You are on page 1of 22

Stock Exchange In Pakistan In Pakistan there are three Stock Exchanges..

Karachi Stock Exchange (KSE)

Lahore Stock Exchange (LSE)

Islamabad Stock Exchange (ISE) 1) Karachi Stock Exchange The Karachi Stock Exchange or KSE is astock exchangelocated inKarachi, Sindh, Pakistan. Founded in 1947, it is Pakistan's largest and oldest stock exchange, with many Pakistani as well as overseas listings. Its current premises are situated on Stock Exchange Road, in the heart of Karachi's Business District.Karachi Stock Exchange is the biggest and most liquid exchange and has beendeclared as the Best Performing Stock Market of the World for the year 2002. As onDecember 31, 2008, 653 companies were listed with the market capitalization of Rs.1,858,698.90 billion (US $ 23,527.83 billion) having listed capital of Rs. 750.48 billion (US $ 9.50 billion). The KSE 100 Index closed at 5865.01 on December 31,2008.KSE has been well into the 4th year of being one of the Best Performing Markets of the world as declared by the international magazine Business Week. Similarly theUS newspaper, USA Today, termed Karachi Stock Exchange as one of the best performing bourses in the world. History of KSE The index was launched in late 1991 with a base of 1,000 points. By 2001, it hadgrown to 1,770 points. By 2005, it had skyrocketed to 9,989 points. It then reached a peak of 12,285 in February 2007. KSE-100 index touched the highest ever benchmark of 14,814 points onDecember 26,2007, a day before theassassinationof former Prime Minister Benazir Bhutto, when the index nosedived.[2]The index recovered quickly in 2008, reaching new highs near 15,500 in April. However, by November 22,2008 during theglobal financial crisis of 2008 it had fallen to 9,187. GROWTH & PROGRESS * As on December 31, 2008 Today KSE has emerged as the key institution of the capital formation in Pakistanwith:-

Listed companies 653, securities listed on the exchange 692: ordinary share653, Preference shares 14 and debt securities (TFC's) 25.

Listed capital Rs.750,477.55 million (US$ 9,499.72 million).

Market capitalization Rs.1,858,698.90 million (US$ 23,527.83 million). The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Average daily turnover 146.55 million shares with average daily trade valueRs.14,228.35 million (US$ 180.11 million).

Membership strength at 200.

Corporate Members are 187 out of which 9 are public listed companies.

Active Members are 163.

Fully automated trading system with T+2 settlement cycle.

Deliveries through central depository company.

National Clearing and Settlement System in place. MARKET INDICES KSE began with a 50 shares index. As the market grew a representative index wasneeded. On November 1, 1991 the KSE-100 was introduced and remains to this datethe most generally accepted measure of the Exchange. The KSE-100 is a capitalweighted index and consists of 100 companies representing about 86 percent of market capitalization of the Exchange.In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to provide the basis of index trading in future. On August 29, 1995 the

KSE all shareindex was constructed and introduced on September 18, 1995.KSE has also introduced KSE30 Index which is calculated using "Free Float MarketCapitalization Methodology". The primary objective of the KSE 30 Index is to have a bench mark by which the stock price performance can be compared to over a periodof time. In particular, the KSE-30 Index is designed to provide investors with a senseof how large company's scrip's of the Pakistan's equity market are performing. BOARD OF DIRECTORS The KSE is run by a Board of Directors that consists of 10 members includingManaging Director. Out of these, 5 Directors are elected from amongst 200 membersof the Exchange and 4 non-member Directors are nominated and appointed by SECPfrom amongst the professionals belonging to various trades and professions. TheChairman is elected by the Board from amongst the non-member Directors. Theoperational and administrative activities of the Exchange are managed by theManaging Director who is the full time Chief Executive of the Exchange. Following are the members of the Board. 01 Mr. Kamran Y. MirzaChairman02 Mr. Adnan AfridiManaging Director 03 Mr. Asad IqbalDirector 04 Mr. Osman Asghar KhanDirector 05 Dr. Farid Khan Director 06 Mr. Muhammad Yasin LakhaniDirector 07 Mr. Zafar S. MotiDirector 08 Mr. Khalid Ahmed SherwaniDirector 09 Haji Ghani Haji UsmanDirector 10 Mr. Amin YusufDirector INVESTMENT CLIMATE Equity Market In 1991, the secondary market was opened for foreign investors on an equal basiswith the local investors. This measure along with the government policy of privatisation has resulted in rapid growth of the market since 1991. It may also bementioned that "privatisation" has bee n adopted as a philosophy and most of the business & finance activities which were previously reserved for the public sector have now been opened for the private sector. The change of policy is most visible inthe financial sector where a number of commercial banks, investment banks, discounthouses, leasing companies, modarabas, life insurance companies and mutual fundshave been allowed in the private sector.Liberalisation policy has led to rapid deregulation of the national economy and theimpediments to private initiative have been speedily removed. Foreign exchangeholdings and transfers have been liberalised, industrial sanctioning has been doneaway with except for few sectors where, for strategic reasons, prior permission of thegovernment is necessary. Legal Framework The securities market and the corporate sector are regulated by the provisions of :1.The Companies Ordinance 1984;2.The Securities and Exchange Ordinance 1969 and Rules framed thereunder in1971;3.The Securities & Exchange Commission Act 1999.There are also Federal legislations relating to specific areas like:1.Monopolies and Restrictive Trade Practices (Control and Prevention)Ordinance, 1970;2.Investment Companies and Investment Advisors Rules 1971;3.Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980;4.Companies (Issue of Capital ) Rules 1996;5.Leasing

Companies (establishment and Regulation) Rules 1996;6.Asset Management Companies Rules 1996;7.Insurance Companies Ordinance 2000;8.Guidelines for insiders trading In addition to above, the listed companies are also subject to the Rules andRegulations of the stock exchanges. The Regulator The regulatory authority for the securities market and corporate sector in Pakistan isthe Securities and Exchange Commission of Pakistan. The Commission wasestablished on January 01,1999 by dissolving the Corporate Law Authority which wasformed in 1981 under a Special Law. The Commission administers the compliance of the Corporate laws in the country. The Commission is run by the Commissionersunder a Chairman.The Asian Development Bank's Capital Market Development Programme envisagedthe conversion of CLA into Securities and Exchange Commission of Pakistan, as anautonomous regulatory authority. The new system provides administrative,operational and financial autonomy to the Commission and at the same time providesan accountability mechanism through establishment of a Securities and ExchangePolicy Board. All policy decisions are made by the Board on the recommendations of the Commission which is also empowered to take suo motto action. The Board isdirectly answerable to the Parliament.Members of the stock exchanges are also subject to the discipline of self-regulationunder various Rules and Regulations of the stock exchanges. Self-Regulation is theessence of market regulation and for this purpose the legal framework has beenamended to facilitate the attainment of SRO status by the stock exchanges. INVESTOR SPECIFIC The following plans and tax incentives are available to both investors and listedcompanies. Foreign Investor - specific:

The foreign investors are freely allowed to operate in the capital marketwithout any retention period.

There are no restrictions on the extent of foreign ownership stake and also nolimit for holding the shares for trading purposes.

Funds invested in the capital market are freely transferable alongwith dividendincome.

Foreign investors are treated at par with local investors in tax treatment. Local Investor specific:

Capital gains on sale of listed securities are exempt from income tax up to theyear 2010. This exemption is available since 1974.

The dividend is subject to withholding tax at 10%. Dividend income is taxed as a separate block of income in the hands of individual shareholders.

Any income derived from TFCs is subject to income tax with effect fromincome year 2001 2002. General:

Listed companies are toned at 35%.

Provident funds can now invest in approved listed securities. They are alsoallowed to invest in open end mutual funds established under the AssetManagement Companies Rules 1996.

No turnover tax is payable by companies on their turnover representingtransactions in securities listed on stock exchanges. MEMBERSHIP Membership of KSE is limited and fixed at 200 and prospective members have to purchase a seat from existing members. The price of the membership seat is freelynegotiable between the buyers and sellers which varies according to the interaction of the forces of demand and supply. The KSE does not interfere with these transactions.However, the membership is allowed subject to fulfillment of criteria andqualification laid down by the Board.Since June 1990, membership has been opened to corporate entities. Corporatemembers are required to have a minimum paid up capital of Rs. 20 million and arealso subject to criteria fixed by the Board.The Membership of KSE is also available to foreign entities provided that the Nominee Director of the company is a citizen of Pakistan. Criteria for Individual Membership: 1.No person shall be eligible to be admitted as Member, if:a.He/she is less than 21 years of age; b.He/she is not a citizen of Pakistan;c.He/she has been adjudicated a Bankrupt; or a Receiving Order inBankruptcy has been made against him/her, or he/she has proved to beinsolvent even though he/she

has obtained his/her final discharge;d.He/she has compounded with his/her creditors, unless he/she has paidhundred paisas in the rupee; The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 9 of 28 e. He /she has been convicted of an offence involving fraud or cheating or dishonesty or any other indictable criminal offence;f.He/she is associated with, or is a member of, or subscriber to, or shareholder or debenture holder in, or connected through a partner or employee with any other Organization, Institution, Association inKarachi where dealings in Securities are carried on;g.He/she has been at any time expelled or declared a defaulter by anyStock Exchange or Trade Association in Pakistan;h.He/she has been previously refused admission to the membership of any Stock Exchange unless a period of six months has elapsed from thedate of such refusal;

2.The applicant should be an income tax or wealth tax assessee or borne as anassessee on the register of income tax/wealth tax.3.The minimum qualification for an applicant for the Membership shall be"Graduation".(In the case of a person holding at least 5 years experience of working as anagent with any of the members of the KSE or a former member of the KSEwho had resigned on voluntary basis without any cause of complaint or claim,may be allowed waiver of this requirement by the Board).4.The applicant should have sufficient knowledge of stock market business.5.Reference from a scheduled bank in addition to other references as disclosedin the Membership form.6.In the case of an active member filing his/her/their transfer application/nomination, such member shall also submit a bank guarantee or aguarantee by one of the existing members of the Exchange or a guarantee bythe incoming member or any equivalent security in the manner as may be prescribed by the Exchange to the extent of Rs. 2.5 million valid for a periodof 2 years from the date of transfer of membership in order to indemnify theKarachi Stock Exchange against all claims of replacement of shares receivedafter the transfer of membership as per Rule 26(a) of Ready DeliveryContracts.

Stock Exchange of PakistanPage 9 of 28 e. He

/she has been convicted of an offence involving fraud or cheating or dishonesty or any other indictable criminal offence;f.He/she is associated with, or is a member of, or subscriber to, or shareholder or debenture holder in, or connected through a partner or employee with any other Organization, Institution, Association inKarachi where dealings in Securities are carried on;g.He/she has been at any time expelled or declared a defaulter by anyStock Exchange or Trade Association in Pakistan;h.He/she has been previously refused admission to the membership of any Stock Exchange unless a period of six months has elapsed from thedate of such refusal;

2.The applicant should be an income tax or wealth tax assessee or borne as anassessee on the register of income tax/wealth tax.3.The minimum qualification for an applicant for the Membership shall be"Graduation".(In the case of a person holding at least 5 years experience of working as anagent with any of the members of the KSE or a former member of the KSEwho had resigned on voluntary basis without any cause of complaint or claim,may be allowed waiver of this requirement by the Board).4.The applicant should have sufficient knowledge of stock market business.5.Reference from a scheduled bank in addition to other references as disclosedin the Membership form.6.In the case of an active member filing his/her/their transfer application/nomination, such member shall also submit a bank guarantee or aguarantee by one of the existing members of the Exchange or a guarantee bythe incoming member or any equivalent security in the manner as may be prescribed by the Exchange to the extent of Rs. 2.5 million valid for a periodof 2 years from the date of transfer of membership in order to indemnify theKarachi Stock Exchange against all claims of replacement of shares receivedafter the transfer of membership as per Rule 26(a) of Ready DeliveryContracts. Criteria for Corporate Membership:

Stock Exchange of PakistanPage 10 of 28 1.The Corporate Body applicant for membership must;a.be a company or a statuary corporation or a body corporate; b.have a minimum issued and paid-up capital of Rs. 20 million.2.In case of statuary corporation or a body corporate to which section 183 of thecompanies Ordinance 1984 applies; the membership application shall beaccompanied by a "no objection" from the Federal or Provincial Government,as the case may be;3.The Nominee Director representing Corporate Membership must be a citizenof Pakistan. Such nominee shall not be a member of the Exchange, nor shall be a nominee of any other Corporate Member of the Exchange.4.At least two Directors of the corporate membership including the Chief Executive must have a minimum academic qualification of "Graduation".Provided that in the case of conversion of an individual to CorporateMembership the requirement of minimum

qualification for the Chief Executive shall not apply, where the same individual member continues asChief Executive of the Corporate Membership.(In case the Chief Executive of the Company is a

member of the Exchange andthe Nominee Director has the stock market experience of at least 5 years as anagent with any of the members of the Exchange may be allowed waiver of theacademic qualification by the Board).5.In the case of an active member filing his/her/their transfer application/nomination, such member shall also submit a bank guarantee or a guarantee byone of the existing members of the Exchange or a guarantee by the incomingmember or any equivalent security in the manner as may be prescribed by theExchange to the extent of Rs. 2.5 million valid for a period of 2 years from thedate of transfer of membership in order to indemnify the Karachi Stock Exchange against all claims of replacement of shares received after thetransfer of membership as per Rule 26(a) of Ready Delivery Contracts.6.The membership application shall be accompanied by an auditors certificateconfirming that the company maintains a net capital balance/net assets valueof at least Rs. 2,500,000/- (excluding the value of membership card).7.The qualification of nominee Director shall be his holding of qualificationshares in the company to the extent provided under the Articles of thenominating corporate membership.8.50% of the total number of Directors subject to a minimum of two Directorsof the corporate membership, including the Chief Executive and Nominee,must have a minimum academic qualification of "Graduation".Provided that in the case of conversion of an individual to CorporateMembership the requirement of minimum qualification for the Chief Executive/Nominee shall not apply, where the same individual member continues as Chief Executive/Nominee of the Corporate Membership. The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 11 of 28 (In case the Chief Executive of the Company is a member of the Exchange andthe Nominee Director has the stock market experience of at least 5 years as anagent with any of the members of the Exchange may be allowed waiver of theacademic qualification by the Board).9.The Chief Executive and Nominee Director must have at least 3 years stock market experience.10.In case the equity of the company is subscribed by foreign participants; NoObjection Certificates from State Bank of Pakistan and Ministry of Finance; isto be furnished. NOTICE PERIOD FOR TRANSFER OF MEMBERSHIP1.In relation to inactive member, who has applied for transfer of his/her/their membership; the notice period for the purpose shall be 15 days for invitingobjections/claims after the issue of notice.Provided that an active member, who has been inactive for a period of at least2 years from the date of filing the transfer application/nomination and, hasalso filed a declaration to this effect, shall be treated as an inactive member for the purpose of notice period of 15 days.2.In relation to active member (including those who are members of theClearing House), the notice period for inviting objections/claims from themembers shall be 90 days after the issue of notice.Provided that in the event of an undertaking given by the incoming member (on the prescribed format) to settle all the objections/claims/liabilities of theoutgoing member, the Board may even before expiry of the 90 days notice period consider and accept the membership application. NOC OF THE CENTRAL DEPOSITORY COMPANY OF PAKISTAN LIMITEDIn case the outgoing member is a participant of Central Depository Company of Pakistan Limited, he/she is required under the Regulations of CDC to notify the CDCabout his/her application made to the Exchange

for transfer of membership and shallalso submit to the Exchange, NOC of the CDC in this behalf CRITERIA FOR SELECTION OF TOP 25 COMPANIES FORTHE YEAR 2009 KARACHI: Karachi Stock Exchange (KSE) will select top 25 companies for the year 2009 on the basis of new criteria.While, the selection of top 25 companies for the year 2008 will be made on the basisof existing criteria, said a KSE announcement here Tuesday.Under the new criteria, the rate of return on equity has been reduced from 35 percentto 30 percent (on the basis of before tax profit) while distribution of profit has beenraised from 30 percent to 40 percent.The condition of turnover share has been deleted under the new criteria. KSE 100 Index Karachi Stock Exchange 100 Index (KSE-100 Index) is astock indexacting as a benchmark to compare prices on theKarachi Stock Exchange(KSE) over a period of time. In determining representative compaines to compute the index on, companieswith the highestmarket capitalizationare selected. However, to ensure full marketrepresentation, the company with the highest market capitalization from each sector isalso included. History of KSE 100 Index The index was launched in late 1991 with a base of 1,000 points. By 2001, it hadgrown to 1,770 points. By 2005, it had skyrocketed to 9,989 points. It then reached a peak of 12,285 in February 2007.KSE-100 index touched the highest ever benchmark of 14,814 points onDecember 26,2007, a day before theassassinationof former Prime Minister Benazir Bhutto, when the index nosedived. The index recoveredquickly in 2008, reaching new highs near 15,500 in April. However, by November 22,2008 during theglobal financial crisis of 2008it had fallen to 9,187. Monthly Performance Market monthly performance during the period January 2006 to February 2009 isgiven under with high rated index showing in bold text. The highest ever closing for KSE 100 Index was achieved at 15,676.34 points on 18 April, 2008.Following a staggering loss of 42 per cent in four months (April 2008 to August2008), the regulators had put planks under the KSE-100 index at 9,144 points onAugust 28, 2008 to prevent a further fall. The floor was finally removed on December 15, 2008 that had brought the bourse to a virtual halt for more than 100 days.

KSE-30 Index TheKarachi Stock Exchangehas launched the KSE-30 Index with base value of 10,000 points, formally implemented from Friday, September 1, 2006. The mainfeature of this index that makes it different from other indices are:

KSE-30 index is based only on thefree-floatof shares, rather than on the basisof paid-up capital. The other indices inKarachi Stock Exchangerepresents total return of themarket. That is, when a company announces a dividend, the other indices atKSE are not reduced/adjusted for that amount of dividend (whether cash or bonus).Whereas, KSE-30 Index is adjusted for dividends and right shares.At the end of 13th July, 2007, KSE-30 Index has reached its highest ever level of 17,162.45

2) Lahore Stock Exchange Lahore Stock Exchange (Guarantee) Limited is Pakistan's second largest stock exchange after theKarachi Stock Exchange. It is locatedLahore,Pakistan. Lahore Stock Exchange was established in October 1970 and is the second largeststock exchange in the country with a market share of around 12-16% in terms of dailytraded volumes. LSE has 519 companies, spanning 37 sectors of the economy, that arelisted on the Exchange with total listed capital of Rs. 555.67 billion having marketcapitalization of around Rs. 3.64 trillion. LSE has 152 members of whom 81 arecorporate and 54 are individual members. Activities of Lahore Stock Exchange (LSE) have increased significantly in alloperational areas since its inception. Over the years, LSE has successfully met variouschallenges and has now emerged, fully geared and positioned to aggressively competewith its fellow Exchanges, contributing towards the growth of Capital Markets inPakistan. History Of LSE Lahore Stock Exchange (Guarantee) Limited came into existence in October 1970,under the Securities and Exchange Ordinance, 1969, of theGovernment of Pakistaninresponse to the needs of the provincialmetropolisof the province of Punjab. It initially had 83 members and was housed in a rented building in the crowded area of Bank Square inLahore.The number listed companies has increased to 519 since itsinceptopn.With 37 sectors of economy and 519 listed companies with total capital of Rs. 555.67 billion having market capitalization of around Rs. 3.64 trillion . LSE has152 members of whom 81 are corporate 54 are individual members.LSE was firststock exchaneg of pakistan which used internet and currently 50% of its transactionsare done on internet.Lahore Stock Exchange has opened branches

in the industrial cities of FaisalabadandSialkotfor trading. The Sialkot branch is referred to as "Sialkot Trading Floor ". Important Developments over the Past Years A number of significant initiatives have been taken to improve the regulatory regimeand the trading environment for the benefit of Institutional Investors as well as listedcompanies. Although the list of such initiatives is exhaustive, below some of theseincentives are touched upon; LSE was the first Exchange in the country to undertake automation of tradingat the exchanges in 1994. LSE has made large investments in technology &automation to keep pace with globalization of securities trading. TheExchange is fully committed to providing a transparent, efficient, fair andinvestor friendly environment for the benefit of Investors and Issuers. The goalis to bring LSE up to international standards in operational, technical,regulatory and quality management areas and to ensure that not only domestic but also foreign investors are attracted. The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 18 of 28 LSE has made direct investment in Pakistan Credit Rating Agency (Pvt) Ltd.(PACRA), Central Depository Company Ltd. (CDC), National ClearingCompany of Pakistan Ltd. (NCCPL), and National Commodity Exchange Ltd.(NCEL), all of which play a central role in developing the infrastructurearound the financial markets of Pakistan. In addition, LSE is an active member of the Federation of Euro-Asian Stock Exchanges (FEAS) and the South AsianFederation of Exchanges (SAFE), helping to expand its outreach, presence and profile beyond the boundaries of Pakistan.

Stock Exchange of PakistanPage 18 of 28 LSE has made direct investment in Pakistan Credit Rating Agency (Pvt) Ltd.(PACRA), Central Depository Company Ltd. (CDC), National ClearingCompany of Pakistan Ltd. (NCCPL), and National Commodity Exchange Ltd.(NCEL), all of which play a central role in developing the infrastructurearound the financial markets of Pakistan. In addition, LSE is an active member of the Federation of Euro-Asian Stock Exchanges (FEAS) and the South AsianFederation of Exchanges (SAFE), helping to expand its outreach, presence and profile beyond the boundaries of Pakistan.

LSE was the first Exchange in Pakistan to offer Internet based trading to itsmembers in the year 2001. It enables the brokers to reach out to the untappedretail markets. Currently, more than 50% of the total trading volume at theLSE originates from Internet trading terminals. The aim of this measure is totransform the LSE from a regional to a national player over a period of time. LSE has increased its geographical outreach by establishing its branches inother cities of the Province. Two such branch offices have become operationalin Faisalabad and Sialkot. Similar Offices in other cities are also beingcontemplated. LSEs trading system has already been modified to connect branch offices in real-time fashion. There is a growing need for remote tradingterminals reflecting the confidence of traders in the use of stable InternetTrading Systems. LSE has improved the quality of operations and upgraded them to moderninternational standards. This has included upgrading LSEs IT infrastructure,updating regulations and procedures to incorporate existing and expectedtechnological changes, as well as reorganizing and restructuring theworkforce. As a result, LSEs capabilities as both a front-line regulatory bodyand a service organization have been significantly enhanced. LSE has successfully launched Unique Identification Number (UIN) Systemwith an objective to bring more efficiency and transparency to the stock business and to improve the surveillance and monitoring capacity of theExchange. The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 19 of 28 LSE has implemented a regular timetable for the Broker System Audit, inorder to build investors confidence. Also, LSE has taken effective risk andexposure management measures including the implementation of a fullyautomated in-house developed Trade Risk Filter (TRF) to efficiently monitor members pre-trading exposures on a real time basis. This has been a quantumleap for LSE in improving its risk management systems. A visible trend at the LSE has been the increasing number of corporatemembers. It is heartening to note that part of this increase has been due to theentry of investment banks/financial institutions (or their subsidiaries) asmembers of the Exchange. An overview of this trend over the past years is asfollows:

The above trend has led to record trading volumes as well as an improved product offering. The measures at LSE have attempted to create anatmosphere, which is more conducive and transparent for investment. Theinvesting public has received the reforms very positively. LSE Training Institute specifically dedicated to the Capital Markets, is the firstof its kind in Pakistan and was established in 2006. Formal courses have beenintroduced to provide trained human resources for the capital markets. It hasalso launched a series of Education Programs with a view to educate the brokers, agents and general public about the securities market and its laws. Inan effort to promote the education sector, particularly in relation to financial

Stock Exchange of PakistanPage 19 of 28 LSE has implemented a regular timetable for the Broker System Audit, inorder to build investors confidence. Also, LSE has taken effective risk andexposure management measures including the implementation of a fullyautomated in-house developed Trade Risk Filter (TRF) to efficiently monitor members pre-trading exposures on a real time basis. This has been a quantumleap for LSE in improving its risk management systems. A visible trend at the LSE has been the increasing number of corporatemembers. It is heartening to note that part of this increase has been due to theentry of investment banks/financial institutions (or their subsidiaries) asmembers of the Exchange. An overview of this trend over the past years is asfollows: The above trend has led to record trading volumes as well as an improved product offering. The measures at LSE have attempted to create anatmosphere, which is more conducive and transparent for investment. Theinvesting public has received the reforms very positively. LSE Training Institute specifically dedicated to the Capital Markets, is the firstof its kind in Pakistan and was established in 2006. Formal courses have beenintroduced to provide trained human resources for the capital markets. It hasalso launched a series of Education Programs with a view to educate the brokers, agents and general public about the securities market and its laws. Inan effort to promote the education sector, particularly in relation to financial The Islamia University Of Bahawalpur Rahim Yar Khan Campus

LSEsMEMBERSHIPSTRUCTURE:

Year

Corporate Members

PrivateLimitedCompanies

Public LimitedCompanies

Listed

Un-Listed

Banks ortheirSubsidiaries

IndividualMembers

Total

2000 22 3 5 3 118 151

2001

28 3 6 3 111 151

2002 34 4 4 4 105 151

2003 37 4 5 4 101 151

2004 44 5 5 5 93 152

2005 46 4 5 6 91 152

2006 78 3 7 7 57 152

2007* 81 4 6 7 54

152 *As of May 31st, 2007

Stock Exchange of PakistanPage 20 of 28 markets, LSE is providing scholarships to deserving students of LahoreUniversity of Management Sciences (LUMS). LSE encourages universitiesand colleges to come and visit LSE. In another trend-setting example, Lahore Stock Exchange and IslamabadStock Exchange have joined hands to establish a Unified Trading Platformwhich will help to bring increased liquidity in the market, improve pricediscovery, maximize transparency, increase turnover, broaden investor base,curtail risks and distortions in trade, provide cost effective service to theinvesting public and enhance the image of both the Exchanges. As part of second generation capital market reforms being pursued by theSecurities & Exchange Commission of Pakistan, demutualization is beingseriously considered by the members of the exchanges and hopefully thatduring the year 2007 a decision will be taken in the best interest of the capitalmarkets of the country. Demutualization is in line with international standards,which will ensure that the exchange truly and fairly represents the interests of all stakeholders. Core Values Ethical Behavior

Freedom through responsibility

Good Governance

Innovation and Enterprising Spirit

Perseverance in Pursuit of Commitment

The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 22 of 28 Professional Integrity

Strategic vision in Planning

Team Work

Transparency Valuing People

LSE Index The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 23 of 28 LSE-25 :The Lahore Stock Exchange Twenty Five company index also calculates the performance of stocksassuming that all rights issues and bonus shareissues only increase the listedcapital. In the case of bonuses or rights the prices of the shares arenot adjusted as they are in the case of the LSETRI. However, the LSE25 assumes thatdividendspaid out by a component company are notreinvested. In summary, in the LSE25, no price adjustments are made when any component company issues cashdividends.The Lahore Stock Exchange Total Return Index calculates the performance of stocksassuming that all payouts are reinvested in the index on the ex-date. The LSETRIassumes that if a component company issues bonus shares or announces a rights issueit will increase the listed capital. Additionally, the LSETRI also assumes that all pay-outs by a component company are 100% reinvested in the index. Therefore, theLSETRI is adjusted against such payouts announced by any of index constituents onits ex-date allowing the index value to remain comparable over time.

3) Islamabad Stock Exchange The Islamia University Of Bahawalpur Rahim Yar Khan Campus

Stock Exchange of PakistanPage 24 of 28 About ISE The Islamabad Stock Exchange (ISE) was incorporated as aguarantee limited Company on 25th October, 1989 inIslamabad Capital territory of Pakistan with the main objectof setting up of a trading and settlement infrastructure,information system, skilled resources, accessibility and a fair and orderly market place that ranks with the best in the world.The purpose for establishment of the stock exchange inIslamabad was to cater to the needs of less developed areasof the northern part of Pakistan.The ISE has set the highest standards of operational efficiency and is committed tosupport a climate of confidence and optimism that encourages and promotes tradingactivity. It also provides for conducive environment to channelize the smallinvestments of the residents of less developed areas. The ISE offers an easy access to both domestic as well as foreign investors and actively encourages the listing of eligible and profitable companies, both large and small to make it an exciting anddiverse Exchange. The Exchange is playing a pivotal role for economic growth of thearea thereby contributing towards the overall economic prosperity and welfare of thecountry.At present there are 118 members out of which 104 are corporate bodies includingcommercial and investment banks, DFIs and brokerage houses. The other 18Members are individual persons who are well educated, enterprising and progressiveminded. The affairs of the Exchange are governed by the Board of Directors. TheBoard of Directors consists of ten directors, of which five are elected member directors and four are non-member directors nominated by the SECP while themanaging director by virtue of his office is the tenth director of the Board . In order to

protect the interest of the investing public, an Investors Protection fund has beenestablished by the Exchange.Since the inception of automated trading system (ISECTS), the trade volume has beenmultiplying day by day and the average daily turnover has now crossed the figure of 1 million shares. Now all the listed securities are traded through the ISECTS. Thesystem of physical handling of shares and securities has been phased out and majorityof the scrips are settled through Central Depository Company of Pakistan Limited.At the moment there are 248 companies/securities listed including 6 Open- EndMutual Fund and 4 TFCS on the Exchange with an aggregate capital of Rs.572,057.266 million. The market capitalization stood at Rs. 1,943,646.210 million ason 16-12-2008 . The pace of listing has remained slow as the economy of the Countryis under consistent pressure due to internal as well as external factors.In comparison with major financial markets around the World, the functioning of capital market in Pakistan is still very much in its infancy and lacks advancedtechnology. In this context efforts are being made to bring ISE in line with theInternational system and methodology.

Stock Exchange of PakistanPage 25 of 28 Board of Directors

Mr. Rafiud Deen Ahmad Chairman

Mr. Aftab Ahmad Ch. Managing Director / CEO

Syed Nooh Adnan Director

Mr. Zahid Latif Khan Director

Mr. Rafaqut Ali Ch. Director

Sheikh Muhammad Shabbir Director

Sheikh Riaz Ahmad Director

Mr. Aslam Khaliq Director

Mr. Tariq Khamisani Director

Mr. Zouhair Abdul Khaliq Director

Stock Exchange of PakistanPage 25 of 28 Board of Directors

Mr. Rafiud Deen Ahmad Chairman

Mr. Aftab Ahmad Ch. Managing Director / CEO

Syed Nooh Adnan Director

Mr. Zahid Latif Khan Director

Mr. Rafaqut Ali Ch. Director

Sheikh Muhammad Shabbir Director

Sheikh Riaz Ahmad Director

Mr. Aslam Khaliq Director

Mr. Tariq Khamisani Director

Mr. Zouhair Abdul Khaliq Director Rules and Regulations ISE, being a self regulatory organization has its own sets of rules and regulations toregulate its various activities including listing of companies/ securities on its ready board quotation, supervision of member firms to enforce compliance with financialand operational requirements, periodic checks on brokers sales practices, and thecontinuous monitoring and surveillance of their trade operations.Following is the list of Rules and Regulations of Islamabad Stock Exchange:Articles of Association.Brokers & Agent Registration Rules.Clearing House Procedure Manual.General Rules & Regulation of ISE.Internet Trading Guidelines 2005ISE Computerized Trading Regulations.ISE Investors Protection Fund Regulations.Listing Regulations of ISE.Members Default and Procedure for Recovery of Losses RegulationsMemorandum Of Association.

Regulations for Margin TradingRegulations for Proprietary TradingRegulations for Short Selling under Ready Market.Regulations for Trading in Provisionally Listed Companies.Regulations Governing CashSettled Futures Contracts of ISERegulations Governing Deliverable Futures Contract of ISERegulations Governing Future Contracts of ISE.Regulations Governing ISE Members Offices/ Branch OfficesRegulations Governing Over-The-Counter(OTC) Market of ISERegulations Governing Risk Management of ISERegulations Governing System Audit of MembersUnified Trading System Regulations Investor Education Islamabad Stock Exchange is fully aware of the importance of investors educationand believes that by educating the public about stock market investments, further prosperity can be brought in the society. The object of the investor education is toenable a person with absolutely no knowledge of stock exchange to efficiently tradesecurities and ultimately assist in developing a profitable portfolio.The ISE has taken the following initiatives towards the investors education: Launching of website containing comprehensive material and a lot of information about the capital market.

Arrangement of presentations/briefings to the general public about theworking and functioning of the stock markets. Opening of Investors Information Centre for dissemination of informationto the general public. Installation of Investors Hot Line for providing online reply to some basicquestions about the stock market. The people may be connected to thisHotline and may have reply of some basic queries. The ISE has obtained aUniversal Access Number i.e. 111-600-800 Publishing the research papers about the capital market. Companies financial analysis are regularly updated on the website.