Tehran Stock Exchange. Annual Report 2010

Transcription

1 Tehran Stock Exchange Annual Report

2 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

3 TSE at a Glance Trading Days Hours System Mechanisms Market maker Instruments Currency Real time information Saturday to Wednesday 9:00 to 12:00 Automated order driven Opening auction continuous auction Arbitrary Shares & Rights, Participation Certificates, Stock futures Local (Rial) Bid/ask, Prices, Indices, Companies' announcements, Trading volume and value Clearing and Settlement Central Depository Period Settlement Clearing Margin/lending Central Securities Depository of Iran (CSDI) T+3 Book entry Netting No Taxes Dividend Capital gain Transfers (paid by seller only on shares) No tax No tax %0.5 Trading Commissions 3

4 SEO TSE Broker Clearing Fee Total Buyer (%) % 0.5 Seller (%) % 1.05 Structure and Regulations Legal Demutualized (not listed) Regulations Foreign investment Self regulated under SEO supervision Yes (according to foreign investment by law) Minimum Listing Requirements Main market Secondary market Main board Secondary board Paid in capital (Billion Rials) Years of Business Activity Free float ratio (%) # of shareholders profit making operating periods ended the listing date Equity to total assets ratio (%)

5 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

6 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 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

7 Economy Indicators Land area population Active Population (2010, Q2) Capital City life expectation at birth Unemployment Rate (2010, Q2) GDP(PPP) GDP real growth rate GDP per capita (PPP) Inflation rate (consumer prices) Exports Exports commodities import import commodities Current accounts balance (percent of GDP) M2/GDP MC/GDP Description 1.6 million square kilometers 74.7 million 24.2 million Tehran percent 8,473,058 million Rials 3% million Rials ,055,192 billion Rials Petroleum, chemical and petrochemical products, fruits and nuts, carpets 680,709 billion Rials Industrial raw material and intermediate goods, capital goods, foodstuff and other customer goods, technical services % 34 Sep 2010: 1$=10350 Rials Sources:

8 Events 20 Apr 8 May 19 June 4 Jul 8 Jul 25 Jul 17 Aug 23 Aug 7 Oct 7 Oct 2 Nov 13 Nov 14 Nov 13 Dec 22 Dec 9 Mar.2011 Annual General Meeting Auction Mechanism for Unlimited Price Symbols Road Show in Dubai Online Trading Changes in Price Limit Annual general meeting of TSE was held. Financial statements were approved and dividend per share was decided as 200 Rials. Auction mechanism for symbols with no price limit was performed. A road show was held for more introduction of investment opportunities in companies listed in TSE to foreign investors. Online trading was initially provided for direct access of all shareholders. In order to increase liquidity and the capital market depth, price limit of share and stock right increased from 3.5% to 4% and 7% to 8% respectively. The future contracts market was opened. Future Contracts Market Opening IPO of Dana Insurance 5% shares of Dana Insurance, as equivalent to 5,273,750 shares, were offered initially. Calculation of 30 Large 30 large cap index was issued formally for the first Cap Index time. Extraordinary General The extraordinary general meeting was held in order Meeting for 100% capital increase from 150 billion IRR to 300 billion IRR from retained earnings and prudential reserve. Extraordinary General The extraordinary general meeting was held in order Meeting for appointment of the board of directors' members. IPO of Postbank 5% shares of Postbank, as equivalent to 28,057,150 shares, were offered initially. IPO of Tabriz Oil 5% shares of Tabriz Oil Refining, as equivalent to Refining 97,105,275 shares which belong to NIOPDC was IPO of Parsian Insurance Appointment of TSE as the Chairman of FEAS Working Committee Approval of the New Trading Rule IPO of Iran Alloy Steel offered initially. 5% shares of Parsian Insurance Co., as equivalent to 55,000,000 shares, were offered initially. TSE was appointed for the first time as the chairman of FEAS working committee. The New Rule of Securities Trading approved on 2010,12,4 became operative from 2010,12,22 on. 5% shares of Iran Alloy Steel Co., as equivalent to 65,150,000 shares, were offered initially. 8

9 Market Performance The following table shows the general performance of Securities market in 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 at the beginning of the year to 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 had nearly 72% growth in Price increase and dividend account for respectively 42% and 26.2% of total index increase in Market capitalization of TSE in 2010, with 46.5% increase, reached 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. 9

10 Market Indicators Change (%) TEDPIX Market capitalization(million Rial) Rial Volume traded(million) 96,551 79, Value traded(million Rial ) Rial Average daily value traded( Million Rial) Rial PER turnover Velocity Listed companies MC/GDP(%) Main Indices of TSE in 2010 TEDPIX TEPIX Free Float 30 large Main Secondary Financial Industry adjusted cap com.* market market At the end of the 18, , , , , ,222.9 year At the beginning 11,208 9,466 13, ,219 15,993 29,504 8,645 of the year Changes 7,647 3,980 9, ,462 9,558 24,836 5,578 Percent *Calculated from

11 Monthly return of TEDPIX 11

12 Market capitalization in 2010 (Billion Rial) 12

13 Share Trades Volume (million) Changes % Value (million Rial) Volume (million) Value (million Rial) Volume Total 96, ,146,067 79, ,768, value Daily average trades Value Traded of different industries in

14 Business Days and Share Trades in 2010 Month Trading days Value traded (million Rials) Transaction (thousand) Market Cap (million Rials) capitalization (m) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

15 Derivatives On July , Tehran Stock Exchange (TSE) launched derivatives market with trading single stock futures. In the first step, 8 futures contracts on two listed banks stock were offered and then it was expanded to 12 underlying stocks by end The futures contracts are denominated in Iranian Rial and settled physically. Their maturity dates is of two-month cycles. By the end of 2010, 12 companies were listed in futures market. The companies are: 1. Parsian Bank 2. Karafarin Bank 3. Chadormalu Mineral & Ind. Co. 4. Saipa Co. 5. Esfahan's Mobarakeh Steel Co. 6. Iran National Copper Industries Co. 7. Ghadir Investment Co. 8. Mines & Metals Development Investment Co. 9. Iran Telecommunications Co. 10. Mellat Bank 11. Khark Petrochemical Co. 12. Sobhan Pharmaceutical Co. Underlying stocks are common stocks listed on Tehran Stock Exchange (TSE). Each single stock future is assigned a ticker symbol (Underlying Stock -Maturity Year-Maturity Month). Trading hours are 09:00 am to 12:30 pm of Tehran time, Saturday through Wednesday of the regular business days of TSE. Contract size is the number of shares that makes the average value of the contract equal to 20,000,000-30,000,000 Rls. Delivery months are 6 two-month cycles that the bimonthly events start on 22 March. Daily price limit is 4% of previous day s settlement price. Initial margin and maintenance margin are 20% of contract value and 60 % of initial margin respectively. Market-wide position limit is no. of free float share divided by contract size divided by no. of contracts that simultaneously is traded. Member position limit is utmost 20 % of market-wide position limit based on broker's collaterals. The basis for calculation of market-wide position limit is the shares number of the issuer of the underlying stock dividing by the contract size and then dividing by the trading symbols number of futures contracts on the stock being traded at the same time. Position limit of each natural individual is equivalent to of market-wide position limit. Final Settlement is physical. When no underlying stock is owned by the seller at the end of the last trading day, the penalty of this is 1% of the contract value based on the last daily settlement price in the trading period of the contract, which is transferred to the buyer. If the closing price of the underlying stock in the spot market at the end of the trading session of the last trading day is more than the last daily settlement price in the trading period of the contract, the difference is transferred from the seller account into the buyer account. Penalty 15

16 of non-payment of the contract value by the buyer based on the last settlement price until 12 o'clock of the first day of the delivery period is 1% of the contract value which is received from the buyer account into the seller account. If the closing price of the underlying stock in the spot market at the end of the trading session of the last trading day is less than the last daily settlement price in the trading period of the contract, the difference is transferred from the buyer account into the seller account. 16

17 Listed Companies in 2010 Company Date of IPO Capital registered Market Capitalization Increase (million Rial) (million Rial) Dana Insurance 17 Aug 105, Post Bank 2 Nov Tabriz Refinery 13 Nov 1,942, Parsian Insurance 14 Nov 1,100, Total Brokerages firms in 2009 Description Number Brokerage Companies 87 Total trading stations

18 Other Information Top 10 companies by Market Capitalization at year-end 2010 Name Market Cap (Rial millions) % of Total MC 1 Iran Tele. Co National Copper Ind.Co Isfahan Mobarakeh Steel Co Parsian Bank Mellat Bank Chadurmalu MAPNA Saipa Co Tejarat Bank Saderat Bank Total Top 10 companies by Value Trades at year-end 2010 Name Turnover Value (USD millions) % of Total Turnover 1 Saipa Co Shiraz Petrochemical Co Iran Tele. Co National Copper Ind.Co Isfahan Mobarakeh Steel Co MAPNA Tejarat Bank Saderat Bank Parsian Bank Iran Khodro Industrial Group Co Total

19 Top 10 companies by Volume Trades at year-end 2010 Name Turnover Volume (million) % of Total Turnover 1 IranTelecom.co. 11, Saderat bank 8, Saipa co. 7, Isfahan Mobarakeh Steel 7, Mellat Bank 6, Tejarat Bank. 5, MAPNA 4, Iran Khodro Industrial Group Co. 2, National Copper Ind.Co. 2, Bahman group 2, Total

20 Market Capitalization / Sectors Market Cap. (billion Rials) Industrial Group Dec 10 Dec 09 Change % of Total (%) MC 1 Monetary intermediation 15, , Basic Metals 13, , Post and telecommunications 11, , Motor Vehicles And Auto Parts 6, , Metal Ores Mining 6, , Diversified Industrials (Holdings) 5, , Chemicals & By-products 3, , Cement, Lime & plaster 3, , Refined Petroleum Products & Nuclear Fuel 3, , Technical & Engineering Services 2, , Pharmaceuticals 2, , Investment Companies 2, , Transportation and storage 1, , Real Estate And Construction 1, , Food Products and Beverages except sugar 1, Insurance & Pension funding Except Compulsory Social Security Computer & Related Activities Electric Machinery & Apparatus Oil and Gas Extraction and Related Services Except Surveying 20 Machinery & Equipment Financial leasing Industrial contracting Rubber & Plastic Products Fabricated Metal Products except Machinary & Equipments Other Non-metallic Mineral Products Tanning and Dressing of Leather Ceramic & Tiles Sugar & Byproducts Medical, Precision & Optical Instruments Radio, TV & Communication Equipment Textiles Paper & By-products Agriculture Coal & Lignite Mining Publishing, Printing & Reproduction of Media Wood & By-products

21 37 Other Mining Total 86, , Industry P/E Ratio By sectors * No of Listed Companies Agriculture Basic Metals Cement, Lime & Plaster Ceramic & Tiles Chemicals & Chemicals -products Coal & Lignite Mining Computer & Related Activities Diversified Industrials (Holdings) Electrical Machinery & Apparatus Fabricated Metal Products except Machinery & Equipments Financial Leasing Food Products and Beverages except sugar Industrial Contracting P/E Insurance & Pension funding Except Compulsory Social Security Furniture Investment Companies Machinery & Equipment Medical, Precision & Optical Instruments Metal Ores Mining Monetary Intermediation Motor Vehicles And Auto Parts Oil & Gas Extraction and related services except Surveying Other Mining 1 7 Other Non-metallic Mineral Products Paper & Paper -products Pharmaceuticals & Medicinal Products

22 Post and telecommunications Publishing, Printing & Reproduction of Media Radio, TV & Communication Equipment Real Estate And Construction Refined Petroleum Products & Nuclear Fuel Rubber & Plastic Products Sugar & By-products Tanning and Dressing of Leather Technical & Engineering Services Textiles Transportation and Storage Wood & By-products Total/Weighted Average * TSE uses the International Standard for Industrial Classification (ISIC) system. Sectors Indices December December Change (%) 1 Radio, TV & Communication Equipment Furniture Textiles Computer & Related Activities Motor Vehicles And Auto Parts 6, , Coal & Lignite Mining Industrial Contracting 1, Fabricated Metal Products except Machinary & Equipments 4, , Chemicals & By-products Pharmaceuticals 1, Technical & Engineering Services Basic Metals 9, , Investment Companies Metal Ores Mining 3, , Refined Petroleum Products & Nuclear Fuel 33, , Diversified Industrials (Holdings) 1, Electrical Machinery & Apparatus 65, , Financial Leasing Food Products and Beverages except sugar Monetary intermediation Wood & By-products 11, ,

23 22 Tanning and Dressing of Leather 1, Other Mining 1, Sugar & Byproducts Rubber & Plastic Products 3, , Cement, Lime & Plaster Ceramic & Tiles Transportation and Storage , Other Non-metallic Mineral Products Post and telecommunications Oil and Gas Extraction and Related Services Except Surveying Machinery & Equipment 2, , Medical, Precision & Optical Instruments Paper & By-products 1, , Insurance & Pension Funding Except Compulsory Social Security 2, , Agriculture Publishing, Printing & Reproduction of Media 8, , Real Estate And Construction Industrial Contracting

24 Market Achievements TSE has taken numerous actions in the line of its development plans for increase of market liquidity and transparency, promotion of market soundness and public confidence, enhancement of market access through updated technology, market awareness programs, interaction with the government and authorities, diagnosis of listed issuers problems and deficiencies, completion of regulations and development of required rules and procedures, and introduction of new financial instruments. Some the above mentioned actions are: To develop market surveillance mechanisms and to apply ownership control software in the companies subject to article 44 of Constitution, with cooperation of SEO. To enact regulations and develop trading procedures in order to facilitate online trading and provide direct access to the market. To study on the possibility of and provide relevant procedures for listing TSE's shares. To study on the establishment of futures market, provide required regulations with cooperation of SEO, and develop trading system. To develop trading rules for option contracts, and decide on pricing model and margin determination method of options. To study and develop new formats for financial reporting of members and participate in planning an integrate system of financial reporting by members. To study and plan marketing system for companies with potential for being listed in TSE. To develop guidelines and indices of corporate governance, internal controls and investor relations. To update the strategic plan of TSE and plan and establish the system of monitoring the plans in order to obtain the qualitative and quantitative goals of the company. To perform some road shows in other countries for more introductions of investment opportunities to foreign investors. 24

25 Future Outlook (2011) Operating plans of 2011 have been developed in the line of the strategic plan and in the way to meet the most important needs of TSE and capital market. The main goals and objectives of TSE are: 1. To develop and strengthen the derivatives market through introduction of option contracts and future contracts on new underlying assets, upgrading the trading system and enhancing market access. 2. To launch fixed income securities market (participation certificate and Sukuk) with the aim to facilitate financing through capital market and create new investment opportunities. 3. To develop financing system through identification and attraction of new issuers, increase interactions with listed issuers and plan relevant financial services to meet market participants' needs. 4. To develop market awareness, promote reporting system, and increase the number of active shareholders. 5. To increase trading volume and improve liquidity through revising and updating trading rules and introducing new trading mechanisms. 6. To promote market soundness and transparency through promotion of market surveillance mechanisms and increase of using mechanized and efficient monitoring systems. 7. To enhance international cooperation in order to share information and experiences, introduce common products, and promote technical knowledge of experts. 25

26 Corporate Governance The Board of Directors Efficient policies of corporate governance are critical for true and sound performance of the capital market and total economy, and attraction and maintain of public confidence. Inefficient corporate governance may decrease the market confidence that in turn results in outflow of resources or liquidity crisis and price fall in TSE. In fact, TSE is accountable to not only shareholders but also investors and its other members. TSE has developed its corporate governance regulations and determined some expectations from the board of directors and its committees, in the line of meeting the highest ethic standards, providing full and transparent information, and full compliance with governing laws and regulations. The board of directors appointed by shareholders in 2010, through holding 21 meeting, has made efforts to create efficient governance in the line of shareholder s interests and balance in the interests of different stakeholders including customers, employees, investors and the society. The board of directors has 3 specialized committees and 2 sub-committees. Members of the Board of Directors Member of the Board of Directors Legal Person Position Tadbir Investment co. Hamidreza Rafiee Keshtli Chairman Securities and Exchange Brokers Association Social Security Investment Co. Bank-e- Mellat Brokerage Co. Iran Melli Investment Brokerage Co. Khosro poormemar Hossein Salimi Mohammad Ebrahim Poorzarandi Amir Hossein Erza Vice Chairman Non-executive member Non-executive member Non-executive member Hafez Brokerage Co. Mohammad Reza Rahbar Non-executive member Bank Tejarat Securities and Exchange Organization Seyed Mojtaba Fahim Hashemi Ali Hosseini Hasan Ghalibaf Asl Non-executive member SEO representative CEO 26

27 Auditing Committee The committee is responsible for monitoring internal and external auditors, suggesting external auditors to the board of directors or shareholders for appointment, deciding on the external auditors fees and removal of them, reviewing audit areas and times, receiving audit report, ensuring timely and true improving actions taken by the management against deficiencies, defects, and any noncompliance. The audit committee consists 5 members, at least 2 of whom are non-executive members of the board of directors and the others are external individuals appointed by the board of directors. The audit committee members and chairman are appointed by the board of directors. The audit committee has the following authorities: To suggest external auditor for appointment and decide on its fees. The audit firm reports to the committee before reporting to the general annual meeting. To monitor and assess the external auditor performance. To settle any disagreements of management with external auditors in relation to financial reports. To approve initially all audit and non-audit services rendered by the audit firm. To use external counsels, accountants and other experts if required. To inquire employees or external individuals in order to get required information. To hold meetings with managers, external auditors or external counsels if required. To establish internal control system in order to ensure that all operation of the company are in the line of its goals and in the framework of laws, regulations and the article of association. To ensure financial reports integrity and transparency. Risk Management Committee The committee is responsible for monitoring the management performance in relation to strategic policies, and market, liquidity, operation and reputation risks management. The committee assesses and controls risk management and reports the board of directors. The committee has the following responsibilities: To oversee development and execution of short term strategic plans of TSE. To oversee effectiveness of ensuring the compliance with rules and regulations. To review policies and procedures of risk management. To review risk management framework. To report significant risk exposures and offenses. To oversee leading of required resources to risky areas. To assess compliance with other policies and guidelines. To assess economy condition and effectiveness of resources application. To review the process of detecting significant risks. To review management information adequacy and internal control structures. To oversee efficiency of risk management related to corporate governance. To oversee required controls on frauds and conflict of interests. To review changes in risk management framework. 27

28 To oversee effectiveness of risk management and ensure that risk management is considered in budget planning. Remuneration Committee The committee oversees compensations related to CEO and his deputies. It consists nonexecutive members of the board of directors, chief executive officer and one of his deputies. The committee has the following responsibilities: To execute all the Board's responsibilities related to salaries and wages of CEO. To provide a report of bonuses related to the board of directors and CEO in the annual report, according to rules and regulations. To monitor compensation methods and incentive plans, assess CEO's performance in the line of the company's goals and decide on his compensations based on the assessment. 28

29 Financial Statements For the Fiscal Year Ended March 20,

30 Report of Independent Auditor To the General Assembly Tehran Stock Exchange Corporation 1. We have audited the balance sheet of Tehran Stock Exchange Corporation as of 1389 and the income and cash flow statements of the Company for the fiscal year ended together with notes 1-32 thereof. These statements have prepared by board of directors. The responsibility of financial statements is with the company's Board of Directors and our responsibility is to express an opinion on the financial statements based on our audit, and also to report on any noncompliance with the legal requirements set out in the Commercial Code as amended and the company's provisions of the Articles of Incorporation. 2. We conducted our audit in accordance with the Auditing Standard of financial statements. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. The audit includes examining, on a test basis, evidences supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles and procedures used and significant estimates made by the Board as well as evaluating the overall fairness of financial statement presentation. We believe our audit provides a reasonable basis for our opinion. 3. In our opinion, the financial statements referred to above present fairly in all material aspects in conformity with Iranian Accounting Standards. 4. Corresponding amounts included in financial statements have been examined by other independent auditors. They issued an unqualified report on 19/1/ The transaction included in the explanatory note 31 to the financial statements has been examined as all transactions subject to the Article 129 of the Commercial Code as amended, and related party transactions, that are conducted and reported to us by the Company's Board of Directors. We have not observed any evidences indicating that the transaction has not been conducted on the appropriate trade conditions and in normal course of the company's activities. 6. We have examined the report of the Board of Directors to the Annual General Meeting of the company in respect of the Company's general status and activities. Based on our examinations, we have not observed any material cases of non-conformity of the provided information with books and records submitted to us by the Board of Directors. 30

31 Tehran Stock Exchange Corporation Financial Statements For the Fiscal year ended March 20, May 2011 Dayarayan Audit and Financial Services Firm We would like to submit the financial statements of Tehran Stock Exchange Corporation for The fiscal year ended March 20, Components of the financial statements are as followings: Balance sheet Income statement Retained earnings account Cash flow statement History Basis for preparing Financial Statements Significant Accounting policies Notes to the Financial Statements (items and numbers) The financial statements have been prepared according to the National Accounting Standards and they have been approved by the Board of Directors on March 20, Members of the Board of Directors Member of the Board of Directors Tadbir Investment co. Securities and Exchange Brokers Association Social Security Investment Co. Bank-e- Mellat Brokerage Co. Iran Melli Investment Brokerage Co. Hafez Brokerage Bank Tejarat Legal Person Hamidreza Rafiee Keshtli Khosro poormemar Hossein Salimi Mohammad Ebrahim Poorzarandi Amir Hossein Erza Mohammad Reza Rahbar Seyed Mojtaba Fahim Hashemi Position Chairman Vice Chairman Non-executive member Non-executive member Non-executive member Non-executive member Non-executive member 31

32 Securities and Exchange Organization Ali Hosseini Hasan Ghalibaf Asl Managing director 32

33 Assets Not e March 20,2011 IRR Million March 20,2010 IRR Million Balance Sheet March 20, 2011 Liabilities & shareholders' equity Not e March 20,2011 IRR Million March 20,2010 IRR Million Current Assets: Current Liabilities: Cash & Bank 4 24,521 5,247 Trade Accounts Payable 13 7,761 2,895 Short Term 5 190, ,930 Other accounts Payable 14 9,556 12,173 Investments Trade Accounts 6 13,472 15,432 Deferred income 15 8,698 - Receivable Other Accounts 7 11,525 9,267 Dividends 16 1,922 1,615 Receivable Prepayments 8 1,164 4,016 Provision for Taxes 17 26,359 23,409 Total Current Assets 241, ,892 loans received 18 1,112 2,635 Non-Current Assets: Total Current Liabilities 55,408 42,727 Tangible Fixed assets 9 103,235 51,550 Noncurrent liabilities: 0 Intangible assets 10 1, Long- term loans Long Term 11 30,221 30,221 Provisions for Employees Termination 19 6,153 3,666 Investments Benefits Other Assets 12 60,487 32,300 Total Non-Current Liabilities 6, Total Non-Current Assets 195, ,880 Total Liabilities 61,561 47,227 Shareholders' equity: Paid-in capital(255 million shares paid totally) , ,000 Legal reserve 21 17,592 12,149 prudential reserve 21 22,364 48,592 Retained earning 80,049 86,804 Total Shareholders' equity 375, ,545 Total Assets 436, ,772 Total liabilities and shareholders' Equity 436, ,772 Explanatory notes are an integral part of financial statements. 33

34 Income Statement For the Fiscal year ended March 20, 2011 Note Fiscal year ended March 20,2011 IRR Million Fiscal year ended March 20,2010 IRR Million Services revenue , ,441 Cost of services 23 (79,626) (71,713) Gross income 123,021 98,728 Administrative and general expenses 24 (35,121) (22,985) Operating profit 87,900 75,743 Financial expenses - (439) Net other non-operating income and expenses 25 42,621 34,996 Income before tax 130, ,300 Income tax 17 (21,661) (20,624) Net income 108,860 89,676 Earnings per share Retained Earnings Account Net Income 108,860 89,676 Retained earnings at the beginning of the period 93,286 66,938 Prior period adjustment 26 (6,482) - Retained earnings at the beginning of the periodadjusted 86,804 66,938 Capitalization 20 (57,000) - 29,804 66,938 Allocatable income 138, ,614 Income allocation: Dividend 16 (30,000) (45,000) Board of directors bonus (1,400) (1,232) Legal reserve 21 (5,443) (4,716) Prudential reserve 21 (21,772) (18,862) Allocated income during the period (58,615) (69,810) Retained earnings at the end of the period 32 80,049 86,804 Explanatory notes are an integral part of financial statements. ٣۴

35 Cash flow Statement For the Fiscal year ended March 20, 2011 Note Fiscal year ended March 20,2011 Fiscal year ended March 20,2010 Operating activities: Net cash inflow from operating activities 27 99,166 57,583 Return on investments and servicing of finance: Interest received from short-term investment 39,182 34,256 Earnings received from long-term investment 3,205 2,055 Dividends Paid 15 (29,693) (45,724) Net cash inflow (Outflow) from Investment Returns and servicing of finance Income tax: 12,694 (9,413) Income Tax paid (17,608) (6,718) Investing activities: Receipt for short- term investment sales 5,570 - Payment for acquisition of short-term investments - 5,130 Payments for acquisition of other assets (20,000) (30,000) payment for acquisition of tangible fixed assets (58,487) (8,515) Receipts for acquisition of tangible fixed asset sales 1, Payments for acquisition of intangible assets (890) (171) Net cash inflow (out flow) from investing activities (72,477) (43,310) Net cash inflow (out flow) before financing activities 21,775 1,858 Financing activities: Loan principal paid (2,501) (2,502) Net cash increase (decrease) 19,274 4,360 Cash Balance at the beginning of the period 5,247 9,607 Cash balance at the end of the period 4 24,521 5,247 Non-cash trades ,103 1,304 Explanatory notes are an integral part of financial statements. ٣۵

36 1. Background 1.1. History Tehran Stock Exchange Corporation has been founded according to the Securities Market Law approved on November 22, 2005, and registered with the number with the Companies & Noncommercial Institutions Registration Office in Tehran. The head office of the company is located in Tehran and has 21 Branches within the country and an independent registered branch in Kish Island by now Main Activities According to the Provision 2 of the Articles of Incorporation, the main activities of the company are: Establishing, organizing and operating the Stock Exchange for making trades on listed securities by Iranian and foreign parties according to the law and regulations. Listing securities including securities of foreign issuers according to the law and regulations. Determining the brokerage membership conditions for different groups of members, admitting the membership applicants, and enactment and enforcement of professional and disciplinary principles. Providing conditions necessary for fair access of members to trades of listed securities. Cooperation and Consistency with the other financial institutions undertaking responsibilities related to securities trades, making researches, training, culture developing, and cooperation with other Iranian and foreign Exchanges to share information and experiences. Supervising well conduction of listed securities transactions and supervising issuers' activities. Providing, collecting, processing and issuing information related to securities, and performing other duties according to the law and regulations Employment position The number of employees at the end of the financial period is as follows: Permanent and temporary employee March 20,2010 March 20, Basis for preparing financial statements The financial statements of the Company have been prepared mainly on historical cost basis and where necessary current values have been used. 3. Significant accounting policies 3.1. Investments Long term investments are valued at cost less any provision for impairment of any investment. Income from investments in subsidiaries is recognized when profit is approved by the general meeting of shareholders of the investee until approval of financial statements, and income from investments in associates is recognized when profit is approved by the general meeting of shareholders of the investee until balance sheet date. Short term investments are recognized at least cost and net realizable value. ٣۶

37 3.2. Tangible fixed assets Tangible fixed assets are carried on the cost basis. Costs for betterment and substantial repairs resulting in a significant increase in the capacity and useful life of fixed assets or an improvement of their output quality, are accounted for as capital costs and depreciated during the remaining useful life of the relevant assets. Costs necessary to maintain the normal capacity of the assets like maintenance and insignificant repairs, are accounted for as expenses of the period when incurred Depreciation of tangible fixed assets are calculated based on the estimated useful life of the asset, according to the depreciation regulations included in the Article 151 of the amendment of the Direct Taxation Act and on the basis of the following rates and methods: Assets Depreciation rate Depreciation method Buildings 7% Diminishing balance Computer system and hardware 3 & 10 year Straight line Administrative equipments 10 year Straight line Vehicles 25%, 35% Diminishing balance Fixed assets acquired and used within a month are depreciated and carried from the beginning of the next month. When an asset is not used for any reason like work stopping, its depreciation will be equivalent to 30% of the depreciation rate included in the table above Foreign currency translation Foreign currency items with the formal exchange rate at the balance sheet date and expenses carried in foreign currency at historical cost are translated with the formal exchange rate at the date the transaction is entered into. Differences arising from settlement or exchange of foreign currency items are recognized as income or expenses of the period when incurred Provision for employees' termination benefits Provision for employees' termination benefits are calculated and carried according to their last monthly fixed salary and continuous benefits for every year of their service Revenue recognition Revenue sources of the Company are commissions from trading, admitting and listing fees, brokerage fees, broker services and other sources. The ceiling of rates for broker services is determined by the Security Exchange Organization. The income resources are recognized as realizing over the time, in the framework of approvals and they are carried on accrual basis. ٣٧

38 3.6. Intangible assets Intangible assets are carried on the cost basis and amortizable intangible assets (software) are amortized until maximum 3 years. 4. Cash The company's cash in hand at the balance sheet date are as following: March 20,2011 March 20, 2010 Bank accounts (Rial) 24,285 4,618 Bank accounts (foreign currency) Fund Total 24,521 5, Short term investments Notes March 20,2011 March 20,2010 Time deposits ,000 84,000 Contribution bonds ,360 77,930 Investment funds ,000 34,000 Total 190, , Time deposits with banks are including 5 time deposit certificates with 17.5% interest rate and 2 time deposit certificates with 17% interest rate This amount is relevant to petrochemical and hydroelectric industries contribution bonds and ministry of energy contribution bonds with 17% and 18% interest rate respectively This amount is mainly relevant to investment fund certification with 17% interest rate. ٣٨

39 6. Trade accounts receivable The receivables are including: Note March 20,2011 March 20,2010 Listed companies (listing fees) 6-1 7,493 8,179 Central depository and settlement corporation 3,954 3,304 Brokerage 1,519 2,964 Other ,472 15, Listing fees receivable from listed companies at the end of the year 1389 were 8,886 million IRR from which 1,393 million IRR was carried as a provision for bad debts. 7. Other Accounts Receivable Amount March 20,2011 Amount March 20,2010 Loans to Employees 4,947 3,180 Security for building lease 2,500 2,250 Income from short-term investment 2,130 2,597 Over the counter National oil Refining and Distribution Co Security for Visa card Other 1, ,525 9,267 ٣٩

40 8. Prepayments The balance of prepayments is including: March 20, 2011 March 20, 2010 Million Dollars Costs, goods and services 2, Tax 1, Other ,016 1,164 ۴٠

41 9. Tangible Fixed Assets Cost- million IRR Retained depreciation-million IRR Book value- million IRR Description Balance on 1388/12/29 Additions Sold assets Transfers and Others Balance on 1389/12/29 Balance on 1388/12/29 Balance on 1389/12/29 Balance on 1388/12/29 Balance on 1389/12/29 Land 26,967 - (990) - 25, ,977 26,967 Building 19, (359) - 19,280 2,042 1,230 (46) 3,266 16,054 17,018 Equipment, 10,340 2,709 (342) 20 12,727 3,568 2,327 (145) 5,750 6,977 6,772 Fixtures and Computer Vehicle 1, , Total 57,478 3,588 (1,691) 20 59,359 5,968 3,746 (191) 9,523 49,872 51,510 Capital 40 53,363 - (40) 53, , prepayments Total 57,518 56,951 (1,691) (20) 112,758 5,968 3,746 (191) 9, ,235 51,550 ۴١

42 9.1. All tangible fixed assets amounted 30,427 million IRR are insured against fire, flood and earthquake, 9.2. Land and building sales refer to an apartment located in Ghazvin floor, which is sold to Tadbirgaran-e-farda brokerage Details related to the income from sale of apartment, equipments, fixtures and computer are as following: Description Million IRR Cost Million IRR Retained depreciation Million IRR Book value Million IRR Sale price Million IRR Sale profit Million IRR Land , Building 359 (46) ,349 (46) 1,303 1, Equipment, Fixtures and 342 (145) Computer 1,691 (191) 1,500 1, Income from sale of the above mentioned assets are included in note Excess prepayments related to the capital includes 52,990 million IRR paid for 70% value of a land located in saadatabad street with an area of 2523/24 square meters. Total price of the land is 160,606 million IRR. 10-Intangible Assets The intangible assets are including: March 20, 2011 March 20,2010 Software Regional floor Branches line of PRA link Hafez floor Mobile lines , ۴٧

43 10.1. Software in the company is including: Balance on 1388/12/29 Cost million IRR Purchases Balance on 1388/12/29 Balance on 1388/12/29 Retained depreciation Million IRR Amortization Balance on 1388/12/29 Balance on 1389/12/29 Book value million IRR Balance on 1388/12/29 Future Contract Software Other Software Long Term investments Long term investments in companies are including: No. of Shares March 20, 2011 March 20, 2010 Over the counter Corporation of Iran 20,000,000 20,000 20,000 Central depository corporation 10,000,000 10,000 10,000 Iran financial center (private Joint) 199, Iran mercantile Exchange corporation 13, ,221 30,221 ۴٨

44 A Summary of Financial Statement of Iran Financial center Company is as follows: Balance Sheet Mar 20, 2011 (29/12/1389) Assets March Liabilities & Shareholders Equity March 20, , 2011 Millio Rials Current assets 200 Current liabilities 56 Non-current assets 10 Capital (200,000 Shares / 1000 Rials / Paid) 200 Retained Loss (46) Total 210 Total liabilities & shareholders' equity Other assets Other assets are including: March 20, 2011 March 20, 2010 Time investment deposit certificate 50,000 30,000 Employee's loan (long term) 10,487 2,300 60,487 32,300 ۴٩

45 13. Trade Accounts payable The amount due to accounts payable that is 7,761 million IRR is for balance of receivables from brokers that TSE received it from Central Depository Corporation, in excess of broker commissions. 14. Other Accounts Payable Note March 20, 2011 Mar 20, 2010 Employee's saving fund ,386 2,427 Provision for incurred and unpaid expenses 1, Taxes payable Non-recognized settlements 706 1,115 Insurance Premium Securities and Exchange Organization 375 5,499 Other 2,233 1,385 9,556 12, Amount due to employees saving fund are for 3% deductions from employees salary in addition to 3% due from the employer. A loan will be paid to the employees from the amount, according to the board of director's approval. 15. Deferred Income In the line of best utilization of the company's resources (liquidity management), an amount of 60,000 million IRR has been deposited with banks with the interest rate of 17%. According to the agreements, the one-year interest amounted as 10,200 million IRR was received at the beginning of the period, 1,502 million IRR of which was recognized as non-operating income and the nondepreciated balance amounted as 8,698 million IRR was included under the above mentioned heading and was carried as non-operating income in the next year. ۵٠

46 16. Dividends March 20, 2011 March 20, 2010 Dividend in 1388 (200 Rls for 1 share) 30,000 - Dividend in 1387 (300 Rls for 1 share) 45,000-45,000 Dividends in 1386 (250 Rls for 1 share) 37,500 37,500 Divide has in 1385 (25 Rls for 1 share) 3,750 3,750 Dividends paid (114,328) (84,635) Balance at the end of the year 1,922 1,615 During the financial period, dividend has been paid according to the schedule announced, to all individuals and legal entities except those with insufficient information. 17. Reserve Tax Summary of the provision for taxes is as the followings: Fiscal Year March 20,2011 (Million IRR) Tax March 20,2010 Million Rials Basis for recognition declared profit (Loss) Income taxable declared assessed finalized paid reserve balance reserve balance ,029 53,246 13,311 14,590 13,859 13, Taxes and books ,819 26,443 6,888 9,822 9,666 9,666-2,785 auditing ,300 62,429 15,990 20,624-15,607 4,698 20, ,521 86,644 21, ,661-26,359 23,409 ۵١