Tehran Stock Exchange Annual Report 2010 1 Mission Statement To develop a fair, efficient and transparent market equipped with diversified instruments and easy access in order to create added value for the stakeholders. Vision To be the region's leading Exchange and country's economic growth driver. Goals 1. To increase the capital market's share in financing the economic productive activities. 2. To apply the effective rules and procedures to protect the market's integrity and shareholders' equity. 3. To expand the market with the use of updated and efficient technology and processes. 4. To promote financial literacy and develop investing and shareholding culture in Iran. 5. To extend and facilitate the market access through information technology. 6. To create value for shareholders and comply with transparency and accountability principles, with cooperation and interaction of stakeholders. 7. To develop constantly intellectual assets and human resources of the company. 2 TSE at a Glance Trading Days Saturday to Wednesday Hours 9:00 to 12:00 System Automated ‐ order driven Mechanisms Opening auction ‐ continuous auction Market maker Arbitrary Instruments Shares & Rights, Participation Certificates, Stock futures Currency Local (Rial) Real time information Bid/ask, Prices, Indices, Companies' announcements, Trading volume and value Clearing and Settlement Central Depository Central Securities Depository of Iran (CSDI) Period T+3 Settlement Book entry Clearing Netting Margin/lending No Taxes Dividend No tax Capital gain No tax Transfers (paid by seller only on shares) %0.5 Trading Commissions 3 Buyer (%) Seller (%) SEO 0.04 0.06 TSE 0.032 0.048 Broker 0.4 0.4 Clearing Fee 0.028% 0.042% Total 0.5 1.05 Structure and Regulations Legal Demutualized (not listed) Regulations Self‐regulated under SEO supervision Foreign investment Yes (according to foreign investment by‐law) Minimum Listing Requirements Main market Secondary market Main board Secondary board Paid‐in capital (Billion Rials) 1000 500 200 Years of Business Activity 3 3 3 Free float ratio (%) 20 15 10 # of shareholders 1000 750 250 profit‐making 3 2 1 operating periods ended the listing date Equity to total assets ratio (%) 30 20 15 4 Content: CEO's message 6 Economic conditions 7 Introduction 9 TSE Performance 11 Market Achievement 29 Future Outlook 30 Corporate Governance 31 Financial Statement 34 Brokers 61 Mutual Funds 65 Issuers 66 5 CEO Message In 2010, in the continuation of 2009 growth, Iranian capital market showed a considerable boom. In this year all indices had appositive trends as compared to the previous years. In this year, market capitalization, value traded and the number of trades reached 89,7491,217 million Rials, 198,146,067 million Rials and 3.4 million times respectively. Goals and strategies decided by the board of directors and executives in the line of soundness, transparency and liquidity of the market as well as promotion of financial literacy and development of investment culture paved the way of growth and development of the market, attracted the general confidence of the investors, and created value added for the stakeholders. To increase market liquidity, in 2010, TSE has taken actions to obtain fair and liquid markets; enacted, approved and made operative the new trading rules; defined a new method for block trading; increased daily price fluctuation for shares and rights; executed opening auction mechanism for halted shares; defined a new index as 30 large cap companies; launched future market; and developed regulations for online access of investors to the market. In order to attract new companies to be listed, TSE has made some efforts in marketing, admitting, listing and offering of companies subject to article 44 of the Constitution (privatization), and more tax exemption for listed companies, as well as more transparency of prospectuses. Also, some efforts have been made for development of market awareness and promotion of financial literacy through targeted training courses, books, web sites and TV programs in order to help people to make informed participation in the capital markets. In order to develop the capital market and facilitate access to it through information technology, some actions have been taken such as developing DMA, improving the website, and developing a trading system for futures market. The main plans of TSE in 2010-2011 are to enhance mechanisms of market surveillance and provide monitoring software, to develop and promote derivatives market, to launch fixed income securities market, to develop financial system, and to use legal opportunities for listing new companies. 6 Economy Indicators Description Land area 1.6 million square kilometers population 74.7 million Active Population (2010, Q2) 24.2 million Capital City Tehran life expectation at birth 72 Unemployment Rate (2010, Q2) 14.6 percent GDP(PPP) 8,473,058 million Rials GDP real growth rate 3% GDP per capita (PPP) 112.5 million Rials Inflation rate (consumer prices) 15.8 Exports 1,055,192 billion Rials Exports commodities Petroleum, chemical and petrochemical products, fruits and nuts, carpets import 680,709 billion Rials import commodities Industrial raw material and intermediate goods, capital goods, foodstuff and other customer goods, technical services Current accounts balance (percent of GDP) 4.2 M2/GDP 70% MC/GDP 34 Sep 2010: 1$=10350 Rials Sources: www.CBI.ir, www.Worldbank.org, www.IMF.org 7 Events Annual General Meeting Annual general meeting of TSE was held. 20 Apr Financial statements were approved and dividend per share was decided as 200 Rials. Auction Mechanism for Auction mechanism for symbols with no price limit 8 May Unlimited Price Symbols was performed. Road Show in Dubai A road show was held for more introduction of 19 June investment opportunities in companies listed in TSE to foreign investors. Online Trading Online trading was initially provided for direct access 4 Jul of all shareholders. Changes in Price Limit In order to increase liquidity and the capital market 8 Jul depth, price limit of share and stock right increased from 3.5% to 4% and 7% to 8% respectively. Future Contracts Market The future contracts market was opened. 25 Jul Opening IPO of Dana Insurance 5% shares of Dana Insurance, as equivalent to 17 Aug 5,273,750 shares, were offered initially. Calculation of 30 Large 30 large cap index was issued formally for the first 23 Aug Cap Index time. Extraordinary General The extraordinary general meeting was held in order Meeting for 100% capital increase from 150 billion IRR to 7 Oct 300 billion IRR from retained earnings and prudential reserve. Extraordinary General The extraordinary general meeting was held in order 7 Oct Meeting for appointment of the board of directors' members. IPO of Postbank 5% shares of Postbank, as equivalent to 28,057,150 2 Nov shares, were offered initially. IPO of Tabriz Oil 5% shares of Tabriz Oil Refining, as equivalent to 13 Nov Refining 97,105,275 shares which belong to NIOPDC was offered initially. IPO of Parsian Insurance 5% shares of Parsian Insurance Co., as equivalent to 14 Nov 55,000,000 shares, were offered initially. Appointment of TSE as TSE was appointed for the first time as the chairman 13 Dec the Chairman of FEAS of FEAS working committee. Working Committee Approval of the New The New Rule of Securities Trading approved on 22 Dec Trading Rule 2010,12,4 became operative from 2010,12,22 on. 9 IPO of Iran Alloy Steel 5% shares of Iran Alloy Steel Co., as equivalent to Mar.2011 65,150,000 shares, were offered initially. 8 Market Performance The following table shows the general performance of Securities market in 2010-2011. Total returns on investment reached 68.2% in 2010, which has been one of the highest real rates of returns among other WFE members and investment in the economy of Iran, as compared to returns on other investment opportunities. Also in the period, TSE showed the most capitalization and value traded. In 2010, the total value traded by TSE with 16.7% increase reached 198,146 billion Rials, the average daily value traded of TSE had an increase of 14.8%, the number of transaction with a growth of 65% reached 2732 thousand times, and the market capitalization of TSE amounted as 897,491 billion Rials indicated 46.5% growth. In 2010, TEDPIX (the total return index of TSE) increased from 45598 at the beginning of the year to 767.3 at the end of the year, which indicates a 68.2% average return on investments in TSE. Other indices in TSE also showed a considerable growth. This indicates an even price increase in all market sectors. Free float share index with the base figure of 10000 had nearly 72% growth in 2010. Price increase and dividend account for respectively 42% and 26.2% of total index increase in 2010. Market capitalization of TSE in 2010, with 46.5% increase, reached 86.69 billion dollars at least. As market capitalization increased, market capitalization to GDP ratio also increased up to 22.8%. Among listed industries, monetary intermediation, basic metals, Post and Telecommunication Company and Motor Vehicles and auto Parts holdings account for 18%, 15%, 13% and 8% of market capitalization respectively. The share value traded in TSE during 244 business days in 2010 reached 19,139 million US Dollars, with 10.2% increase as compared to the previous year. It is a new record for TSE. In 2010, among listed industries, Motor Vehicles And Auto Parts, Monetary intermediations(banks) and Basic Metals account for the most value traded as 21%, 15% and 13% of total value respectively, while, in 2009, Telecommunication , Monetary intermediations(banks) and pharmaceuticals with respectively 49%, 20% and 6% of total value traded accounted for the first 3 ranks in the market.