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Annual Report 2010
The
Stoc
k Exch
an
ge
of M
au
ritius Ltd
The Stock exchange of Mauritius Ltd(Member of the World
Federation of Exchanges)
4th Floor, One Cathedral Square Building16, Jules Koenig
Street
Port Louis, Republic of MauritiusTel : (230) 212 9541 - Fax ;
(230) 208 8409
Email : [email protected] :
www.stockexchangeofmauritius.com
An
nu
al R
ep
ort 2
01
0
THE STOCK EXCHANGE OF MAURITIUS LTD(Member of the World
Federation of Exchanges)
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table of contents GroupFinancialHighlights
2PerformanceHighlights 3
Corporate Review DirectorsReport 4 - 5BoardofDirectorsprofile 6
- 8ChiefExecutivesReport 9 - 13SeniorManagementProfile
14CorporateGovernanceReport 15 - 27InternalControlStatement 28 -
32AuditandRiskManagementCommitteeReport 33 -
34OperatingandFinancialReview 35 - 62
Financial Review DirectorsResponsibilityStatement
66AuditorsReporttotheShareholdersoftheStockExchangeofMauritiusLtd
67 - 68StatementsofFinancialPosition
69StatementsofComprehensiveIncome
70StatementofChangesinEquity-TheGroup
71StatementofchangesinEquity-TheCompany 72StatementsofCashFlows 73
- 74NotestotheFinancialStatements 75 -101
Additional Information MemberCompanies
102ListedCompanies-OfficialMarket
103-Development&EnterpriseMarket 104
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group financial highlightsThe STock exchange of mauriTiuSannual
reporT 2010
FINANCIAL YEAR (FY) 2010 2009 2008
For the year (Rs000)Revenue 133,872 112,170 121,622OtherIncome
26,387 28,582 23,550Administrativeexpenses (58,466) (52,906)
(48,703)Operatingprofit 101,793 87,846
96,469Netprofitattributabletoequityholders 68,276 58,439
63,578OperatingCashflow 82,650 68,516 76,148At year-end
(Rs000)NetCurrentassets 134,517 159,413 130,353Totalassets 335,807
276,057 230,271Totalliabilities 50,134 45,599
47,577Shareholders'funds -StatedCapital 3,350 3,350 3,350-Reserves
218,315 173,291 134,494Sharesissued(thousand) 330 330 330 For the
Year (%)Revenuegrowth 19.3 (7.8) 35.7Operatingprofitmargin 76.0
78.3 79.3NetProfitMargin 42.6 41.5 43.8Cost-to-incomeratio 36.5
37.6 33.5ReturnonEquity 30.8 33.1 46.1 Per Share Data (Rs)
OperatingCashFlow 250.45 207.62 230.75Basicearnings 206.90 177.10
192.66NetTangibleAssets 865.68 698.36 553.62NetDividend 70.46 59.52
64.42
Definitions
Operating Profit MarginOperating profit of the group expressed
as apercentageofrevenue.
Net Profit
MarginNetprofitattributabletoequityholders,expressedasapercentageoftotalrevenueofthegroup.
Cost-to-Income ratioRatio of total expenses to total revenue of
thegroup.
Return on EquityProfit attributable to equity holders, expressed
as apercentageofshareholders'funds.
Net Tangible
assetsTotalassetslesstotalliabilitiesofthegroup,dividedbythenumberofsharesissued.
Net
DividendDividendsproposeddividedbythenumberofsharesissued.
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performance highlightsThe STock exchange of mauriTiuSannual
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Key Market Statistics
Financial Year 2010 2009 % Change
Total Turnover (Value) Rs million-OfficialMarket 11,825 9,875
20-Development&EnterpriseMarket 2,957 1,213 144 NoofSessions
251 249Average Daily Turnover (Value) Rs million-OfficialMarket 47
40 19-Development&EnterpriseMarket 12 5 142 Total No of Shares
Traded-OfficialMarket 322million 193million
67-Development&EnterpriseMarket 452million 156million 189
NoofSessions 251 249 - Accounts held with the Central Depository
&Settlement Co Ltd NumberofSecuritiesaccountsopenedinCDS
252,842 233,669 8NumberofsharesdepositedinCDS 3.8billion 3.3billion
15AggregatevalueofsharesheldinCDS 140.0billion 112.6billion 24
Number of Listed Companies -OfficialMarket 38 40
(5)-Development&EnterpriseMarket 49 48 2
Total Market Capitalisation Rs' billion -OfficialMarket 150.8
130.7 15-Development&EnterpriseMarket 51.7 45.4 14
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director's reportThe STock exchange of mauriTiuSannual reporT
2010
INTRODUCTION
The Board of Directors of the Stock Exchange
ofMauritiusLtd(SEM)ispleasedtopresentitstwentyfirstAnnualReporttotheshareholdersoftheSEM,togetherwiththeauditedfinancialstatementsoftheGroupandoftheCompanyfortheyearended30June2010.
PRINCIPAL ACTIVITIES OF THE SEM
TheprincipalactivitiesoftheSEM,asdefinedbyitsConstitution,includethefollowing:
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Operatingandmaintainingasecuritiesexchangeinaccordancewithlaw.
- Providingfacilitiesforthebuyingandsellingandotherwise dealing
in securities on a securitiesexchange.
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Providingandmaintaining,tothesatisfactionoftheFinancialServicesCommission,adequateandproperlyequippedpremisesfortheconductofitsbusiness.
- Havingoperatingrulesforthemarketsitoperatespursuanttolaw.
PRINCIPAL ACTIVITIES OF THE CENTRAL DEPOSITORY & SETTLEMENT
CO. LTD (CDS)
The principal activities of the CDS, as defined bythe Securities
(Central Depository Clearing andSettlement) Act 1996, is to provide
depository,clearingandsettlementserviceinordertofacilitatedealingsinsecuritiesontheExchange.
GROUP FINANCIAL PERFORMANCE DURING THE YEAR 2010
Despite the worldwide economic slowdown
andthefinancialturmoilaffectingthesecuritiesindustryworldwide, the
Group has succeeded in achievingcommendable results for the
financial year 2010.TheGroup recorded revenuegrowthof19.3%forthe
year 2010, with revenues reaching
Rs133.9millionwhencomparedwithRs112.2millionin2009.Shareholders
funds increased by more than 25%in2010, toattaina total
valueofRs221.7million,againstlastyearsfigureofRs176.6million.
FINANCIAL PERFORMANCE OF THE COMPANY DURING THE YEAR 2010
Onthecompanysfront,theSEMregisteredarevenuegrowthof17.8percent,achievingatotalvalueofRs83.4millioninyear2010,comparedwithRs70.8millioninyear2009.Totalprofitaftertaxincreasedby18.4percentoverlastyeartoattainatotalvalueofRs58.1millionfortheyear2010.CashandCash
equivalents of the company, including
long-termdeposits,roseby49percenttoreachatotalvalueof Rs162.7
million, against an amount of Rs109.2millioninyear2009.
MAIN DEVELOPMENTS DURING THE YEAR 2010
The SEM strove to position itself as an
attractivelistingvenueforglobalandspecialisedfunds.Inthisconnection,somesignificantchangeswerebroughttoChapter
16of our ListingRules to align itwiththe spirit and content of the
Securities (CollectiveInvestment Schemes and closed-end
Funds)Regulations2008andinenhancingourExchangescompetitiveness and
appeal to a wide variety offunds.
With a view to increasing our Exchanges visibilityat the
international level the SEM accelerated itslinks to Global Data
Vendors and increased itsdata vendors to 4. We will continue to
look fornew Data Vendors in 2010-2011 with a view toimproving our
profile at the international leveland attracting more foreign
investors interests inourmarket.
TheSEMhasalsobeenactiveontheCorporateSocialResponsibilityfront.TheprojectsupportedbySEMin2009-2010istheLearn-to-Earninitiativeforout-of-schoolyoungpeople.Thisprojectaimsatimpartingschooldrop-outswithawidevarietyofskillsinthefieldofartsandcrafts,withaviewtosecuringthemajobormakingthembecomesmallentrepreneursinthefieldoftraining.
In April 2010 the SEM co-sponsored with GBOTthe Annual General
Meeting of the South AsianFederation of Exchanges (SAFE) and its
Flag Shipconference on the following theme South
AsianCapitalMarketsConference. Theeventwaswellattendedbya
largenumberofdelegates
fromthefinancialservicessectorinSouthEastAsiaaswellasbyinternationalinvestors.Thisconferenceconstitutedan
opportunity to share SEMs achievements
andinvestmentprospectstotheaudienceandhighlightthe attractiveness
of African Markets as the lastfrontierofgrowthintheworld.
DIVIDENDS
On17thJune2010,inlinewiththedividendpolicyofdistributing40percentofSEMsnetprofitaftertax,thedirectorsapprovedafinaldividendpaymentamountingtoRs23,251,657
(Rs70.46pershare) inrespect of the year ended 30 June 2010. For
theyear 2009, dividends amounting to Rs19,642,177(Rs59.52 per
share), were paid to the ordinaryshareholdersoftheCompany.
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AUDITORS
TheAuditors,MessrsKempChatterisDeloittehaveexpressedtheirwillingnesstocontinueinofficeandaresolutionproposingtheirre-appointmentwillbesubmittedatthenextAnnualMeetingoftheSEM.
InaccordancewithSection221(1)(h)oftheCompaniesAct2001,theremunerationsoftheAuditorsoftheSEMandofitssubsidiaryaredisclosedinNote17oftheauditedfinancialstatements.
ACKNOWLEDGEMENTS
The Board of Directors of the SEM wishes to extend its thanks to
all its stakeholders, namely, the Ministry of Finance and Economic
Development, the Financial Services Commission, the Listed
Companies, the Investment Dealers, the Asset Management Companies
and the investing public at large for their continuous contribution
and support to the smooth running of the SEM during the course of
the year.
The Board also commends the management
teamandemployeesoftheSEMfortheirhardworkanddedicationduringtheyear2010.
Last,butnotleast,theBoardoftheSEMwouldliketoexpressitsheartfeltthankstotheSEMShareholdersfortheircontinuedsupport.
By order of the Board of Directors of the
StockExchangeofMauritiusLtd
GatanLanHunKuenChairman
RajTapesarVice Chairman
29September,2010
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corporate reviewThe STock exchange of mauriTiuSannual reporT
2010
Board of Directors Profile
DONALD
AH-CHUEN,non-executivedirector,isafellowmemberoftheInstituteofCharteredAccountantsinEnglandandWales.HeholdsaM.B.A.(Strathclyde),isafellowmemberofthe
InstituteCharteredAccountants
inAustraliaandholdsaM.C.I.P.D.(MemberofCharteredInstituteofPersonnel&Development,U.K.).Heis
currently the Chief Executive of ABC Banking Corporation Ltd. He is
also
theChairmanoftheTertiaryEducationCommissionofMauritius,CouncilmemberoftheMauritiusChamberofCommerceandIndustry,ExecutiveCommitteeMemberoftheChineseChamberofCommerce,andaDirectoroftheCentralDepositoryandSettlementCoLtd(CDS).
RAJ TAPESAR, non-executive director, holds a MBA(Finance). He is
a licensedinvestment dealers representative and he currently
occupies the position
ofManagingDirectoratMCBStockbrokersLtd.HeistheVice-ChairmanoftheStockExchangeofMauritiusandisalsoadirectoroftheCentralDepository&SettlementCompanyLtd(CDS).
GAETAN LAN HUN
KUEN,non-executivedirector,isafellowmemberoftheInstituteofCharteredAccountantsinEnglandandWales.HehasbeenChairmanoftheStockExchangeofMauritiusLtdsinceNovember2009.HecurrentlyholdsthepositionofFinanceDirectoratIrelandBlythLtdandalsoservesasdirectoroftheMauritianEagleInsuranceCo.Ltd.HeisalsoadirectoroftheCentralDepository&SettlementCompanyLimited(CDS).
SUNIL BENIMADHU, joined the SEM as Chief Executive in May 1998.
Hewas appointed executive director of the SEM in October 2008. He
holdsa M.B.A. in Finance and Investment from the University of
Illinois, UnitedStates. He also holds a D.E A. in Development
Economics and a Matrise inMacro-Economics from the University of
Aix-Marseille, France. He has recentlybeenelectedasPresidentof
theAfricanSecuritiesExchangesAssociation
(ASEA)foraperiodoftwoyears.From2002to2004,hewasamemberoftheExecutiveCommitteeof
theSouthAsianFederationofExchanges
(SAFE),whichcomprisestwelveStockExchangesoftheSouthAsianregion.From2001to2003,hechairedtheSADCCommitteeofStockExchanges(COSSE),anassociationofstockexchangeswhichincludestenexchangesoftheSouthernAfricanregion.
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Board of Directors Profile (Cont'd)
PEROOMAL GOPALLEN MOOROOGEN, non-executive director, is a
fellowmemberoftheAssociationofCharteredCertifiedAccountantsandholdsaMBA.HecurrentlyoccupiesthepositionofTeamLeaderatMauritiusTelecom.HeisalsodirectorSwanInsuranceCompanyLtdandAngloMauritiusAssuranceSocietyLtd.HeisalsoadirectoroftheCentralDepository&SettlementCo.Ltd(CDS).
VINCENT LAMUSSE, non executive director, is a holder of a degree
inEconomics and a Master in Management Science. He is actually
SeniorManager-Investment,oftheAngloMauritiusFinancialServicesLimited.Heisalso
theVice-Chairpersonof
theCentralDepository&SettlementCompanyLimited(CDS).
REEDHEE BHUTTOO
(MRS),non-executivedirector,holdsaB.A.(Hons)EconomicsandanAdvanceDiplomainMarketing,CIMUK.ShecurrentlyoccupiesthepositionofOfficeratSBMSecuritiesLtd.SheisalsoadirectoroftheCentralDepository&SettlementCompanyLimited(CDS)
NANDITA RAMDEWAR (MRS), non-executive director, is a fellow of
theAssociation of Chartered Certified Accountants and holds a M.B.A
Finance.SheoccupiesthepositionofSeniorManagerattheStateInsuranceCompanyofMauritiusLtd,wheresheisalsotheCompanySecretary.SheisalsodirectorofSicomFinancialServicesLtd,SicomGlobalFundLtdandSicomManagementLtdandoftheCentralDepository&SettlementCo.Ltd(CDS).
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corporate review (Cont'd)The STock exchange of mauriTiuSannual
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Board of Directors Profile (Cont'd)
VIKASH
TULSIDAS,non-executivedirector,holdsaB.A(Hons)LawandBusinessStudiesfromtheUniversityofWarwick,UK.HecurrentlyoccupiesthepositionofManagingDirectoratAXYSStockbrokingLtd.HeisalsoPresidentofthePortLouisStockbroking
Association and a director of the Central Depository &
SettlementCompanyLtd(CDS).
BILAL IBRAHIM
SASSA,non-executivedirector,holdsaB.Com(Hons),UniversityofNatal,SouthAfricaandisalicensedInvestmentdealersrepresentative.HecurrentlyoccupiesthepositionofChiefBusinessDevelopmentExecutiveatCIMGroup.
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Chief Executive's ReportThe STock exchange of mauriTiuSannual
reporT 2010
Introduction
The evolutionof the stockmarket duringfinancialyear 2009-2010
could be summarized as a taleof two halves. The July-December
period wascharacterised by a strong rebound of the
marketindices,asaresultoftheunprecedentedworldwideconcertedeffortstocontaintheperniciouseffectsofthefinancialcrisis,coupledwiththeimplementationofastimuluspackageandanaggressiveslashingofinterest
rates by the authorities in Mauritius. Thelocal
stockmarketexpressedasignof relief to
theresilienceshowninitiallybytheMauritianeconomywithregardtothejittersfromthewesternworld.Italsoreactedpositivelytotheassessmentbyleadingeconomic
and financial thought-leaders that theenergetic and aggressive
quantitative easing
bytheFederalReserveBankandthedwindlingofkeyinterestratestonearzero
intheUSand inEuropewould save international financial markets from
atotalcollapse.
The January to June 2010 period saw renewedworries of a
double-dip recession, following
thebankruptcyofGreeceandthethreatsofbankruptcyhangingovertheotherPIGScountries.AfteranearlyspurtatthebeginningofJanuary,thestockmarketinMauritiusembarkedonadecliningtrendonthebackof
investorsworriesabout the impactof
theEuropeancrisisonacountrywhosegrowth is verymuchEurocentric.
In what follows, we undertake an analysis ofthe evolution of the
stock market in Mauritius in2009-2010, describe some of the key
initiativesimplemented by the SEM during this periodand briefly
outline the focus of the SEM in thecomingyear.
A brief assessment of the evolution of the stock market in July
2009-June 2010
BetweenJuly2009-December2009,theSEMDEXandtheDEMEXgained17.2%and4.92%respectivelyonthebackofthefollowingkeyfactors:
1. The fiscal and monetary authorities
swiftreactiontotheglobalfinancialcrisiscomfortedinvestors that
Mauritius would be able
to fend-off the negative impact of thecrisis. A stimulus package
of Rs 14.5 billion,representing5%ofGDP,hadbeenearmarkedto undertake
major infrastructure projectsto modernise the countrys
infrastructureframe-work,supplementanydecreaseinPrivateSectorinvestmentandprovideequityfinancingtocertainprivatesectorfirmsindifficulty.Themonetaryauthoritiesslashedkeyinterestratesby250basispointswithinasix-monthperiodtoreduceborrowingcostsandstimulatebanklendingtoprivatesectorinstitutions.
2. Themarkets reboundalsoreflected
investorssentimentthattheDoomandGloomscenariothathadprevailedintheimmediateaftermathof
Lehman Brothers demise was
probablyoverdoneandthattheworldeconomywasnotreallyonthebrinkoffalling-offthecliff.
3. TheSeptember2008-March2009periodhadseen theMauritius
stockmarket
lose50%ofitsvalueandinvestorsfeltthatthereweresomebargain-huntingopportunitiesavailable
in themarket.
Afteragainofnearly80%bytheSEMDEXandof33.7% by the DEMEX between
March 2009
andDecember2009,thestockmarketstarted2010onarathernervousstanceandthemarketsnervousnesswasfurthercompoundedasfromendMarch2010in
the lightof thebankruptcy
threatsweighingonsomeEuropeancountries.Thecollapseof
theEuro,coupledwiththeensuingappreciationofthedollaragainsttheMauritianRupee,underscoredthethreatsof
a double-whammy on those listed companieswhose income are
euro-dependent. In spite ofthis negative environment, foreign
investors havebeen very active on our market during the periodJuly
2009-June 2010 and have been net positivebuyers of listed Mauritian
Stocks to the tune ofRs 806 million. The Official market and the
DEMrecovered some of the lost ground in June 2010following
concerted efforts by the Europeanauthorities to contain the debt
crisis affecting thePIGScountries.
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chief executive's report (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
Thefollowingtablescapturethemarketsevolutionduringthetwodistinctphasesdescribedaboveandtheactivitiesofforeigninvestorsontheofficialmarketduringthesametimeframe.
Table1: Market Evolution (1 July 31 December 2009)
INDICES 1-Jul-09 31-Dec-09 % change
SEMDEX 1,417.47 1,660.87 17.17%
SEM-7 321.20 360.75 12.31%
SEMTRI(Rs) 3,921.82 4,712.70 20.17%
SEMTRI(US$) 1,862.85 2,395.98 28.62%
MarketCapitalisation(Rs) 130,768,790,822.40 151,212,328,912.90
15.63%
Table 2: Market Evolution (1 January 30 June 2010)
INDICES 1-Jan-10 30-Jun-10 % change
SEMDEX 1,660.87 1,654.16 -0.40%
SEM-7 360.75 33.78 -7.48%
SEMTRI(Rs) 4,712.70 4,734.00 0.45%
SEMTRI(US$) 2,395.98 2,257.84 -5.77%
MarketCapitalisation(Rs) 151,212,328,912.90 150,818,485,754.10
-0.26%
Table 3: Foreign Investors Activity on the Official Market (1
July 2009-30 June 2010)
Purchases Sales Net Investments (Rs) (Rs) (Rs)
July2009-December2009 1,112,508,492 1,041,611,331 70,897,160
Jan2010-June2010 1,858,032,543 1,123,404,942 734,627,600
Total(July09-June2010) 2,970,541,036 2,165,016,274
805,524,761
Key Initiatives of the SEM in 2009-2010
The initiatives of the SEM in 2009-2010
wereessentiallycenteredaroundthedevelopmentofnewavenuesofgrowthfortheExchangeandendeavouredto
overcome the structural constraints of a
smalleconomywherethenumberofnewpotentiallistingsareinherentlylimitedinscope.
1. Positioning the SEM as a Listing Venue for Global and
Specialised Funds
One of the key initiatives undertaken by theSEM in 2009-2010
concerns a fundamentalreview of the listing rules with a view
to
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Key Initiatives of the SEM in 2009-2010 (Cont'd)
1. Positioning the SEM as a Listing Venue for Global and
Specialised Funds (Cont'd)
positioningtheSEMasanattractivevenuefortheListingofGlobalandSpecialisedFundsandmoving
away from an equity based domesticexchange to a multi-product
internationally-orientedexchange.Therecentchangesbroughtto the
listing rules have not only enabled analignment of these rules with
the Securities(Collective Investment Schemes and
closed-endFunds)Regulations2008(CISRegulations),but have more
importantly created the spacefor the listing of a wide variety of
funds andcollective investment schemes on the
SEM.Beforethesechanges,ourlistingrulescateredonly for the listing
of a restricted number offundsbut todayweare inaposition to
listawholespectrumoffundsincludingProfessionalCollective Investment
Schemes, SpecialisedFunds, Expert Funds, Real Estate funds andmany
other types of Funds. The SEM is alsocommitted to an aggressive
turn-aroundtime on the processing of listing applicationswhich does
not exceed two weeks. We
haveadoptedalistingfeestructureforfundswhichisverycompetitive,whencomparedwithotherjurisdictionslikeDublin,Luxembourg,Bermuda,CaymanIslandsetc.
To sensitise themarket and themanagement
companies operating in the Global BusinessSector about the
flexibility and
effectivenessofourrules,theSEMorganizedaninformativemeeting in
early 2010 with more than
150playersfromthefinancialservicessector.
2. Extending our reach at the international level through Global
data vendors and Index providers
OneofthekeyobjectivesoftheSEMinrecentyearshasbeentoenhancethevisibilityoftheExchangeattheinternationallevelwithaviewto
attracting more foreign investor intereston our market. In this
connection, the SEMwas connected to Bloombergs network
inthesecondpartof2009,enablingBloombergsubscribersworldwidetofollowourmarketona
liveand real-timebasis. SEM isoneof thefew Exchanges in Africa to
be connected toBloombergonareal-timebasis.
We have also in 2009-2010 extended ourcontractual relationship
with Global Data
Vendors by entering into a contractual
agreement in May 2010 with Factset, aU.S based data vendor.
These
partnershipsconstituteapowerfulmediumtoreachouttotheinternationalpoolofinstitutionalinvestorsandextendSEMsvisibilityattheinternationallevel.
3. SEMs proactive role in furthering the national and regional
agenda
In2009-2010,SEMhasbeenveryproactiveinputtingMauritiusandourstockmarketontheradar
screen of International investors and infurtheringtieswith
regionaland internationalassociationsofStockExchanges.
The SEM has been present and spoken at
a number of international workshops onEmerging and African
markets where
wevestrivedtoexplainthepotentialoftheAfrican/Mauritian markets and
demonstrated theoperational and regulatory excellence oftheSEM.
We have also been very active at the level
of Stock Exchange associations such as theWorld Federation of
Exchanges (WFE), theAfrican Stock Exchanges Association
(ASEA)andtheSouthAsianFederationofExchanges(SAFE). In April 2010,
we co-hosted withGlobal Board of Trade (GBOT) the AnnualGeneral
Meeting of SAFE and its two-dayflagship conference. TheSAFE
regroups theExchanges of the Indian sub-continent
andaimsatpromotingthedevelopmentofcapitalmarkets in the region,
while ensuring
theharmonisationoftheoperationalandregulatorystandardsofthememberExchanges.
4. Setting the stage for the trading and clearing of derivatives
products
In 2009-2010, the SEM and CDS have been
working on the trading and clearing
ofderivativeproducts.Inthisconnection,theSEMhas organized a number
of workshops withbrokers and institutional investors to explainthe
mechanics, operational features and
risksassociatedwithderivativesmarkets.TheSEMandCDShavealsoparticipatedinanumberofradioprogramsandpressinterviewstosensitiseinvestors
about derivative products.
Thoughtheoperationalandregulatoryframeworksforthelaunchingofderivativesareready,thefirst
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chief executive's report (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
Key Initiatives of the SEM in 2009-2010 (Cont'd)
4. Setting the stage for the trading and clearing of derivatives
products (cont'd)
derivative contract on the SEM7hasnot yet
beenlaunchedastherearestillsomepracticalhurdles thatneed
tobeovercomebefore thelaunching of the first contract. One of
thekey characteristics of a successful
derivativesmarketistheexistenceofmarket-makerswhocan ensure
liquidity on the market. We
needtoenrollthesupportofmarket-makers,ontheone hand, and brokers
need to mobilize theinterestoftheirclientsinameaningfulway,onthe
other hand, before the rolling out of thefirstcontractontheSEM.
An overview of some initiatives earmarked for 2010-2011
2010-2011willbegearedtowardsincreasinglistedproductsandattractingmoreplayersandparticipantsonourmarket.
1. Investor Education
SEM is a strong supporter of the drive tobring the stock market
within the reach andunderstandingof thegeneral public, andhasa
vision to develop an investment culture inMauritius.Weprovide this
support througharange of information and education services.The
number of investors trading on
ourExchangehasincreasedinrecentyearsontheback of the bull run that
characterised ourmarket during the 2002 - early 2008
period,initiatives undertaken by investment dealersto reachout
topotential investors, anumberof international road shows in which
theSEMandsome listedcompanieshaveactivelyparticipated and the
initiatives undertaken bythe SEM to bring the stock market
activitiesclosertoMauritianhouseholds.AsatendMay2010,56,000investorsholdingnearly251,000securities
accounts were registered with theCDS. These figures, though
encouraging,indicate thegrowthpotential that exists.Ourtarget is to
increase thenumberof
registeredinvestorsto100,000by2013,ensuringtherebythat one in every
five working Mauritians isa shareholder of the listed scrips traded
ontheSEM.
In this context, the Exchange will launch in
2010 an Investor Education campaign underthe theme Faire de
Maurice une nation
dactionnaires: 100,000 actionnaires dici2013. This campaign will
comprise thelaunching of a series of in-house
educationcoursesattheSEMforthepublicat
large,aneducationalbrochure,radioprogrammes,pressinterviewsandnewspaperadverts.
2. Listing of multi-currency products on SEM
TheSEMhassofarfocusedessentiallyonthelistingofrupee-basedproducts.TheSEMandtheCDShaverecentlyhelddiscussionswiththeBanksandtheCentralBanktocreatethespacefor
the listing of multi-currency denominatedproducts on the SEM. We
have made goodprogressonthisfrontandthisinitiativeopensup the space
for the SEM to engage withinternational institutions to discuss
about
thefeasibilityofintroducingforeigncurrencybasedproductslikeexchange-tradedfunds(ETFs)andotherproductstolistontheSEM.ThisinitiativewillfurthercontributetotheinternationalisationoftheSEMandhelptoovercomethestructuralconstraintsofasmalleconomybyoperatingupnewlistingavenuesfortheSEM.
3. Bridging regulatory and other gaps in the positioning process
of the SEM as an attractive Listing Venue for Global and
Specialised Funds
In2009-2010,weachievedanimportantstep
by reviewing our listing rules and
renderingthemflexibleandadaptabletothespecificitiesof a wide
variety of funds. In 2010-2011,our focuswill beon an
aggressivemarketingof this competitive framework, but we willalso
focus on initiatives to bridge
regulatoryandothergapswithaviewtoenhancingthecompetitiveness of SEM
as listing venue
forfunds.Inthisconnection,wehaveearmarkedaspecificnumberofinternationalrecognitionsthattheSEMneedtoobtainandwewillworktowards
the obtention of these recognitionstogetherwiththeFSC.
4. Moving up to an enhanced version of our trading system and
implementing a new surveillance system to improve overall market
surveillance.
The SEM became the second African Stock
Exchangein2001aftertheJSEtooperateafullyautomated stock market
infrastructure fromtradingtosettlement.Thissystemrevolutionised
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An overview of some initiatives earmarked for 2010-2011
(Cont'd)
4. Moving up to an enhanced version of our trading system and
implementing a new surveillance system to improve overall market
surveillance. (Cont'd)
tradingpracticesinMauritiusandempoweredtheinvestorinasignificantmannerbyenablinghim
to follow the market in real-time andact upon market opportunities
in real-time,whileprovidinghimwithanumberofmarketindicators
toanalyse thedepthof themarketoneverysinglelistedinstrument.
ThetimehasnowcomefortheSEMtomove
up to an enhanced version of the
tradingsystemandfurtherempowertheinvestor.Weare currently engaged
in discussions with thesystems supplier to define the
appropriatetimingfortheintroductionofthenewversionofthetradingsoftware.
We also intend to look into the introduction
of a more sophisticated surveillance systemat theSEMwhichwill
enable the surveillancedepartment to carry out its functions
moreefficiently.
5. Looking at partnership possibilities The stock exchange
Industry has witnessed
some major changes in recent years asexchanges try to boost up
liquidity, attractmore investors and position themselves
asmulti-productplatforms.
TheSEMcannotbeoblivioustothesefundamentalstrategicshifts
currently characterising the exchange
space.Inthisconnection,2010-2011willbegearedtowardsidentifying the
strategic changes and
partnershipsthatcanbebeneficialtothefutureoftheSEMandof its
different stockholders, including issuers andinvestors.
The SEM has come a long way since 1989. Thenext 10 years will be
very challenging due to thelack-luster growth scenario in countries
on
whichMauritiusdepends.However,challengesdorepresentopportunitiesandwearekeentocapitalizeonsomeoftheseopportunitiestotaketheExchangetothenextstageofitsdevelopment.
We would like to express my appreciation to theMinistry of
Finance and to the FSC for all theirsupport during the year. Our
thanks go to SEMsChairman for his support and guidance and tothe
Board of Directors for its involvement andcontribution. We owe the
Management and staffof the SEM a word of appreciation for their
driveandcommitment.Lastbutnotleast,wewouldliketo thank our key
stakeholders, namely investmentdealers, listed issuers, investors
and all SEMCommitteeMembers for supportingour initiatives.
SunilBenimadhuChief Executive
22September,2010
Sunil BENIMADHUChief Executive
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management profileThe STock exchange of mauriTiuSannual reporT
2010
SunilBenimadhu
joinedtheSEMasChiefExecutiveinMay1998.HewasappointedExecutiveDirectorof
theSEM inOctober2008. HeholdsanM.B.A.in Finance and Investment from
the University ofIllinois,UnitedStates. Healsoholds aD.EA.
inDevelopment Economics and a Matrise in Macro-Economics from the
University of
Aix-Marseille,France..HehasrecentlybeenelectedasPresidentoftheAfricanSecuritiesExchangesAssociation(ASEA)foraperiodoftwoyears.From2002to2004,hewasamemberof
theExecutiveCommitteeof
theSouthAsianFederationofExchanges(SAFE),whichcomprises twelve
Stock Exchanges of the SouthAsian region. From 2001 to 2003, he
chaired theSADC Committee of Stock Exchanges(COSSE), anassociation
of stock exchanges which includes
tenexchangesoftheSouthernAfricanregion.
Darmanand VIRAHSAWMYSenior Manager/Head of Business
Development
DarmanandVirahsawmyholdsaD.E.S.SinEconomicsofInformationandaMatriseinEconometricsfromtheUniversityofMontpellier,France.HejoinedtheSEMsince1989asManager,andiscurrentlySeniorManager/HeadofBusinessDevelopment.
Shamin Ahmad SOOKIAHead of Listing
Shamin Ahmad Sookia is a fellow member of theAssociation of
Chartered Certified Accountantsanda fellowmemberof theChartered
InstituteofManagement Accountants. He is also a holder ofan MSc
(I.T) and an MBA (Marketing). He joinedthe SEM in 2005, is
currently the Head of theListing Division. He is presently a member
of theMIPA, ACCA Mauritius Branch & CIMA MauritiusBranch. He
isalsoanactivememberof theAuditCommittee of CIMA Southern Africa
Region sinceSeptember2006.
Pamela LI CHUN FONGManager, Finance and Administration
Pamela Li Chun Fong is a fellow member of
theAssociationofCharteredCertifiedAccountantsandalsoholdsaDiplomainAccountancy.ShejoinedtheSEMin1995asAccountantandcurrentlyheadstheFinance
and Administration Department. She is
amemberoftheMIPAandACCAMauritiusBranch.
Chaitanand JHEENGUNManager, Trading and Market Information
Chaitanand Jheengun is a fellow member of the
InstituteofCharteredSecretariesandAdministratorsandhealsoholdsanM.B.A.HejoinedtheSEMin1990
as Administrative Officer. He currently
headstheTradingandMarketInformationDepartmentandisalsotheCompanySecretary.HeisalsoamemberoftheICSAMauritiusBranch.
Shalini GOKHOOL Manager, Legal Affairs
ShaliniGokhoolholdsanLLB(Hons)andshehasalsocompleted the
Vocational Course for Barristers atthe Mauritius Council of Legal
Education in
1997.ShejoinedtheSEMin2001andcurrentlyheadstheLegalDepartment.
Nishan AUBEELUCKManager, Marketing and Market Development
Nishan Aubeeluck holds an MSc in
InternationalBusinessfromtheUniversityofMelbourne,Australia.HejoinedtheSEMin2004,andcurrentlyheadstheMarketingandMarketDevelopmentDepartment.HeismemberoftheAustralianCentreforInternationalBusiness
(ACIB), the Financial Services Institute
ofAustralia,andtheFinanceandTreasuryAssociationofAustralia(FTA).
Vickram RAMFULCorporate Finance Manager (Listing Division)
Vickram Ramful is a Fellow of the Association
ofCharteredCertifiedAccountants.Heisalsoaholderof a BA(Hons) in
Accounting from the Universityof Lincolnshire and Homberside UK.
and holdsan MBA(Finance).He joined the SEM in 2005 andcurrently
holds the position of Corporate FinanceManager in the Listing
Division. He is currently
amemberoftheMIPAandACCAMauritiusBranch.
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CORPORATE GOVERNANCE PRAC-TICES
The Board of Directors of the SEM reiterates itsengagement in
the promotion of the
sustainabledevelopmentoftheCompany,particularlyinitsrolesas market
operator and commercial entity, whileensuringthat the interestsof
theshareholdersandstakeholdersarebothpromotedandprotected.
TheSEMmaintainsasetofCorporateGovernanceprinciplesandpracticestoensurethattheCompanyisincompliancewiththerelevantlegislation,theCodeofCorporateGovernanceforMauritiusandtheSecuritiesAct2005.
SEMS CONSTITUTION
Section 25(1) of the Securities Act 2005 providesthat:
TheSEMshallbeademutualisedexchangeconstitutedasapubliccompany.
AnewConstitutionfortheconversionoftheSEMintoapubliccompanyhasbeenapprovedbytheFinancialServicesCommissioninJune2008.TheprovisionofthenewConstitutioncomplieswiththeprovisionoftheCompaniesAct2001inrelationtopubliccompaniesandwiththeSecuritiesAct2005.
SEMbeingapubliccompany,thetransferofitssharesare not subject to
pre-emption rights.
However,restrictionsonownershipofsharesasrequiredbylaware reflected
in clauses 10.1 and 10.4 of the
SEMConstitutionasstipulatedbelow:
10.1TRANSFER OF SHARES TO BE SUBJECT TOBOARDANDFSCAPPROVAL
Notwithstanding the rights conferred upon the Board by clause
10.4. hereof, all transfers and transmissions of Shares shall have
to be approved by the Board. Any document relating to or affecting
the title to any Shares shall be registered with the Company, after
having been approved by the Board, without payment of any fee.
No Shares shall be transferred except with the approval of the
FSC pursuant to Section 23 of the Financial Services Act 2007.
10.4BOARD'S RIGHT TO REFUSE OR DELAYREGISTRATIONOFTRANSFER
(a) The Board may, subject to compliance with sections 87 to 89
of the Act, refuse or delay the registration of any transfer of any
Share to any person, whether that person be an existing Shareholder
or not, where:
(i) so required by law;
(ii) a holder of any such Share has failed to pay on the due
date any amount payable thereon either in terms of the issue
thereof or in accordance with the Constitution (including any Call
made thereon);
(iii) the transfer is not accompanied by such proof as the Board
reasonably requires of the right of the transferor to make the
transfer;
(iv) the Company is required or authorised to do so under the
provisions of the Securities (Central Depository, Clearing and
Settlement) Act or any other enactment.
(b) Notice of the decision of the Board refusing or delaying a
transfer of any Share, stating the reasons for the refusal, shall
be sent to the transferor and the transferee within twenty-eight
(28) days of the date on which such transfer was delivered to the
Board.
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BOARD OF DIRECTORS OF SEM
SEM SHAREHOLDERS FINANCIAL SERVICES COMMISSION
ExternalAuditor
SEM MANAGEMENT COMMITTEE
OPERATIONS OF THE COMPANY
Listing Executive Committee
Consultative Committee on the review of the listing Rules
Committee Index Management Committee Consultative & Informative
Committee
SEMBOARD COMMITTEES
Corporate Governance Committee - Nomination Committee -
Remuneration Committee
Audit & Risk Management Committee
Other Stakeholders
Investors Investment Dealers Listed Companies Suppliers
Employees
Conduct Audit
Supervise
Overview
Reporting
Reporting
ReportingAppointment
Election of 10 Directors Two members of Industry One Executive
Director
Approval of appointment(pursuant to section 24 of the Financial
Services Act 2007)
ReportingAppointment
Reporting
Reporting
Appointment
PROFILE OF MANAGEMENT TEAM
TheSEMManagementCommitteeconsistsoftheChiefExecutiveandtheManagersofeachdepartment.TheprofileofeachMemberoftheManagementTeamisdisclosedonpage14oftheSEMAnnualReport.
COMPOSITION OF THE BOARD
Clause21.1ofthenewConstitutionprovidesforthenewcompositionoftheBoardasfollows:
The Board shall consist of not more than
tendirectors,ofwhom:
at least two shall be members of the Industry;and
atleastoneshallbeanExecutiveDirector;
NopersonshallbeappointedasaDirectorwithoutthepriorapprovaloftheFSCpursuanttoSection24oftheFinancialServicesAct2007.
The Directors are elected in accordance with theprovisionsof
theConstitutionof theCompany.
ADirector,excludingtheExecutiveDirector,remainsinoffice for a
period of one year and at the
annualmeetingfollowingtheexpiryofthisperiodheretiresfrom office,
but he is eligible for re-election orre-appointment.
DIRECTORS PROFILE
The profile of each Member of the Board
ofDirectorsisdisclosedonpages6and7oftheSEMAnnualReport.
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SEM BOARD AND BOARD COMMITTEE MEMBERS
During the financial year ended 30 June 2010, the following
directors sat on the SEM Board andBoardCommittees:
Corporate Audit & Risk Board of the Governance
ManagementName of Director SEM Committee Committee
ProfessorDonaldAh-Chuen 4
MrSunilDuttBenimadhu 4 4
MrsReedheeBhuttoo 4 4
MrVishalJoyram 4
MrVincentLamusse 4
MrGatanLanHunKuen 4 4
MrPeroomalGopallenMooroogen# 4 4
MrsNanditaRamdewar 4 4
MrBilalIbrahimSassa* 4 4
MrAndrTait@ 4
MrRajTapesar 4 4 4
MrVikashTulsidas 4 4
Notes:-
MrVishalJoyramwasappointedalternatetoMrsReedheeBhuttooon10thMarch2010.
MrGatanLanHunKuenwaselectedtositasChairmanoftheBoardon12thNovember2009.
# Mr Gopallen Mooroogen resigned from the Corporate Governance
Committee on 12th November 2009 and wasreplacedbyMrRajTapesar.
* MrBilal
IbrahimSassaresignedfromtheAudit&RiskManagementCommitteeandwasreplacedbyMrsReedheeBhuttooon12thNovember2009.
@
MrAndrTaitwasappointedalternatetoMrBilalIbrahimSassainApril2010.
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DELEGATION BY THE BOARD
While the Board has the specific responsibility fordirecting the
long-term strategies and policies ofthe SEM and for approving
yearly budgets of
theCompany,theday-to-dayoperationalresponsibilitiesare delegated to
theChief Executive and the
SEMManagementteam.Toassistintheexecutionofitsresponsibilities, and
in linewithSection3.5of theCode of Corporate Governance for
Mauritius,
theBoardhasestablishedtwoSub-Committees;namely,theAuditandRiskManagementCommitteeandtheCorporateGovernanceCommittee,whichalsoactsastheRemunerationCommitteeandtheNominationCommittee.
TERMS OF REFERENCE OF THE CORPORATE GOVERNANCE COMMITTEE
Theapproved termsof referenceof
theCorporateGovernanceCommitteeareasfollows:
To ensure that the reporting requirements
onCorporateGovernance,onanongoingbasis,areinaccordancewiththeprinciplesoftheCode;
Todetermine,agreeanddevelopthecompanysgeneral policy on
corporate governance inaccordancewiththeprinciplesoftheCode;
To ensure that disclosures are made in theannual report
incompliancewith
thedisclosureprovisionsinthecodeofCorporateGovernanceforMauritius.
TERMS OF REFERENCE OF THE NOMINATION COMMITTEE
TomakerecommendationstotheBoardontheappointmentofnewexecutiveandnon-executivedirectors,includingmakingrecommendationsonthecompositionoftheBoardingeneralandthebalance
between executive and
non-executivedirectorsappointedtotheBoard;
ToreviewregularlytheBoardstructure,sizeandcompositionandmakerecommendationstotheBoard
with regard to any adjustments that aredeemednecessary;
To identify and nominate candidates for theapproval of the Board
to fill Board vacanciesas and when they arise, as well as to put
intoplace plans for succession, in particular for
theChairpersonandChiefExecutive;
TomakerecommendationstotheBoardforthecontinuation (or not) in
services of anydirectorwhohasreachedtheageof70;
To recommend directors who are retiring
byrotationforre-election;
To liaise with the Board in relation to thepreparation of the
Committees report toshareholders,asrequired.
TERMS OF REFERENCE OF THE REMUNERATION COMMITTEE
Determine, agree and develop the companysgeneral policy on
executive and seniormanagementremuneration;
Determine specific remuneration packages
forexecutivedirectorsofthecompany,includingbutnot limited tobasic
salary,benefits inkind,anyannual bonuses, performance-based
incentives,shareincentives,pensions,andotherbenefits;
Determine the level of non-executive andindependent
non-executive fees to
berecommendedtotheshareholdersatthemeetingoftheshareholders.
Duringthefinancialyearended30June2010,theCorporateGovernanceCommitteemettwotimestodiscussonthefollowingmainissues:
To make proposals for the election of
Directorsfortheyear2009-2010.
SucessionPlan-Chairman/ViceChairmanoftheSEM
To approve the Performance Bonuses of theExecutive Director and
the SEM staff for thefinancialyearended30June2010.
To review the salaries of the Executive
DirectorandtheSEMstafffortheyear2010-2011.
TERMS OF REFERENCE AUDIT AND RISK MANAGEMENT COMMITTEE
The terms of reference of the Audit and
RiskManagementCommitteearedisclosedintheAuditandRiskManagementCommitteeReport.
SEM RISK MANAGEMENT
AreportsummarisingthekeyrisksfortheSEMandthe relative risk
control mechanisms
implementedbythecompany,isdisclosedintheInternalControlStatementonpage28oftheAnnualReport2010.
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ATTENDANCE OF THE BOARD AND BOARD COMMITTEES
Duringthefinancialyear30June2010,theattendancerecordoftheBoardandBoardCommitteesaregiveninthetablebelow:
AUDIT & RISK CORPORATE MANAGEMENT GOVERNANCE SEM BOARD
COMMITTEE COMMITTEE
Number of meetings heldduring the year 9 3 2
Name of director
ProfessorDonaldAh-Chuen 7/9 - -
MrSunilDuttBenimadhu 9/9 - 2/2
MrsReedheeBhuttoo 5/6 2/3 -
MrVincentLamusse 7/9 - -
MrGatanLanHunKuen 7/9 - 2/2
MrPeroomalGopallenMooroogen 7/9 - 1/1
MrsNanditaRamdewar 5/9 3/3 -
MrBilalIbrahimSassa 1/9 - 1/2
MrRajTapesar 7/9 2/3 1/1
MrVikashTulsidas 9/9 1/3 -
MrVishalJoyram(alternate) 3/3 - -
Average Attendance Rate 74% 67% 88%
REMUNERATION PHILOSOPHY
Theincreaseinremunerationoftheemployeesandthe performance
bonuses which are paid to
theemployeesoftheSEM,arereviewedandapprovedeachyearbytheMembersoftheSEMRemuneration
Committee.Thereviewisbasedontheperformanceassessment of each
employee at the end of
thefinancialyearandtakesintoconsideration,therateofinflationfortheyear.
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DIRECTORS REMUNERATION PAID BY SEM AND ITS SUBSIDIARY (CDS)
RemunerationpaidtothedirectorsoftheSEMandoftheCDSfortheyearsended30June2010and2009aredisclosedinthetablebelow:
2010 2009Name of Sem Directors Rs000 Rs000
ProfessorDonaldAh-Chuen 72 51
MrSunilDuttBenimadhu* 6,302 4,860**
MrsReedheeBhuttoo 77 51
MrMarcLagesse - 8
MrVincentLamusse 72 51
MrGatanLanHunKuen 144 94
MrPeroomalGopallenMooroogen 104 133
MrDevanandPoonyth - 7
MrsNanditaRamdewar 88 72
MrBilalIbrahimSassa 77 65
MrRamanaidooSokappadu - 7
MrRajTapesar 111 61
MrVikashTulsidas 72 61
*
Totalremunerationforbothyearsincludesbasicsalaries,End-of-YearandPerformancebonuses,pensioncontribu-tionsandpassagebenefits.
**
Inyear2009,theremunerationoftheExecutiveDirectorrelatestotheperiodstartingfrom01October2008to30June2009.
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DIRECTORS REMUNERATION PAID BY SEM AND ITS SUBSIDIARY (CDS)
(Cont'd)
Name of CDS Directors 2010 2009 (RS000) (RS000)
MrSteveLeung 127 127
MrPeroomalGopallenMooroogen 75 75
MrVikashTulsidas 40 -
MrJavedSuhootoorah 58 54
MrsNanditaRamdewar 66 66
MrGaetanLanHunKuen 58 54
MrRajTapesar 70 62
MrsArunaCollendavelloo 68 79
MrDhanesswurnathThakoor 54 54
MrRamanaidooSokappadu 74 74
ProfessorDonaldAhChuen 58 62
MrVincentLamusse 77 58
MrVipinMahabirsingh 2,701 2,503
MrsReedheeBhuttoo 54 54
MrSuieSenHockMineAhKine 54 54
MrBilalSassa 30 94
POWERS DELEGATED BY SEMS BOARD TO THE LISTING EXECUTIVE
COMMITTEE
ThepowertoactoncertainlistingmattersresidesintheBoardoftheSEM.UndertheprovisionsoftheSecuritiesAct2005,theListingExecutiveCommittee(LEC)
previously the Listing Committee, deals
withlistingapplicationsontheOfficialMarketandother
specificissuesasprovidedintheSEMListingRules.Furthermore,undertherulesoftheDevelopment&EnterpriseMarket(DEM),applicationsfortheadmis-sionofcompaniesontheDEMisalsoentertainedbytheLEC.
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MEMBERS OF THE LISTING EXECUTIVE COM-MITTEE (LEC)
The Listing Executive Committee is comprised
ofthefollowingfourRepresentativesofSEMandfourExternalMembers:
SEMs Representatives:
SunilDuttBenimadhu-ChiefExecutiveShaminAhmadSookia-HeadofListingShaliniGokhool-ManagerLegalDepartmentChaitanandJheengun-ManagerTradingandMarketInformationDepartment
External Members:
NassirRamtoola(Chairman)PrabhaChinienShardaDindoyalMargaretWongPinLun
TERMS OF REFERENCE OF THE LEC
The LEC exercises the following responsibilities
inrespecttolistingmatters:
To determine the suitability of applicationsmade to the SEM for
a listing after reviewinga comprehensive listing report prepared
bythe staff of the Listing Division in accordancewith the
requirementsof the relevant rulesandprocedures.
TorecommendchangestoListingRulesandRulesof
theDevelopment&EnterpriseMarket
totheBoard,includingthelistingfeeratespublishedbytheExchangefromtimetotime.
ToassesscasesofapparentbreachesoftheListingRules / rules of the
Development &
EnterpriseMarketandmakerecommendationtotheBoard,aftertheiradjudication.
ToassesscasesonthesuspensionorcancellationofalistingontheExchangeandtoreferthesetotheBoardforconsideration.
Twelve meetings of the LEC were held during thefinancial year
2010 whereby the following issues,interalia,wereconsidered:
Applications for new listings on the OfficialMarket
Withdrawal of a company from the OfficialMarket
ApplicationsfornewlistingsontheDEM
CancellationofadmissionsfromtheDEM
CONSULTATIVE COMMITTEE ON THE REVIEW OF THE LISTING RULES
A Consultative Committee was set up by the Board of Directors of
the SEM to review the Listing Rules governing the Official Market.
The Committee comprises of executives of the SEM and
representatives of the securities industry. The main purpose of the
Committee is to align the Listing Rules with international
standards of best practices.
INDEX MANAGEMENT COMMITTEE
The Index Management Committee composed,of stockbrokers, fund
managers, academics, andofficials from the Stock Exchange of
Mauritius,ensuresthattheprocessofbuildingandmaintainingtheSEM-7isasinteractiveaspossible.MANDATE
OF THE INDEX MANAGEMENT COM-MITTEE
TheIndexManagementCommittee:
Establishes the criteria and procedures
forselectionoftheconstituentsoftheSEM-7.
Determinesthebaseperiodandvalue. Formulates a scientific and
transparent
methodologyofindexcalculation.
Reviews,monitorsandmaintainsperiodicallythe
SEM-7. Considersthedevelopmentofsectoralindices.
TheIndexManagementCommitteemeetsquarterlyto review the
constituents of the SEM-7. Thesemeetings are held on the first
Tuesday (or nearestMauritian business day after that day) of
January,April,JulyandOctober.
TheinclusionorexclusionofaconstituentintheSEM-7isatthediscretionofanindependentlyconstitutedIndexManagementCommittee.ThisdiscretionshallonlybeusedinthespiritoffurtheringtheobjectivesoftheSEM-7.
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The SEM holds 51 per cent of the ordinary share capital of the
Central Depository and Settlement Company Ltd (CDS). At 30 June
2010, the value of the ordinary share capital issued by the CDS Ltd
was Rs15 million and its total reserves amounted to Rs102.4
million.
The CDS Ltd is a private company incorporated in Mauritius. Its
registered office is situated at One Cathedral Square, Level 4,
Jules Koenig Street, Port Louis. The main activities of the company
are to provide depository, clearing and settlement services in
order to facilitate dealings in securities.
MEMBERS OF THE INDEX MANAGEMENT COM-MITTEE
The current members of the Index ManagementCommitteeare:
Messrs:VincentLamusse(Chairman)SunilBenimadhuRajTapesarMathewLamportPremBeejanBilalSassaDarmanandVirahsawmy(Secretary)
CONSULTATIVE AND INFORMATIVE COMMITTEE
The Consultative and Informative Committee hasbeen set up by the
Board with the mandate
todiscussissuesrelatedtotradingactivities,operationalaspectoftheATS&CDSSystems,newproductsand
developmentofthemarket.TheCommitteecomprises of representative
of SEM, CDS,
InvestmentDealersandCustodianBanks,anditdoesnothaveexecutivepowers.TheChiefExecutiveofSEMactsasChairpersonoftheCommittee.
TheCommitteemeetsasandwhentheneedarisesand met six times during
the financial year ended30 June 2010. The main issues discussed by
thecommitteeinclude:
Introduction of Futures Contracts on the StockExchange.
Intra-dayReverseTurnaroundTrades.
CISRegulations.
MarketSurveillance.
OperationalaspectsofATSandCDSSystems.
GROUP STRUCTURE OF THE SEM
SEM LTD
CDS LTD
51%shareholding
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COMMON DIRECTORS AND THE SHAREHOLDING PERCENTAGES
The names of the Directors who sat in both the Boards of the SEM
Ltd and the CDS Ltd during the financial year ended 30 June 2010,
together with the relative shareholding percentages in SEM and CDS,
are given in the table below:
Name of Director % Holding in CDS Ltd % Holding in SEM Ltd
ProfessorDonaldAh-Chuen(ABCGroupofCompanies) - 7.50%
MrsReedheeBhuttoo(SBMSecuritiesLtd) - 4.83%
MrGatanLanHunKuen(IrelandBlythGroup) - 7.50%
MrVincentLamusse(AngloMauritiusAssuranceSocietyLtd) - 7.50%
MrGopallenP.Mooroogen(MauritiusTelecom) - 7.50%
MrsNanditaRamdewar(StateInsuranceCompanyofMauritiusLtd) -
7.50%
MrBilalSassa(CimStockbrokersLtd) - 7.50%
MrRajTapesar(MCBStockbrokersLtd) - 5.44%
The tablebelowdiscloses thenumberofotherdirectorshipswhich
thedirectorsof theSEMhold in
listedcompaniesandthenumberofsharesheldbythem,bothdirectlyandindirectlyintheSEM.
Name of Director Number of Number of shares Number of shares
directorships held directly held indirectly in listed companies in
SEM in SEM
ProfessorDonaldAh-Chuen 1 Nil 0.46%
MrSunilDuttBenimadhu Nil Nil Nil
MrsReedheeBhuttoo Nil Nil Nil
MrVincentLamusse Nil Nil Nil
MrGatanLanHunKuen 2 Nil Nil
MrPeroomalGopallenMooroogen 2 Nil 0.000033%
MrsNanditaRamdewar Nil Nil Nil
MrBilalIbrahimSassa 1 Nil Nil
MrRajTapesar Nil Nil Nil
MrVikashTulsidas Nil Nil Nil
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SHAREHOLDERS OF THE SEM
Thetablebelowdisclosesthelistofshareholdersandtherelativenumberofordinarysharesbeingheldbythemasat30June2010:
List of shareholders Number of Shares held % Holding
BramerSecuritiesLtd 24,750 7.50
CimStockbrokersLtd 24,750 7.50
MauritiusTelecomLtd 24,750 7.50
StateInsuranceCompanyofMauritiusLtd 24,750 7.50
TheAngloMauritiusAssuranceSocietyLtd 24,750 7.50
MirabelInvestmentsLtd 22,750 6.89
MauritianEagleInsuranceCoLtd 20,000 6.06
NewtonSecuritiesLtd 19,000 5.76
MCBStockbrokersLtd 17,936 5.44
PlasmoLtd 16,248 4.92
RametInvestmentLtee 16,000 4.85
CapitalMarketsBrokersLtd 15,943 4.83
SBMSecuritiesLtd 15,943 4.83
IslandLifeAssuranceCoLtd 14,850 4.50
ABCMotorCoLtd 12,375 3.75
ChueWing&CoLtd 12,375 3.75
IrelandBlythLtd 4,750 1.44
CompagnieD'InvestissementetdeDveloppementLimite 4,543 1.38
FlacqUnitedEstatesLimited 2,500 0.76
ForwardInvestmentAndDevelopmentEnterprisesLimited 2,500 0.76
ExcelsiorUnitedDevelopmentCompaniesLimited 2,500 0.76
TheMedineSELtd 2,500 0.76
GalvanisingCoLtd 2,000 0.61
AssociatedBrokersLtd 999 0.30
Ramet&AssociesLtee 538 0.16
Total 330,000 100
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DEALINGS IN SHARES BY THE DIRECTORS
TherewerenodealingsinthesharesoftheSEMbythedirectorsoftheCompanyduringtheyearended30June2010.
TheCompanyhasnoshareoptionplans.ThelasttransactioninthesharesofSEM,inthe
context of a share transfer, was effected at
apriceofRs550inMay2010.
There is no shareholders agreement which
affectsthegovernanceoftheCompanybytheboardandtheSEMdoesnothaveanymanagementagreementwithanythirdparties.
RELATED PARTY TRANSACTIONS
During the financial year ended 30 June 2010, the following
transactions took place:
Between the SEM and its subsidiary company:
Rs000PurchaseofgoodsandservicesIT services outsourced to CDS Ltd
1,114
OutstandingBalancesIntercompany transactions due to CDS Ltd
459
Between the SEM and key management personnel
CompensationofKeyManagementPersonnel
Short-term benefits 8,983Post-employment benefits
697Contributions to Pension Plans 1,063
DIVIDEND POLICY
ThedividendpolicyoftheCompanyisdisclosedintheDirectorsReportonpage4oftheSEMAnnualReport2010.
IMPORTANT EVENTS
ThefollowingtabledisclosestheimportanteventsfortheSEM:
Dividend declaration 04 June 2010
Submission of annualreports and auditedaccounts to the
FinancialServices Commission 30 September 2010
Dividend payment 01 October 2010
Annual Meetingof Shareholders November 2010
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CORPORATE SOCIAL RESPONSIBILITY
Duringthepasttwoyears,theSEMhasbeenmakingsmalldonationstoseveralNGOsliketheSACIM,theMauritius
Mental Health Association, APEIM andChildhope.
Under Sections 50K and 50L of the Finance andAudit Act 2009, the
SEM took the decision to
setupaCSRfundtofinanceCSRactivitiesthatwould
help contribute to the social and
environmentaldevelopmentofthecountry.
After having considered the various areas ofintervention
available, the Company decidedto contribute to the CSR projects
listed underthe Approved National Programme; namely,
theEradicationofAbsolutePoverty(EAP).
Duringthefinancialyearended30June2010,theSEMhascontributedatotalamountofRs982,109tofinancethefollowingthreeCSRprojects:
Rs1. ProjectLearntoEarnfor Out-of-SchoolYouthCourse 672,109
2. APEIMUpgradingofSchool 160,000
3. GandhiBreedhAshram ProvisionofEquipment&
otheramenitiesforthe runningofCharitableHome 150,000
982,109
POLITICAL DONATIONS
NopoliticaldonationswasmadebytheSEMforthefinancialyearended30June2010.
GatanLanHunKuenChairman
29September,2010
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Board Responsibility
TheBoardoftheSEMassumesitsoverallresponsibilityovertheGroupssystemofinternalcontrolandriskmanagement
and for reviewing the adequacy andintegrity of the systems already
established withintheGroup.
InordertocomplywiththeprinciplesoftheCodeonCorporateGovernanceforMauritius,
theBoardoftheSEMhassetupanAuditandRiskManagementCommittee to
identify, monitor and
managesignificantbusinessrisksoftheCompany.
Likewise, in accordance with the CDS Rules,the Board of the CDS
Ltd has set up a BusinessConduct Committee (BCC) to review and
controlthebusinessandoperationalrisksoftheCDS.TheBCCalsomonitorstheriskmanagementframeworkestablishedbytheCDStoaddressthedifferenttypesofrisksthatareinherenttoclearingandsettlementorganisations,
namely, counterparty, liquidity,systemicandoperationalrisks.
Key Risks for the SEM
Themain typesof risks facing theStockExchangeofMauritiuswhile
conducting
itsbusinessactivitiesareenumeratedinthetablewhichfollows:
KEY RISKS EXPOSURES DESCRIPTION
1 Systemic Risk Systemic risk relates to the likelihood that
financialdifficultiesexperiencedbyan investmentdealermaybe
transmitted or passed over to other investmentdealers and through
them, to the SEM. The SEMis subject to systemic risk,which
ismanagedby thevarious stakeholderswhoparticipate in
thefinancialmarkets.
2 Technology and Systems Risks The operation of the SEMs
Automated
TradingSystem(SEMATS),isbeingoutsourcedtotheCentralDepository &
Settlement Company Ltd (CDS). TheSEMATS is exposed to technology
and systems riskssuch as system failure, which can result in loss
ofdata.
3 Employee Fraud Risk This is the risk of employees or officers
of the SEMindividually, or in collusion defraud the company
orcommitanunauthorizedactivity,resultinginfinanciallossorunauthorizeduseofinformationassets,whichcanleadto:legalexposure,reputationriskandadverseimpactonoperations.
4 Negligence, Errors, Omissions
Thisrelatestothenegligentacts,errorsoromissionscommittedby
theemployeesor thedirectorsof
theSEM,givingrisetoclaimsfromthirdpartieswhomayhavesufferedfinanciallossesasaresultofthebreachofprofessionalduty.
5 Information for Decision Making Risk
The risk that sensitive information used for
decisionmakingmaynotbeaccurateandknownattherighttime.
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KEY RISKS EXPOSURES DESCRIPTION
6 Integrity Risk Information Systems Infrastructure
ManagementProcessIntegrityappliesto:
-applicationsystemdevelopmentandmaintenance;-logicalsecurityandsecurityadministration;-computerandnetworkoperations;and-business/datarecovery.
Withoutupdatedpoliciesandproceduresdocument,notermsofreferenceareavailabletofollowwhendealingwithcriticaldataand
informationsystemsat theSEM.Furthermore,
suchdocumentationprovidesaguidelineforemployeeswhendealingwithcriticaldata.
7 Information systems Infrastructure Management Process
Integrity Risk
Thisrelatestotheriskofasystemfailureoccurringanddata needs to be
replaced on the system by meansof backup, the backup data may be
incomplete
orunavailable.Thisalsorelatestotheriskthatconfidentialelectronicmailscouldbeaccessedortamperedwithbyunauthorizedpersonswithoutappropriateauthority.
8 Business Interruption Risk
Shouldadisasteroccur(e.g.systemfailure)unnecessaryfinancial
lossesanddamagetothereputationoftheSEMmayoccurasaresultoftheabsenceofacompletedisasterrecoveryplan.
10 Operations Risk
Theriskthatoperationsarenoteffectivelyandefficientlycompletedduetolackofproperlyestablishedcontrolprocedures.
11 Relevance Risk - The risk that information is not relevant to
thepurposes, forwhich it is collected,maintainedordistributed.
-Theriskassociatedwithnotgettingtherightdata/informationtotherightperson/process/systemattherighttimetoallowtherightactiontobetaken.Often
arises from a failure to fully understandinformation needs and a
lack of attention totimelinessissues.
12 Performance Gap Risk
Theriskthatabusinessprocessdoesnotperformataworldclass
levelbecausethepracticesdesignedintotheprocessareineffective.
13 Credit Risk
Creditriskrelatestothelikelihoodthatclientswillfailtomeettheirfinancialobligationsasandwhentheyfalldue,thusexposingtheSEMtoafinancialloss.
14 All Risk Computer Equipment
Thisrelatestothelossordamagetocomputerequipmentcaused by fire and
allied perils and from accidentalcausewhilst it
isatworkoratrestorduringcleaning,dismantling,movementorreassemblybytheCompany.
15 Personal injury of staff This relates to the liability at law
to any
employeeforpersonalinjurybyaccidentwhilstengagedintheserviceofthecompany.
Key Risks for the SEM (Cont'd)
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0
internal control statement (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
The risk management strategy of the SEM
hasbeentohaveriskmonitoringandriskmanagementsystemsinplacethatattempttominimizetothestrictminimum
risks that the Group may be
confrontedwithindischargingitsresponsibilities.Toachievethisobjective,theGrouphasimplementedthefollowingriskcontrolmechanisms:
Capital Adequacy Requirements
In accordance with the Financial Reporting ofInvestment Dealers
Rules, all investment dealershavetosubmitonaquarterlybasis,
inadditiontoaudited accounts, Capital Adequacy
Requirementsreturns(CAR)returnsbythetenthbusinessday
inthemonthfollowingthepreviousthreemonths.
AspertheFinancialReportingofInvestmentDealersRules, no
investment dealer is allowed to have ashortfall in its capital,
other than pursuant to
aspecifictemporaryexceptiongrantedbytheSEM.TheSEMhasfulldiscretionastothenecessityandsufficiency
of special adjustments in any
particularcase,takingintoconsiderationallfactorspertainingtothemarketwithregardtothefinancialresourcesorfuturecontractsandtheaffairsasawholeoftheinvestmentdealerinvolved.
Internal Control System
TheSEMsinternalcontrolsystemencompassesthefollowingkeycontrolmechanisms:
Delegation of responsibilities to committeesof the Board through
clearly defined terms ofreference.
Formal organizational structure, with clearlydefined duties and
responsibilities for
eachemployeeandwell-definedlinesofreporting.
Formalizedwritteninternalprocedures,detailingclearly the
activities performed within eachdepartment.
Segregation of duties whereby tasks
areapportionedbetweendifferentmembersofstafftoreducethescopeforerrorandfraud.
Annual Budgetary exercise requiring alldepartments to prepare
budgets and businessplans for the forthcoming year. The
annualbudget
isbeingreviewedbytheAuditandRiskManagementCommitteebeforebeingapprovedbytheBoardforimplementation.
Monthly monitoring of the SEMs actualperformanceagainst
theapprovedbudgetwithdetailedexplanationsonvariances.
External Audit
Astatutoryauditoftheyear-endfinancialstatementsisperformedonanannualbasisbyexternalauditorsandtheresultsarebeingdiscussedattheAuditandRisk
Management Committee before approval bytheBoardoftheSEM.
IT System
TheSEMhasoutsourceditsITfunctiontoitssubsidiaryCDS,whichpossessesthenecessaryITexpertise.Theoutsourcingagreement,whichstartedsinceJanuary2001,
also includes the technical management
oftheAutomatedTradingSystem(ATS).Anysoftwareenhancements,
modifications and additions arethoroughly tested before
implementation in thelive environment. A formal Change
ManagementProcedure has been implemented and during
theyear,minorchangeshavebeenmadetothesystemsoftheSEMandtheCDS.
IT Security Audit
InordertoassisttheSEMandtheCDSinidentifyinganyITrisksandtoundertakeappropriatemeasurestoaddressthoserisks,thewholeITsystemisbeingsubject
to a specialized independant IT audit onceeverytwoyears.
Objective of the IT Security Audit
The objective of the IT Security Audit was
todeterminethestateofsecurityoftheSEMandCDSITinfrastructurewiththefollowinggoals:
Reviewing the organizations IT Security
PoliciesandDisasterRecoveryPlan.
Discovering thevulnerabilities/Security issues inthe critical
information systems running in thenetwork.
Assessingtheoverallbusinessimpactarisingfromanyidentifiedvulnerability(ifgetexploited).
Provide the remedial strategy andrecommendations to assist in
mitigating theidentified vulnerabilities and risks during
theactivity and strengthen the organizations ITSecurity.
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internal control statement (Cont'd)
Scope of the IT Security Audit
TheITSecurityauditcoveredthefollowingareas:
- ReviewofITSecurityPolicy- ReviewofDisasterRecoveryPlanning-
ReviewoftheNetworkSecurityArchitecture- Security audit of the
network components like
routers,firewalls,switchesetc.- Security audit of the Solaris
Servers and Oracle
Databases.- Internalvulnerabilityassessment.-
Non-intrusiveExternalPenetrationTesting.-
VerificationsofPCsonLAN.
The last IT security audit was conducted
duringApril/May2009byAujasNetworkPvtLtd,anIndiancompany specialized
in high-end digital
securityservices.TheauditreportwassubmittedtotheSEMAuditCommitteeforexamination.Nosecuritythreatsand
vulnerabilities were detected during the auditbut the auditors made
some recommendations
toenhancetheoverallinformationsecurityframeworkattheSEMandCDS.AlltherecommendationsmadebytheauditorswereimplementedbyDecember2009.
One of the recommendations of the IT
SecurityauditorswastoimplementaWebContentFilteringmechanismtoscanandmonitortheinternetusageof
users. Any unwanted site or contents can befiltered which is
intended to improve the
securitylevelofthenetwork.Thisrecommendationhasbeenimplemented
since December 2009. A SymantecWeb Gateway has been procured and
installed.TheSymantecWebGateway is an innovativeWebsecurity gateway
appliance that protects
againstWeb2.0threats,includingmaliciousURLs,spyware,botnets,
viruses, and other types of malware andperforms web content
filtering. The Gateway hasbeen configured to ensure consistency
with our ITSecurityPolicy.
Disaster Recovery Plan
TheSEMhasaDisasterRecoveryPlan(DRP)tocaterforvariouspossiblescenarios.TheDRPcoversbothpreventiveandcorrectivemeasures,whichwillenableittodealwithvarioustypesofdisasters,whichcandisruptnormalATSsystemoperation.Preventionoflossofdataintheeventofmediafailuresisachievedthrough
the implementation of redundant andcyclical backup tapes that are
stored both on-siteandoff-site.
The ATS system is designed with High-Availabilityconfiguration
with main and backup servers.
Theback-updatabaseservermaintainsamirrorimageof
thedatabaseonthemainserver.Intheeventofaproblemwiththemaindatabaseserver,thebackupserver
takes over without physical
interventionrequiredatclientsites.Similarly,ifoneofthetwotrading
engines goes down, the second
tradingenginetakesoverwithin10minutes.
IntheeventofamajordisastersitethatcausestheATSsitetobeunavailable,systemsandbusinessoperationswillberestoredatabackupsitewithin6to24hours.
Duringtheyear2009-2010,threesimulationsoftheDRP were performed
on the following
respectivedates:14thSeptember2009,16thDecember2009and30thApril2010.Thesimulationperformedon14thSeptember2009involvedtheparticipationofthe
investmentdealers, custodianbanksaswell
asSEMandCDSpersonnel.Nosystemsdowntimewasobservedduring2009-2010.
Compensation Fund
Section148oftheSecuritiesAct2005providesforthe creation and
maintenance of a
Compensationfundtoprovideforthecompensationofinvestorswhosufferpecuniarylossasaresultof:
(a) theinabilityofalicenseeunderthisActoranycollective
investment scheme to satisfy claimsarising from civil liability by
it in connectionwithservicesprovided;
(b) fraudordefalcationbya licensee,acollectiveinvestment scheme
or any of its officers oremployees;or
(c)
theinsolvencyorbankruptcyofanylicenseeorcollectiveinvestmentscheme.
The SEM Compensation Fund was
established,maintainedandadministeredbytheSEMundertherepealedStockExchangeAct1988(nowSection148oftheSecuritiesAct2005).
In1999,theBoardofDirectorsoftheSEMapprovedthataninitialamountofRs2.75million.-be
transferredoutof
theSEMsretainedearningsforthepurposeoftheFund.Thevalueof the
Fundasat30 June2010amounts
toRs3.9million.IncaseofanyshortfallintheFund,asper
therulesandregulationsof
thenewSecuritiesAct,theinvestmentdealerswouldbecalledupontocontributetotheCompensationFund.
Professional Indemnity Insurance Cover
Inthepast, theSEMtookaprofessional
indemnityinsurance(P.I)coverfortheamountofRs15millioninthejointnameofSEMandallregisteredinvestmentdealers.InthelightofthenewprovisionsundertheSecuritiesAct2005,andinviewofthedifferencein
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internal control statement (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
Professional Indemnity Insurance Cover (Cont'd)
thesizeofbusinessof therelative riskexposure,
itwasrecommendedthateachcompanyshouldhaveitsindividualP.Icover.
On the other hand, since both the SEM and theCDS have common
interests and also commondirectors sitting on both Boards, the SEM
and theCDS decided to take a combined insurance policyincluding
Stock Exchange Professional Indemnity /Crime Insurance / Directors
& Officers Liability foran amount of Rs15 million. This
decision has
alsoenabledbothcompaniestoachievesynergiesandtoreduceinsurancecosts.
REPORT ON THE COMPLIANCE AUDIT (Rule 5.2.1 of SEM Business
Rules)
Section24(1)(a)oftheSecuritiesAct2005providesthat in addition to
its other functions, the SEMshallhaveregulatoryfunctionsandshall,
interalia,ensure that it adequately supervises the marketoperations
and conduct of market
participants.TheSEMBusinessRuleshavebeenimplementedtoenable the SEM
discharge its regulatory
functionsvis--vismarketparticipantsunderthelaw.TheserulesprovideforthecriteriaandconditionsforInvestmentDealers
tobeadmittedasTradingMembersof theSEM, disciplinary action against
Trading Membersin the event of non-compliance with the
rules,requirements on the business practices of
TradingMembersanaCodeofConductwhichtheTradingMembersmustobservewhentradingonSEM.TheSEM
Business Rules were approved by the FSC
inOctober2008andcameintoforceinJanuary2009,followinga3-month
transitionperiodgiven to theInvestment Dealers to ensure compliance
with thenew rules. The SEM has set up a compliance
unitwhichmonitorsonanon-goingbasiscomplianceofTradingMemberswiththerequirementsoftheSEMBusinessRules.
With the adoptionof the SEMBusiness Rules,
theSEMmonitorsthefollowing:
Eligibilitycriteriaformembership
Continued compliance with Exchange require-ments, including
training and certification ofparticipantsandcapitaladequacy
Tradingoperationsofparticipants,includingissueof contractnotes
to clients,brokeragecharges,turnoverlimits,marginrequirements
Code of conduct for members and membersresponsibilities
Maintenance of records, annual accounts andaudit
Inspectionofparticipants
Sanctions in cases of non-compliance withregulations, rules and
procedures of theExchange
The SEM undertook investigation and
compliancevisitsduringthefinancialyear2008/2009withtheInvestmentDealers,
in virtueof Rule5.2.1of
SEMBusinessRulestoassesshowthestandardsdescribedintheBusinessRuleshadbeencompliedwith
.AllTrading Members were informed in writing of
theshortcomingsobservedduringtheComplianceVisit.Afollow-upvisitwascarriedoutontheshortcomingsin
May-June 2009 and most of the members
areadheredtotheSEMBusinessRules.AcopyofthefullreporthasbeensubmittedtotheChiefExecutive.
Thenext investigation and compliance visitwill
beheldduringthesecondquarterofthefinancialyear2010-2011.
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The Audit and Risk Management Committee isestablished to assist
the Board in discharging itsduties relating to the safeguarding of
assets, theoperation of adequate systems, control processesand
thepreparationofaccurate financial reportingand statements in
compliance with all applicablelegal requirements and accounting
standards.The Committee also covers the risk
managementfunctions.
Main Responsibilities
In relation to Auditors and External Audit:
TorecommendtotheBoardwhichfirm(s)shouldbeappointedasexternalauditor(s).
Toevaluatetheindependence,effectivenessandperformanceoftheexternalauditor(s).
Todiscussandreview,withtheexternalauditor(s)before the audit
commences, the
auditor(s)engagementletter,theterms,natureandscopeoftheauditfunction,procedureandengagementand,theauditfee.
Toagreeonthetimingandnatureofreportsfromtheexternalauditor(s)andmakesuggestionsastoproblemareasthattheauditcanaddress.
Toreviewtheoverallauditrole.In Relation to Financial
Statements
Toexamineandreviewthefinancialstatements,theinterimreports,theaccompanyingreportstoshareowners,
the preliminary announcement
ofresultsandanyotherannouncementregardingthecompanysresultsorotherfinancialinformationtobemadepublic,priortosubmissionandapprovalbytheBoard.
To ensure that the financial statements are
incompliancewithaccountingstandards,localandinternational,andwithlegalrequirements;
Toreviewtheannualreportandaccountstakenas a whole and, to ensure
that they present
abalancedandunderstandableassessmentoftheposition, performance and
prospectus of thecompany.
Toreviewtheexternalauditor(s)proposedauditcertificate,managementletterandmanagementresponse.
In Relation to Internal Control and Internal Audit
Tomonitorandsupervisetheeffectivefunctioningof the internal
control systems so as to
ensurethattherolesandfunctionsoftheexternalauditandinternalcontrolaresufficientlyclarifiedandco-ordinatedsoastoobtainanobjectiveoverviewoftheoperationaleffectivenessofthecompanyssystemsofinternalcontrolandreporting.
In Relation to Risk Management
To receive frommanagement information as
totheirprocessesfortheidentification,monitoringandmanagementofsignificantbusinessrisks;
To consider internal control and compliancestructures;
Toreviewtheadequacyofinsurancecoverage;
To review any legal matters that could have
asignificantimpactonthecompanysbusiness;
To make regular assessments of the internalcontrols existing
within the organisationand to review summary reports and
monitormanagementsresponse;
ToensurecomplianceofinvestmentdealerswiththeFinancialReportingRequirementsoftheStockExchange.
Composition
The Audit and Risk Management
Committeecomprisesfournon-executivedirectors.MembersfortheyearwereMrsNanditaRamdewar(Chairperson),MrsReedheeBhuttoo,MessrsRajTapesarandVikashTulsidas.
Reporting and Accountability
The Audit and Risk Management
CommitteethroughitsChairpersonisaccountabletotheBoardfor
itsactivitiesandmakesrecommendationstothe Board concerning matters
arising from theCommitteesresponsibilities.
TheChairpersonoftheCommittee,or,inhis/herabsence,analternatememberattendstheannualmeetingtoanswerquestionsconcerningmattersfallingwithintheambitoftheCommittee.
audit and risk management committee report
The STock exchange of mauriTiuSannual reporT 2010
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audit and risk management committee report (Cont'd)
The STock exchange of mauriTiuSannual reporT 2010
Main Responsibilities (cont'd)
Meetings
TheAuditandRiskManagementCommitteemeetsasandwhennecessaryandmetthreetimesduringthefinancialyear2009-2010.
During its meetings the Committee carried out
afollowupontheinternalcontrolfunctionsandriskmanagement carried out
by management. OtherissuesdiscussedbytheCommitteeincluded:
(i) Review of 2008 2009 audited
financialstatementsandmanagementletter.
.
(ii) Thesettingupof thetermsandscopeof theaudit functions
including the assessment ofthe reporting requirements under
IAS/IFRSapplicable accounting policies, audit fees,thetimetable
inrespectoftheauditexerciseand the annual report for the financial
year2009-2010
(iii) Declaration of dividend for the year
ending30thJune2010.
(iv) The2010/2011SEMBudget
(v) Appointment of SEM Auditors for the year2010/2011
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LISTING DIVISION
The global financial crisis has highlighted theimportance of
having reliable, well-operatedand regulated markets that facilitate
transparentprice discovery and generate confidence to
allstakeholders.SEMsobjectivetocontinuouslyreviewits listing
ruleswithout,howevercompromisingonmarkettransparencyfitswellwithintheperspectiveof
creating a flexible but well-regulated marketenvironment. Our
efforts are aimed at striking
therightbalancebetweenourregulatorydutiesandthecommercial interests
of our stakeholders. We
arealsocommittedtotakingintoaccountdevelopmentstakingplaceonourdomesticmarketaswellasontheglobalfront.
Amendments brought to Chapter 16 of the Listing Rules
The changes brought to Chapter 16 of SEMsListing Rules in
January 2010 were done with thedualobjectivesofaligning
itwiththeprovisionsofthe Securities (Collective Investment Schemes
andClosed-endFunds)Regulations2008andpositioningtheSEMasalistingvenueofchoiceforglobalandspecialised
funds. The new Chapter 16 allows
awidervarietyoffundsandotherinvestmententitiestolistonourExchangeandisbasedonasimplifiedregulatory
environment which has the necessaryingredients to cater for the
evolving nature of
thefundsindustryworldwide.Onekeybenefitforfundsalreadyoperating
intheglobalbusinesssectorandwhichareseekingalistingontheSEMistheflexibilitybrought
to the conditions of entry. The
admissionrequirementshavethusbeenconsiderablyalleviatedforthesetypesofentitiesbasedonthespecificitiesoffundsingeneralandinternationalpracticeintheindustryworldwide.
Review of Related Party Transaction Rules including definition
of relevant terms
TheSEMhasembarkedontheprocessofreviewingthe definitions of
"related party" and
"relatedpartytransactions"underChapter13oftheListingRuleswith a
view to simplifying the
applicationoftheabovedefinitionsinlinewithbestinternationalpracticewhiletakingintoconsiderationtheMauritiancontext.
Compliance and Monitoring
TheListingDivisioncontinuestomonitorlistedissuerscompliance with
the Listing Rules by targeting
itsresourcestoarangeofactivities,includingvettingofissuersdocumentsforcorporateactions,monitoringmarket
activities through querying about unusual
movements in share prices / volumes
tradedandprovidingguidanceand rules interpretation
toqueriesemanatingfromissuersor
issuers'advisers.Theaboveapproachisintendedtominimisedelaysin
issuers dissemination of information to
thepublic,andpromotesaself-compliantcultureamongissuers.
Improving listed issuers knowledge of the Listing Rules
Occasionallyandasthecircumstancesmaywarrant,theListingDivisionissuesguidancetoallissuersonspecifictopics
thatneedtobemademoreexplicit.Also,topromoteself-compliancewiththeListingRulesby
issuers, the SEM encourages issuers to improvetheir knowledge of
the Listing Rules by attendingseminars organized by the Exchange.
During
theyear,theExchangeundertooktwoinitiativesinthisregard.AninformativemeetingwasheldinFebruary2010withkey
representativesof
themanagementcompaniesoperatingintheGlobalBusinessSectortoexplaintothemthekeychangesthathaverecentlybeenbroughttoChapter16oftheListingRules.Themessage
that the Exchange wanted to get acrosswas to show how these changes
have created anenablingandconduciveenvironmentforthe
listingofglobalandspecialisedforeignfundsontheSEM.ApresentationwasmadeinJune2010oncompliancewiththeListingRulesandDEMRulesinthecontextofaone-dayconferenceonCorporateGovernanceorganized
by the Institute of Chartered
SecretariesandAdministrators.Similareventswith
issuersandmarketpractitionershelptheSEMtoascertaintheirneeds and to
facilitate mutual understanding
ofregulatoryissuesthroughcontinuingdialogue.
Admissions and withdrawals during the year
As at 30 June 2010, there were 37 companies,8 authorised mutual
funds and 1 internationalissuer listed on the Official Market as
comparedto48companiesand1close-endedfund listedontheDEM.
ThefollowingfundswereadmittedtolistingontheOfficialMarketduringtheyear:-
Global Diversified Fund PCC -CellsNumber2 to4Shares
Africa Sustainability Fund-ClassAShares
Cerulean (Mauritius) PCC-ClassAShares
Imara Portfolio Selector PCC-ImaraFlameLilyFund
audit and risk management committee report (Cont'd)
operating and financial reviewThe STock exchange of
mauriTiuSannual reporT 2010
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operating and financial review (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
LISTING DIVISION (Cont'd)
Admissions and withdrawals during the year (cont'd)
MonDesertAlmaLimitedandTheMountSugarEstatesCompanyLimitedwerewithdrawnfromtheOfficialMarket
during the year following
amalgamationswithTheSavannahSugarEstatesCompanyLimitedandHarelFrresLimitedrespectively.
Socit de Dveloppement Industriel et
AgricoleLimite(SODIA)wasadmittedtotheDEMduringtheyearwhilenocancellationoftheadmissionofaDEMcompanywasregistered.
Corporate actions and other transactions during the year
AlthoughtheMauritianeconomyhasbeenshowinga great deal of
resilience in the face of a
worldeconomywhichislabouringtogetbackonitsfeet,Mauritian companies
listedon theSEMhavebeenbusy during the year reengineering their
businessprocessesandtryingtofindwaystofacethefuture.Duringthelastfewyears,wehavebeenwitnessinganincreasingnumberofcorporateactionsbylistedcompanies.
The two tables below give an insightof the corporate actions and
other transactions
ofmajorsignificancewhichtookplaceduringtheyearonboththeOfficialMarketandtheDEM.
Type of Transaction Number
Name of listed Companies on the
Official MarketStatus as at 30/06/2010
DisclosableTransaction 3 -BritishAmericanInvestmentCo(Mtius)Ltd
Completed
-DaleCapitalGroupLimited Completed
-BelleMareHoldingLtd Completed
SubstantialTransaction 1 -TheMauritiusUnionAssuranceCoLtd
Completed
RelatedPartyTransaction 2 -OmnicaneLimited Completed
-ENLCommercialLimited Completed
DividendinSpecie 1 -IrelandBlythLimited Completed
LongFormAmalgamation
2 -TheSavannahSugarEstatesCompanyLimited Completed
-HarelFreresLimited Completed
Sharesplit 1 -DaleCapitalGroupLimited Completed
Placing 1 -MauritiusStationeryManufacturersLtd Inprogress
BonusIssue 1 -TheUnitedBasaltProductsLtd Inprogress
RightsIssue 1 -MauritiusStationeryManufacturersLtd Completed
Offer by Seaton Invest-ment Ltd to
purchaseminorityshareholders
1 -BritishAmericanInvestmentCo(Mtius)Ltd Inprogress
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LISTING DIVISION (Cont'd)
Corporate actions and other transactions during the year
(cont'd)
Attracting new listings
TheSEMaimsatattractingnew listings fromboththedomesticand
internationalmarkets.While it
isbeingrecognizedthatdomesticenterprisesarefairlywell represented
on SEMs markets both sector-wise and industry-wise, we believe that
there isstill scope foranumberofprivateundertakings toseeka
listingwitha view to raise funds for
futuregrowth.Toattractthesecompanies,theSEMwishestounderscorethepowerfulvaluecreationroleithasplayedsinceitsinceptionin1989.AlistingonSEMisbelievedtohelpthetransformationofacompanysway
of doing business and facilitate its accessionto yet another level
of development in its
growthcycle.Withrespecttointernationalissuers,theSEMintends to
pursue actively marketing initiatives toentice fundsoperating in
the local global businesssector and other entities incorporated
abroad orlistedonothersecuritiesexchangestochooseSEMasa
listingvenue. For thecomingyear,
theListingDivisionhasbeenassignedwiththetaskofhavingatleast2newdomesticcompanieslistedoneachofSEMstwomarketsandofattracting20fundsonourlistingplatform.
SEM Socially Responsible Investing Index (SEM SRI)
Although the practice of Corporate
SocialResponsibility(CSR)ismuchdebatedandcriticized,proponents
argue that there is a strong business
caseforCSR,inthatcorporationsbenefitinmultipleways by operating
with a perspective broader
andlongerthantheirownimmediateshort-termprofits.Intheincreasinglyconscience-focusedmarketplacesof
the 21st century, the demand for more ethicalbusiness processes and
actions is increasing.Simultaneously, pressure is applied on the
industryingeneral to improvebusinessethics
throughnewpublicinitiativesandlaws.TheSEMperfectlyaccordswiththephilosophyadvocatedbybusinesseswhichembrace
responsibility for the impact of
theiractivitiesontheenvironment,consumersandotherstakeholders.AswasannouncedinlastyearsAnnualReport,theListingDivisionhasbeencontemplatingtodevelopanewindex,theSEMSociallyResponsibleInvestingIndex(SEMSRI),asameansofidentifyingcompanieslistedonSEMsmarketsthatincorporatetheprinciplesof
corporate social responsibility
intotheirbusinessactivities.TheSEMSRIwhichwillbeareflectionofthedeliberateinclusionofpublicinterestintocorporatedecision-makingisdesignedtodisplaytheperformanceofsociallyresponsiblesharestradedonboththeOfficialMarketandtheDEM.
Exchange-traded funds ( ETFs )
The Listing Division has been entrusted with thetask of
developing the rules relating to the listingof exchange-traded
funds (ETFs). An exchange-traded fund (ETF) is an investment fund
tradedonstock exchanges similarly to stocks. An ETF holdsassets
such as stocks, commodities, or bonds and
Furtherissueofsecurities 3 -TriangleRealEstateInvestmentFund
Completed
-AscenciaLtd Inprogress
-UnitedInvestmentsLtd Inprogress
ShareBuyBack 1 -CIELInvestmentLimited Completed
Restructuring ( includingconversion and bonusissue)
1-DeepRiverInvestmentLimited Completed
SignificantTransactions
(acquisition&disposal) 2 -CIELInvestmentLimited
Completed
DividendinSpecie 1 -MedineLimited Completed
Conversion of sharesand reduction of statedcapital
1 - Southern Cross TouristCoLtd
Completed
Type of Transaction Number
Name of listed Companies on the
DEMStatus as at 30/06/2010
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operating and financial review (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
LISTING DIVISION (Cont'd)
trades at approximately the same price as the
netassetvalueofitsunderlyingassetsoverthecourseofthetradingday.MostETFstrackanindexandmaybe
attractive as investments because of their
lowcosts,taxefficiency,andstock-likefeatures.Typically,thetradingofETFs
isreservedto largeinstitutionalinvestorswhoactuallybuyor sell
sharesofanETFdirectlyfrom/tothefundmanager.ETFsofferpublicinvestorsanundividedinterestinapoolofsecuritiesandotherassetsandthusaresimilarinmanywaystotraditionalmutualfunds.
Share Split
Asharesplitorstocksplitisadecisionbyacompany'sboardofdirectorstoincreasethenumberofsharesthat
are outstanding by issuing more shares to
currentshareholders.Astocksplitisusuallydonebycompaniesthathaveseentheirsharepriceincreaseto
levels that are either too high or are
beyondthepricelevelsofsimilarcompaniesintheirsector.Theprimarymotiveistomakesharesmoreaffordableto
small investors even though the
underlyingvalueofthecompanyhasnotchanged.TheListingDivision
believes that there is scope on both
theOfficialMarketandtheDEMforcompanieswhosesharepricesare
relativelyhigh to split their
shares.TheDivisionintendsduringthecourseofthecomingyear tomeetwith
the top representativesof thesecompanies and persuade them to
proceed with ashare split. This will have the effect of
increasingliquidity in their shares and making investments
intheunderlyingsharesmoreattractive.
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TRADING ACTIVITIES
OFFICIAL MARKET
Market Performance
MarketperformanceontheOfficialMarketforthecurrentfinancialyearwaspositive,withtheindicesreboundingsharplyfromtheirrelativelylowlevelsofendJune2009.Inthewakeofthemarketrebound,market
capitalizationof theOfficialMarket,whichhaddropped
toRs130.6billionatend
June2009increasedby15.3%duringfinancialyear2009/2010
to reach Rs 150.8 billion, i.e 54.4 % of GDP.Traded volumes and
traded values also increasedin2009/2010.Foreign
investorswhohadretreatedfromfrontiermarkets
intheaftermathofthecrisismade their way back to the local stock
market,generating positive investment flows on
severallistedcompanies.
SEMDEX:FINANCIAL YEAR 2009 to 2010
Month
1,400
1,450
1,500
1,550
1,600
1,650
1,700
1,750
1,800
Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10
May-10 Jun-10
SEM
DEX
Jul-09
Official Market Indices
TheSEMDEXclosedthefinancialyearat1654.16pointsgaining16.70%ontothepreviousfinancialyear.TheSEM-7andtheSEMTRIinrupeetermsregisteredgainsof4%and21%respectively.Thefollowingtabledepictsthecomparativefiguresforthemainindicesandthemarketcapitalization.
01-Jul-09 30-Jun-10 Net Change (%)
SEMDEX 1,417.47 1,654.16 16.7
SEM-7 321.2 333.78 3.92
SEMTRI(RS) 3,921.82 4,734.00 20.71
SEMTRI(US) 1,862.85 2,257.84 21.2
MARKETCAPITALISATION(RSbn) 130.58 150.81 15.33
Thegraphsbelowhighlightthemonthlyevolutionofthemainindicesduringthefinancialyearunderreview.TheSEMDEXandSEMTRIreachedtheirhighestlevelatthestartofFebruary2010whereasthebluechipindex,SEM-7,toppedinthemonthofOctober2009.
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0
operating and financial review (Cont'd)The STock exchange of
mauriTiuSannual reporT 2010
TRADING ACTIVITIES (Cont'd)
OFFICIAL MARKET (Co