ANNUAL REPORT. Te h r a n S t o c k E x c h a n g e

Transcription

1 Si-o-se Pol which means 33 Bridge or the Bridge of 33 Arches), also called the Allah- Verdi Khan Bridge, is one of the eleven bridges of Isfahan, Iran. It is highly ranked as being one of the most famous examples of Safavid bridge design

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. 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. 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 2

3 TSE at a Glance Trading Days Hours System Mechanisms Market maker Instruments Currency Real time information Clearing and Settlement Central Depository Period Settlement Clearing Margin/lending Taxes Dividend Capital gain Transfers (paid by seller only on shares) 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 Central Securities Depository of Iran (CSDI) T+3 Book entry Netting No No tax No tax %0.5 Trading Commissions SEO TSE Broker Clearing Fee Total Buyer (%) % 0.5 Seller (%) % 1.05 Structure and Regulations Legal Regulations Foreign investment Minimum Listing Requirements Paid-in capital () Years of Business Activity Free float ratio (%) Number of shareholders Profit-making Operating periods ended the listing date Demutualized (not listed) Self-regulated under SEO supervision Yes (according to foreign investment by-law) Main market Main board Secondary board Secondary market Equity to total assets ratio (%)

4 Content: CEO s Message Economy Events Market Performance Derivatives Business Operations and Achievements Future Outlook Corporate Governance Financial Statement Appendices

5 CEO s Message In 2010, in the continuation of 2009 growth, Iranian capital market showed a considerable boom. In this year all indices had positive trends as compared to the previous years. In this year, market capitalization, value traded and the number of trades reached 897,398,436 million Rials, 197,339,350 million Rials and 2.9 million times respectively. Goals and strategies decided by the board of directors and executives in the line of integrity, transparency and liquidity of the market as well as promotion of financial literacy and development of investment culture paved the way for 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 futures 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 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. 5

6 Economy Indicators Unit Description Land area million square kilometer 1.6 population million 74.7 Active Population (2010, Q2) million 24.2 Capital City Tehran life expectation at birth Year 72 Unemployment Rate (2010, Q2) percent 14.6 GDP (2009) Million Rial 3,426,998,017 GDP growth rate (annual) % 1.8 GDP per capita (2009) Million Rial 47 Inflation rate (consumer prices)(2009) % 13.5 Dec 2010: 1$=10353 Rials Sources:

7 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 Annual General Meeting Auction Mechanism for Unlimited Price Symbols Road Show in Dubai Online Trading Changes in Price Limit Future Contracts Market Opening IPO of Dana Insurance Calculation of 30 Large Cap Index Extraordinary General Meeting Extraordinary General Meeting IPO of Postbank IPO of Tabriz Oil Refining IPO of Parsian Insurance Appointment of TSE as the Chairman of FEAS Working Committee Approval of the New Trading Rule Events 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. 5% shares of Dana Insurance, as equivalent to 5,273,750 shares, were offered initially. 30 large cap index was issued formally for the first time. The extraordinary general meeting was held in order for 100% capital increase from 150 billion IRR to 300 billion IRR from retained earnings and prudential reserve. The extraordinary general meeting was held in order for appointment of the board of directors members. 5% shares of Postbank, as equivalent to 28,057,150 shares, were offered initially. 5% shares of Tabriz Oil Refining, as equivalent to 97,105,275 shares which belong to NIOPDC was 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. 7

8 Mmarket Performance The following table shows the general performance of Securities market in Total returns on investment reached 53.71% 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 16.9% increase reached 197,339 billion Rials, the average daily value traded of TSE had an increase of 15.4%, the number of transaction reached 2912 thousand times, and the market capitalization of TSE amounted as 897,398 billion Rials indicated 52.9% 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 66.9% 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 had nearly 69.8% growth in Among listed industries, Motor Vehicles and auto Parts holdings, monetary intermediation, basic metals and chemical and by products account for 21%, 14%, 13% and 7% of market capitalization respectively. The share value traded in TSE during 243 business days in 2010 reached 197,339 billion Rials with 16.9% 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 22%, 14% 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. 8

9 Market Indicators Change (%) TEDPIX 76,713 45, Market capitalization 897,398, ,840, Volume traded 96,563 79, Value traded 197,339, ,825, Average daily value traded 812, , P/E Ratio Turnover Velocity % Listed companies Description TEDPIX Free Float adjusted 30 large-cap Main Indices of TSE in 2010 Main market Secondary market Financial Industry At the end of the year 76,713 23,833 1,135 15,682 25,551 54,340 14,223 At the beginning of the year 45,955 14,034 1,000* 9,293 16,106 29,600 8,721 Changes 30,758 9, ,389 9,445 24,740 5,502 Percent (%) *Calculated from 15 AUG

10 Monthly Return on Investment in TSE of TEDPIX Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TEDPIX 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,450 76,713 74,519 73,124 74,373 54,568 57,516 59,242 57,403 47,641 53,443 49,022 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10

11 Market capitalization in 2010 () 1000,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,446, ,398, ,937, ,975, ,140, ,012, ,926, ,043, ,810, ,647, ,234, ,415,420 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Market Capitalization of Different Sectors In 2010 Transportation and Storage Medical, Precision & Optical Instruments Technical & Engineering Services Refined Petroleum Products Other Monetary intermediation Basic Metals Cement, Lime & Plaster Chemicals & By-products Diversified Industrials (Holdings) Metal Ores Mining 11 Motor Vehicles And Auto Parts Post and telecommunications

12 Share Traded Description Changes % Volume () Value () Volume () Value () Volume Total 96, ,339,350 79, ,825, Daily average trades , , value Value Trade of different Sectors other Motor Vehicles And Auto Parts Industrial contracting Oil and Gas Extraction and Related Services Except Surveying Diversified Industrials (Holdings) Refined Petroleum Products & Nuclear Fuel Metal Ores Mining Monetary intermediation Technical & Engineering Services Post and telecommunications Chemicals & By-products 12 Basic Metals

13 Business Days and Stock Right & Share Traded in 2010 Month Trading Days Value traded () Transaction Market-Cap () Jan 22 6,407, , ,446,328 Feb 18 10,352, , ,415,420 Mar 18 5,211, , ,647,029 Apr 20 13,581, , ,043,808 May 22 28,783, , ,234,086 Jun 20 23,629, , ,810,967 Jul 19 11,481, , ,926,419 Aug 23 22,215, , ,348,404 Sep 19 26,531, , ,937,277 Oct 21 17,048, , ,012,261 Nov 21 15,782, , ,975,928 Dec 20 16,315, , ,398,436 13

14 New Listed Companies In 2010 Market Capitalization Capital Registered Company Date of IPO Increase () () Dana Insurance 17-Aug 105,475 2,753,319 Post Bank 02-Nov 561,143 1,291,751 Tabriz Refinery 13-Nov 1,942,105 2,722,831 Parsian Insurance 14-Nov 1,100,000 3,634,400 Total 3,708,723 10,402,302 Brokerages Firm Description Brokerage Companies Total trading stations Number Top 10 Companies by Market Capitalization at year-end 2010 Top 10 Companies by Market Capitalization at year-end 2010 Name Market Cap () % of Total MC 1 Iran Tele. Co. 120,555, National Copper Ind.Co. 54,387, Isfahan Mobarakeh Steel Co. 40,511, Parsian Bank 36,410, Mellat Bank 29,200, Chadurmalu mineral & Ind Co. 28,740, MAPNA 28,135, Saipa Co. 25,823, Tejarat Bank 24,192, Saderat Bank 23,456, Total 411,413,

15 Top 10 companies by Value Traded at year-end 2010 Name Value () % of Total Value Traded 1 Saipa Co. 9,698, Parsian Bank 5,105, Isfahan s Mobarakeh Steel Co. 5,074, Iran Tele. Co. 4,670, Sadra Co. 4,575, MAPNA 4,055, Ghadir Investment Co. 3,379, National Copper Ind.Co. 3,026, North Drilling Co. 2,801, Gol-E-Ghohar Iran Ore Co. 2,495, Total 44,883, Top 10 companies by Volume Traded at year-end 2010 Name Volume () % of Total Volume Traded 1 Saipa co. 4, IranTelecom.co. 2, Isfahan Mobarakeh Steel Co. 2, Parsian Bank 1, Sadra Co. 1, Mellat Bank 1, Bahman group Co. 1, MAPNA 1, Rena Investment Co. 1, Iran Khodro Industrial Group Co. 1, Total 18,

16 Market Capitalization / Sectors * Industry Market-Cap () % Of Total MC Market-Cap () % Of Total MC Change (%) 1 Agriculture 189, , Basic Metals 135,941, ,095, Cement, Lime & Plaster 34,676, ,288, Ceramic & Tiles 2,217, ,678, Chemicals & By-products 39,630, ,310, Coal & Lignite Mining 176, , Computer & Related Activities 8,402, ,707, Diversified Industrials (Holdings) 59,271, ,982, Electrical Machinery & Apparatus 6,860, ,729, Fabricated Metal Products 2,981, ,628, Financial Leasing 4,284, ,142, Food Products and Beverages 11,343, ,002, Industrial Contracting 4,146, ,440, Insurance & Pension Funding 9,848, ,605, Investment Companies 22,735, ,701, Machinery & Equipment 5,160, ,917, Medical, Precision & Optical Instruments 26,933, ,566, Metal Ores Mining 66,422, ,841, Monetary intermediation 156,972, ,762, Motor Vehicles And Auto Parts 70,712, ,483, Oil and Gas Extraction 6,062, ,815, Other Mining 89, , Other Non-metallic Mineral Products 2,342, ,824, Paper & By-products 302, , Pharmaceuticals 767, ,146, Post and telecommunications 120,555, ,462, Publishing, Printing & Media 168, , Radio, TV & Communication 751, , Real Estate And Construction 12,886, ,481, Refined Petroleum Products 31,141, ,369, Rubber & Plastic Products 3,075, ,030, Sugar & Byproducts 1,910, , Tanning and Dressing of Leather 2,295, , Technical & Engineering Services 28,264, ,809, Textiles 330, , Transportation and Storage 17,426, ,071, Wood & By-products 118, , * TSE uses the International Standard for Industrial Classification (ISIC) system. Total 897,398, ,840, ,227.7

17 P/E Ratio / Sectors Industry Number of Listed Companies 1 Agriculture Basic Metals Cement, Lime & Plaster Ceramic & Tiles Chemicals & By-products Coal & Lignite Mining Computer & Related Activities Diversified Industrials (Holdings) Electrical Machinery & Apparatus P/E 10 Fabricated Metal Products Financial Leasing Food Products and Beverages Industrial Contracting Insurance & Pension Funding Machinery & Equipment Medical, Precision & Optical Instruments Metal Ores Mining Monetary intermediation Motor Vehicles And Auto Parts Oil and Gas Extraction Other Mining Other Non-metallic Mineral Products Paper & By-products Pharmaceuticals Post and telecommunications Publishing, Printing & Media Radio, TV & Communication Real Estate And Construction Refined Petroleum Products Rubber & Plastic Products Sugar & Byproducts Tanning and Dressing of Leather Technical & Engineering Services Textiles Transportation and Storage Wood & By-products

18 Indices / Sectors Industry Dec-2010 Dec-2009 Change (%) 1 Agriculture Basic Metals 9, , Cement, Lime & Plaster Ceramic & Tiles Chemicals & By-products Coal & Lignite Mining Computer & Related Activities Diversified Industrials (Holdings) 1, Electrical Machinery & Apparatus 65, , Fabricated Metal Products 4, , Financial Leasing Food Products and Beverages Industrial Contracting 1, Insurance & Pension Funding 2, , Investment Companies Machinery & Equipment 2, , Medical, Precision & Optical Instruments 1, Metal Ores Mining 3, , Monetary intermediation Motor Vehicles And Auto Parts 6, , Oil and Gas Extraction Other Mining 1, Other Transportation Equipments 1, , Paper & By-products 1, , Pharmaceuticals Post and telecommunications Publishing, Printing & Media 8, , Radio, TV & Communication Real Estate And Construction Refined Petroleum Products 33, , Rubber & Plastic Products 3, , Sugar & Byproducts Tanning and Dressing of Leather 1, Technical & Engineering Services Textiles Transportation and Storage , Wood & By-products 11, ,

19 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 stocks 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. Derivatives 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 are 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 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. 19

20 Business Operations and Achievements TSE has taken numerous actions in the line of its development plans for increase of market liquidity and transparency, promotion of market integrity 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 of 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. 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 enhance accountability to stakeholders, 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 integrity 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. 20

21 Corporate Governance The Board of Directors Members of the Board of Directors Member of the Board of Directors Legal Person 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 meetings, 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. Position Tadbir Investment co. Securities and Exchange Brokers Association Social Security Investment Co. Bank-e- Mellat Brokerage Co. Iran Melli Investment Brokerage Co. Hafez Brokerage Co. Bank Tejarat Securities and Exchange Organization Hamidreza Rafiee Keshtli Khosro pourmemar Hossein Salimi Mohammad Ebrahim Pourzarandi Amir Hossein Erza Mohammad Reza Rahbar Seyed Mojtaba Fahim Hashemi Ali Hosseini Hasan Ghalibaf Asl 21 Chairman Vice Chairman Non-executive member Non-executive member Non-executive member Non-executive member Non-executive member SEO representative CEO

22 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 of 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 nonaudit 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. 22

23 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 to 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. 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 of non-executive 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. 23

24 Khaju Bridge is arguably the finest bridge in the province of Isfahan, Iran.It was built by the Persian Safavid king, Shah Abbas II around 1650 C.E. Financial Statements For the Fiscal Year Ended March 20,

25 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 3/20/2011,together with notes 1-32 thereof. These statements have been prepared by the 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. 1 May 2011 Dayarayan Audit and Financial Services Firm 25

26 Tehran Stock Exchange Corporation Financial Statements For the Fiscal year ended March 20, 2011 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 Legal Person Position Directors Tadbir Investment co. Hamidreza Rafiee Keshtli Chairman Securities and Exchange Khosro poormemar Vice Chairman Brokers Association Social Security Investment Co. Hossein Salimi Non-executive member Bank-e- Mellat Brokerage Co. Mohammad Ebrahim Non-executive member Poorzarandi Iran Melli Investment Amir Hossein Erza Non-executive member Brokerage Co. Hafez Brokerage Mohammad Reza Rahbar Non-executive member Bank Tejarat Seyed Mojtaba Fahim Hashemi Non-executive member Securities and Exchange Organization Ali Hosseini Hasan Ghalibaf Asl Managing director 26

27 Balance Sheet March 20, 2011 Assets Note March 20,2011 March 20,2010 Current Assets: Current Liabilities: Liabilities & shareholders equity Note March 20,2011 March 20,2010 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 ,153 3,666 Long Term Investments 11 30,221 30,221 Provisions for Employees Termination Benefits Other Assets 12 60,487 32,300 Total Non-Current Liabilities 6, Total Non-Current 195, ,880 Total Liabilities 61,561 47,227 Assets 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. 27

28 Income Statement For the Fiscal year ended March 20, 2011 Note Fiscal year ended March 20,2011 Fiscal year ended March 20,2010 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 period-adjusted 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. 28

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

30 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 & Non-commercial 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. 30

31 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 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 Intangible assets Intangible assets are carried on the cost basis and amortizable intangible assets (software) are amortized until maximum 3 years. 31

32 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 Mutal funds ,000 34,000 Total 190, , Time deposits with banks are including 3 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. 32

33 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(rent and services) 1,519 2,964 Other Listing fees receivable from listed companies at the end of the year 1389 were 8,886 million Rials from which 1,393 13,472 15,432 million Rials was carried as a provision for bad debts. 7. Other Accounts Receivable Amount March 20,2011 Amount March 20,2010 Loans to Employees (current portion) 4,947 3,180 Security for building lease 2,500 2,250 Income from short-term investment 2,130 2,597 Over the counter Co. (Fara bourse) National oil Refining and Distribution Co Security for Visa card Other 1, ,525 9,267 The Balance of prepayments is including: 8. Prepayments Costs, goods and services Tax Other March 20, 2011 March 20, , , ,164 4,016 33

34 9. Tangible Fixed Assets Cost- million IRR Retained depreciation-million Rials Book value- million Rials Description Balance on 20/3/2009 Additions Sold assets Transfers and Others Balance on 20/3/2010 Balance on 20/3/2009 During the year Sold assets Balance on 20/3/2010 Balance on 20/3/2009 Balance on 20/3/2010 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, Fixtures and 10,340 2,709 (342) 20 12,727 3,568 2,327 (145) 5,750 6,977 6,772 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 prepayments 40 53,363 - (40) 53, , Total 57,518 56,951 (1,691) (20) 112,758 5,968 3,746 (191) 9, ,235 51, All tangible fixed assets amounted 30,427 million Rials 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 Cost Retained depreciation Book value Sale price Land , Building 359 (46) ,349 (46) 1,303 1, Equipment, Fixtures and Computer 342 (145) Total 1,691 (191) 1,500 1, Sale profit Income from sale of the above mentioned assets are included in note Excess prepayments related to the capital includes 52,990 million Rials paid for 70% value of a land located in saadatabad street with an area of 2523/34 square meters. Total price of the land is 160,606 million Rials. 34

35 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 & 12 telephone lines Total 1, Software in the company is including Balance on 20/3/2009 Cost million Rials Purchases Balance on 20/3/2009 Balance on 20/3/2009 Retained amortization Amortization Balance on 20/3/2009 Balance on 20/3/2010 Book value million Rials Future Contract Software Other Software Total Balance on 20/3/2009 Long term investments in companies are including 11-Long Term Investments No. of Shares March 20, 2011 March 20, 2010 Over the counter 20,000,000 20,000 20,000 Corporation of Iran Central depository 10,000,000 10,000 10,000 corporation Iran financial center 199, (private Joint) Iran mercantile Exchange 13, corporation Total 30,221 30,221 35

36 A Summary of Financial Statement of Iran Central Financial center Company is as follows: Balance Sheet Mar 20, 2011 (29/12/1389) Assets March 20, 2011 Liabilities & Shareholders Equity March 20, 2011 Current assets 200 Current liabilities 56 Non-current assets 10 Total 210 Capital (200,000 Shares / 1000 Rials / Paid) 200 Retained Loss (46) 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 Total 60,487 32, Trade Accounts payable The amount due to accounts payable that is 7,761 million Rials is for balance of receivables from brokers that TSE received it from Central Depository Corporation, in excess of broker commissions. 36

37 14. Other Aaccounts payable Note March 20, 2011 Mar 20, 2010 Employee s saving fund ,386 2,427 Provision for incurred and unpaid 1, expenses Taxes payable Non-recognized settlements 706 1,115 Insurance Premium Securities and Exchange Organization 375 5,499 Other 2,233 1,385 Total 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 Rials has been deposited with banks with the interest rate of 17%. According to the agreements, the one-year interest amounted as 10,200 million Rials was received at the beginning of the period, 1,502 million Rials of which was recognized as non-operating income and the non-depreciated balance amounted as 8,698 million Rials was included under the above mentioned heading and was carried as non-operating income in the next year. 37

38 16. Dividends March 20, 2011 March 20, 2010 Dividend in 2009 (200 Rls for 1 share) 30,000 - Dividend in 2008 (300 Rls for 1 share) 45,000 45,000 Dividends in 2007 (250 Rls for 1 share) 37,500 37,500 Divide has in 2006 (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. Provision for tax Summary of the provision for taxes is as the followings Fiscal Year declared profit (Loss) Income taxable March 20,2011 () Tax declared assessed finalized paid provision balance March 20,2010 Million Rials provision balance Basis for recognition ,029 53,246 13,311 14,590 13,859 13, Taxes and ,819 26,443 6,888 9,822 9,666 9,666-2,785 books auditing ,300 62,429 15,990 20,624-15,607 4,698 20, ,521 86,644 21, ,661 - unaudited 26,359 23,409 38

39 18. Loans received The loans Received are including an loan from Bank Melli of Iran with 4% year interest in order to pay a housing loan to employees on the basis of an agreement to bourse branch Bank Melli of Iran. March 20, 2011 March 20, 2010 Principal ,500 Interest (first Year) Interest (second Year) Interest (over the period) 144-8,083 7,939 Paid in year 1387 (Principal and (1,968) (1,968) Interest) Paid in year 1388 (principal) (2,502) (2,502) Paid in year 1389 (principal) (2,501) - Balance 1,112 3,469 Long term portion - (834) Current portion 1,112 2, Provision for employees termination benefits Turnover of this account is as follows March 20, 2011 March 20, 2010 Balance at the beginning of the year 3,666 2,375 Paid out during the year (282) (546) Current year provision 2,769 1,837 Balance at the end of the year 6,153 3,666 39

40 20. Capital Capital of the company at the begining of the year as amounted 150 billion Rials, consists of 150 million non-bearer full-paid shares having a nominal value of 1,000 Rials. According to the approvals of the extraordinary general meeting on 6/10/2010, capital increase could be allowed to the extent of 150 billion Rials in two phases (70% in the first phase and 30% in the second phase) from prudential reserve and retained profit. The first phase of the capital increase has been made in the reported year and the capital reached 48 and 57 billion Rials from prudential reserve and retained profit respectively. According to the article 9 of the Constitution at the balance sheet date the company s shareholders are classified as: Mar 20,2011 Mar 20, 2010 Shareholders Shares % Shareholders Shares % Brokers 77 86,592, ,937, Financial ,017, ,834, institutions Other 5,729 68,389, ,806 40,229, Total 5, ,000, , ,000, Reserves Legal Reserve Prudential Reserve Balance at the beginning of the year 12,149 48,592 Raising during the year 5,443 21,772 Transfer to the capital - (48,000) Total 17,592 22, Services Revenue Note March 20, 2011 March 20, 2010 Income from trading commission , ,268 Income from broker services ,390 35,690 Income from listing fees ,921 23,232 Rentals 6,599 6,231 Other - 20 Total 202, ,441 40

41 22.1. According to the approval of the Securities & Exchange Organization, income from trading commission amounted as 131,579 million Rials has been calculated, based on 1/4 value of per transaction, up to 200 million Rials (22.33 Thou sand dollars) ceiling for the first quarter of the year, and based on 0/8 value of per 1000 transaction up to 200 million Rials from 22/6/2010 on and it has been received by the Central Depository Company, which details have been provided bellow. The remainder (158 million Rials) relates to income from future contracts commission. According to the approvals of the Securities and Exchange Organization, the future contracts commission has been based on. 0/8 value of a contract March 20, 2011 March 20, 2010 Normal transactions (Retail) 117,970 88,626 Whole trading 13,600 16,600 Market maker transactions 9 42 Total 131, , Income from broker services Notes March 20, 2011 March 20, 2010 Trading system fees ,042 22,215 Brokerage fees 8,725 8,725 Exchange floor trading station fees 4,623 4,750 Total 44, Increases in trading system fees and commissions result from increases in trading stations and brokers performance respectively Income from listing fees is as follows Note March 20, 2011 March 20, 2010 Listing fees ,037 15,854 Admission fees ,884 7,378 19,921 23,232 41

42 According to the approval of the Securities and Exchange Organization, Listing fees are as equivalent to of capital and up to 50 million Rials for every year According to the approval of the Securities and Exchange Organization, Admitting fees are annually as equivalent to of capital and up to 500 million Rials, for the companies that their capital are equivalent or less than 250 billion Rials and up to 1000 for the companies that their capital are more than 250 billion Rials. 23. Cost of rendered services: The costs of rendered services are including: Note March 20, 2011 March 20, 2010 Direct wage and salary ,249 37,345 Repair and maintenance of Regional ,127 15,959 floors Floors security forces fees 4,780 3,198 Trading system management ,219 12,500 Computers, communications and 2,924 1,793 technology costs Marketing and development of markets , and financial instruments Conference and exhibition costs Council duty Total 79,626 71, Items of Direct wages are including: March 20, 2011 March 20, 2010 Salary and wages 15,360 13,412 New year bonus and rewards 12,444 9,898 Legal and job benefits 7,996 5,335 Insurance premium by employer 4,505 3,718 Over time pay 3,847 2,209 Employee s termination benefits 2,018 1,353 Mission allowance and traveling costs 1, Others Total 48,249 37,345 42

43 23.2. The cost of supply and maintenance of regional floors are including 23.4 The amount is related to launching the future contracts market in this year March 20, 2011 March 20, 2010 Rentals for regional floors buildings 9,266 7,650 Depreciation costs 3,591 3,226 Water, Electricity, Telephone and Gaz 1,872 1,396 Repair and maintenance of floors 1,684 1,772 Other 1,714 1,915 Total 18,127 15, According to the contract concluded for the first quarter of the year, the cost of trading system management has been paid to Technology Management co. of Tehran stock Exchange. 24. General & Administrative Expenses Note March 20, 2011 March 20, 2010 Salaries and wages ,795 16,874 Rent of building 2,169 2,131 Bad debt expenses ,393 - Council duty 1, Water, Electricity, Phone and Gas 1, Meetings Administrative and consumable supplies The board and committees attending compensation Membership fee of professional associations Publication cost Depreciation Cost Repair and maintenance Post Others 1, Total 35,121 22,985 43

44 23.1. Compensation costs are including March 20, 2011 March 20, 2010 Salaries, wages 6,336 4,924 bonus and rewards 7,024 5,010 Legal and job benefits 4,742 3,167 Over time payments 2,465 1,262 Insurance premium by employer 1,891 1,279 Mission allowances and traveling costs 1, Employees termination benefits Others Total 24,795 16, Increases in the costs are as a result of approvals of Ministry of Labor and Social Affairs and increase of over time hours. 25. Net other incomes and non-operating expenses Other income and non operating expenses are including March 20, 2011 March 20, 2010 Bank deposit interest 23,951 33,545 Contribution bonds 14,764 2,016 Over the Counter Exchange company 2, dividend Central depository corporation s dividend 1,000 1,250 Income from tangible fixed assets sale Iran mercantile Exchange company 5 5 dividend Net profit (loss) of the foreign currency (2) 59 exchange Fines and claims (Note 24-1) 0 (2,825) Other non-operating income Total 42,621 34,996 44

45 26. Prior Period Adjustments The item as amounted 1,848 million Rials relates to adjustments to provision for tax of the financial year 1387, which has been paid to Tax affairs Organization and the remainder (4,634 million Rials) relates to the difference of provision for tax in the financial year In order to provide a proper picture of the financial position and operation results, corresponding items of provision for tax and retained profit related to the prior period adjustments have been improved and restated in corresponding financial statements. Then the corresponding items do not match to financial statements provided in the previous financial year. Note The balance in the previous financial statements Debtor Creditor The balance in the current financial statements Million Rials Million Rials provision for tax 17 16,927-6,482 23,409 Retained profit 93,286 6,482-86,804 Total 6,482 6, Reconciliation of Operating Profit (loss) Reconciliation of operating profit (loss) to net cash inflow (outflow) from operating activi ties is as the followings: March 20, 2011 March 20, 2010 Operating profits 87,900 75,743 Depreciation expenses 3,864 3,454 Net increase in employees termination benefits 2,487 1,291 Increase in operating accounts receivable (8,462) (12,347) Increase in prepayments 1,750 (1,916) Increase (decrease) in operating accounts payable 3,786 (7,488) Deferred income 8,698 - The board of directors bonus (1,400) (1,232) Other non-operating income and expenses Total 99,166 57,583 45

46 28. Contingent Lliabilities and Capital Oobligations Capital obligations as amounted 107, 616 million Rials are related to the 30% price of a land, that is 22,710 million Rials and the remainder costs of it, 84,906 million Rials There is no material contingent liability at the balance sheet date to require disclosure. 29. Post balance sheet date events No significant post balance sheet event has occurred requiring adjustments or disclosures in the financial statements, except what included in the note Eps of the period has been calculated based on the weighted average of the common shares number of the fiscal year. 31. Related parties transactions 46

47 Party Relationship Type Transaction details Amount Closing balance of due to (from) Note A. Transactions subject to the Article 129 of the Commercial Code as amended OTC B. other related parties Board of Directors Member/Having a common bourd of directors member Received dividend Allotment of Expenses - 2, , Iran Central Depository and Settlement Co. Investee company Received dividend 25 Rentals and Expenses , Tadbirgaran-e-farda Brokerage Shareholder Sale of an apartment located in Ghazvin floor Fair value of the transaction has a significant difference with the transaction price. 1, Retained earnings at the end of the year Retained Earnings allocation depends on general assembly ratification Amount Legal duties Division of minimum 10% of net profit according to the Article 90 of the Commercial Code as am ended. 10,886 Board of Directors proposal Dividend proposed by Board of Directors 47 25,500

48 Appendices The Arg of Karim Khan is a citadel located in the north-east of Shiraz, southern Iran. It was built as part of a complex during the Zand dynasty and is named after Karim Khan, and served as his living quarters. In shape it resembles a medieval fortress. 48

49 Appendix 1 About TSE The Arg-é Bam in Persian, Bam citadel ) was the largest adobe building in the world, located in Bam, a city in the Kermān Province of southeastern Iran. 49

50 Te Teh hr ra an n SS tto oc ck k EE xxc ch ha an ng ge e 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 & Non-commercial Institutions Registration Office in Tehran and demutualized in 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. Capital and Shareholders According to the Securities Market Law, no legal or individual shareholder may hold directly or indirectly more than 2.5% shares of TSE. TSE shareholders are classified as brokers, financial institutions and others. Shareholders in 2010 Group Shareholders number Share number % Brokers 77 86,592, Financial institutions ,017, Others ,389, Total ,000,

51 Regulatory Framework Due to the capital markets development and the need for new regulation, the new Securities Act was passed by the Iranian parliament in The Act, which is more comprehensive and advanced than the previous one, has been passed to protect investors rights and aimed at organizing, and development of a fair, efficient and transparent securities market. The Act provides required regulation for the primary market, prevention of financial violations, development of various financial instruments and financial institutions. After passing the Act, some changes occurred in the legal structure of Iranian securities market. According to the Act, a new regulatory body, called Securities & Exchange Organization (SEO) was established to operate as a supervisor on legislation and enforcement and other affairs under the Law. In other words, the regulator of the Securities Market comprises two regulatory institutions: Securities & Exchange High Council and Securities & Exchange Organization. The Securities & Exchange Council will be the highest authority and will be responsible for all related policies, market strategies, and supervision of the market. The Chairman of the Council will be the Minister of Economy and finance; other members are: Minister of Commerce, Governor of the Central Bank of Iran, President of the Chamber of Commerce, Attorney General, Chairman of the SEO, representative of the brokers association, three financial experts proposed by the Minister of economy and Finance and approved by the Council of Ministers, and one representative for each commodity exchange. The SEO will be responsible for administrative and supervisory duties, governed by the Board of Directors. The SEO s Board of Directors will be elected by the Securities and Exchange Council. Legal Structure of Iranian Securities Market Securities & Exchange High Council Securities & Exchange Organization Other Financial Institutions Commodity Exchange Tehran Stock Exchange 51

52 Organizational structure The board of directors of TSE constitutes 7 non-executive members appointed by the shareholders of the company for 2 years. These individuals appoint a managing director, who manages the operations of the Exchange through the various department heads that report to him. Managing director s term of office is for two-year renewable term. Board of Directors Audit Committee Risk Management Committee Internal Aauditing Department Board Secretariat Remuneration committee CEO Market Department CEO Office Public Relation and International Department Legal Department Administration Issuers & Members Research & Business Development Financial Department Issuers Department R&D Department Administration Department Members Department Planning Department IT Department Listing Department Training Department Regional Floors Department 52

53 Tehran Regions Total Human Resources Trading System TSE is open for trading five days a week from Saturday to Wednesday, excluding public holidays. Trading takes place through the Automated Trade Execution System from 9am to 12am, which is integrated with a clearing, settlement, depository and registry system. The trading system is an order driven system, which matches buying and selling orders of the investors. Investors can place their orders with TSE accredited brokers, who enter these orders into the trading system. Then, the system automatically matches buy and sell orders of a particular security based on the price and quantity requirements. The mechanism for which the price of equities is determined is as follows: The best price (price priority) Time of order priority Under the price priority rule, a selling (buying) order with the lowest (highest) price takes precedence. Under the time priority rule, an earlier order takes precedence over others at the same price. The trading system also generates and displays details of current and historical trading activity, including prices, volumes traded and outstanding buy and sell orders. This ensures that investors have the required information to be able to make informed investment decisions. Daily Price Fluctuations According to the rules, the price fluctuation is fixed to a maximum of 4% either way from the last closing. Restriction on Rights is 8%. This can be changed in specific situation by the Board of the TSE in case of unusual price movements. Short selling is not permitted and no minimum trading lots is determined. Trading Days Saturday-Wednesday Hours 9:00-12:00 Market segmentation Main market (main and secondary boards), secondary board System Automated Trading System (ATS) (order driven) Mechanisms Opening/Continuous auction Market-maker/ Specialists Selective Instruments Shares & Rights, Corporate Participation Bonds Currency Iranian Rial Real time information bid/ask, prices, Volume, Value and company announcements Dividend tax 22.5% tax levied on earnings at source From Company Capital gain tax None 53

54 Trading floor is open to investors during operating hours and provides facilities like large screens displaying real time trading data. Additional space is available which oversees the trading floor that contains touch-screen terminals which can be used by investors to view the details of outstanding buy and sell orders. Market Information Dissemination Timely issuance of information is one of the main indications of a fair, efficient and transparent market. TSE continuously issues news and information related to the trading price and volume through its website according to the disclosure rules approved by the SEO. Point information related to trades will be provided for investors as free. SEO also provides news related to issuers through its website. Besides, SEO has implemented a network named CODAL through which information affecting the price will be issued directly. All these information are free by now. Clearing & Settlement Central Securities Depository of Iran has been established as an implication of the new Securities Market Act. The Central Securities Depository of Iran (CSDI) accomplishes clearing and settlement of trading, maintains and transfers the securities as dematerialization and acts as the central registry of the country s securities market as well. In near future, the institution will be benefited by the new depository software, carrying out clearing and settlement of trading on the basis of DVP and acting as CCP in trade clearings. CSDI is managed as a corporation type company, with TSE, brokers and banks as its shareholders. The CSDI is an integral part of a transparent, viable, fair and efficient equities market in Iran that has attracted domestic investor s confidence and will contribute to the wealth of the nation. Clearing & Settlement Central Depository Central Securities Depository of Iran (CSDI) Period T+3 Registered Yes Settlement Book entry Clearing Netting DVP In the Future Risk Sharing In the Future Margin/Lending In the Future 54

55 Brokerage Fees With effect from 22 May 2007, the brokerage fees for shares and rights are 0.4% of the value of the transaction payable by both the seller and buyer subject to the maximum 100 million Rials. TSE Commission % of transaction value payable by both the seller and buyer with a maximum of 200 million Rials. SEO Commission 0.1% of transaction value payable by both buyer and seller with a maximum of 200 million Rials. Clearing Fee 0.071% of transaction value payable by both seller and buyer with a maximum of 200 million Rials. Taxes The sellers pay 0.5 percent of the value of the transaction. There are no taxes on capital gain. 22.5% tax has levied on company s profit and there is no dividend tax on shareholders directly. Commissions & Fees to the market as the main indicator of share price movement. TEPIX is a weighted market value of all share prices appearing on the TSE Price Board. In addition to the TEPIX, Total return index (TEDPIX), price indices of Main and Secondary Markets, of every individual industry is computed as well. TEPIX calculation method is as follows: Where Pit and Pib represent share price of company i respectively at time t and at the close of trading on March 21st, 1990; and C shows the total number of shares. Main and Secondary Markets indices calculation method are as TEPIX and No adjustment takes place on the day when a share becomes ex-dividend. TEDPIX is a total return index, that is the price level index plus the dividend reinvested. Participation Bonds Trading Commission 0.1% of transaction value payable by both buyer and seller with a maximum of 100 million Rials. Transactions on participation bonds are exempt from any other taxes. Indices In 1990, the All-Shares Price Index, TEPIX introduced 55

56 Estimation Interval Base Value Base Date Number Indices Daily 1, March 21, Total Return Index (TEDPIX) Daily March 21, All- Share Price Index (TEPIX) Daily 4, March 21, Financial Index Daily 1, March 21, Industrial Index Daily March 21, Top 50 Companies Index Daily March 21, Each Industry(sector) Index Daily March 21, Each Company Index After each Change 1, March 21, Cash Dividend Index (TEDIX) 56

57 Single Stock Futures Contract Specifications Contract Underlying stock Ticker symbol Trading hours Contract size Delivery months Daily price limit Minimum Price Fluctuation Trading Period Initial Margin Maintenance Margin Collateral Limit (Optional) Order Limit Currency Delivery Date Trading Fees (Based on Trading Value of the Contract) Physical Delivery Fee Description Common stocks listed on Tehran Stock Exchange (TSE). Each single stock futures is assigned a ticker symbol (Underlying Stock -Maturity Year-Maturity Month) 09:00AM-12:30 PM Tehran time, Saturday through Wednesday of the regular business days of the Tehran Stock Exchange. The Number of shares that makes the average value of the Contract equal to 20,000,000-30,000,000 Rls. 6 two-month cycles that the Bimonthly events start at 22 March. ±4% of previous day s settlement price 1 Rls per share First trading date till the day before delivery date 20% of contract value. 60 % of initial margin. 20 % of contract value in cash or other agreed notes 10 contract Rls The day after last trading day TSE CDS Trading Member SEC Long Put Long Put Long Put Long Put of contract value at settlement price the last trading day's Market-Wide position limit: No. of free float share divided by contract size divided by no. of contracts that simultaneously is traded. Member position limit: utmost 20 % of Market-Wide position limit based on broker's collaterals. Institutional Client Individual Client Higher of of market-wide position limit or 0.1 of paid capital of market-wide position limit Position limit 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 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. 57

58 When the capital increase and dividend payment by the issuer, TSE adjusts the last daily settlement price and the contract size before the trading symbols are opened. Others If the annual general meeting of the company is coinciding with the trading period of a contract, TSE may avoid to set trading symbol for the contract in this month. 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. 58

59 Appendix 2 Members, Mutual funds, Issuers The Blue Mosque Masjed-e Kabūd; Azerbaijani: is a famous historic mosque in Tabrīz, Iran. The mosque and some other public buildings were constructed in 1465 upon the order of Jahan Shah, the ruler of Kara Koyunlu.