, Place of issue, ID number,

ID serial number, National number, and Post code. For legal entities; Name

of the firm, Registration number, registration place, Postal Address, and

Fixed Telephone Number.

Then, CSDI create the trading symbol in trading system and data are

recorded under the trading symbol. The trading symbol include the word

“Loan” plus the month and the last two digits of the year (As an example:

LoanMay12).

21

CONT… At the next stage, the hard copy of certificates is published by the CSDI,

and convey to the bank. The bank distributes the certificates through its

branches throughout the country to depositors.

Now certifications are ready to trade via Iran FaraBourse New Financial

Instruments Board.

The trading procedure is the same as trading a stock or a bond.

The first trading day of the first symbol, the price fluctuation limits were

not applied. From then onwards, the limits applied.

Since the certificates are valid for two years, when they are approached to

expiry date, the market price should approach to zero. Thus, they should be

separately traded in different trading symbols. Following this rule, every

month Iran FaraBourse open a new symbol. 22

CONT… In order to open a new symbol, the last closing price of the latest

symbol is applied and fluctuation limits is applied.

In the post session any changes will be send to the Technology Dep.

Of the Bank through Secured line. The data will be record on the

Bank systems. Similarly, the Bank would send any changes in the

certificates status to the CSDI. In case of applying for the loan,

CSDI will inactive the certificates in the trading system.

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CONT…Saturday to Wednesday DayPreopening 8:30 – 9:00, Trading 9:00 to 12:00 Hours

Atos Euronext Market Solutions (AEMS) SystemContinuous Auction Trading MechanismsIran Rials Currency

±5% Price fluctuation Limit

T+3 Settlement

88 Active Brokers

700 Trading Stations over the country

Bid/Ask, Low, High and last Price, Indices, Trading value and Volume, and Companies Announcements

Real Time Information

Not Permitted Short Selling / Margin Trading

MARKET STATUS OF CERTIFICATES

Items 1389-1390(2010-12)

No. Symbols 17

Volume 5,900,000

Turnover- US$ 353,752,039

Total Number of Certificates 7,677,583

Number of Inactivated Certificates 3,210,960

Available Certificates 4,466,623

Total Number of Loans 191,939

Number of Loans Applied 80,274

Applicable Loans 111,665

25

26

2-Nov

-10

22-Nov

-10

12-Dec-

10

1-Jan

-11

21-Jan

-11

10-Feb

-11

2-Mar-

11

22-Mar-

11

11-Apr-

11

1-May-

11

21-May

-11

10-Jun

-11

30-Jun

-11

20-Jul

-11

9-Aug

-11

29-Aug

-11

18-Se

p-11

8-Oct-

11

28-Oct-

11

17-Nov

-11

7-Dec-

11

27-Dec-

11

16-Jan

-12

5-Feb

-12

25-Feb

-12

16-Mar-

12

5-Apr-

12

25-Apr-

120

10

20

30

40

50

60

70

80

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Vol

ume

Pric

e -U

S$LoanNov10

27

29-Dec-

10

14-Jan

-11

30-Jan

-11

15-Feb

-11

3-Mar-

11

19-Mar-

11

4-Apr-

11

20-Apr-

11

6-May-

11

22-May

-11

7-Jun

-11

23-Jun

-11

9-Jul-

11

25-Jul

-11

10-Aug

-11

26-Aug

-11

11-Se

p-11

27-Sep

-11

13-Oct-

11

29-Oct-

11

14-Nov

-11

30-Nov

-11

16-Dec-

11

1-Jan

-12

17-Jan

-12

2-Feb

-12

18-Feb

-12

5-Mar-

12

21-Mar-

12

6-Apr-

12

22-Apr-

120

10

20

30

40

50

60

70

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Pric

e-U

S$

Vol

ume

LoanDec10

28

Thank you

Q&A

Maskan BankFaraBourse