Tehran Stock Exchange Annual Report 2013 2013 Tehran Stock Exchange Tehran Tehran Stock Exchange Tehran Stock Exchange Annual Report 2013 Contents CEO Message 1 Iran’s Economy in 2013 and the Forecasts 4 TSE at A Glance Highlights of the Exchange in 2013 About the Exchange 5 A Brief History of Tehran Stock Exchange 7 Organization 8 Values 10 Mission 11 Vision Goals Markets and Trading at TSE Markets of TSE 13 Listing Requirements at TSE’s Markets 14 Trading Procedures 14 Market Surveillance 15 Statistics 17 Financial Digest 17 Trading Data and Indices 18 TSE Operations 21 Board of Directors and Its Committees 22 Internal and Human Resources Development Securities Listing Legal Aairs and Investment Protection 23 Education 24 International Relations 25 Development Projects 2014 27 Contacts Key Entities Attachments CEO Message Despite all austerities dominated over Iran’s economy in 2013, and the stagnant real estate, currency and gold markets in the country over the year, Tehran Stock Exchange (TSE) had a flourishing year, in which the Exchange’s return exceeded 130 percent; with the market capitalization surpassed USD 172 billion, which was about 60 percent of Iran’s GDP at the moment. We have worked on improving investment culture in Iran, which resulted in 200 thousand new investors who joined TSE during 2013. Moreover, the first Corporate Governance (CG) conference was held by TSE in the year to encourage the listed companies and market participants for implementing CG principles nationwide. The Iranian authorities attempt to increase the capital market’s fairness and transparency in order to provide all investors with similar opportunities, and by this means we have been able to strengthen TSE’s reputation and our stakeholders’ confidence, which motivated thousands of new investors to be our first-time traders at TSE in 2013. Hassan Ghalibaf Asl Chief Executive Officer 6 Iran’s Economy in 2013 and the Forecasts With 1.65 million sq. km in surface, Iran is the 18th largest country in the world, and was the 2nd great economy in the MENA in 2013 in term of GDP after Saudi Arabia, and in term of population (77 million) after Egypt. Iran has the second and the fourth biggest natural gas and oil resources respectively, and holds 1st, 12th and 13th largest mineral resources of zinc, manganese and steel, as well as 2nd, 11th and 12th reservoirs of copper, lead and iron in the world. Iran is a prominent country regarding agricultural products and remarkably supplies pistachio, saffron, date and caviar with renowned standards, and is also the 8th to 10th global producer of fruits. Moreover, the country is among the 7 top outperformers of nanotechnology field. The economic figures indicate that during the past decades Iran’s per capita GDP has improved significantly, and the indicators of life standards including poverty control and revenue equality, as well as human development indicators have developed. The progress is to some extent indebted to investment, improvement of employment to population ratio and productivity since 1990s, as well as international trade volume since early 2000s. However, due to weak local policies and the country’s international status in the recent years, the improvement has stagnated. The country’s GDP and state revenues are still particularly dependent on oil revenues, and are therefore instable. Despite the presence of the National Development Fund, Iran’s GDP and state revenues will be affected by the products’ international price shifts. The Iranian authorities, however, have taken a comprehensive strategy for market-oriented reforms, which is reflected in the 20-year Perspective Document and the 5th five-year Development Plan, but the strategy has encountered several hurdles and challenges in practice to remain unaccomplished. Iran’s economic growth in 1H2013 was -2 percent and -5.8 percent in 2012. The subsidy reforms since late 2010 and severe sanctions imposed in 2012 resulted in a distressed economic perspective for Iran, so that the economy shrank about 6 percent in 2012 – 2013 and the inflation rate rose to 45 percent in July 2013 from 12 percent in late 2010. The international deteriorated status of the country led the Iranian authorities to abandon the single and managed exchange rate before re-implementing it in June2013. The payments balance last year was positive and stood at 6.5 percent of 2012 – 2013 GDP, which was almost half of its previous period. The sharp decrease in petroleum exports was the main reason behind the situation, which was to some extent offset by imports reduction. The central bank’s gross assets in the foreign accounts during 2012 – 2013 increased to about USD 105 billion, but the state’s financial status was greatly deteriorated. With GDP lowering about 10 percent since 2010 – 2011, the authorities started to cut the expenses, while the budget balance decreased from 3 percent of GDP in 2010 – 2011 to -1 percent in 2013 – 2014 . The Subsidy Management Organization had a considerable budget deficit, which amounted to the state’s total deficit in 2013 – 2014 of 2.25 percent of GDP. Since 1H2013 and after the presidential elections, promising news spread from abroad and local demand was lowered. The situation became more noticeable during the next months after Iran’s deal with P51+, and it is expected that the country’s economic activities in 2014 – 2015 stabilize again to reach 1 to 2 percent growth. 7 Since mid last year when the President Rowhani’s administration went to office, the macroeconomic outlook is improving and the real value of Iranian Rial has considerably gained. The Central Bank limited banking system financing, and through financial stability policy narrowed liquidity growth in order to lower inflation to 30 percent in 2014. Nonetheless, Iran’s monetary authority is determined to implement a single exchange rate and to curb the limitations. Besides, the subsidies regime is being reformed through supplying a supportive framework and macroeconomic policies. USD exchange rate was preserved at IRR 25,000 at the beginning of July 2013, and the price gap between official and market rates were narrowed due to the increasing confidence to the new government and Geneva nuclear deal. It is expected that the Geneva interim agreement and sanctions reduction in a 6-month period, Iran will earn USD 7 billion of its blocked funds (almost 2 percent of GDP). Based on the deal, Iran will be able to access USD 4.2 billion of its oil revenues overseas, and the daily oil sales set at 1mmbbl/d. The suspended sanctions against petrochemical exports, car industry, gold and precious metals trading will make USD 1.5 billion for Iran. However, the deal has yet to remove the sanctions imposed against the central bank and other financial institutes. The provisional nuclear deal has gradually increased oil exports during the recent months, so that in January 2014 Iran exported 1.32 mmbbl/d oil, and diminishing credits provided by the central bank, Iranian Rial appreciation, as well as the globally lowered price of basic commodities since July 2013 have reduced inflation pressure over the country’s economy. The Iranian government has partial dominance over production and trading sectors, due to its owned public and semi-public enterprises, which give the state a pivotal role in the country’s economy. The financial services are under state banking sector’s authority. Moreover, Iran’s ranking in doing business and ease of business activities is 152 out of 189 countries; whereas the ranking was 144 among 183 countries in 2012. However, the recent promising developments may improve the ranking in 2014. The Iranian government has taken some steps based on the improved perspective of the Iranian economy, including providing more independence to the central bank, reforming the country’s taxing regime, stabilizing the exchange rate, reestablishing the Management and Planning Organization, opening the petroleum sector doors to the foreign investors and collecting technical support. In fact, Iran’s economic outlook has improved in the recent months, and the government has been obliged to reduce the sanctions and their inflationary pressure over the economy and to increase transparency in the economic activities. The measures will eventually increase Iran’s exporting potentials and consumers’ purchasing power, and will provide protection to investors through improving consumers and economic participants’ confidence. 8 TSE at a Glance Trading Trading Days Saturdays - Wednesdays Trading Hours 8:30 – 9:00 Pre-opening Session 9:00 – 12:30 Single Trading Session Instruments Equity Shares, Rights, Bonds, Derivatives, Sukuks Currency Iranian Rial Market Making First Market: Optional Second Market: Mandatory Clearing & Settlement Organization Central Securities Depository of Iran (CSDI) Settlement Period Equities: T+3 Fixed Income: T+1 Short Selling Not Permitted Taxing Dividends and Capital Gain Tax Exempted Transaction Tax 0.5 % Exchange Regulations and Organization Structure Public Company Regulation Self-Regulated under Securities and Exchange Organization Daily Price Fluctuation Limit Equities: +/-4% Rights: +/-8% Bonds: +/-1% Trading Commissions Buyer 0.486% Seller 0.529 Markets & Listing Qualifications First Market (Main Board) Min. Cap: IRR 1,000 bil, Operation: 3 yrs, Free-float: 20%, EAR: 30% First Market (Secondary Board) Min. Cap: IRR 500 bil, Operation: 2 yrs, Free-float: 15%, EAR: 20% Second Market Min. Cap: IRR 200 bil, Operation: 1 yrs, Free-float: 10%, EAR: 15% Number of Listed