A FINAL PROJECT REPORT ON Study On the Stock Exchange in SAARC Region A report submitted to IIMT, Greater Noida as a partial

l fulfillment of Full time Postgraduate Diploma in Business Management. Under the Guidance of Mr. Anshul Mittal Submitted To: D. K. Garg (Chairman) IIMT, Greater Noida. Submitted By: MONIKA(Finance) Enr No.- FMR3010 Batch-15th

Ishan Institute of Management & Technology 2, Knowledge Park 1, Greater Noida, Distt. G.B. Nagar (U. P.) E-mail: ishan_corporate@yahoo.com Website: www.ishanfamily PREFACE
1

As a student of management, apart from theoretical studies we need to get a deeper insight into the practical aspects of those theories by working on various projects. So these projects have high importance in management studies to enhance the knowledge and skills. Management in India is heading towards a better profession as compared to other professions. The demand for professional managers is increasing day by day. Working on this project has been an enriching experience. This project will help me a lot in the professional growth. It has given us the confidence to prepare for ourselves as fully fledged international marketing professional in the eminent future. A comprehensive understanding of the principle will increases the decision-making ability and sharpens the tools for this purpose. Practical Knowledge is an important suffix to theoretical Knowledge. One cannot merely depend upon the theoretical Knowledge. Classroom lectures make the fundamental concept of Management clear. They also facilitate the learning of practical Things. However, Classroom lectures must be correlated with the practical training situations. It is in the sense that practical Training in a company has a significant role to play in the subject of business management. The demand for professional managers is increasing day by day. To achieve profession competence, manager ought to be fully occupied with theory and practical exposure of management. A comprehensive Understanding of the principle will increases their Decision making ability and sharpening their tools for this purpose. The scope of the work under taken by us includes introduction to basic & major things about the Impact of e-banking on the customer and also their own future aspects.

CERTIFICATE

This is to certify that the project work done on Study On the Stock Exchange in SAARC Region submitted to Ishan Institute of Management and Technology, Greater Noida by Monika in partial fulfillment of the requirement for the award of degree of Post Graduate Diploma in Business Management is a bonafide work carried out by them under my supervision and guidance. This project work is the original one has not been submitted anywhere else for any other degree/diploma.

Date: Name of the guide: Place: Mr. Anshul Mittal General Manager Allied Financial Services Pvt. Ltd. Vikas Deep Building 3 rd floor Laxmi Nagar

Seal/Stamp of Guide

ACKNOWLEDGEMENT

No research can blossom from single persons mind without proper guidance, assistance and inspiration from various quarters. Our project was given its present shape by assistance of many people whom we are greatly indebted to. We owe deep intellectual debt to the numerous people who through their rich and various contributions have greatly improved our understanding of various concepts of our project. We express our sincere thanks to honorable Mr. Anshul Mittal (General Manager) for his stimulate discussion, constructive and valuable suggestions that helped us in this endeavor. We would like to thank all those people who graciously helped us by sharing their valuable time, experience & knowledge for completion of this project. We take an opportunity to express our sincere thanks to Dr. D. K. Garg (Chairman, IIMT), and all the staff members of the PGDM department for making available all the facilities in fulfilling the requirements for this reasonable work. Finally, we thank our parents for their moral support and financial help.

Monika (FMR 3010)

DECLARATION

The Final project on Stock Markets in SAARC Region-Comparative

Study under the guidance of Mr. Anshul Mttal is the original work done by me.
This is the property of the institute and use of the report without prior permission of the institute will be considered illegal and actionable.

Signature of Student Date: Monika ENR No.: FMR 3010

TABLE OF CONTENTS
CHAPTER NAME OF TOPICS PAGE
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NO. 1 2 3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4 5. 6. 7 8. 9. 10. INTRODUCTION HISTORY OF SAARC STOCK MARKETS IN SAARC COUNTRIES NEPAL STOCK EXCHANGE INDIAN STOCK EXCHANGE COLUMBO STOCK EXCHANGE MALDIVES STOCK EXCHANGE AFGHANISTAN STOCK EXCHANGE KARANCHI STOCK EXCHANGE DHAKA STOCK EXCHANGE RULES AND REGULATION FRO STOCK EXCHANGE IN SAARC REGION SAARC TRADES AND TREATIES GOVERNMENT RULES AND REGULATION OF STOCK EXCHANGE IN SAARC COUNTRIES MAJOR STOCK MARKET SCAM IN SAARC COUNTRIES LEARNING AND EXPERIENCE CONCLUSION BIBLIOGRAPHY

NO. 09-11 12-15 16-17 18-27 28-31 31-32 33 33-35 36-37 38-118 119-146 147-256 257-299 300 301-303 304

EXECUTIVE SUMMARY

SOUTH ASIAN ASSOCIATION FOR REGIONAL CO-OPERATION (SAARC) represents more than one-fifth of humanity, combining population is more than 150 crore. It is the largest regional grouping in terms of human resources than that of EU and ASEAN. But nearly half of its population is living below the poverty line. SAARC was formed in 1985 with the goal of raising the living standard of the regions poverty stricken people. But unfortunately it has not been able to leverage its full potential.

Set up in 1985, SAARC has passed its disturbing teen phase and now in 2007, April 3-4 it touched 22 years, more responsible than ever before. The attainment of the maturity of SAARC is reflected from the fact that it has expanded itself by admitting Afghanistan as the eighth member state and giving China, South Korea and Japan observer status. The United States and the European Union also observers, sent high level delegation to the summit. Iran was given permission to join as an observer next year. In the 13th summit, 2005, held at Dhaka, the decision on Afghanistan, to join SAARC was taken. The new dynamism of SAARC and its willingness to move forward is reflected in the statement given by the PM of India: We stand today at the crossroads of historic change and opportunity. I believe that this summit has given us the hope that we can live in peace and amity and the confidence that we can make SAARC work. I pledge to work sincerely under the able guidance and cooperation of the leaders of South Asia to make the year ahead a turning point in the history of SAARC. I believe that a new dawn is breaking out over South Asia and that we are all set to fulfill the promise and vision of SAARC. SAARC has miles to go and multiple roles to perform. It has shown willingness to progress together by admitting Afghanistan as a new member and giving China, South Korea and Japan as observer status. Despite the new dynamism and a new sense of purpose shown by the leaders at the Delhi summit, regional politics and bilateral trust deficit is going to play a vital role in determining SAARCs success. In this summit Afghanistan as the new member went public accusing Pakistan of supporting the Taliban. Nepal is in favour of giving China the member status by further expanding the area of operation of SAARC, which India may not like. The great wall of politics acts as a stumbling bloc. SAARC should learn from the success of EU. With the resolve to make South Asia not a nuclear flash point, not the most dangerous place of earth to live in, but a South Asia of cooperation, peace, mutual understanding, so that SAARC can fulfill its basic objectives for which it was formed.

CHAPTER-1 INTRODUCTION
The South Asian Association for Regional Cooperation (SAARC) is an economic and political organization of eight countries in Southern Asia. In terms of population, its sphere of influence is the largest of any regional organization: almost 1.5 billion people, the combined population of its member states. It was established on December 8, 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and Bhutan. In April 2007, at the Association's 14th summit, Afghanistan became its eighth member. SOUTH ASIAN ASSOCIATION FOR REGIONAL CO-OPERATION (SAARC) represents more than one-fifth of humanity, combining population is more than 150 8

crore. It is the largest regional grouping in terms of human resources than that of EU and ASEAN. But nearly half of its population is living below the poverty line. SAARC was formed in 1985 with the goal of raising the living standard of the regions poverty stricken people. But unfortunately it has not been able to leverage its full potential. In 22 years-13 summits, not encouraging. The functioning of SAARC has suffered most because of political differences between its two major constituents-India and Pakistan. New Delhis gigantic size in terms of natural and human resources, military capability and an emerging economic power creates apprehension of its future role in SAARC, in the minds of other constituents. The growing importance of India in both inter regional and international field as a major actor in terms of economic and military capability appears to have negative consequences in the psychology of other SAARC member countries. Set up in 1985, SAARC has passed its disturbing teen phase and now in 2007, April 3-4 it touched 22 years, more responsible than ever before. The attainment of the maturity of SAARC is reflected from the fact that it has expanded itself by admitting Afghanistan as the eighth member state and giving China, South Korea and Japan observer status. The United States and the European Union also observers, sent high level delegation to the summit. Iran was given permission to join as an observer next year. In the 13th summit, 2005, held at Dhaka, the decision on Afghanistan, to join SAARC was taken. The new dynamism of SAARC and its willingness to move forward is reflected in the statement given by the PM of India: We stand today at the crossroads of historic change and opportunity. I believe that this summit has given us the hope that we can live in peace and amity and the confidence that we can make SAARC work. I pledge to work sincerely under the able guidance and cooperation of the leaders of South Asia to make the year ahead a turning point in the history of SAARC. I believe that a new dawn is breaking out over South Asia and that we are all set to fulfill the promise and vision of SAARC. SAARC has miles to go and multiple roles to perform. It has shown willingness to progress together by admitting Afghanistan as a new member and giving China, South Korea and Japan as observer status. Despite the new dynamism and a new sense of 9

purpose shown by the leaders at the Delhi summit, regional politics and bilateral trust deficit is going to play a vital role in determining SAARCs success. In this summit Afghanistan as the new member went public accusing Pakistan of supporting the Taliban. Nepal is in favour of giving China the member status by further expanding the area of operation of SAARC, which India may not like. The great wall of politics acts as a stumbling bloc. SAARC should learn from the success of EU. With the resolve to make South Asia not a nuclear flash point, not the most dangerous place of earth to live in, but a South Asia of cooperation, peace, mutual understanding, so that SAARC can fulfill its basic objectives for which it was formed. Instead of issuing declarations after declarations the organization should strengthen itself, learning from its own past and others. It is politics, which divides, economy that unites. The EU, the countries of the Mekong sub region applied the principle of economic cooperation, sidelining their political difference, in making their region more integrated economically. It is along way to go for South Asian Economic union as proposed at Kathmandu Summit in 2002 or the common currency as proposed by Sri Lankas president at the 14th summit to speed up regional integration. It may be too early to follow these ideals. Trade should be given prime importance and steps should be taken for the full operationalisation of SAFTA by all the member states. Disappointing the fact is that Pakistan stuck to its old stance of making all economic progress conditional to the resolution of political disputes. To make the year turning point in the history of SAARC, as declared by the PM of India, all member states must bridge the gap of trust deficit and sideline politics in favour of economics in the lager interest of the region.

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CHAPTER 2 HISTORY OF SAARC

In the late 1970s, Bangladeshi President Ziaur Rahman proposed the creation of a trade bloc consisting of South Asian countries. The idea of regional cooperation in South Asia was again mooted in May 1980. The foreign secretaries of the seven countries met for the first time in Colombo in April 1981. The Committee of the Whole, which met in Colombo in August 1981, identified five broad areas for regional cooperation. New areas of cooperation were added in the following years. The objectives of the Association as defined in the Charter are: 1. To promote the welfare of the peoples of South Asia and to improve their quality of life;

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2. To accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potential; 3. To promote and strengthen collective self-reliance among the countries of South Asia; 4. To contribute to mutual trust, understanding and appreciation of one another's problems; 5. To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; 6. To strengthen cooperation with other developing countries; 7. To strengthen cooperation among themselves in international forums on matters of common interest; and 8. To cooperate with international and regional organizations with similar aims and purposes. The Declaration on South Asian Regional Cooperation was adopted by the Foreign Ministers in 1983 in New Delhi. During the meeting, the Ministers also launched the Integrated Programmed of Action (IPA) in nine agreed areas, namely, Agriculture; Rural Development; Telecommunications; Meteorology; Health and Population Activities; Transport; Postal Services; Science and Technology; and Sports, Arts and Culture. The South Asian Association for Regional Cooperation (SAARC) was established when its Charter was formally adopted on 8 December 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan was added to the regional grouping at the behest of India on November 13, 2005, and became a member on April 3, 2007. With the addition of Afghanistan, the total number of member states were raised to eight (8). In April 2006, the United States of America and South Korea made formal requests to be granted observer status.

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The European Union has also indicated interest in being given observer status, and made a formal request for the same to the SAARC Council of Ministers meeting in July 2006. On August 2, 2006 the foreign ministers of the SAARC countries agreed in principle to grant observer status to the US, South Korea and the European Union. On 4 March 2007, Iran requested observer status. Followed shortly by the entrance of Mauritius.

SAARC PREFERENTIAL TRADING ARRANGEMENT

The Agreement on SAARC Preferential Trading Arrangement (SAPTA) was signed on 11 April 1993 and entered into force on 7 December 1995, with the desire of the Member States of SAARC (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions. The establishment of an Inter-Governmental Group (IGG) to formulate an agreement to establish a SAPTA by 1997 was approved in the Sixth Summit of SAARC held in Colombo in December 1991. The basic principles underlying SAPTA are: overall reciprocity and mutuality of advantages so as to benefit equitably all Contracting States, taking into account their respective level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems; Negotiation of tariff reform step by step, improved and extended in successive stages through periodic reviews; Recognition of the special needs of the Least Developed Contracting States and agreement on concrete preferential measures in their favour; Inclusion of all products, manufactures and commodities in their raw, semi-processed and processed forms. So far, four rounds of trade negotiations have been concluded under SAPTA covering over 5000 commodities. 13

SOUTH ASIAN FREE TRADE AREA

The Agreement on the South Asian Free Trade Area is an agreement reached at the 12th SAARC summit at Islamabad, capital of Pakistan on 6 January 2004. It creates a framework for the creation of a free trade area covering 1.4 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives. The seven foreign ministers of the region signed a framework agreement on SAFTA with zero customs duty on the trade of patc`lly all products in the region by end 2016. The new agreement i.e. SAFTA, came into being on 1 January 2006 and will be operational following the ratification of the agreement by the seven governments. SAFTA requires the developing countries in South Asia, that is, India, Pakistan and Sri Lanka, to bring their duties down to 20 percent in the first phase of the two year period ending in 2007. In the final five year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts. The least developed nations in South Asia consisting of Nepal, Bhutan, Bangladesh and Maldives have an additional three years to reduce tariffs to zero. Pakistan has signed but not ratified the treaty, though there is hope in India that it will sometime in 2008.

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CHAPETR-3 STOCK MARKETS IN SAARC COUNTRIES NEPAL STOCK EXCHANGE

The Nepal Stock Exchange Limited popularly called NEPSE is the only Stock Exchange of Nepal. It is located in SinghaDurbar Plaza, Kathmandu Nepal. In April 4, 2008 the 15

equity market capitalization of the companies listed on NESPE was US$ 3658.39 million. The basic objective of NEPSE is to impart free marketability and liquidity to the government and corporate securities by facilitating transactions in its trading floor through member, market intermediaries, such as broker, market makers etc. NEPSE opened its trading floor on 13 January 1994.Till April 4,2008 the number of listed companies were 147. The NEPSE Index is primary all equity market index of NEPSE.

HISTORY
The history of securities market began with the floatation of shares by Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. in 1937. Introduction of the Company Act in 1964, the first issuance of Government Bond in 1964 and the establishment of Securities Exchange Center Ltd. in 1976 were other significant development relating to capital markets. Securities Exchange Center was established with an objective of facilitating and promoting the growth of capital markets. Before conversion into stock exchange it was the only capital markets institution undertaking the job of brokering, underwriting, managing public issue, market making for government bonds and other financial services. Nepal Government, under a program initiated to reform capital markets converted Securities Exchange Center into Nepal Stock Exchange in 1993.

MEMBERS
Members of NEPSE are permitted to act as intermediaries in buying and selling of government bonds and listed corporate securities. At present, there are 23 member brokers and 2 market makers, who operate on the trading floor as per the Securities Exchange Act, 1983, rules and bye-laws. Besides this, NEPSE has also granted membership to issue and sales manager securities trader (Dealer). Issue and sales manager works as manager to the issue and underwriter for public issue of securities whereas securities trader (Dealer) works as individual portfolio manager.

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SECURITIES AVAILABLE FOR TRADING

A. Shares Equity Shares Preference Shares B. Debentures C. Government Bonds

TRADING SYSTEM
NEPSE operates on the NEPSE Automated Trading System (NATS), a fully screen based automated trading system, which adopts the principle of an order driven market. Purchase & Sell of Physical Share certificates is done through NATS. The Automated Trading System was started from 24 August 2007.

INDIAN STOCK EXCHANGE

NATIONAL STOCK EXCHANGE (NSE)

National Stock Exchange Limited

Type Stock Exchange Location Mumbai, India Coordinates 19337N 725135E Owner National Stock Exchange of India Limited Key people Mr. Ravi Narain Managing Director Currency INR

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No. of listings 1587 MarketCap US$ 1.46 trillion (2006) Indexes S&P CNX Nifty CNX Nifty Junior S&P CNX 500

The National Stock Exchange of India Limited (NSE), is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading.. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.

ORIGIN

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The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a taxpaying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

INNOVATIONS
NSE has remained in the forefront of modernization of India's capital and financial markets, and its pioneering efforts include:

Being the first national, anonymous, electronic limit order book (LOB) exchange

to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model.

Setting up the first clearing corporation "National Securities Clearing

Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India.

Co-promoting and setting up of National Securities Depository Limited, first Setting up of S&P CNX Nifty. NSE pioneered commencement of Internet Trading in February 2000, which led

depository in India.

to the wide popularization of the NSE in the broker community.

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Being the first exchange that, in 1996, proposed exchange traded derivatives,

particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives

Being the first and the only exchange to trade GOLD ETFs (exchange traded NSE has also launched the NSE-CNBC-TV18 media centre in association

funds) in India.

with CNBC-TV18

MARKETS
Currently, NSE has the following major segments of the capital market:

Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures

HOURS
NSE's normal trading sessions are from 09:55am to 03:30pm on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

INDICES
NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including.

S&P CNX Nifty CNX Nifty Junior CNX 100 (= S&P CNX Nifty + CNX Nifty Junior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) 20

CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

CERTIFICATION
NSE also conducts online examination and awards certification, under its programmers of NSE's Certification in Financial Markets (NCFM). Currently, certifications are available in 19 modules, covering different sectors of financial and capital markets. Branches of the NSE are located throughout India.

BOMBAY STOCK EXCHANGE (BSE)

Bombay Stock Exchange Mumba heyar Bzr

Type Stock Exchange Location Mumbai, India Owner Bombay Stock Exchange Limited Key people Rajnikant Patel (CEO)

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Currency INR No. of listings 4700 MarketCap US$ 1.79 trillion (Dec 31, 2007) Volume US$ 980 billion (2006) Indexes BSE Sensex Website www.bseindia.com

The

Bombay

Stock

Exchange

Limited (Marathi/Hindi: Mumba

eyar

Bzr)

(formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) has the greatest number of listed companies in the world, with 4700 listed as of August 2007. It is located at Dalal Street, Mumbai, India. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was US$ 1.79 trillion, making it the largest stock exchange in South Asia and the 12th largest in the world. The Bombay Stock Exchange was established in 1875. Around 6,000 Indian companies list on the stock exchange, and it has a significant trading volume. The BSE SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for most of the trading in shares.

ALLIANCES
Singapore Exchange (SGX) made a strategic investment in Bombay Stock Exchange, acquiring 5% of its shares for US$42.7 million. It is consistent with the strategy of building an Asian Gateway for securities and derivatives. BSE is also considering to take part of the capitalisation of the rising ascension of its partner, Singapore Exchange, which is becoming a leading financial hub in Asia-Pacific. BSE also claims a strategic partnership with Deutsche Brse.

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HOURS
Beginning of the Day Session....8:00 - 9:00 Login Session....9:00 - 9:30 Trading Session....9:55 - 15:30 Position Transfer Session....15:30 - 15:50 Closing Session....15:50 - 16:05 Option Exercise Session....16:05 - 16:35 Margin Session....16:35 - 16:50 Query Session....16:50 - 17:35 End of Day Session....17:35 The hours of operation for the BSE quoted above are stated in terms of the local time in Mumbai, India (also known as Bombay). This translates into a standard time zone UTC/GMT +5:30. BSE's normal trading sessions are on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

HISTORY OF BSE
Following is the timeline on the rise and rise of the Sensex through Indian stock market history. 1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. 1860-1865 Cotton price bubble as a result of the American Civil War 1870 - 90's Sharp increase in share prices of jute industries followed by a boom in tea stocks and coal.

1900s
1978-79 Base year of Sensex, defined to be 100. 1986 Sensex first compiled using a market Capitalization-Weighted methodology for 30 component stocks representing well-established companies across key sectors. Since 1990 23

1000, July 25, 1990 On July 25, 1990, the Sensex touched the magical four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon season and excellent corporate results. July 1991 Rupee devalued by 18-19 % 2000, January 15, 1992 On January 15, 1992, the Sensex crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh. 3000, February 29, 1992 On February 29, 1992, the Sensex surged past the 3000 mark in the wake of the market-friendly Budget announced by the then Finance Minister, Dr Manmohan Singh. 4000, March 30, 1992 On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and Sensex witnessed unabated selling. 5000, October 8, 1999 On October 8, 1999, the Sensex crossed the 5,000-mark as the BJP-led coalition won the majority in the 13th Lok Sabha election. 6000, February 11, 2000 On February 11, 2000, the infotech boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006. 6151, Feb 14, 2000 Tops. Index declines until Sept 2001 and loses half the value. Coincides with dot-com bubble burst. 2595, Sept 21, 2001 Bottoms. 7000, June 20, 2005 On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital, and IPCL made huge gains. This helped the Sensex crossed 7,000 points for the first time. 8000, September 8, 2005 On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index -- the Sensex -- crossed the 8000 level following brisk buying by foreign and domestic funds in early trading. 9000, November 28, 2005 The Sensex on November 28, 2005 crossed the magical figure of 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on

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the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors. 10,000, February 6, 2006 The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10K-mark on February 7, 2006. 11,000, March 21, 2006 The Sensex on March 21, 2006 crossed the magical figure of 11,000 and touched a life-time peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points. 12,000, April 20, 2006 The Sensex on April 20, 2006 crossed the 12,000-mark and closed at a peak of 12,040 points for the first time. 13,000, October 30, 2006 The Sensex on October 30, 2006 crossed the magical figure of 13,000 and closed at 13,024.26 points, up 117.45 points or 0.9%. It took 135 days for the Sensex to move from 12,000 to 13,000 and 123 days to move from 12,500 to 13,000. 14,000, December 5, 2006 The Sensex on December 5, 2006 crossed the 14,000-mark to touch 14,028 points. It took 36 days for the Sensex to move from 13,000 to the 14,000 mark. 15,000, July 6, 2007 The Sensex on July 6, 2007 crossed the magical figure of 15,000 to touch 15,005 points in afternoon trade. It took seven months for the Sensex to move from 14,000 to 15,000 points. 16,000, September 19, 2007 The Sensex scaled yet another milestone during early morning trade on September 19, 2007. Within minutes after trading began, the Sensex crossed 16,000, rising by 450 points from the previous close. The 30-share Bombay Stock Exchange's sensitive index took 53 days to reach 16,000 from 15,000. Nifty also touched a new high at 4659, up 113 points. The Sensex finally ended with a gain of 654 points at 16,323. The NSE Nifty gained 186 points to close at 4,732. 17,000, September 26, 2007 The Sensex scaled yet another height during early morning trade on September 26, 2007. Within minutes after trading began, the Sensex crossed the 17,000-mark . Some profit taking towards the end, saw the index slip into red to 16,887 down 187 points from the day's high. The Sensex ended with a gain of 22 points at 16,921. 25

18,000, October 09, 2007 The BSE Sensex crossed the 18,000-mark on October 09, 2007. It took just 8 days to cross 18,000 points from the 17,000 mark. The index zoomed to a new all-time intra-day high of 18,327. It finally gained 789 points to close at an alltime high of 18,280. The market set several new records including the biggest single day gain of 789 points at close, as well as the largest intra-day gains of 993 points in absolute term backed by frenzied buying after the news of the UPA and Left meeting on October 22 put an end to the worries of an impending election. 19,000, October 15, 2007 The Sensex crossed the 19,000-mark backed by revival of funds-based buying in blue chip stocks in metal, capital goods and refinery sectors. The index gained the last 1,000 points in just four trading days. The index touched a fresh alltime intra-day high of 19,096, and finally ended with a smart gain of 640 points at 19,059.The Nifty gained 242 points to close at 5,670. 20,000, October 29, 2007 The Sensex crossed the 20,000 mark on the back of aggressive buying by funds ahead of the US Federal Reserve meeting. The index took only 10 trading days to gain 1,000 points after the index crossed the 19,000-mark on October 15. The major drivers of today's rally were index heavyweights Larsen and Toubro, Reliance Industries, ICICI Bank, HDFC Bank and SBI among others. The 30-share index spurted in the last five minutes of trade to fly-past the crucial level and scaled a new intra-day peak at 20,024.87 points before ending at its fresh closing high of 19,977.67, a gain of 734.50 points. The NSE Nifty rose to a record high 5,922.50 points before ending at 5,905.90, showing a hefty gain of 203.60 points. 21,000, January 8, 2008 The sensex peaks. It crossed the 21,000 mark in intra-day trading after 49 trading sessions. This was backed by high market confidence of increased FII investment and strong corporate results for the third quarter. However, it later fell back due to profit booking. 15,200, June 13, 2008 The sensex closed below 15,200 mark, Indian market suffer with major downfall from January 21,2008 14,220, June 25, 2008 The sensex touched an intra day low of 13,731 during the early trades, then pulled back and ended up at 14,220 amidst a negative sentiment generated on the Reserve Bank of India hiking CRR by 50 bps. FII outflow continued in this week. 12,822, July 2, 2008 The sensex hit an intra day low of 12,822.70 on July 2nd, 2008. This is the lowest that it has ever been in the past year. Six months ago, on January 10th, 26

2008, the market had hit an all time high of 21206.70. This is a bad time for the Indian markets, although Reliance and Infosys continue to lead the way with mostly positive results. Bloomberg lists them as the top two gainers for the Sensex, closely followed by ICICI Bank and ITC Ltd. 11801.70, Oct 6, 2008 The sensex closed at 11801.70 hitting the lowest in the past 2 years. 10527, Oct 10, 2008 The Sensex today closed at 10527,800.51 points down from the previous day having seen an intraday fall of as large as 1063 points. Thus,this week turned out to be the week with largest percentage fall in the Sensex

COLUMBO STOCK EXCHANGE

Colombo Stock Exchange

Type Founded Headquarters Website

Stock exchange 1985 Colombo, Sri Lanka www.cse.lk

The Colombo Stock Exchange (CSE) is the main stock exchange in Sri Lanka. It is one of the most modern exchanges in South Asia, providing a fully automated trading platform. The vision of the CSE is to contribute to the wealth of the nation by creating value through securities. The headquarters of the CSE have been located at the World Trade Center Towers in Colombo since 1995 and it also has branches across the country in Kandy, Matara, Kurunegala and Negombo. As of 31 December 2007, the Colombo Stock Exchange had 235 listed companies with a combined market capitalization of $7.6 billion.

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HISTORY
Share trading in Sri Lanka dates back to 1896 when the Colombo Brokers Association commenced the share trading in limited liability companies which were involved in opening plantations in Sri Lanka. The establishment of a formal stock exchange took place in 1985 with the incorporation of the Colombo Stock Exchange (CSE), which took over the Stock Market from the Colombo Share Brokers Association. It currently has a membership of 15 institutions, all of which are licensed to operate as stockbrokers.

CURRENT STATUS FINANCIAL

As of 31 May 2008, 234 companies are listed on the CSE, representing twenty business sectors with a market capitalization of 850 billion rupees (over US$7.2 billion), which corresponds to approximately 24% of the Gross Domestic Product of the country. There are currently two indices in the CSE: 1. 2. The All Share Price Index (ASPI) The Milanka Price Index (MPI)

TRADING SESSION
The exchange has pre-market sessions from 09:00am to 09:30am and normal trading sessions from 09:30am to 02:30pm on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

TECHNOLOGY
The CSE operates 3 main systems: 1. The Central Depository System 28

2. 3.

Automated Trading System Debt Securities Trading System

The automation of the Exchange commenced in 1991 with the installation of a central depository and an electronic clearing and settlement system for share transactions. The trading activity was automated with the installation of the Automated Trading System (ATS) in 1997. The technology introduced by the Exchange has significantly enhanced the competitiveness of the CSE and has provided a more efficient and transparent market. The CSE is currently in the process of introducing a debt securities trading system for trading of fixed income securities. As a modern exchange, the CSE now offers state-of-the-art technological infrastructure to facilitate an "order-driven trading platform" for securities trading - including shares, corporate debt securities and government debt securities.

AFFILIATION
World Federation of Exchanges (wfe)
The CSE was elected as a member of the World Federation of Exchanges in October 1998 and also was the first Exchange in the South Asian Region to obtain membership. The CSE is the 52nd Exchange to have been elected to membership of the Federation.

South Asian Federation of Exchanges (SAFE)

The CSE became a founder member of the SAFE in January 2000, and is currently the Chairman of the Association. SAFE consists of 17 Exchanges from India, Pakistan, Bangladesh, Sri Lanka, Nepal and Bhutan. Its primary objectives are to encourage cooperation among its members in order to promote the development of their individual securities markets, to develop an integrated regional stock trading system, and to offer listing and trading opportunities for securities issued in the region.

FOREIGN INVESTERS
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Companies listed on the CSE have seen a large increase in foreign investment following the ceasefire agreement signed by the Sri Lankan Government that brought and end to the 20 year old civil war. Foreign investment in the stock market is freely permitted except in the case of a few companies where there are certain restrictions imposed. Investment in shares in Sri Lanka and repatriation of proceeds take place through Share Investment External Rupee Accounts (SIERA) opened with licensed commercial banks. Income from investments such as interest, dividends and profit realized from such investments are not subject to Exchange Control Regulations by the Sri Lankan Government.

POST CEASEFIRE AGREEMENT BOOM

After witnessing mediocre performance throughout the 1990s mainly due to the Sri Lankan Civil War, the ceasefire agreement signed in 2001 saw unprecedented growth in the both indices of the CSE. The All Share Price Index, which was hovering around the 500 mark in August 2001, has now surpassed the 2000 mark. This has led the CSE to be consistently dubbed as one of the best performing markets in the world. As of 2005 the CSE had recorded a consistent annual growth of over 30% in the All Share Price Index (ASPI) for the previous three years. It surpassed that in 2006, with the ASPI growing by 41.6 %, and the MPI growing by 51.4% during the calendar year. Buoyed by improved investor confidence due to positive political developments and strong corporate results the CSE continued to achieve strong growth in 2007, as the ASPI surged passed the 3,000 mark for the first time in its history on February 13, reaching a record high for the seventh consecutive day. The CSE has also recorded an average daily turnover of Rs. 776.8 million for 2007.

MALDIVES STOCK EXCHANGE

Maldives Stock Exchange
Type Stock Exchange 30

Location Mal, Maldives Coordinates 41044.17N 733036.98E

Currency MVR No. of listings 5 MarketCap MVR 2.2 billion (Dec 30, 2008) Volume MVR 59.2 million (2008) Indexes MASIX Website www.mse.com.mv

The Maldives

Stock

Exchange (MSE),

is

private

sector Stock

Exchange in Mal, Maldives. A Securities Trading Floor (STF) was first established on 14th April 2002. It was operated by the Capital Market Development Authority(CMDA), the regulator. However, the Securities Act 2006 requires that CMDA invite offers from a private company to establish and operate a stock exchange. The Maldives Stock Exchange Pvt Ltd has been licensed to operate as a Stock Exchange since the 23 January 2008. As such the MSE started its operations effective from 24 January 2008. The primary function of MSE is to facilitate companies raise capital through the issue of new securities. The MSE provides a regulated market for the trading of securities between investors. The MSE is also the centre for trade reporting and pricing of the stocks. It also provides clearing, settlement and depository services through a subsidiary, the Maldives Securities Depository (MSD)

With 5 listed companies and 4 trading members, the total market capitalization of the listed companies was MVR 2,125,519,460.00 as of 24 March 2008.
The Maldives Stock Exchange Index (MASIX) was published on 28 October 2004. Like other stock market indices, MASIX captures the overall movement in prices & changing 31

expectations of the Maldives Stock Market. MASIX represents the Maldives Stock Exchange.

AFGHANISTAN STOCK EXCHANGE

The Afghanistan Stock Exchange is part of the planned Economic development of Afghanistan. It will operate Afghanistan's first liquid exchange to offer the most diverse array of financial products and services. AFX will bring together cash equities exchanges and foreign exchanges, to be the leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data in Afghanistan. In late 2001 the United Nations Security Council authorized the creation of an International Security Assistance Force (ISAF). This force is composed of NATO troops that are involved in assisting the government of President Hamid Karzai in establishing the writ of law as well as rebuilding key infrastructures in the nation. In 2005, the United States and Afghanistan signed a strategic partnership agreement committing both nations to a long-term relationship. In the meantime, multibillion US dollars have also been provided by the international community for the reconstruction of the country.

KARACHI (PAKISTAN) STOCK EXCHANGE

The Karachi Stock Exchange or KSE is a stock exchange located in Karachi, Sindh, Pakistan. Founded in 1947, it is Pakistan's largest and oldest stock exchange, with many Pakistani as well as overseas listings. Its current premises are situated on Stock Exchange Road, in the heart of Karachi's Business District.

HISTORY
Karachi Stock Exchange is the biggest and most liquid exchange in Pakistan. It was declared the Best Performing Stock Market of the World for the year 2002. As on May 30, 2008, 654 companies were listed with a market capitalization of Rs. 3,746.203 billion (US$ 56.334 billion) having listed capital of Rs. 705.873 billion (US$ 10.615 billion). The KSE 100TM Index closed at 12130.51 on May 30, 2008.

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BUSINESS TRADING
The exchange has pre-market sessions from 09:15am to 09:30am and normal trading sessions from 09:30am to 03:30pm. It is the second oldest stock exchange in South Asia. The karachi stock exchange has undergone a considerable deal of downturn partly due to global financial crisis and partly on account of domestic troubles. It remained suspended in excess of 4 months and resumed normal trading only on December 15,2008. The KSE 100 Index and KSE 30 Index after hitting the low around mid january has now rebounced and recovered 20-25% till March 12th 2009.

GROWTH
The KSE is the biggest and most liquid exchange in Pakistan and in 2002 it was declared as the Best Performing Stock Market of the World by Business Week. As of December 20, 2007, 671 companies were listed with the market capitalization of Rs. 4364.312 billion (US$ 73 Billion) having listed capital of Rs. 717.3 billion (US$ 12 billion). On December 26, 2007, the KSE 100 Index reached its ever highest value and closed at 14,814.85 points. Foreign buying interest had been very active on the KSE in 2006 and continued in 2007. According to estimates from the State Bank of Pakistan, foreign investment in capital markets total about US$523 Million. According to a research analyst in Pakistan, around 20pc of the total free float in KSE-30 Index is held by foreign participants. KSE has seen some fluctuations since the start of 2008. One reason could be that it is the election year in Pakistan, and stocks are expected to remain dull. KSE has set an all time high of 15,000 points, before settling around the 14,000 mark. Karachi stock exchange Board of Directors has recently (2007) announced plans to construct a 40 story high rise KSE building, as a new direction for future investment. Disputes between investors and members of the Exchange are resolved through deliberations of the Arbitration Committee of the Exchange.

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KSE began with a 50 shares index. As the market grew a representative index was needed. On November 1st, 91 the KSE-100 was introduced and remains to this day the most generally accepted measure of the Exchange. Karachi Stock Exchange 100 Index (KSE-100 Index) is a benchmark used to compare prices overtime, companies with the highest market capitalization are selected. To ensure full market representation, the company with the highest market capitalization from each sector is also included. In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to provide the basis of index trading in future. On August the 29th, 1995 the KSE all share index was constructed and introduced on September 18, 1995.

2008 KARACHI STOCK EXCHANGE CRISES

April 20 : Karachi Stock Exchange achieved a major milestone when KSE-100

Index crossed the psychological level of 15,000 for the first time in its history and peaked 15,737.32 on20 April, 2008. Moreover, the increase of 7.4 per cent in 2008 made it the best performer among major emerging markets.

May 23: Record high inflation in the month of May, 2008 resulted in the

unexpected increase in the interest rates by State Bank of Pakistan which eventually resulted in sharp fall in Karachi Stock Exchange.

July 17 :Angry investors attacked the Karachi Stock Exchange in protest at July 16 : KSE-100 Index dropped one-third from an all-time high hit in April, as rising pressure on shaky Pakistan's coalition government to

plunging Pakistani share prices.

2008

tackle Taliban militants exacerbates concern about the country's economic woes.

August 18: KSE 100 Index rose more than 4% after the announcement of the

resignation of President Pervez Musharraf but Credit Suisse Group said that Pakistan's Post-Musharraf rally in Stock Exchange will be short-lived because of a rising fiscal deficit and runaway inflation.

August 28 :Karachi Stock Exchange set a floor for stock prices to halt a plunge December 15: Trading resumes after the removal of floor on stock prices that was

that has wiped out $36.9 billion of market value since April.

set on August 28 to halt sharp falls. 34

DHAKA (SRILANKA) STOCK EXCHANGE

Dhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of theDhaka city. It was incorporated in 1954. Dhaka stock exchange is the first stock exchange of the country. As of 31 December 2007, the Dhaka Stock Exchange had 350 listed companies with a combined market capitalization of $10.8 billion.

HISTORY It first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as Dacca Stock Exchange Ltd in 13 May 1964. After the liberation warin 1971 the trading was discontinued for five years. In 1976 trading restarted in Bangladesh. In 16 September 1986 DSE All Share Price Index was started. The formula for calculating DSE all share price index was changed according to IFC in 1 November 1993. The automated trading was initiated in 10 August 1998. In 1 January 2001 DSE 20 Index was started. Central Depository System was initiated in 24 January 2004. As of November 15 2007, the benchmark index of the Dhaka Stock Exchange (DSE) crossed 3000 points for the first time, setting another new high at 3013 points.

FORMATION
Dhaka Stock Exchange (DSE) is a public limited company. It is formed and managed under Company Act 1994, Security and Exchange Commission Act 1993, Security and Exchange Commission Regulation 1994, and Security Exchange (Inside Trading) regulation 1994. Theissued capital of this company is Tk. 500,000 which is divided up to 250 shares each pricing Tk. 2000. No individual or firm can buy more than one share. According to stock market rule only members can participate in the floor and can buy shares for himself or his clients. At present it has 230 members. Market capitalization of the Dhaka Stock Exchange reached nearly $9 billion in September 2007 and $15 billion a year later

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MANAGEMENT
The management and operation of Dhaka Stock Exchange is entrusted on a 25 members Board of Director. Among them 12 are elected from DSE members, another 12 are selected from different trade bodies and relevant organizations. The CEO is the 25th exofficio member of the board. The following organizations are currently holding positions in DSE Board:

Bangladesh Bank ICB President of Institute of Chartered Accountants of Bangladesh President of Federation of Bangladesh Chambers of Commerce and Industries President of Metropolitan Chambers of Commerce and Industries Professor of Finance Department of Dhaka University President of DCCI (Dhaka Chamber of Commerce and Industry)

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CHAPTER-4 RULES AND REGULATIONS FOR THE STOCK EXCHANGE IN SAARC REGION

INDIAN STOCK MARKET

The thing which attracts people to the Indian share market is its volatility. The different reasons for movement in market can be ups and downs in political conditions, economic crisis or variations, some natural disaster or due to the relationship of India with the neighboring nations. SEBI or the securities and exchange board of India runs the Indian stock market under certain rules and regulations. It also has some rules and guidelines which help the investor to protect his/her rights. They have very effective directives which help in regulating and promoting the stock market The two kinds of stock exchange of India are NSE and BSE. They stand for National Stock Exchange and Bombay Stock Exchange respectively. The NSE includes the large caps which are the blue chip companies whereas the BSE consists of 4000 companies as per the 1992 data. The Bombay Stock Exchange is usually known as the SENSEX which implies sensitive index. The headquarters of both the stock exchange are in Mumbai. The Indian stock market is very demanding as compared to other markets. This is one of the causes for it being the safest place to invest. This market has all the substance to encounter the things responsible for financial crisis. The shares which are thought to be potential from the trading point of view are dealt in this market. The blue chip companies which have a regular growth and function with large amount of money for paying off the dividends are a part of this market. Along with this the Indian stock market includes the stocks which are seen as best running. They mostly are referred to as defensive stocks. These stocks remain stable even at the time of recession. Hence they avoid the risk factor of liquidity. Such investor friendly traits and characteristics attract a lot of people to invest in market. Many people these days follow stock tips to invest in the share market and make a lot of money. Common man invests daily in the share market, analyzes it and aims to make profit through it by the use of various techniques like software, etc. The Indian stock 37

market is divided into Commodity and Equity market. This also contains options and Future. The people who are seriously interested to get involved in the share market must try to understand the stock market first. The next step should be to analyze the working of the stock market. Finally one needs to listen to what the experts and Indian stock market specialists have to say. It is advisable to follow the suggestions of the experts to avoid the risk of losing your hard earned money. One should keep a check on oneself by limiting the amount of investment. Greed should not lead a person to put to risk money which goes beyond the capacity. Knowledge, training, Paper Cup analyses and patience are the main things which one should have to rule the stock market. There are many resources available to help people gain such ability one of them being the companies which work in this direction.

TRADING RULES FOR INDIAN STOCK EXCHANGE BOMBAY THE 20TH DAY OF AUGUST 1992 NOTIFICATION SECURITIES AND EXCHANGE BOARD OF INDIA (STOCK BROKERS AND SUB-BROKERS) RULES, 1992
S O 627 (E) In exercise of the powers conferred by section 29 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Central Government hereby makes the following rules, namely:-

SHORT TITLE AND COMMENCEMENT.

1. (1) These rules may be called the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules, 1992. (2) They shall come into force on the date of their publication in the Official Gazette.

DEFINITIONS

38

3. In these rules, unless the context otherwise requires (a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of 1992); (b) "certificate" means a certificate of registration issued by the Board; (c) "Rules" means the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules, 1992; (d) "stock exchange" means a stock exchange which is for the time being recognized by the Central Government under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (e) "stock broker" means a member of a stock exchange; (f) "sub-broker" means any person not being a member of a stock exchange who acts on behalf of a stock-broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock-brokers; (g) "Regulations" means the Securities and Exchange Board of India (Stock Brokers and Sub- Brokers) Regulations, 1992.

NOT TO ACT AS STOCK-BROKER OR SUB-BROKER WITHOUT REGISTRATION.

3. No stock-broker or sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by the Board under the Regulations: Provided that such person may continue to buy, sell or deal in securities if he has made an application for such registration till the disposal of such application. Conditions for grant of certificate to stock-broker. 4. The Board may grant a certificate to a stock-broker subject to the following conditions namely: (a) He holds the membership of any stock exchange; (b) He shall abide by the rules, regulations and bye-laws of the stock exchange or stock exchanges of which he is a member;

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(c) In case of any change in the status and constitution, the stock broker shall obtain prior permission of the Board to continue to buy, sell or deal in securities in any stock exchange; (d) He shall pay the amount of fees for registration in the manner provided in the regulations; and (e) He shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other particulars of the complaints received from such investors. Conditions of grant of certificate to sub-broker. 5. (1) The Board may grant a certificate to a sub-broker subject to the following conditions, namely: (a) He shall pay the fees in the manner provided in the regulations; (b) He shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other particulars of the complaints received; (c) In case of any change in the status and constitution, the sub- broker shall obtain prior permission of the Board to continue to buy, sell or deal in securities in any stock exchange; and (d) He is authorised in writing by a stock-broker being a member of a stock exchange for affiliating himself in buying, selling or dealing in securities: Provided such stock-broker is entitled to buy, sell or deal in securities This is a significant step on your road to financial independence. For investing a very small fee, you will receive a set of winning rules that will help you learn how to buy and sell shares, how to invest and how to make money on the stock market. Every investor, whether a novice or very experienced, will be able to win on the stock market with these rules. The aim of my Top 10 Rules is to reduce the risk of losing money and to maximize profits when buying and selling shares. 40

Whenever by any provision of this Act any power, duty or function is authorised or required to be exercised or performed by the bank, such power duty or Function shall be exercised or performed, subject to the direction and control of the Governor of the bank, by the officer designated as the head of the Department of Exchange Control or on his behalf by any other officer designated as an assistant to him; Provided, however, that any permission, which by any such provision is authorised to be granted by the bank, may be granted on behalf of the head of the department by an authorised dealer, if he is for the time being empowered, by directions issued by the head of the department, to grant such permission. Any directions given by the head of the department under this section may specify the circumstances in which and the conditions and restrictions subject to which an authorised dealer may grant the permission to which the directions relate I am not a stockbroker or an investment advisor or CEO of a big company. I am just a personal investor, who after 20 years of hard work, investing, reading many investment books, trial and error and making a few mistakes, have produced the Top 10 Rules that everyone who wants to make a lot of good, honest money should follow. I have finally achieved my financial independence and am now enjoying the fruits of my investing. If I had these 10 rules earlier in my life I would have been financially independent many years ago. You can use these rules to make yourself financially secure now ! I started trading stocks back in 1990 on the U.K Stock market. Since then I have also traded shares on the United States Stock market. It is easy to buy and sell shares worldwide now thanks to internet stock broking. I have done a lot of research by reading investment books, attending investment seminars and subscribing to investment magazines. Over the years I have collected a lot of information and have developed thesewinning rules that I always refer to before I make any investment in the stock market whether it be in U.S.A.or overseas. By following these Top 10 Rules I have been able to trade in shares successfully..........VERY SUCCESSFULLY !!! 41

My Top 10 Rules are not a "Get Rich Quick" scheme. They are a set of guiding principles that will help you learn how to save, invest, prosper and to achieve your financial goals. I can not guarantee that they will make you a millionaire overnight but they will certainly help you to get started. Over time you will quickly see the benefits of these rules and your financial prosperity will grow..........SIGNIFICANTLY !!! Some of these rules are incredibly simple and obvious but until they are spelled out in black and white for you to read, absorb and to follow you probably would never have followed them !!! The principles used in my Top 10 Rules apply anywhere in the world for anyone that is eager to achieve financial independence and that wants to make good, honest money..........a lot of good, honest money !!!

So if you want to win understand these rules.

1) you cannot predict the future. Stop believing it and stop wasting your time trying to do it. No-one ever has nor ever will be able to "predict" what is going to happen in the future. Runaway markets tend to keep running away. Cheap stocks seem to get much cheaper and expensive stocks more often than not, get much more expensive. do not even bother trying to justify a market simply let it do what it wants to. 2) The big money is made from position sizing. You really must stop chasing a holy Grail and spend time on different position sizing rules. This is the one "secret" that separates a professional from the man in the street. 3) Price is all that matters. Stocks do not follow fundamentals. It's all about "perceptions." Why can two identical stocks have completely different fortunes in the market? 4) Stop thinking like an institution. The big money management funds are not interested in outperforming the stock market. as strange as it seems. They are interested in managing money. So when they tell you to "diversify", only invest in blue Chip stocks with a solid past earnings, great management teams, solid this and that.... treat it for the non-sense it is. Unless you want poor returns.

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5) 99% of technical analysis is junk. Whole companies have been set up to feed you B*S in the form of technical analysis. Throw it away and get down to basics. 6) Question everything and everyone. Even me. Never blindly believe anything you read or hear about. Be careful about what you read and even more careful about what you believe in. after all an opinion is only some-ones belief. 7) If you have to ask you shouldn't be in. I can't believe people actually ask other people whether they should hold or sell a stock position they are in. Surely before you enter you have your exits all in place. I'll guarantee if you are asking this question you are not making money. 8) I am in the stock market to make money not to win a puzzle. No-one can beat the market. Make a fortune in a bull market play defensive in a bear market. Returns of 300%+ should be easily attainable in the right conditions but do not give it back when the market conditions change. 9) Some people are just not cut out to trade the stock market. If you attach too much importance to your trading account i.e you are trading "scared money" you will never have the conviction to follow your rules. If you are not having success stop trading. either learn why you are failing or give your money to someone who is. 10) Trading the stock market isn't everything. It's only money. there are much more important things in life and you'd better not forget it.

KARACHI AUTOMATED TRADING SYSTEM (KATS) REGULATIONS OF THE KARACHI STOCK EXCHANGE

(GUARANTEE) LIMITED

43

(As amended on April 01, 2011 and sent for Gazette Notification)

KARACHI

AUTOMATED

TRADING

SYSTEM

(KATS)

REGULATIONS
In exercise of the powers conferred on it by sub-section (i) of Section 34 of the Securities & Exchange. Ordinance, 1969 (XVII of 1969), the Karachi Stock Exchange (Guarantee) Limited with the previous approval of the Federal Government have made the following Regulations called the "Karachi Automated Trading System (KATS) Regulations" which shall come into force at once. 1. SHORT TITLE AND EXTENT: (a) These regulations may be called "Karachi Automated Trading System Regulations (KATS) of the Karachi Stock Exchange (Guarantee) Limited. (b) These Regulations shall apply to the Members in respect of trading conducted through Karachi Automated Trading System (KATS). 2. DEFINITIONS: (a) Board means the Board of Directors of the Karachi Stock Exchange (Guarantee) Limited as defined in the Articles of Association of the Exchange. (b) Disaster means a situation in which the primary site of the Automated Trading System of the Exchange becomes inoperative or in-accessible for any reason, as may be declared by the Exchange or intimated by the Member to the Exchange. (c) "Exchange" means The Karachi Stock Exchange (Guarantee) Limited. (d) Hours of Operation means the time periods on each day that the Exchange is open for trading during which KATS is available to the Members for automated trading in the Exchange. (e) KATS or Karachi Automated Trading System means the securities automated trading system introduced by the Karachi Stock Exchange (Guarantee) Limited. 44

(f) Members means a member of the Karachi Stock Exchange (Guarantee) Limited as defined in the Articles of Association of the Exchange. (g) Order means a valid sale or purchase order placed by a Member through KATS. (h) Negotiated Deal means a deal which has been negotiated between two parties outside the regular market. (i) Special Terms Orders means an order which has special conditions for trading. (j) Tick Size means the minimum price increment/decline at which trades can be made on the KATS. (k) Unique Identification Number (UIN) means: (i) In case of individual Pakistani client of a Member Computerized National Identity Card Number (CNIC); (ii) In case of individual foreigner / overseas Pakistani citizens (without CNIC) client of a Member Passport number; (iii) In case of legal entity (whether local or foreign, natural or legal) client of a Member its Registration number; (iv) In case of a individual broker broker registration number issued by SECP, for proprietary trades; (v) In case of intra-exchange trading by individual broker broker registration number with suffix 1 for trading on behalf of clients; (vi) In case of corporate broker company registration, for proprietary trades;

45

(vii) In case of intra-exchange trading by corporate broker company registration number with suffix 1 for trading on behalf of clients; (viii) For mutual funds, where registration number is not available

SECP will issue UIN based on the Mutual Fund Asset Management Companys (AMC) registration number and a suffix of one onwards for the number of funds that the AMC has floated. For example, if AMC registration is 5645675 and the AMC has floated 5 funds the number given will be: 5645675/1 for the first fund, 5645675/2 for the second fund and so on; (ix) In case of foreign institutional investor UIN will be of the international broker dealer. Explanation: Provided that the term Client for the purpose of UIN shall mean the clients of a Member of the Exchange and the Member himself if he trades on its own account

3. HOURS OF OPERATION:
The Hours of Operation for automated trading through KATS shall be notified from time to time by the Exchange with the approval of the Board.

4. ELIGIBILITY:
The Exchange shall notify the companies that shall be eligible for trading on the KATS.

5. AVAILABILITY:
(a) The Exchange will make available KATS to the Members by providing trading workstation connections. The number of trading workstations for each Member shall be decided by the Board.

46

(b) Every Member registered as Broker with the Securities & Exchange Commission of Pakistan under the Brokers and Agents Registration Rules, 2001 shall mandatorily get and maintain one Disaster Recovery (DR) Terminal at a remote place outside the Exchange premises, which shall be connected to DR Site of the Exchange. However, such DR Terminal: (i) If installed at the place other than the registered Office/Branch Office of the Member shall be view only terminal during normal operations of the Exchange and will be activated only for trading purposes during the period of Disaster declared by the Exchange or intimated by the Member to the Exchange. While activating DR Terminal for trading purposes, Exchange shall ensure that normal trading workstations are not connected with KATS. As soon as the Exchange or the Member declares removal of Disaster status, the DR Terminal will be switched-back to view only from the trading terminal; (ii) If installed at the registered Office/Branch Office of the Member, it will function as a normal trading workstation connected with the KATS during normal operations of the Exchange and will be switched over to DR Site of the Exchange during the period of Disaster. (c) The Exchange may shutdown automated trading in the event that KATS is inoperative or inaccessible to more than such number of trading workstations as may be prescribed by the Board. (d) If the Board of Directors is satisfied that the trading through KATS cannot be resumed within reasonable time then the Board may allow the trading in the Exchange on the conventional outcry system for such time as it deems fit.

6. TICK SIZE:
The Tick Size will be 1 (one) paisa for all orders placed on KATS, unless otherwise specified in the relevant Regulations governing a specific market.

7. QUEUE PRIORITY:
47

(a) Orders that cannot be immediately executed shall be queued for future execution in a specific order of priority mainly based in the following order:(i) Price (ii) Time of entry Any other factors affecting the order of queue priority shall be determined and notified by the Exchange with the prior approval of the Board. (b) In case an order is executed partly, the remaining part of such Order shall not lose its priority. (c) The Queue Priority shall be determined by KATS through an interactive process and the order of priority displayed by KATS shall be conclusive except in the case of manifest error which shall be determined by the Board.

8. INSERTION OF CLIENT'S CODE IN EVERY BID AND OFFER THROUGH KATS

(a) Every Member while inserting a bid and offer through KATS for each of his clients, shall insert unique Client Codes for those clients which are maintained by them in their back office system and registered with NCCPL. These Client Codes are linked / mapped to UIN through the interface of National Clearing Company of Pakistan Limited. These Client Codes should not be re-assigned to another client of the member even after the closure of the account. (b) Every Member shall ensure that the shares purchased or sold against a Client Code are posted to the respective Sub-Account / Investor Account of that particular client with CDC upon settlement of trades through the Exchange.

9. DISCLOSED AND UNDISCLOSED VOLUME:

(a) An Order may specify the total share volume and may specify a lesser amount that is disclosed to the market. The disclosed volume shall not exceed the total volume. (b) Total and disclosed volume of an order must be a marketable lot. 48

(c) An increase in Disclosed Volume will cause a new time stamps and change in Queue Priority but a decrease in Disclosed Volume will not cause a new time stamp or change in queue priority.

10. TIME IN FORCE RESTRICTION:

(a) All orders shall be valid only for the relevant trading day unless a time restriction is specified otherwise in which case such order shall be automatically removed on the close of the day or after expiry of the specified time, as the case may be, if it remains unfilled till then. (b) Terms allowed for Time in Force Restriction include; (i) Day (ii) Good Till Cancelled (GTC) (i.e. Open) (iii) Good to Date (Month-Day-Year) (GTD) (iv) Good for Week (GTW) (v) Good for Month (GTM) (vi) Fill or Kill (FOK)

11. CROSS TRADE:

Cross Trades are trades entered between two clients of the same member. Such trades shall be allowed only if the orders are placed and executed according to regular order matching principles prescribed for all KATS orders.

49

12. CANCEL ORDER:

A Cancel Order can only cancel an outstanding order and cannot cancel a trade completed with the specified Order. It will not act as a Cancel Trade Request if that Order has already traded.

13. CHANGE FORMER ORDER (CFO):

(a) The terms of an Order posted to the KATS cannot be changed except by the Change Former Order (CFO) option. (b) The options available for CFO shall be notified by the Exchange from time to time.

14. SETTLEMENT:
The Settlement of the trading through KATS shall take place as per the existing rules and regulations of the Exchange as amended or substituted from time to time.

15. NEGOTIATED DEAL:

(a) Negotiated Deal shall not participate in the open market but trade throughout the hours of operation of the Exchange and thereafter until a time set by the Exchange. (b) Price protection procedures shall not apply to Negotiated Deals. (c) Negotiated Deal shall have no minimum volume requirements. (d) A Negotiated Deal will trade in its entirety as if it were an All or None (AON) transactional partial fills and Undisclosed Volumes shall not be allowed. (e) Negotiated Deals will be between two separate houses otherwise the same shall be treated as Cross Trade. (f) Negotiated Deal can be an Old Lot. (g) All unconfirmed Negotiated Deals will be cancelled when the KATS engine is dumped. 50

16. SPECIAL TERMS ORDERS:

(a) A Special Terms Order shall not be shown as part of the normal round lot order book but will be maintained in a Special Terms Order book that can be viewed separately from the round lot book. (b) The options available for Special Terms Order shall be notified by the Exchange from time to time with the prior approval of the Board.

17. OPENING:
(a) Order entered during the pre-opening period are queued and not executed at the time of entry. As each Order is queued (whether or not the company is expected to open) the price at which it is expected to open will be calculated through KATS. (b) Where a market imbalance exists, an opening price will be chosen by KATS through an interactive process. (c) Once the opening price is chosen, all trading shall take place at that single, opening price and no price level transition will be allowed. (d) Opening Price Calculation: The opening price shall be chosen as the price that will cause the greatest number of shares to trade at the open. If the same number of shares might be able to trade at differed price levels, the price level chosen will be the one which leaves the least number of shares remaining on one side or the other at the opening price level after the opening trading. If more than one price could have the same remaining balance, the price level is chosen that results in the least net change from the last trading days closing price. If all this fails to pick a unique price level, the highest trade level of the remaining alternatives will be chosen as the opening price. (e) Orders not completely filled: All orders entered during the pre-opening will have a time priority based on the actual time of entry. For orders not completely filled at the open, this time priority will be maintained thereafter during the trading day and for 51

subsequent trading days. Orders carried over from previous trading days have priority over orders entered during the pre-opening for the purpose of opening. Limit orders entered during the pre-opening period are subject to the same procedures that govern their entry during the trading day. (f) Frozen Trades: The Exchange can define parameters that can cause any trade that violates them to be frozen so that it ca be examined before they decide to allow it or prevent it. This is bases on such things as a drastic change in the trade price or an extremely high volume. The monitoring that takes place during the trading day is also in effect during the open. Any trade that violates freeze parameter at the open will result in a freeze. All the trading done for the open of the current company is placed on hold until the Exchange decides how to proceed. Only the specific company is frozen.

18. HALTS:
(a) Trading in each company can be halted on demand by the Exchange. (b) A halt can be instituted for a company at any time during the trading day. Once halted, no further trading in the company will take place unless the halt is removed. (c) All orders may be cancelled globally by the Exchange at discretion of the Exchange. (d) Cancellation messages shall be forwarded to the traders. (e) The Exchange may, in the interest of the market, put a halt on trading by any member under the KATS. (f) Order entry or reinstatement may take place during the halt period.

19. GENERAL:
(a) A member shall be responsible for all orders entered from his trading workstation(s). (b) The Board may issue any guidelines and clarifications from time to time for removal of any difficulties in the execution or operation of these regulations. 52

(c) The terms and phrases used herein without a specific definition shall have the meaning in accordance with current trade practice. (d) Any determination made by KATS through an interactive process shall be conclusive. (e) Any dispute arising out of or in connection with the trade executed under these regulations shall, within two trading days of arising of such dispute, in the first place be referred to a committee constituted by the Board. Any part dissatisfied with the decision of the aforesaid committee may, within ten days of such decision, appeal to the Board. (f) Notwithstanding anything contained in these regulations the Exchange may in its sole discretion cancel any order (before or after settlement) with the prior approval of the Board.

20. PENALTY
The Exchange, upon violation or non-compliance of any provision of these Regulations by a Member of the Exchange, shall impose penalties at its sole discretion, which may be financial i.e. maximum penalty of Rs. 500,000 and/or which may include suspension of trading upto a period of 3 months and on second or third violation suspension of trading may be extended to1-2 years.

KARACHI

AUTOMATED

TRADING

SYSTEM

(KATS)

REGULATIONS
In exercise of the powers conferred on it by sub-section (i) of Section 34 of the Securities & Exchange Ordinance, 1969 (XVII of 1969), the Karachi Stock Exchange (Guarantee) Limited with the previous approval of the Federal Government have made the following Regulations called the "Karachi Automated Trading System (KATS) Regulations" which shall come into force at once.

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PREAMBLE:
WHEREAS the Karachi Stock Exchange (Guarantee) Limited leas decided to introduce automated trading through Karachi Automated Trading System (KATS); AND WHEREAS it is necessary and expedient to frame regulations for operation, regulation and control of the KATS; NOW, THEREFORE, the Board of Directors of The Karachi Stock Exchange (Guarantee) Limited, with the prior approval of the Federal Government hereby make these regulations which shall come into force with effect from the date of publication in the Official Gazette :

GOVERNING OVER THE COUNTER (OTC) MARKET OF THE KARACHI STOCK EXCHANGE (GUARANTEE) LIMITED amended on March 18, 2010 and sent for Gazette Notification) THE REGULATIONS GOVERNING OVER THE COUNTER (OTC) MARKET
1. SHORT TITLE & COMMENCEMENT a) These Regulations shall be called The Regulations Governing Over-The-Counter (OTC) Market. b) These Regulations shall apply to all companies and securities applying for listing and/or listed under OTC Market. c) These Regulations shall come into force immediately on publication of the same in Gazette of Pakistan.

(As

2. DEFINITIONS
In these Regulations, unless the subject or context otherwise requires: a) Bid Price means the price for which a Market Maker is willing to pay for the purchase of a Companys security. 54

b) Blank Sale means a sale by a party that does not own shares or the sale does not constitute a sale with pre-existing interest or is a sale by a party that has not entered into a contractual borrowing arrangement to meet delivery requirements. c) Board means Board of Directors of the Karachi Stock Exchange (Guarantee) Limited. d) Broker means any member of the Exchange engaged in the business of executing transactions in securities for the account of others and for his own account and is registered with the Commission under the Brokers and Agents Registration Rules, 2001. e) Commission means The Securities & Exchange Commission of Pakistan. f) Company means a company applying for listing under these regulations. g) Debt Market Securities includes: (i) Corporate debt securities such as Term Finance Certificates (TFCs), SUKUK certificates (Sharia Compliant Bonds), Registered Bonds, Commercial Papers, Participation Term Certificates (PTCs) and all kinds of debt instruments issued by any Pakistani or foreign company or corporation registered in Pakistan; and (ii) Government debt securities such as Treasury Bills (T-bills), Federal Investment Bonds (FIBs), Pakistan Investment Bonds (PIBs), Foreign Currency Bonds, Government Papers and all kinds of debt instruments issued by Federal Government, Provincial Government, Local Authority and other Statutory bodies h) Exchange means The Karachi Stock Exchange (Guarantee) Limited. i) Information Memorandum means a document outlining the salient features, risks and terms of a debt market securities offered/issued to Qualified Institutional Buyers.

55

j) Market Maker means a broker appointed under these Regulations who shall Make Market for the Companys securities on a compulsory and continuous basis. k) Make Market means the continuous submission of two-way quotes by a Market Maker for the purchase and sale of the Companys securities. l) Member means a Member of the Exchange. m) Offer Price means the price for which a Market Maker is willing to sell a Companys security. n) Qualified Institutional Buyers (QIBs) for the purpose of these regulations means: (i) Any of the following entity: a. A Banking company as defined in the Banking Companies Ordinance, 1962. b. A Financial Institution as referred to in Section 3A of the Banking Companies Ordinance, 1962. c. An Investment Company as defined in the Non-Banking Companies (Establishment and Regulation) Rules, 2003. d. A Company as referred to in Section 503 of the Companies Ordinance, 1984. e. A Company registered with the Commission as broker under the Brokers and Agents Registration Rules, 2001. f. A Fund established under the Collective Investment Scheme under the Non-Banking Companies (Establishment and Regulation) Rules, 2003. g. A Trust established by a deed under the provisions of the Trust Act, 1882.

56

h. An Employees Provident Fund governed by the Employees Provident Fund (Investment in Listed Securities) Rules, 1996. i. A Pension Fund as defined in the Voluntary Pension System Rules, 2005. ii) Any corporate body established by Federal Government, Provincial Government and/or Local Authority. (iii) Any other entity as allowed based on the criteria prescribed by the Exchange with prior approval of the Commission. o) Short Sale means a sale by a party that does not own shares or the sale does not constitute a sale with pre-existing interest but is a sale by a party that has entered into a contractual borrowing arrangement to meet delivery requirements. p) Short Term means a period of less than one (1) year. q) Sponsoring Member means a Corporate Brokerage House of the Exchange or a Commercial Bank or an Investment Bank or a Discount House or any other financial institution approved by the Exchange which is appointed by the companies seeking listing on the Exchange under these regulations and to perform functions as provided under these regulations. r) Spread means the difference between the Bid Price and Offer Price. s) Trustee means a person appointed by the Company for securing an issue of Debt Market Securities and assumes powers, role and responsibility as stated in the security trust deed in terms of section 119 of the Companies Ordinance, 1984. Provided that the Trustee shall be a bank, a trust company which is a subsidiary of bank, a central depository company approved by the Commission, a Non-Banking Finance Company or such other company trust as may be approved by the Commission to act as Trustee but shall not include an associated company/undertaking of the Company.

57

3. ELIGIBILITY FOR LISTING

I) The Company may apply for listing of its equity securities to be issued/ offered to the general public under these regulations provided that: a) The minimum paid up capital of the company is Rs. 10 million. b) The minimum public offering is Rs. 5 million or 25% of the capital, whichever is higher. c) At the time of listing, the break-up value of the ordinary shares of the company, duly certified by a Chartered Accountant / Auditor shall not be less than its face value. II) The Company may apply for listing of its Debt Market Securities issued to Qualified Institutional Buyers (QIBs) through private placement under these regulations provided that: a) The minimum paid up capital of the Company shall be at least Rs. 50 million. b) The minimum long term entity instrument rating shall not be less than BBB. c) It shall comply with the requirements of regulation No. 4(c), 10(b), 10(d), 12(b), 14, 15, 16, 19 and 20 and Schedule-III of these Regulations.

4. CONDITIONS APPLICABLE FOR LISTING OF SECURITIES:

The Company shall comply with the following listing requirements: a) The Company shall apply for approval to the Exchange. The application shall contain the names of the sponsors of the company, names of the directors of the Company, a complete appraisal by the Sponsoring Member in accordance with Regulation 7(b)(i) hereof (any other information deemed necessary). b)The Exchange may reject the application of the Company at its sole discretion if, for the protection of investors, they deem the listing of the Company of the OTC Market not 58

to be suitable and/or the Company does not meet the eligibility criteria set out in Regulation 3 hereof and/or for the contravention of Regulation 4(c) hereof or the appraisal tendered by the Sponsoring Member is not in accordance with Regulation 7(b) (i) hereof, provided that, a Company shall be given an opportunity of hearing by the Exchange before the Companys application is rejected. c) The company shall not be eligible for listing under these regulations if any of its Director / Sponsor is a defaulter of any Stock Exchange and / or he is a Director in other listed company which has violated and/or failed to comply with any provision of the Listing Regulations of the Exchange and/or has defaulted in the payment of the loans of any bank or financial institution or government dues, unless the same are legitimately disputed by him by litigation.

5. OFFER OF SECURITIES
a) The Company and/or its sponsors may offer securities before its listing directly to the investors or to the Market Maker through the Bought-Out Deal in accordance with Regulation 9 hereof. b) The Exchange shall fix the face value of the security and may impose conditions on the Company for the purpose of listing and trading of securities for each class/type of security. c) Before the issuance of securities in accordance with these Regulations, the company shall fix standard lot of securities for trading in consultation with the Exchange. d) Where the Company and/or sponsors offer any securities to the Market Maker through the bought-Out Deal, the requirement of the Companies Ordinance, 1984 and the Companies (Issue of Capital) Rules, 1996 shall remain applicable on such offering subject to the relaxation given by the Commission under Rule 10 of the Companies (Issue of Capital) Rules, 1996.

6. ISSUANCE OF SHARES AT A PREMIUM OR DISCOUNT

59

The company may offer the shares either at the premium or discount subject to the following conditions:a) A company may issue shares at a premium or discount to the Sponsoring Member through the bought-out deal, who will then offload it to the public. b) In case the issue is offered at a premium, the public offering shall be underwritten by independent underwriters. c) In case shares are issued to different subscribers at different prices at the same time then those subscribers who are issued shares at lower prices shall have to hold the same for at least 6 months time from the date of subscription.

7.APPOINTMENT MEMBER

AND

FUNCTIONS

OF

SPONSORING

a) Appointment of Sponsoring Member i. The company, before applying for listing on the Exchange under these Regulations, shall appoint one Sponsoring Member to represent them in accordance with the functions provided herein. ii. The Sponsoring Member appointed by the Company in accordance with Regulation 7(a)(i) hereof shall, concurrent to the Companys application for listing in accordance with Regulation 4 hereof, apply to the Exchange for registration and, in performing its functions as a Sponsoring Member, shall be bound by the provisions in these Regulations as well as all applicable laws including but not limited to the rules and regulations governing the Exchange, the Securities and Exchange Ordinance, 1969 and the Securities & Exchange Commission of Pakistan Act, 1997. iii. A Sponsoring Member appointed in accordance with Regulation 7(a) (i) and (ii) hereof shall enter into a written agreement with the Company and provide copies of such agreement to the Exchange along with its application for registration. 60

iv. Upon receipt of the application for registration, the Exchange may, at its sole discretion, reject the application of the Sponsoring Member, if it deems: a. The Sponsoring Member to lack sufficient expertise in performing the functions set out hereunder or is unable to obtain such expertise; or b. any of the Sponsoring Members Directors is a Director in a listed company which has violated and/or failed to comply with any provision of the Listing Regulations of the Exchange; or c. if any of the Sponsoring Members Directors is a Director in a company which has been adjudicated insolvent; or d. there are grounds to reasonably believe that, for the protection of investors, the Sponsoring Members application must be rejected; Provided that, before a rejection of an application as aforesaid, the Exchange shall provide the Sponsoring Member an opportunity of being heard. v. If a Sponsoring Members application is rejected in accordance with Regulation 7(a) (iv) hereof, the Company shall appoint another Sponsoring Member within one month of the rejection, which shall apply to the Exchange for registration. vi. If a Sponsoring Members (being a corporate brokerage house) membership of the Exchange is at any time suspended, terminated, transferred or it becomes ineligible to act as a Sponsoring Member for any reason whatsoever, or where the Sponsoring Member (not being a corporate brokerage house) becomes ineligible to act or continue as a Sponsoring Member for any reason whatsoever, the Company shall appoint another Sponsoring Member. b) Functions of Sponsoring Member.The Sponsoring Member shall perform the following functions on behalf of the companies appointing them under a Sponsorship Agreement:

61

i. The Sponsoring Member shall, either on his own or in consultation with other expert, appraise the project for the purpose of seeking listing of the company under these regulations and shall certify/confirm to the Exchange that:a) They have examined the technical, managerial, commercial, economic and financial aspects of the project and/or the company. b) That they have been satisfied that the company has or will have the necessary operational infrastructure. c) That the project and company are viable and investment worthy. d) That based on appraisal, the Sponsoring Member has determined the price at which the shares of the company will be offered to the public. e) That the information furnished to the Exchange at the time of application, as listed in Schedule-I, to these Regulations comply with the companys obligations under these Regulations. f) That they will be available at all times to advise and guide the directors of an OTC company of their obligations to comply with these Regulations. g) That they will provide the Exchange with any other information, in such form and within such time limits as the Exchange may reasonably require. h) That they will liaise with the Exchange where requested so to do by the Exchange by an OTC company for which it acts. i) That they will inform the Exchange when they cease to be a Sponsoring Member to an OTC Company. j) That they will act with due skills and care at all times.

62

k) That necessary arrangements have been made to ensure that the public issue will be fully subscribed or otherwise has been fully underwritten provided; there would be no requirement for minimum number of subscribers to the public offering.

8. APPOINTMENT AND FUNCTIONS OF A MARKET MAKER

a) Where the Sponsoring Member is not a corporate brokerage house, it shall appoint a broker who shall be the primary Market Maker for a period of three years. b) Where the Sponsoring Member is corporate brokerage house it shall be the primary Market Maker. c) The primary Market Maker shall appoint one other broker for making market compulsorily in the security for a period of one year from the date of commencement of public trading. The broker so appointed by the primary Market Maker shall be the additional Market Maker. d) Any broker, excluding the primary and additional Market Maker, will be free to voluntarily Make Market in the Companys security. The voluntary Market Maker must continue making market in the Companys security for at least a period of three months. e) The primary, additional and voluntary Market Makers shall compulsorily and continuously (on all working sessions of the Exchange) Make Market in the Companys security by quoting bids and offer provided that, if the Company and the primary Market Maker opt for the bought out deal in accordance with Regulation 9 hereof in which the primary Market Maker purchases one hundred percent of the Companys issue of securities, the primary Market Maker shall not make market until such time as he sells the Companys securities to the general public through subscription. Notwithstanding the foregoing, the voluntary Market Maker may, abstain from offering sell quotes if it does not have sufficient saleable stock of at least 10 marketable lots. f) Where the Company sells its securities directly to the investors, the primary and additional Market Makers shall not Make Market in the Companys security until such 63

time as the primary and additional Market Makers each have either subscribed to or purchased at least ten percent of the Companys tradable securities. g) Compulsory market-making by the primary Market Maker shall continue for all times as the scrip is listed, provided however, that the primary Market Maker can withdraw from such market making obligations after a period of three years from the commencement of public trading on the Exchange provided appointment of another broker is made to perform such functions. h) Primary and additional Market Makers must hold (between them in any mutually agreed proportion to be intimated to the Exchange) five percent of the Companys securities at all times. i) The specific price bands for market makers to operate shall not be more than 2.5% upward or downward fluctuations. j) The primary and/or the additional market maker shall be bound to purchase or sale during a business day the shares of the company of at least 1% of public offering or 50,000 shares of the face value of Rs. 10/- each, whichever is higher, in any given scrip.

9. BOUGHT-OUT DEALS BY THE COMPANIES

The company, if it is desirous of raising funds urgently, may sell its existing securities or issue new securities to the primary Market Maker only once and subject to the terms and conditions as may be agreed upon. However, the primary Market Maker shall subsequently sell such securities to the investors subject to the procedure and conditions provided in these regulations.

10. TRADING OF SECURITIES AND ALLIED MATTERS

a)Market-Making The Sponsoring Member shall provide an undertaking to the Exchange stating:-

64

i. That the compulsory market-making will continue for all times as the scrip is listed provided however, that the Sponsoring Member can withdraw from such market making obligation after a period of three years from the commencement of public trading on the Exchange provided arrangement by another member/dealer is made to perform such functions. ii. The specific price bands for market makers to operate shall not be more than 2.5% upward or downward fluctuations. b) Applicability of Capital Adequacy Requirement The provisions of capital adequacy requirements for the Sponsoring Member / Brokers of their trading exposures under the OTC market shall be applicable as stipulated in Capital Adequacy Rules by the Board from time to time and will be treated separately from the one prescribed for the regular market. c) Trading through KATS. The securities listed under these regulations shall be traded through KATS under T+2 Settlement System or any other counter subject to the clearing and settlement procedure as may be decided by the Board with suffix OTC added to its symbol. d) Non-applicability of short selling regulations Short/blank selling shall not be permissible on the OTC market.

11. DOCUMENTS FOR OFFER FOR SALE

a) An offer for sale made to public either directly by the company or by the Sponsoring Member or dealers of the Exchange, shall be accompanied by an offering document to be issued by the company along with all the relevant information and documents. b) The offering document will conform to such terms and conditions and specifications as may be laid down by the Exchange or Commission. However the offering documents in all cases will contain a statement to the effect that :

65

i. The OTC is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. ii. A prospective investor should be aware of the risk of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. c) Copies of offering document along with application forms and all other related documents shall be made available by the company at all the counters of the members or their dealers.

12. APPLICABILITY OF LISTING REGULATIONS AND OTHER ALLIED MATTERS:

a) All the provisions of Listing Regulations of the Exchange presently in force or as amended from time to time shall be applicable to the Company unless otherwise provided in these Regulations. b) The Company shall be required to comply with the provisions of the Code of Corporate Governance as provided under Schedule-II to these Regulations. c) The Company shall disclose in its offering documents and all subsequent financial statements that the requirement of appointment of Chief Financial Officer (CFO) and Internal Auditor under the Listing Regulations of the Exchange are not applicable on the company. d) The Exchange shall have powers, for reasons to be recorded, to waive or abate the requirements of any of the Regulations in any particular case, with the prior written approval of the Commission.

13. APPLICABILITY OF COMPANIES (ISSUE OF CAPITAL) RULES, 1996

The Companies (Issue of Capital) Rules, 1996 shall be applicable for the listing of companies under these regulations. However, the requirements of the said Rules may be relaxed by the Commission under Rule 10 thereof. 66

14.

GENERAL

DISCLOSURE

OF

PRICE

SENSITIVE

INFORMATION
An OTC Company must notify the Exchange without delay of any new development which are not in public knowledge concerning a change in: i. Its financial condition; ii. Its sphere of activity; iii. The performance of its business; or iv. Its expectation of its performance which, if made public, would be likely to cause a substantial movement in the price of OTC securities.

15. RELATED PARTY TRANSACTIONS

An OTC Company must notify the Exchange without delay, as soon as the terms of a transaction with a related party are agreed disclosing: i. The name of the related party concerned and the nature and extent of their interest in the transactions; ii. Particulars of the transactions, including the name of any company or business where relevant; iii. The affect of the transaction on the OTC Company; iv. Any other information necessary to enable investors to evaluate the effect of the transaction on the OTC Company; and

67

v. A statement that with the exception of any Director who is involved in the transaction as a related party, its director considers, having consulted with their sponsoring Member that the terms of the transaction are fair and reasonable in so far as its shareholders are concerned.

16. DISCLOSURE OF MISCELLANEOUS INFORMATION

i. The resignation, dismissal or appointment of any director giving the date of such occurrences; ii. Any change in its accounting reference date; iii. Any change in its registered office address; iv. Any material change in its actual performance or financial condition; v. Any profit forecast, estimate or projection included in the Offer for Sale or otherwise made public on its behalf; and vi. The resignation, dismissal or appointment of its Sponsoring Member or Brokers.

17. RETENTION OF SPONSORING MEMBER

An OTC Company must retain a Sponsoring Member at all times. If an OTC Company ceases to have a Sponsoring Member, the Exchange will suspend trading in its securities and impose a penalty of Rs. 10,000/- for each day of default.

18. RETENTION OF BROKER

An OTC Company must retain a broker at all times.

19. PRECAUTIONARY SUSPENSION

The Exchange may suspend the trading of OTC Company where: i. trading in those securities is not being conducted in an orderly manner;

68

ii. It considers that an OTC Company has failed to comply with these Regulations; iii. The protection of investors so requires; or iv. The integrity and reputation of the market has been or may be impaired by dealings in those securities.

20. DISCIPLINARY ACTION

If the Exchange considers that an OTC Company has contravened these Regulations, it may take the following measures: i. Fine it; ii. Censure it; iii. Publish the fact that it has been fined or censured; and/or iv. Cancel the admission of its OTC securities v. Recommend the Commission to appoint an Administrator.

21.

DISCIPLINARY

ACTION

AGAINST

SPONSORING

MEMBER
If the Board considers that a Sponsoring Member is either in breach of its responsibilities under Regulation 7, or that the integrity and reputation of OTC market has been or may be impaired as a result of its conduct or judgment, the Board may: i. suspend the Sponsoring Member; ii. Remove it from the register; and/or iii. Publish the action it has taken and the reasons for that action.

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22.DOCUMENTS / INFORMATION REQUIRED FOR LISTING

The company shall apply for listing on the prescribed form and shall furnish all the information and documents duly attested as per details of the documents provided under Schedule-I at the time of listing.

23. CHANGES IN THE REGULATIONS

The Board may with the prior approval of the Commission make any changes in these regulations after giving reasonable notice and publication through the Gazette of Pakistan. SCHEDULE-I The Exchange will list the securities on the OTC issued by companies registered under Companies Ordinance, 1984. The company/sponsor shall be required to furnish the following documents/information at the time of application for listing: 1. Listing application under Section 9 of the Securities & Exchange Ordinance, 1969 (Annexure A). 2. Application for submission of undertaking and payment of fee (Annexure B). 3. An unconditional undertaking under Listing Regulation No. 5 on non-judicial stamppaper of required value (Annexure C). 4. An undertaking pertaining to issue of security, computerized transfer deeds, verification of signatures on transfer deeds and intimation of book closure for entitlement of profits (Annexure D). 5. Copy of the feasibility report/ information memorandum duly appraised by sponsor justifying the purpose of issue of the security. 6. Copy of underwriting agreement(s), (if applicable) along with No Objection Certificate(s) from the underwriter(s) and confirmation of non-execution of any buy-

70

back/repurchase agreement(s) with the sponsors and/or with any other person(s). (Annexure-E). 7. A copy of the Board Resolution of the issuer for issue of the security. 8. Auditors Certificates of the issuing company under section 53(I) read with Clause 28(1) of Section 2 of Part-I of the second schedule to the Companies Ordinance, 1984 and the breakup value per ordinary share on the basis of latest audited accounts along with its calculation. 9. A copy of the security trust deed along with agreement for hypothecation and mortgage documents, in case of debt instrument only. 10. Copies of the consent letters from Bankers to the Issue along with undertaking of the banks concerned, confirming that the subscription money shall be kept in a separate bank account, which shall not be released to the company without prior written approval of the Exchange and/or until the security is formally listed. 11. Copies of individual consents of all Directors, Chief Executive and Secretary of the Company for publishing their names as Directors, Chief Executive and Secretary in the Offering document of the Company. 12. Name of institution for computer-balloting and letter of acceptance of the institution; (The institution where the arrangements for computer balloting are made shall be an independent entity and should not be associated with the company seeking listing). 13. 25 copies each of the following: i) Memorandum & Articles of Association; ii) Draft offering document (5 copies of the offering document will be submitted in advance and after scrutiny/finalization, remaining 20 copies will be submitted); iii) Statement of audited accounts for the last 5 years or for a shorter number of years if the company is in operation only for such period. The last audited accounts incorporated 71

in the offering document shall not be older than 6 months from the date of completion of all the relevant documents / information for listing; 14. List of copies of all material contracts and agreements, sanction letters entered into or exchanged with foreign participants, machinery suppliers and with any other financial institutions, with an undertaking to provide and submit to the Exchange the copies of all the other or any of the material contracts, agreements, sanction letters entered into or exchanged with any person, as and when so required by the Exchange. 15. Copy of application submitted with CDC for the security to be the eligible security upon listing. 16. Report of State Bank of Pakistan that the names of promoters/sponsors/controlling directors of the company are not in the Defaulters List of State Bank of Pakistan either in their individual capacity or in the capacity of Directors of other companies. (This will not apply to nominee Directors of the Government and Financial Institutions). 17. Report of State Bank of Pakistan that the name of the company as well as the names of other companies in which directors of the company are holding directorship are not in the defaulters list of State Bank of Pakistan. 18. Printed copy of the security certificate duly cancelled. 19. Certified true copy of the Certificate of Incorporation; 20. Certified true copy of the conversion certificate from private to public company; if applicable; 21. Certified true copy of the Certificate of Commencement of Business; 22. Certified true copy of the certificate for change of name, if applicable;

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23. Names of Directors/Sponsors and directorship of other companies listed on the Exchange along with confirmation of each Director/ Sponsor under Regulation No.4-c of the Regulations governing Over the Counter Market (on Company's letter head); 24. In case where the shares are issued to different subscribers at different prices at the same time, those subscribers who are issued shares at lower price shall hold such shares for a period of six months from the date of public subscription. These subscribers shall be issued jumbo certificates with markings "not saleable for six months". (Regulation No. 6-c of the Regulation Governing Over the Counter Market). 25. Application of registration of Sponsoring Member along with copy of agreement entered into with the company under Regulation No. 7-a (ii) & (iii) of the Regulations Governing Over the Counter Market; 26. Profile of the Sponsoring Member along with a statement in respect of each Director of Sponsoring Member, containing the information under Regulation No. 7-a (iv) of the Regulations Governing Over the Counter Market; 27. Copy of appraisal report of the company carried out by the sponsoring member either on his own or in consultation with any expert together with certification/confirmation under Regulation No.7-b (i) of the Regulations Governing Over the Counter Market; 28. Consent of primary market makers and additional market maker under Regulation No. 8 of the Regulations Governing Over the Counter Market; 29. Undertaking of sponsoring member for compulsory market making in the scrip of the company under Regulation No.10 (a) of the Regulations governing Over the Counter Market (Annexure-F). 30. Statement showing the cost of project and means of finance (on company's letterhead);

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31. Copies of the agreements relating to issue of securities for consideration other than cash, if any; 32. Names of Directors/ shareholders common to the company and the institutions/ funds, which have subscribed the shares under private placement; 33. Due diligence report(s) of the underwriter(s) justifying the premium asked for by the company under its present issue, if applicable; 34. Copies of airway bills, bills of lading Letter(s) of Credit established in favour of machinery suppliers along with copies of bills of entry. In case the machinery has not been shipped, the company should furnish shipment schedule duly authenticated by the supplier of the machinery; 35. Complete list of plant and machinery along with an affidavit on non-judicial stamppaper of required value signed by Chief Executive/Managing Director, stating, the name(s) of manufacturer(s) and/or supplier(s); whether it is new, old or reconditioned together with capacity and its utilization; 36. Copies of the title deeds of land; 37. Copy of letter from Chartered Accountant(s) consenting to the Issue of Prospectus/Offer for Sale to act in their respective capacity under Section 57(5) of the Ordinance. 38. Copy of letter from Legal Advisor consenting to act in their respective capacity; 39. Copy of letter from consultant to the issue, (if any) consenting to act in their respective capacity. The consultant of the company will also confirm that they have reviewed the contents of the draft prospectus/offer for sale, which are correctly and fairly stated. 40. An affidavit on non-judicial stamp paper of required value signed by the Chief Executive of the company confirming the dates of trial/commercial production; 74

41. Details of share department in respect of number of employees, their designation, experience, qualification and the timings of public dealing; 42. A complete list of Shareholders /Subscribers, containing their names, addresses and shareholdings; 43. Any other documents/material contract and such other particulars as may be required by the Exchange. SCHEDULE-II

CODE OF CORPORATE GOVERNANCE FOR OVER THE COUNTER (OTC) MARKET

All companies listed on the OTC Market shall ensure compliance of the following Code of Corporate Governance. (i) The directors of listed companies shall, at the time of filing their consent to act as such, give a declaration in such consent that they are aware of their duties and powers under the relevant law(s) and the listed companies Memorandum and Articles of Association and the listing regulations of stock exchanges in Pakistan.

QUALIFICATION AND ELIGIBILITY TO ACT AS A DIRECTOR

(ii) No listed company shall have as a director, a person who is serving as a director of ten other listed companies. (iii) No person shall be elected or nominated as a director of a listed company if: (a) His name is not borne on the register of National Tax Payers except where such person is a non-resident; and

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(b) He has been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a banking company, a Development Financial Institution or a NonBanking financial Institution or he, being a member of a stock exchange, has been declared as a defaulter by such the stock exchange; and (iv) A listed company shall endeavour that no person is elected or nominated as a director if he or his spouse is engaged in the business of stock brokerage (unless specifically exempted by the Securities and Exchange Commission of Pakistan).

TENURE OF OFFICE OF DIRECTORS

(v) The tenure of office of Directors shall be three years. Any casual vacancy in the Board of Directors of a listed company shall be filled up by the directors within 30 days thereof.

RESPONSIBILITIES, POWERS AND FUNCTIONS OF BOARD OF DIRECTORS

(vi) The directors of listed companies shall exercise their powers and carry out their fiduciary duties with a sense of objective judgment and independence in the best interests of the listed company. (vii) Every listed company shall ensure that: (a) a Statement of Ethics and Business Practices is prepared and circulated annually by its Board of Directors to establish a standard of conduct for directors and employees, which Statement shall be signed by each director and employee in acknowledgement of his understanding and acceptance of the standard of conduct; (b) the Board of Directors adopt a vision/ mission statement and overall corporate strategy for the listed company and also formulate significant policies, having regard to the level of materiality, as may be determined it; Explanation: Significant policies for this purpose may include: Risk management; 76

 Human resource management including preparation of a succession plan; Procurement of goods and services; Marketing; Determination of terms of credit and discount to customers; Write-off of bad/ doubtful debts, advances and receivables; acquisition/ disposal of fixed assets; Investments; Borrowing of moneys and the amount in excess of which borrowings shall be sanctioned/ ratified by a general meeting of shareholders; Donations, charities, contributions and other payments of a similar nature; Determination and delegation of financial powers; Transactions or contracts with associated companies and related parties; and Health, safety and environment A complete record of particulars of the significant policies, as may be determined, along with the dates on which they were approved or amended by the Board of Directors shall be maintained. The Board of Directors shall define the level of materiality, keeping in view the specific circumstances of the listed company and the recommendations of any technical or executive sub-committee of the Board that may be set up for the purpose; (c) The Board of Directors establish a system of sound internal control, which is effectively implemented at all levels within the listed company; (d) The following powers are exercised by the Board of Directors on behalf of the listed company and decisions on material transactions or significant matters are documented by a resolution passed at a meeting of the Board: Investment and disinvestment of funds where the maturity period of such investments is six months or more, except in the case of banking companies, Non-Banking Financial Institutions, trusts and insurance companies; Determination of the nature of loans and advances made by the listed company and fixing a monetary limit thereof; Write-off of bad debts, advances and receivables and determination of a reasonable provision for doubtful debts; 77

 Write-off of inventories and other assets; and Determination of the terms of and the circumstances in which a law suit may be compromised and a claim/ right in favour of the listed company may be waived, released, extinguished or relinquished; (e) Appointment, remuneration and terms and conditions of employment of the Chief Executive Officer (CEO) and other executive directors of the listed company are determined and approved by the Board of Directors; and (f) In the case of a modaraba or a Non-Banking Financial Institution, whose main business is investment in listed securities, the Board of Directors approve and adopt an investment policy, which is stated in each annual report of the modaraba/ Non-Banking Financial Institution.

Explanation:

THE INVESTMENT POLICY SHALL INTER ALIA STATE:

That the modaraba/ Non-Banking Financial Institution shall not invest in a connected person, as defined in the Asset Management Companies Rules, 1995, and shall provide a list of all such connected persons; That the modaraba/ Non-Banking Financial Institution shall not invest in shares of unlisted companies; and the criteria for investment in listed securities. The Net Asset Value of each modaraba/ Non-Banking Financial Institution shall be provided for publication on a monthly basis to the stock exchange on which its shares/ certificates are listed.

MEETING OF THE BOARD

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(viii) The Chairman of a listed company, if present, shall preside over meetings of the Board of Directors. (ix) The Board of Directors of a listed company shall meet at least once in every quarter of the financial year. Written notices (including agenda) of meetings shall be circulated not less than seven days before the meetings, except in the case of emergency meetings, where the notice period may be reduced or waived. (x) The Chairman of a listed company shall ensure that minutes of meetings of the Board of Directors are appropriately recorded. The minutes of meetings shall be circulated to directors and officers entitled to attend Board meetings within 14 days of the date of the meeting. In the event that a director of a listed company is of the view that his dissenting note has not been satisfactorily recorded in the minutes of a meeting of the Board of Directors, he may refer the matter to the Company Secretary. The director may require the note to be appended to the minutes, failing which he may file an objection with the Securities and Exchange Commission of Pakistan in the form of a statement to that effect.

SIGNIFICANT ISSUES TO BE PLACED FOR DECISION BY THE BOARD OF DIRECTORS

(xi) In order to strengthen and formalize corporate decision-making process, significant issues shall be placed for the information, consideration and decision of the Boards of Directors of listed companies. Significant issues for this purpose may include: Annual business plans, cash flow projections, forecasts and long term plans; Budgets including capital, manpower and overhead budgets, along with variance Analyses; Quarterly operating results of the listed company as a whole and in terms of its Operating divisions or business segments; Internal audit reports, including cases of fraud or irregularities of a material nature; Management letter issued by the external auditors; Details of joint venture or collaboration agreements or agreements with distributors, 79

agents, etc; Promulgation or amendment of a law, rule or regulation, enforcement of an accounting standard and such other matters as may affect the listed company; Status and implications of any law suit or proceedings of material nature, filed by or against the listed company; Any show cause, demand or prosecution notice received from revenue or regulatory authorities, which may be material; default in payment of principal and/or interest, including penalties on late payments and other dues, to a creditor, bank or financial institution or default in payment of public deposit; Failure to recover material amounts of loans, advances, and deposits made by the listed company, including trade debts and inter-corporate finances; Any significant accidents, dangerous occurrences and instances of pollution and environmental problems involving the listed company; Significant public or product liability claims likely to be made against the listed company, including any adverse judgment or order made on the conduct of the listed company or of another company that may bear negatively on the listed company; disputes with labour and their proposed solutions, any agreement with the labour union or Collective Bargaining Agent and any charter of demands on the listed company; and payment for goodwill, brand equity or intellectual property.

ORIENTATION COURSES
(xii) All listed companies shall make appropriate arrangements to carry out orientation courses for their directors to acquaint them with their duties and responsibilities and enable them to manage the affairs of the listed companies on behalf of shareholders.

COMPANY SECRETARY
Appointment and Approval (xiii) The appointment, remuneration and terms and conditions of employment of the Company Secretary of listed companies shall be determined by the CEO with the approval of the Board of Directors. The Company Secretary of listed companies shall not be removed except by the CEO with the approval of the Board of Directors. 80

Qualification of Company Secretary (xiv) No person shall be appointed as the Company Secretary of a listed company unless he is: (a) A member of a recognized body of professional accountants; or (b) A member of a recognized body of corporate/ chartered secretaries; or (c) A lawyer; or (d) A graduate from a recognized university or equivalent, having at least five years experience of handling corporate affairs of a listed public company or corporation. Requirement to Attend Board Meetings (xv) The Company Secretary of a listed company shall attend meetings of the Board of Directors. Provided that unless elected as a director, the Company Secretary shall not be deemed to be a director or entitled to cast a vote at meetings of the Board of Directors for the purpose of this clause. Provided further that the Company Secretary shall not attend such part of a meeting of the Board of Directors, which involves consideration of an agenda item relating to the Company Secretary, CEO or any director.

CORPORATE AND FINANCIAL REPORTING FRAMEWORK

The Directors Report to Shareholders (xvi) The directors of listed companies shall include statements to the following effect in the Directors Report, prepared under section 236 of the Companies Ordinance, 1984: (a) The financial statements, prepared by the management of the listed company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity. (b) Proper books of account of the listed company have been maintained. (c) Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.

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(d) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure therefrom has been adequately disclosed. (e) The system of internal control is sound in design and has been effectively implemented and monitored. (f) There are no significant doubts upon the listed companys ability to continue as a going concern. (g) There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. The Directors Reports of listed companies shall also include the following, where necessary: (a) If the listed company is not considered to be a going concern, the fact along with reasons shall be disclosed. (b) Significant deviations from last year in operating results of the listed company shall be highlighted and reasons thereof shall be explained. (c) Key operating and financial data of last six years shall be summarized. (d) If the listed company has not declared dividend or issued bonus shares for any year, the reasons thereof shall be given. (e) Where any statutory payment on account of taxes, duties, levies and charges is outstanding, the amount together with a brief description and reasons for the same shall be disclosed. (f) Significant plans and decisions, such as corporate restructuring, business expansion and discontinuance of operations, shall be outlined along with future prospects, risks and uncertainties surrounding the listed company.

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(g) The number of Board meetings held during the year and attendance by each director shall be disclosed. (h) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by: Associated companies, undertakings and related parties (name wise details); NIT and ICP (name wise details); Directors, CEO and their spouse and minor children (name wise details); Executives; Public sector companies and corporations; Banks, Development Finance Institutions, Non-Banking Finance Institutions, insurance companies, modarabas and mutual funds; and Shareholders holding ten percent or more voting interest in the listed company (name wise details).

Explanation:
For the purpose of this clause, clause (b) of direction (i) and direction (xxiii), the expression executive means an employee of a listed company other than the CEO and directors whose basic salary exceeds five hundred thousand rupees in a financial year. (i) All trades in the shares of the listed company, carried out by its directors, CEO, Company Secretary and their spouses and minor children shall also be disclosed. Frequency of Financial Reporting (xvii) The quarterly un-audited financial statements of listed companies shall be published and circulated along with directors review on the affairs of the listed company for the quarter. (xviii) All listed companies shall ensure that second quarterly financial statements are subjected to a limited scope review by the statutory auditors in such manner and according to such terms and conditions as may be determined by the Institute of

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Chartered Accountants of Pakistan and approved by the Securities and Exchange Commission of Pakistan. (xix) All listed companies shall in the form and manner specified by the Commission ensure that the annual audited financial statements are sent to every member of the company at least twenty-one (21) days before the Annual General Meeting is held to consider the same. (xx) Every listed company shall immediately disseminate to the Securities and Exchange Commission of Pakistan and the stock exchange on which its shares are listed all material information relating to the business and other affairs of the listed company that will affect the market price of its shares. Mode of dissemination of information shall be prescribed by the stock exchange on which shares of the company are listed. This information may include but shall not be restricted to information regarding a joint venture, merger or acquisition or loss of any material contract; purchase or sale of significant assets; any unforeseen or undisclosed impairment of assets due to technological obsolescence, etc.; delay/ loss of production due to strike, fire, natural calamities, major breakdown, etc.; issue or redemption of any securities; a major change in borrowings including any default in repayment or rescheduling of loans; and change in directors, Chairman or CEO of the listed company. Responsibility for Financial Reporting and Corporate Compliance (xxi) No listed company shall circulate its financial statements unless the CEO present the financial statements, duly endorsed under his respective signatures, for consideration and approval of the Board of Directors and the Board, after consideration and approval, authorize the signing of financial statements for the issuance and circulation. It shall be mandatory for the CEO to have the second quarter and annual accounts (both separate and consolidated where applicable) initialed by the external auditors before presenting it to the Board of Directors for approval. (xxii) The Company Secretary of a listed company shall furnish a Secretarial Compliance Certificate, in the prescribed form, as part of the annual return filed with the Registrar of Companies to certify that the secretarial and corporate requirements of the Companies

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Ordinance, 1984 have been duly complied with. Disclosure of Interest by a Director Holding Companys Shares (xxiii) Where any director, CEO or executive of a listed company or their spouses sell, buy or take any position, whether directly or indirectly, in shares of the listed company of which he is a director, CEO or executive, as the case may be, he shall immediately notify in writing the Company Secretary of his intentions. Such director, CEO or executive, as the case may be, shall also deliver a written record of the price, number of shares, form of share certificates (i.e. whether physical or electronic within the Central Depository System) and nature of transaction to the Company Secretary within four days of effecting the transaction. The notice of the director, CEO or executive, as the case may be, shall be presented by the Company Secretary at the meeting of the Board of Directors immediately subsequent to such transaction. In the event of default by a director, CEO or executive to give a written notice or deliver a written record, the Company Secretary shall place the matter before the Board of Directors in its immediate next meeting: Provided that each listed company shall determine a closed period prior to the announcement of interim/ final results and any business decision, which may materially affect the market price of its shares. No director, CEO or executive shall, directly or indirectly, deal in the shares of the listed company in any manner during the closed period. Auditors Not to Hold Shares xxiv) All listed companies shall ensure that the firm of external auditors or any partner in the firm of external auditors and his spouse and minor children do not at any time hold, purchase, sell or take any position in shares of the listed company or any of its associated companies or undertakings: Provided that where a firm or a partner or his spouse or minor child owns shares in a listed company, being the audit client, prior to the appointment as auditors, such listed company shall take measures to ensure that the auditors disclose the interest to the listed company within 14 days of appointment and divest themselves of such interest not later than 90 days thereof. Divestiture of Shares by Sponsors/Controlling Interest (xxv) In the event of divestiture of not less than 75% of the total shareholding of a listed company, other than a divestiture by non-resident shareholder(s) in favour of other non85

resident shareholder(s) or a disinvestment through the process of privatization by the Federal or Provincial Government, at a price higher than the market value ruling at the time of divestiture, it shall be desirable and expected of the directors of the listed company to allow the transfer of shares after it has been ascertained that an offer in writing has been made to the minority shareholders for acquisition of their shares at the same price at which the divestiture of majority shares was contemplated. Where the offer price to minority shareholders is lower than the price offered for acquisition of controlling interest, such offer price shall be subject to the approval of the Securities and Exchange Commission of Pakistan. External Auditors (xxvi) No listed company shall appoint as external auditors a firm of auditors which has not been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan. (xxvii) No listed company shall appoint as external auditors a firm of auditors which firm or a partner of which firm is non-compliant with the International Federation of Accountants (IFAC) Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan. (xxviii) The Board of Directors of a listed company shall recommend appointment of external auditors for a year. The recommendations of the Board of Directors for appointment of retiring auditors or otherwise shall be included in the Directors Report. In case of a recommendation for change of external auditors before the elapse of three consecutive financial years, the reasons for the same shall be included in the Directors Report. (xxix) No listed company shall appoint its auditors to provide services in addition to audit except in accordance with the regulations and shall require the auditors to observe applicable IFAC guidelines in this regard and shall ensure that the auditors do not perform management functions or make management decisions, responsibility for which remains with the Board of Directors and management of the listed company. (xxx) All listed companies are required to change their external auditors every five years. If for any reason this is impractical, a listed company may at a minimum, rotate the

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partner in charge of its audit engagement after obtaining the consent of the Securities and Exchange Commission of Pakistan. (xxxi) No listed company shall appoint a person as the CEO or a director of the listed company who was a partner of the firm of its external auditors (or an employee involved in the audit of the listed company) at any time during the two years preceding such appointment or is a close relative, i.e. spouse, parents, dependents and non-dependent children, of such partner (or employee). (xxxii) Every listed company shall require external auditors to furnish a Management Letter to its Board of Directors not later than 30 days from the date of audit report. (xxxiii) Every listed company shall require a partner of the firm of its external auditors to attend the Annual General Meeting at which audited accounts are placed for consideration and approval of shareholders. Compliance with the Code of Corporate Governance (xxxiv) All listed companies shall publish and circulate a statement along with their annual reports to set out the status of their compliance with the best practices of corporate governance set out above. (xxxv) All listed companies shall ensure that the statement of compliance with the best practices of corporate governance is reviewed and certified by statutory auditors, where such compliance can be objectively verified, before publication by listed companies. (xxxvi) Where the Securities and Exchange Commission of Pakistan is satisfied that it is not practicable to comply with any of the best practices of corporate governance in a particular case, the Commission may, for reasons to be recorded, relax the same subject to such conditions as it may deem fit.

SCHEDULE-III LISTING OF DEBT MARKET SECURITIES ISSUED TO QIBs THROUGH PRIVATE PLACEMENT
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1. CONDITIONS APPLICABLE TO THE COMPANY

The following conditions shall apply to the Company for listing of Debt Market Securities under Regulation 3(II): (i) The Company shall provide to the Exchange the following along-with the application under Regulation 3(II) of these Regulations: a. Documents/information as given at Annexure-DI; b. An unconditional undertaking on the format as given at Annexure-DIII; and c. Any other document/material/information as may be required by the Exchange. (ii) The Company shall ensure, before issuance of Debt Market Securities to QIBs that: a. a Trustee is appointed irrespective of the fact whether the Debt Market Securities are secured or otherwise and shall be retained as Trustee at all times; b. the Trustee so appointed may, subject to prior approval of the Exchange, retire from his office on appointment of a new Trustee and the retirement shall take effect at the same time as the new Trustee is appointed with the approval of the Exchange or from the date of assumption of assets of the Company by the newly appointed Trustee, whichever is later. c. at least one corporate brokerage house registered with the Commission as broker shall be appointed and retained as Market Maker at all times; d. the Market Maker so appointed shall hold five percent of the said Debt Market Securities at all times; e. the Market Maker shall mandatorily make available two way quotes on daily basis with a maximum spread of 2.5% till complete redemption of the Debt Market Securities; f. the Market Maker shall be bound to purchase or sale a maximum of one percent of total principal outstanding of the issue in each Debt Market Security during a business day; 88

g. the Market Marker shall make available copy of the Information Memorandum to QIBs at all times; h. the Debt Market Securities are issued only in demat form; and i. the proceeds of Debt Market Securities shall not be utilized, directly or indirectly, for financing acquisition of the voting shares of its associated company. (iii) The Company shall, till complete redemption of the Debt Market Securities, ensure that: a. in case of secured Debt Market Securities, 100% security cover is maintained at all times; b. the unclaimed interest, if any, is not forfeited and is kept under a separate head of account namely, Unclaimed Interest; c. upon request by a Debt Market Securities holder, copy of its annual audited accounts and quarterly accounts are furnished to that Debt Market Securities holder; d. a record date is fixed and transfer is closed for purposes of payment of interest and payment of redemption or repayment amount or for such other purposes as the Exchange may require and to give to the Exchange the notice in advance of at least seven clear working days, or of as many days as the Exchange may from time to time reasonably prescribe, stating the dates of closure of transfers (or, when transfers are not to be closed, the date fixed for taking a record of its Debt Market Securities holders) and specifying the purpose or purposes for which the transfers are to be closed (or the record is to be taken); e. any material modification is not made in the structure of the Debt Market Securities in terms of coupon, conversion, redemption by any manner otherwise than that as disclosed in the Information Memorandum, or otherwise without prior written approval of the Exchange, Trustee and the Debt Market Securities holders. The Company shall make an application to the Exchange for seeking modification only after approval of the Board of Directors, the Trustee and the Debt Market Securities holders;

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f. the Company Secretary or any other person as Compliance Officer is designated who (1) shall be responsible for ensuring compliance with the regulatory provisions applicable to such Debt Market Securities and report the same at the meeting of the Board of Directors of Company held subsequently; and (2) shall directly report to the Exchange and the Trustee on the implementation of various clauses of these Regulations and other directives of the Exchange, if any; g. fee with respect to the listing of Debt Market Securities is paid to the Exchange in the manner as prescribed in the Regulations; and h. all relevant provisions of the regulations of the Exchange for listing, trading, clearing and settlement of transactions and other allied matters in Debt Securities Market are complied with. (iv) The Company shall forward to the Trustee promptly, whether a request for the same has been made or not in respect of following information/documents: a. copy of the latest audited annual accounts and quarterly accounts as and when finalized along with key financial ratios. b. the ratios shall include debt/equity ratio, current ratio, return on equity, return on assets, earning per share, debt service coverage ratio, interest service coverage ratio etc., where applicable; c. copy of the notice, resolution and circular relating to new issue of Debt Market Securities at the same time as it is sent to the Commission, the Exchange or the shareholders/ Debt Market Securities holders; d. copy of the notice, letter, circular, etc. issued to the Debt Market Securities holders or published in the print media relating to the issue of Debt Market Securities; e. certificate from the auditors of the Company regarding maintenance of 100% security cover in respect of secured Debt Market Securities on semi-annual basis within one month of the closing of each half year;

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f. redemption status of the Debt Market Securities on semi-annual basis till it is fully redeemed; g. status of redemption reserve, if any; and h. any other information/document as required by the Trustee. (v) The Company shall provide access to the Trustee to the books of accounts and record relating to the Debt Market Securities. (vi) The Company shall provide any other information/documents as required by the Exchange in addition to the information mentioned above in (b), (e) (f), (g) of para (iv). (vii) In case, where the equity shares of the Company are not listed on the Exchange, in addition to the documents/information as mentioned in (a), (b), (c), (d) of para (iv) above, the Company shall immediately notify to the Exchange the following: (a) Prohbitory order, if any, restraining the Company from transferring debt market securities from the name of any Debt Market Securities holder; (b) any action which will result in the redemption, conversion, cancellation, retirement in whole or in part of any Debt Market Securities; (c) Any action that would adversely affect payment of principal amount and mark up/interest/profit on the Debt Market Securities; (d) Any change in the form or nature of any of its debt securities that are listed on the Exchange or in the rights or privileges of the holders; (e) Any other change that would affect the rights and obligations of the Debt Market Securities holders; (f) Any other information not in the public domain necessary to enable the holders of debt market securities to clarify their position and to avoid the creation of a false market in such debt market securities;

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(g) The date of the meetings of its Board of Directors at which the recommendation or declaration of issue of Debt Market Securities or any other matter affecting the rights or interests of holders of Debt Market Securities is proposed to be taken up, at least two days in advance; (h) Any changes in the general character or nature of business / activities, disruption of operation due to natural calamity, revision/ withdrawal of credit rating and commencement of commercial production / commercial operations; (i) Any event such as strike and lock out, which have a bearing on the interest payment/ principal repayment capacity of the Company; (j) detail of any letter or comments made by the Trustee regarding payment/nonpayment of mark up/interest/profit on due dates, payment/nonpayment of principal amount on the due dates or any other matter concerning the Debt Market Securities, the Company and the assets backing the Debt Market Securities along with its comments thereon, if any; (k) Any delay/default in payment of mark up/ interest/ profit and principal amount for a period of more than fifteen days from the due date; (l) Its failure to create charge on the assets within the stipulated time period; and (m) Any other information having bearing on the operation/performance of the Company as well as price sensitive information. (viii) The Company shall maintain a record of Debt Market Securities holders and inform the Exchange and the Trustee of the address where the register is kept.

2. GENERAL CONDITIONS:
The following conditions, in addition to the above, shall also apply to Debt Market Securities listed under regulation 3(II): (i) The Debt Market Securities shall be offered only to QIBs entirely through private placement by circulation of Information Memorandum. In addition to circulation of Information Memorandum, Debt Market Securities may also be offered through meetings, telephone calls, conference calls and specific correspondence with QIBs; 92

(ii) No advertising material, booklet, flyer, magazine, circular or any other document inviting general public or a class of the general public for subscription of the Debt Market Securities shall be published, displayed or run in the print or electronic media; (iii) The Debt Market Securities shall not be issued to and transferred in the names of persons other than QIBs; (iv)The Debt Market Securities shall not be allotted to sponsors, associates and associated companies/undertakings in excess of 25% of the total issue size; (v) The Debt Market Securities shall not be allotted to a single QIB in excess of 25% of the total issue; (vi) Minimum investment amount by a single QIB shall not be less than Rs. 1 million; (vii) Number of initial subscribers of the Debt Market Securities shall not be less than thirty (30); (viii) All Debt Market Securities other than Short Term shall be rated from a rating agency registered with the Commission and both the instrument and entity rating shall be disclosed in the Information Memorandum. The credit rating report of the entity and the instrument shall be prepared on the basis of the Companys latest audited accounts and duly reviewed if it is older than six months. In case where the instrument and entity rating is obtained from more than one credit rating agencies, all the ratings, including the unaccepted rating(s), shall be disclosed in the Information Memorandum; (ix) The instrument rating shall be reviewed annually based on the latest audited accounts from the credit rating agency and revision in the rating shall be intimated promptly by the Company to the Exchange and the Trustee. The information relating to credit rating of instrument shall also be disseminated through the Exchanges website; (x) The Company shall submit, to the Exchange and the Trustee, a statement regarding the payment of mark up/profit/interest on Debt Market Securities and redemption of the principal amount, regularly on semi-annual basis till complete redemption of such Debt Market Securities; and

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(xi) The Debt Market Securities shall be traded or the off market trades shall be reported through the platform provided by the Exchange.

3. CONTENTS OF INFORMATION MEMORANDUM:

(i) The Information Memorandum to be circulated to QIBs for offer of Debt Market Securities shall contain at least the information as provided in Annexure-DII to these Regulations. (ii) Information Memorandum shall be a private document and shall be circulated only to QIBs. (iii) Information Memorandum shall not be used as a document inviting the general public or a class of the general public for subscription of Debt Market Securities.

4. PROCEDURE FOR LISTING OF DEBT MARKET SECURITIES UNDER REGULATION

3(II): For listing of Debt Market Securities under regulation 3(II) the following steps shall be followed: (i) The Company, after finalization of the list of subscribers, shall, for listing of its Debt Market Securities, make an application on Form-DI to the Exchange along with the documents/information as mentioned in Regulation 1(i); (ii) The Information Memorandum circulated by the Company among QIBs inviting them for subscription of Debt Market Securities shall not be considered as a prospectus and, therefore, shall not be issued, published and circulated to the general public or a class of the general public; (iii) The Exchange may reject any application, made under regulation 3(II), at its sole discretion if it deems that listing of the Debt Market Securities is not in the interest of the market, the Company does not meet the minimum eligibility criteria set out in the Regulations or the Company is in contravention of these Regulations; Provided that, the Company shall be given an opportunity of hearing by the Exchange before the listing application is rejected; 94

(iv) Trading in Debt Market Securities listed under regulation 3(II) shall commence one day after the date of their formal listing; (v) Payment of mark up and repayment of principal amount to Debt Market Securities holders shall be credited in their respective bank accounts electronically.

5. LISTING AND ANNUAL FEES

(i) A company applying for listing of its Debt Market Securities under regulation 3(II) of these Regulations shall pay an initial listing fee equivalent to one twentieth of one percent of the total issue size of Debt Market Securities subject to a maximum of Rs. 0.5 million. (ii) The annual listing fee shall be payable in respect of each financial year of the Exchange, commencing from 1st July and ending on 30th June next, before the 30th September in each calendar year, as per following schedule: S. No. Total Issue Size Amount of fee i Upto Rs. 150 million Rs. 30,000/ii Above Rs.150 million & upto Rs.500 million Rs. 40,000/iii Above Rs. 500 million Rs. 50,000/Provided that the Board may revise the above fees or any of the slabs or add new slabs with the approval of the Commission. FORM-DI FORM OF APPLICATION UNDER SECTION 9 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969 FOR LISTING OF DEBT MARKET SECURITIES UNDER REGULATION 3(II) OF THE REGULATIONS [This shall be on the Letterhead of the Company] 95

Dated: ________________ The General Manager, Karachi Stock Exchange (Guarantee) Limited, Karachi. Dear Sir, 1. We hereby apply for listing of (Name of Debt Market Securities) of (Name of the Company) on your Stock Exchange. 2. Necessary documents/information as required under clause 1(i) of Schedule-III of these Regulations are enclosed. [Name, designation and signature of the CEO, CFO or the Company Secretary duly authorized by the Board of Directors of the Company by way of resolution to make an application on behalf of the Company] Copy for information to: The Securities and Exchange Commission of Pakistan, Islamabad.

ANNEXURE-DI
DOCUMENTS / INFORMATION REQUIRED TO BE SUBMITTED

ALONGWITH APPLICATION FOR LISTING OF DEBT MARKET SECURITIES UNDER REGULATION 3(II) OF THE REGULATIONS A company applying for listing of its Debt Market Securities under regulation 3(II) of the Regulations shall provide the following documents/information along with application:

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(i) Copy of the resolution passed by the Board of Directors of the company approving issuance of Debt Market Securities to QIBs through private placement and submission of application to the Exchange for listing along with minutes of the meetings. (ii) Names of the Directors of the company along with their directorships in other companies, if any. (iii) Copy of the license, consent, approval, NOC etc. from the concerned regulatory authority for undertaking/ carrying on the business. (iv) Copy of the Information Memorandum prepared for circulation among QIBs. (v) Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of initial listing fee at the rate as mentioned in Schedule-III of the Regulations. (vi) Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of annual listing fee at the rate as mentioned in Schedule-III of the Regulations. (vii) Confirmation by the Company that all the subscribers of the Debt Market Securities are eligible QIBs. (viii) In case of secured Debt Market Securities, an undertaking on non-judicial stamp paper by the Company stating that appropriate and sufficient security has been created in favour of the Trustee, that the assets on which charge has been created in favour of the Trustee are free from any encumbrances and that permission/NOC/ consent of the existing creditors who have charge on such assets has been obtained for creation of charge on these assets in favour of the Trustee. (ix) Certificate from the companys auditors testifying receipt of the subscription money from all the subscribers of the Debt Market Securities. (x) Copy of power of attorney in favor of the Consultant of the Company, if any. (xi) Copy of the consent letter from the consultant (if any) of the Company. The letter shall state that the Consultant has given its consent to act as consultant of the Company and that this consent shall not be withdrawn till the formal listing of securities.

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(xii) A letter from the Consultant of the Company stating that: all subscribers of the Debt Market Securities are eligible QIBs; to the best of their knowledge and belief the disclosures made in Information Memorandum are true, fair, correct and adequate; the Company fulfills all the requirements of regulation 3(II) of the Regulations; the security, if required, created in favour of the Trustee is appropriate and sufficient; and the assets on which charge has been created in favour of the Trustee are free from any encumbrances and that permission/NOC/consent of the existing creditors who have charge on such assets has been obtained for creation of charge on these assets in favour of the Trustee. (xiii) Copy of consent letter from the Legal Advisor of the Company, if any. (xiv) Latest pattern of shareholding of the company. (xv) Copy of the complete Credit Rating Report of the entity and the instrument obtained from any Credit Rating Agency registered with the Commission. (xvi) Copy of the Trust Deed executed between the Company and the Trustee along with agreement for hypothecation and mortgage documents. (xvii) Copy of the Letter of Hypothecation along with detail of assets hypothecated. (xviii) Copy of CDC notice with respect to declaration of its Debt Market Security as CDS eligible security. (xix) Consumer Credit Information Report from State Bank of Pakistan that in respect of the promoters/sponsors/controlling directors of the Company confirming that their names are not in the Defaulters List of State Bank of Pakistan either in their individual capacity or in the capacity of Directors of other companies. (This will not apply to nominee Directors of the Government and Financial Institutions). (xx) Consumer Credit Information Report from State Bank of Pakistan in respect of the Company as well as other companies in which directors of the Company are holding directorship confirming that they are not in the defaulters list of State Bank of Pakistan.

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(xxi) Breakup of the expenses related to issuance of debt market securities to QIBs and the listing, on separate sheet. (xxii) Any other document/material/information as may be required by the Exchange for its own record. (xxiii) In case of a company whose equity shares are not listed on the Exchange, following additional documents shall also be provided: (i) Copy of memorandum and articles of association of the company. (ii) Copy of the certificate of incorporation of the company. (iii) Copy of the certificate of commencement of business of the company. (iv) Copy of the certificate for change of name of the company, if applicable. (v) Copy of the conversion certificate from private to public company; if applicable. (vi) Audited annual accounts of the company for the last 5 years and its latest quarterly accounts, if any or for a shorter period if five years of the commencement of business are not completed. Notes: (i) Please note that copies of all the documents are certified by the Company Secretary. (ii) Please note that all documents relating to regulatory authority are duly certified from the concerned regulatory authority. (iii) In addition to one copy in hard form, scanned copies one each of the following documents shall be provided: a. Memorandum and Articles of Association where applicable; b. Information Memorandum; and

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c. Audited annual accounts of the company for the last 5 years and its latest quarterly accounts or for a shorter period if five years of the commencement of business are not completed. ANNEXURE-DII CONTENTS OF INFORMATION MEMORANDUM The Information Memorandum prepared with respect to issue of Debt Market Securities to QIBs through private placement shall contain at least the following information/disclosures: (i) On cover page the following shall be disclosed: a. a disclaimer in bold letters stating that, This is not a prospectus for issue of securities to the general public but a document prepared for the purpose of offering Debt Market Securities only to Qualified Institutional Buyers (QIBs). This Information Memorandum has not been approved by the Securities & Exchange Commission of Pakistan (the Commission) or the Karachi Stock Exchange (the Exchange); b. a disclaimer in bold letters stating that, The Board of Directors of (Name of the Company) accepts responsibility for accuracy of the information contained in this document; and c. name of the Company, name of the entity preparing the Information Memorandum and date of the Information Memorandum. (ii) Table of contents, Executive summary by the entity preparing the Information Memorandum, purpose of preparation of the Information Memorandum and their scope of work; (iii) Glossary of technical terms and acronyms shall be provided after the table of contents; (iv) Information about the Company like its name, date of its incorporation, registration number, addresses of its registered & head offices, date of its listing, if applicable, name

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of the stock exchange where it is listed, if applicable, its sponsors and major shareholders, associated companies/ undertakings etc.; (v) Latest pattern of shareholding of the Company; (vi) Names of the directors of the Company and their directorships in other companies; (vii) Profile of the management of the Company including all the members of the Board of Directors excluding the nominee directors, the Chief Financial Officer and the Company secretary; (viii) Organization structure of the Company and its principle business; (ix) Future outlook/ business strategy of the Company; (x) Highlights of major restructuring, if any, like merger, demerger, amalgamation, acquisition, reorganization, financial restructuring etc.; (xi) Five years financial highlights relating to cash flows and financial & operating position of the Company including key financial ratios like debt/equity ratio (pre & post issue), current ratio, return on equity, return on assets, earning per share; debt service coverage ratio, interest service coverage ratio etc. in tabular form; (xii) Salient features of the Issue and Debt Market Securities like issue size, tenure, rate of markup/return/interest, nature of the instrument whether it is secured or un-unsecured, redeemable or perpetual, convertible or non-convertible, options like put option, call option/early redemption option, partial call option etc.; (xiii) Redemption schedule; (xiv) Detail of the redemption reserve, if any; (xv) Terms & conditions for investment in the Debt Market Securities; (xvi) Purpose of the issue & breakup of the utilization of the proceeds of the Issue; (xvii) In case the proceeds of the Issue are to be utilized for project financing, detail of such project like project cost & means of financing (i.e. Financial Plan), project 101

implementation schedule, latest status of the implementation of the project, expected date of completion of the project, expected date of trial & commercial production etc.; (xviii) In case of issuance of Debt Market Securities by a Special Purpose Vehicle, detail of the securitization transaction, parties to the transaction and role of each of such party, etc.; (xix) Five years financial projections (i.e Balance Sheet, Income Statement, cash flow statement and statement on changes in equity) including key financial ratios; (xx) Complete credit rating report of the entity and the instrument based on the Companys latest audited accounts and duly reviewed if it is older than six months. In case where the instrument and entity rating is obtained from more than one credit rating agencies, all the ratings, including the unaccepted rating(s), shall be disclosed; (xxi) Detail of security, if applicable, backing the instrument like nature of assets hypothecated, book value of such assets, nature of charge created in favour of the Trustee (i.e. exclusive, parri passu or ranking), nature and amount of the existing charge(s) on the assets, names of the creditors who hold charge on these assets and status of NOC/consent of the existing creditors, creditor-wise and nature-wise break up of total existing debts etc.; (xxii) Name of the Trustee, date of execution of the Trust Deed, authority of the Trustee under the Trust Deed, security enforcement mechanism by the Trustee in case of default by the Company; (xxiii) All the risk factors associated with the investment in the Debt Market Securities of the Company and their mitigants; (xxiv) Basic information about the industry the Company belongs to, key players in the industry, basic raw material used by the Company, if any, and list of supplier thereof, main clients of the Company, competitors of the Company, etc.; (xxv) Summary of all the material contracts relating to the Issue and the project, if any;

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(xxvi) Names and contact details of the Companys bankers, legal advisors, transfer agent and consultants for the offer/issue of Debt Market Securities; (xxvii) Name (s) and contact details of the persons authorized by the Company in respect of offering/issuance of Debt Market Securities; (xxviii) Companys behavior towards servicing of existing debts i.e. the mark up and principal amount on existing term loans and Debt Market Securities issued by it is paid on time; and (xxix) Any disclosure in Information Memorandum shall not be inconsistent with the covenants of the Trust Deed; and (xxx) The Information Memorandum shall not contain any clause which is inconsistent with the terms of Debt Market Securities or the Trust Deed.

ANNEXURE-DIII FORMAT OF UNCONDITIONAL UNDERTAKING UNDER CLAUSE 1(i) OF SCHEDULE-III OF THE REGULATIONS ON NON-JUDICIAL STAMP PAPER OF THE REQUIRED VALUE The General Manager, Karachi Stock Exchange (Guarantee) Limited, Karachi. UN D E R T A K I N G I on behalf of (Name of the issuing company) (the Company) duly authorized by its Board of Directors hereby undertake that:

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(i) the Company shall ensure that the information provided in the documents along-with the application is true, correct and complete in all respect; (ii) the Company shall promptly provide all the information/documents to the Exchange, Trustee and/or Debt Market Securities holders as required under these Regulations; (iii) the Company shall provide information/documents to the Exchange, Trustee and/or Debt Market Securities holders upon request in a timely manner; (iv) the Company shall, all the time, comply with the requirements of these Regulations; Dated: Name and signature of the Chief Executive Officer of the Company duly authorized by its Board of Director Place: Name and signature of the Company Secretary or Chief Financial Officer of the Company duly authorized by its Board of Director Common Seal of the Company

INDIAN STOCK MARKET RULES AND REGULATIONS

GENERAL INSTRUCTIONS FOR FILLING UP THE APPLICATION FORM FOR IN-PRINCIPLE APPROVAL PRIOR TO ISSUE AND ALLOTMENT OF SECURITIES ON PREFERENTIAL BASIS: The application forms should be submitted duly completed in all respects and all details asked for in the forms should be filled.

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Each page of the Application along-with the supporting documents should be initialed by the authorized signatory and affixed with the seal of the company. The pricing certificate detailing computation of issue price should be as per the format given in Annexure A. Company should submit the application, complete in all respects including all the relevant enclosures, within 10 days of the Board Meeting where the proposal for the preferential issue was considered and approved, to enable the company to comply with Regulation 74 (1) of Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Only applications complete in all respects including information/ supporting documents will be taken up for processing. If a particular field / detail in the application form are not applicable, please mention NA against the said field. The Exchange reserves the right to ask for documents other than those mentioned in the application form. If the space provided in the Application form is insufficient, the company may attach separate certificates providing the details for the same along-with the Application form. Non-refundable processing fees of Rs.55,150/- (Rs.50,000/- plus service tax @ 10.3%) to be submitted. For applications submitted on or after February 7, 2011 Non-refundable processing fees @ 0.025% of the issue size subject to a minimum of Rs.1,00,000/- and a maximum of Rs.2,00,000/- would be levied.

PRESCRIBED FORMAT OF APPLICATION TO BE SUBMITTED BY THE COMPANY ON ITS LETTERHEAD.

Date: The General Manager Department of Corporate Services, 105

Bombay Stock Exchange Limited, 1st Floor, P.J.Towers, Dalal Street, Mumbai 400 01. Dear Sir, Sub: Application for In-principle approval prior to issue and allotment of (Quantity & Type of Securities) on preferential basis under Clause 24(a) of the Listing Agreement. We seek your In-principle approval prior to issue and allotment of

(Quantity & Type of Securities) on preferential basis, under Clause 24(a) of the Listing Agreement.

I) The details of the issue are: Date of Board Meeting Date of General Meeting approving the issue u/s 81 (1A) Type of security (Equity, warrants, PCD/FCD, preference shares, etc) No. of Securities to be allotted Face Value Offer Price Computed as per Regulation 76(1) Computed as per Regulation 76(2) Authorized Capital of the Company Paid up Capital of the Company Maximum no. of shares that may be issued pursuant to the said 81(1A) resolution.

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II) The details of the proposed allottees for the aforesaid preferential issue are: Name of Category the Proposed Allottee (Promoter/ Non Promoter) Address of - Allottee Permanent Number (PAN) No. to of Allottee be is:

the Account

securities allotted

*QIB/MF/FII/FI/Banks/Trust

(*) QIB as defined under Definitions in 2(1) (zd) of Chapter I of SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2009.

III) The particulars of other issues (in sequential order) in respect of which approvals are pending with the Exchange: Type of Issue (e.g. Amalgamation, Scheme Arrangement, Preferential, Bonus, Rights, etc.) of Size of Issue RD/BC/ Stage of Approval Pending applicable)

Announcement Date (Tick any one which is

(Y/N) Issue and allotment

(Y/N) principle

Final

In-

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(Y/N) Trading

Listing

&

We hereby certify that: I) i) The proposed allottees have no pre preferential allotment shareholding in the company and have not sold any shares of the company during the six months period prior to the relevant date ( ) on BSE or NSE.

ii) The proposed allottees hold the following shareholding in the company, details of which are as follows: Name of Mode of Holding Prior shareholding Lockin Details the Allottee From TOTAL The proposed allottees have not sold any shares of the company during the last six months prior to the relevant date on BSE or NSE. Further the said shares are not pledged with any entity. Where the lock-in of prior holding is not from the relevant date, demat transaction statements of the allottee for the period from the relevant date upto the date of execution of lock-in are enclosed. (for point I, whichever scenario is applicable from (i) to (ii) ) II) The proposed equity shares to be issued on a preferential basis would rank pari-passu in all respects including dividend with the existing equity shares of the company. III) The proposed issue is being made in accordance with the requirements of Chapter VII of SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2009 and the company will comply with all legal and statutory formalities and no statutory authority has restrained the company from issuing these proposed securities. 108 To (Physical/Demat)* (No. of shares)

IV) In compliance with the provisions of the Regulation 76(3) and 78 (5) of SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2009, the shares allotted would remain under lock-in till the time the company receives from the allottees the difference amount payable, if any, as computed under Regulation 76 (3) of SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2009. V) In case of any queries / clarifications the under-mentioned official may be contacted: Contact Details Name & Designation of Contact Person Telephone Nos. (landline & mobile) Email id

I / We hereby confirm that the information provided in the application and enclosures is true and correct. Thank you, Yours faithfully, (Managing Director/ Company Secretary)

Documents required for granting approvals under Clause 24(a) of the Listing Agreement, for the companies coming out with Qualified Institutions Placement (QIPs) - Prior Approval
Sr. No. 1 Documents to be submitted Certified true copy of the resolution passed by the Board of Directors of the Company approving the placement of securities with Qualified Institutional Buyers (QIBs) under Chapter VIII of SEBI (Issue of Capital and Disclosure 2 Requirements) Regulations, 2009. Copy of the notice sent to the shareholders of the company. 109 Page Nos.

Certified true copy of the resolution passed by the shareholders of the Company in accordance with the requirements of Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Draft placement document for issue of specified securities to QIBs. The placement document required to be prepared in accordance with Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, shall contain disclaimer in bold capital letters to the effect that the placement is meant only for QIBs on a private placement basis and is not an offer to the public or to any other class of investors. Latest shareholding pattern of the company as per the Clause 35 of the Listing Agreement at the time of application for inprinciple approval. Networth certificate together with related workings of the company based on the audited balance sheet of the previous financial year. Confirmation from the Merchant Banker that the proposed issue of ___(Name of the Company)_, is being made in compliance with Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the _(Name of the Company)_ complies with the requirements of Chapter VIII of SEBI (ICDR) Regulations, 2009.. Confirmation by the Managing Director/ Company Secretary as per format enclosed as Annexure I. Processing fee (non-refundable) of Rs. 50,000 or 0.025% of issue size whichever is higher subject to a maximum of Rs. 10,00,000 along with Service Tax as applicable, favoring Bombay Stock Exchange Limited.

8 9

Note: In case of a listing of warrants issued as a combined offering along with non-convertible debt instruments, the company will be required to obtain relaxation from the applicability 110

of the provisions of Rule 19(2)(b) of the Securities Contract (Regulations) Rules, 1957, as notified in the SEBI circular no. SEBI/CFD/SCRR/01/2009/03/09 dated September 3, 2009. In case of issuance of NCDs, the company shall provide additional disclosures in the offer document as required under SEBI (Issue and Listing of Debt Securities) Regulations, 2008. Further, the company shall also obtain Credit Rating for such NCDs. Kindly note that all pages of the documents/details provided should be serially numbered, stamped and certified by the authorized signatory of the company. The Exchange reserves the right to modify and ask for additional documents / clarifications depending on a case to case basis. Approval for the proposed placement of securities by the company will be subject to compliance with the Regulatory requirements, norms of the Governing Board of the Exchange and other Exchange requirements.

ANNEXURE I Format of the confirmation to be submitted by the company:

To, The General Manager, Department of Corporate Services, Bombay Stock Exchange Limited, P.J. Towers, Dalal Street, Mumbai 400 001. Dear Sir,

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Sub:

Proposed placement of

(details of the issue and issue size)

to Qualified

Institutional Buyers (QIBs) under Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. In connection with the above application, we hereby confirm that: The Company complies with the prescribed requirements of minimum public shareholding as required under Clause 40A of the Listing Agreement The aggregate funds that is being raised, through the proposed placement together with all previous placements made in the same financial year, has not exceeded five times of the net worth of the company based on the audited balance sheet of the previous financial year. The placement of specified securities to the Qualified Institutional Buyers shall be made in accordance with Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. The equity shares arising pursuant to the Qualified Institutions Placement shall rank pari passu in all respects including dividend entitlement with the existing equity shares of the Company. The Company shall upload the placement document on its website with appropriate disclaimer to the effect that the placement is meant only for QIBs on private placement basis and is not an offer to the public or to any other class of investors.

_____________________ Date: Secretary Managing Director/ Company

Documents required for hosting of Preliminary Placement Document on the Website of the Exchange 112

After the company decides to open the issue, the company is required to submit the Preliminary Placement Document for uploading on the website of the Exchange before the same is circulated to the QIBs and displayed on the website of the Company. Sr. No. 1 Documents to be submitted Certified true copy of the resolution in which the Board of the company or the Committee of Directors of the company 2 decided to open the proposed issue. Hard copy of the preliminary Placement document (Not applicable if no changes have been made therein after submission of the same at the time of obtaining prior in3 4 principle approval) Soft copy of the Preliminary Placement Document in pdf format Due Diligence certificate of the Lead Merchant Banker(s) in the following Format: Page Nos.

FORMAT OF DUE DILIGENCE CERTIFICATE TO BE GIVEN BY LEAD MERCHANT BANKER(S) ALONGWITH THE PRELIMINARY PLACEMENT DOCUMENT
To, The General Manager, Dept. of Corporate Services, Bombay Stock Exchange Limited, Dalal Street, Mumbai 400 001. Dear Sir,

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Sub:

Placement of

(details of the issue and issue size)

by

(Name of the

company) in terms of Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 We have examined various documents and other materials in connection with the finalisation of the Preliminary Placement document pertaining to the aforesaid issue. WE CONFIRM that: The said issue is being carried out in accordance with the authority accorded by the shareholders of the company in their general body meeting held on ______________. The Preliminary Placement Document contains all the material information, including the information specified in Schedule XVIII of SEBI (ICDR) Regulations, 2009. Nothing contained therein is in contravention of Chapter VIII of SEBI (ICDR) Regulations, 2009 and we have carried out due diligence as per the requirements of Chapter VIII of SEBI (ICDR) Regulations, 2009 ___________________________ Date: seal(s) Lead Merchant Banker(s) to the Issue with their

Format for disclosure of details of acquisition to target company and stock exchanges where the shares of the target company are listed, in terms of Regulation 7(1A) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997

Name of the Target company Name of the acquirer and PACs with the acquirer Details of the acquisition as No of shares follows

% w.r.t. total paid up capital of Target Company

a) Shares / Voting rights (VR) before acquisition/ sale under consideration b) Shares/ voting rights acquired / sold c) Shares / VR after acquisition/ sale 114

Mode of acquisition (e.g. open market / public issue/ rights issue/ preferential allotment/ interse transfer etc). Mode of sale ( e.g. open market/ MOU/ off market etc.) Date of acquisition/ sale of shares/ VR or date of receipt of intimation of allotment of shares, whichever is applicable Paid up capital/ total voting capital of the target company before the said acquisition/ sale Paid up capital/ total voting capital of the target company after the said acquisition/ sale Note 1. The disclosure shall be made within 2 days of acquisition/sale. 2. The term 'acquirer' shall also include a pledgee, other than a bank or a financial institution and such pledgee shall make disclosure to the target company and the stock exchange within two days of creation of pledge. 3. The stock exchange shall immediately display the above information on the trading screen, the notice board and also on its website. Signature of the acquirer/ Authorised Signatory Place : Date :
DOCUMENTS ENCLOSED (To be numbered serially) Serial No. 1 2 3 Document From Cheque towards Processing Fees Printed copy of notice of AGM/EOGM. Pricing Certificate in the prescribed format Page Nos. To

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4 Where allotment is : I) for consideration other than cash a) Copy of valuation report b) Copy of Shareholders Agreements. c) Copy of approval letters from FIPB/SIA and RBI if applicable. II) pursuant to CDR Scheme a) certified copy of CDR Scheme III) pursuant to Order of High Court a) Certified Court IV) pursuant to conversion of loan of financial institutions : copy of Scheme of Arrangement approved by the High

a) A certified true copy of the Loan Agreement company. executed by the

Lock-in Confirmation and transaction 5 statement (wherever applicable) from DP for pre-preferential shareholding of allottees

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CHAPTER-5 SAARC TRADES AND TREATIES

South Asian Association For Regional Co-operation in Law, SAARCLAW, is an association of the legal communities of the SAARC countries comprising judges, lawyers, academicians, law teachers, public officers and a host of other law-related persons, duly registered with the SAARC Secretariat at Kathmandu and has been given the status of a Regional Apex Body Of SAARC. It owes its origin to the desire of the members of the legal community to establish an association within the SAARC region to disseminate information and to promote an understanding of the concerns and developments of the region. SAARCLAW was established in Colombo on 24th October 1991, when the then President of Sri Lanka His Excellency Ranasinghe Premadasa inaugurated the Association in the presence of a large gathering of the legal community. In the ensuing twelve years, affiliate Country Chapters have been established in Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka and activities of the Organisation have also taken place in the Republic of Maldives. The Annual SAARCLAW CONFERENCES have been acclaimed as affording an opportunity to its members for interaction, exchange of ideas and for forging a spirit of solidarity. It has been the convention since 1995 to hold a conference of the Chief Justices of the SAARC countries concurrently with the Annual SAARCLAW Conference. This feature has become institutionalized now and offers a forum for the exchange of thoughts and views of the Chief Justices of our countries. The first SAARCLAW conference was held in Sri Lanka in 1991. Since then conferences have been held almost every year in the SAARC region, at Colombo, Karachi, Dhaka, Kathmandu, New Delhi and Jaipur. To date eleven SAARCLAW conferences have been held. The 11th SAARCLAW conference was hosted by the Bhutan Chapter from 10th-11th June, 2005 at Olathang Hotel in Paro, Butan. The conference was based on the theme Law and Development Bridging the Gap and was held in conjunction with the 8th SAARC Chief Justices meet. The conference was attended by great legal emissaries including all the Chief Justices of the member 117

countries of SAARCLAW. Presentations and speeches were given on topics like Constitutional Law, Globalization and FDI, Anti-Money Laundering, International Law, Constitutional Guarantees & Gender Justice, Alternate Dispute Resolution A regional perspective etc. In its sixteen years of operation the members of SAARCLAW have persistently worked towards the achievement of its objectives of bringing together the legal communities within the region for closer co-operation, development of understanding, promotion of exchange of ideas and dissemination of information, and to use and develop law as a source and an instrument towards social change for development as well as for building co-operation among the peoples of the region. A major step in this direction has been the establishment of the M. Nambyar SAARCLAW Centre For Advanced Studies And Research within the campus of and in association with the NALSAR University, Hyderabad.

SAARC LAW MEET

Leading a Bhutanese delegation to the ninth meeting of the South Asia Regional Cooperation in law (SAARCLAW) held in Jaipur, India, the chief justice, Lyonpo Sonam Tobgye, said that the conference manifested the commonalities in the legal fraternity of the region. We belong to a cradle of one of the earliest human civilizations. We have profound depth in human experience and wisdom, he said.Even as we look back with pride and ahead with hope, we have the responsibility to ensure that the Judiciary continues to be sensitive and responsive to the genuine needs of the people and that the judicial process does not undermine the institutions and traditions which have enabled the people to meet their own needs for centuries." The three-day conference, which began yesterday, will discuss issues related to the judicial systems in the region as well as in the member countries. SAARCLAW, established in 1991, is a regional organization of lawyers, judges, law teachers, legal academician and legal researcher of SAARC countries. It aims at bringing together the legal communities within the region for closer co-operation, understanding, and promoting an exchange of ideas. SAARCLAW is also aims to develop law as a source and instrument for social change for development as well as for building co-operation in the region. While in India, the Bhutanese delegation was expected to call on the speaker and secretary general of the lok sabha and the attorney general. Lyonpo Sonam Tobgye was also expected to meet with the former chief 118

justice, J. S. Verma, chairman of the Human Rights Commission.

ARBITRATION LAW IN SRILANKA

The formulation of a Model Arbitration Law by UNCITRAL has proved to be an event of great importance for the legal and commercial world. Countries all over the world have re-modelled their arbitration laws in the light of the U. N. Model. Sri Lanka is one of them. In 1995, it enacted a fresh Arbitration Act (No. 11 of 1995). As stated in the Preamble, one of its objects is to make comprehensive legal provision for the conduct of arbitration proceedings and the enforcement of arbitral awards. The second object is to make legal provision to give effect, to the principles of the Convention on the Recognition and Enforcement of Foreign Awards of 1958 (the New York Convention).

GENERAL APPROACH
The Sri Lanka Act very largely follows the UNCITRAL Model law. At the same time, certain departures from, or additions to, the rules given in the Model Law have been considered necessary. Important departures and additions will be referred to, in this article, at the appropriate place.

ARBITRATION AGREEMENT AND COURT PROCEEDINGS

The Sri Lanka Act provides that an arbitration agreement shall be in writing. It can be contained in a signed document or in an exchange of letters, telexes, telegrams or other means of telecommunications which provide a record of the agreement (section 4). The Sri Lanka Act provides that by an agreement any dispute can be determined by arbitration unless the matter in respect of which the arbitration agreement is entered into, is contrary to public policy or is not capable of determination by arbitration (section 4). [The Act does not elaborate the two exceptions mentioned above.] If legal proceedings are instituted in court by a party to an arbitration agreement, in

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respect of a matter covered by the arbitration agreement, the court shall have no jurisdiction to hear and determine the same, if the other party objects under (section5). Arbitrators and Chairman Parties are free to determine the number of arbitrators. But if it is an even number, then the arbitrators so appointed shall jointly appoint an additional arbitrator who shall act as the Chairman. Where the parties do not determine the number, it shall be three (section 6). The parties are free to agree on the procedure for appointment. Failing such agreement, the High Court can make the appointment. If the agreed procedure fails, then also, the High Court has power to make the appointment. (section 7). 9TH SAARCLAW INTERNATIONAL CONFERENCE AND 6TH SAARC CHIEF JUSTICES CONFERENCE 20th-22nd September 2002 - Jaipur, Rajasthan , India Whereas SAARCLAW, an association of lawyers, judge, law teachers and law persons of the SAARC region believe that law and socio-economic changes are inextricably intertwined;

And Whereas SAARCLAW and all its members agree that it is necessary and desirable to explore the vital interface between law and socio-economic change and to build into such deliberations a substantial comparative perspective especially from the SAARC and Asia pacific regions; And whereas SAARCLAW verily believes that law ought to be used as an efficacious modality of socio-economic change and should in turn be shaped and developed in the context of such socio-economic change; And whereas SAARCLAW desires to explore and examine the dynamics of socio-economic and legal change generated by a decade of liberalisation within 120

the SAARC countries which has not only change the entire economic landscape but has in turn generated a significant transformation of the legal landscape; And whereas to explore, examine, analyse, discuss and consolidate issues relating to the use of law as a vehicle for ushering in significant and substantial social and economic change, SAARCLAW decided to hold an International Conference on September 20th, 21st and 22nd 2002. Now therefore, after two and a half days of detailed deliberations spread over an inaugural session, five business sessions and a valedictory session, the organisers and participants hereby agree to: Undertake that all necessary steps shall be taken to provide a comprehensive legal framework for new economic initiatives which framework shall reflect the attributes of clarity, certainty, stability and continuity; Resolve to expeditiously take comprehensive and holistic steps to eliminate arrears from the court system o provide a credible vehicle for socio-economic change; Declare that rapid social and economic progress including second generation and third generation economic reforms must focus not only on growth equity but also upon distributive equity and social justice; State that the object of ushering in an era of progress and prosperity must involve a multidisciplinary and diverse array of influential factors from the fields of law, economics, commerce, government, politics, industry, intelligentsia, NGO's academia and professionals; Call upon corporations to imbue their management practices with all elements of good governance based upon the solid substratum of corporate ethics; Demand the creation and implementation of a comprehensive penal and self 121

regulatory code of conduct for corporate good governance to usher in an era of value based governance with special focus on Gandhiji's common man; Affirm that wherever possible, bypasses to litigation should be facilitated by a comprehensive regime of Alternative Dispute Resolution measures including arbitration, conciliation, Lok Adalat and Judicial Settlement; Believe that a sole apex market regulator should be entrusted with comprehensive, preventive, regulatory and punitive powers both civil and criminal for protection of shareholders' rights on a holistic basis with jurisdiction encompassing all entities involving citizens and as shareholders; Reiterate the need for a comprehensive corporate insolvency code addressing the real causes of insolvency and providing a remedial or curative framework whenever genuinely feasible; Underline the need for environmental audit of corporate bodies including the creation of a comprehensive regime of incentives and disincentives for corporate actors conforming to contemporary environmental norms; Emphasis the need for judicial review, judicial activism and judicial intervention for the larger public good in the public interest to impart the healing touch and to provide an efficacious remedial framework by evolving juristic principles and upgrading existing law, to bring it in conformity with the current needs of society, thereby subserving the constitutional purpose of advancing public interest under the rule of law;

Expect the revamp of Intellectual Property Law into a comprehensive code which is compatible with global international norms but enacted after full regard to protection of the concerned country's national interest; Authorise the taking of all ancillary, subsidiary, incidental and related steps and measures for achievement of the aforesaid objectives in shortest possible time. 122

Direct that this declaration be sent to the Central Government, all State Governments, all Union Territories, the Bar Council of India, all State Bar Councils and prominent National Chambers of Commerce. Note that this declaration shall hereafter be referred to as the Jaipur Declaration on Law as an Instrument for Social and Economic Change; So resolved on this Twenty Second day of September, Two Thousand and Two at Jaipur, Rajasthan , India. 10TH SAARCLAW INTERNATIONAL CONFERENCE AND 7TH SAARC CHIEF JUSTICES CONFERENCE 20th - 22nd Feburary 2004- Karachi, Pakistan. PRESIDENTIAL By President, Mrs. Dhara ADDRESS Wijayatilake, SAARCLAW

It is indeed my pleasure to address you on the occasion of the inauguration of the 10th SAARCLAW Conference. As we meet for the10th time, to discuss issues relating to Law and its impact on the lives of our people, we need to be mindful of the serious challenge that we face to make legal interventions more meaningful and more relevant to the ultimate objective of meting out 'Justice'. That then is why the theme today reads "Leap forward - Next Generation Laws". We are commuters on the super highway - a highway which has brought with it the good and the evil. The law is one of the most important intervenient to handle both the good and the evil. But the Law alone is inadequate to ensure that this new highway leads us to where we want. A certain objectivity and a respect for the traditions and cultures of our region needs our focus. Our youth need to be veered away from the kind of society that we may be heading towards - the frightening kind of society that was created by

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William Gibson in his award winning cyber punk classic 'Neuromancer' "a society which is corrupt, decaying, devoid of social interaction, completely controlled by incredible technology used for evil and material gain rather than for social well being; a society which communicates not as we do now in the real physical world but in virtual space." Science fiction is but a prediction of what might be. I find these predictions very alarming. How much nicer it is to meet as we do today and make use of opportunities such as these to see each other in the real world and communicate in the traditional way. It would be quite horrible if we were to hold the 20th SAARCLAW Conference in a virtual world, not in Karachi not in Colombo, not in any of the capitals of our countries. What then are the new challenges that should be addressed in the next generation laws? We struggle to introduce adequate legal interventions to combat Transnational Organized Crime, Terrorism, trafficking of arms and persons, Money Laundering, Cyber Crime, child abuse (through sexual exploitation, exploitative labour and child pornography) and of course in ensuring that our women and children are no longer without remedies when they are victims of abuse. At the same time a certain focus is required to deal with the new dimensions brought in by advances in communication technology which has taken us from tokens to internet. Social evolution has been put on a fast forward mode. With every advance, there is an impact on society and that impact will likely result in a shift of economic power. With all of these exciting changes, the legal community is being challenged as never before. Yes, we need not only laws for the next generation but also attitudes which should be compatible with a commitment to deal with the new scene. The down side of technological advances is that, too often, the benefits have been used in an an abusive way, resulting in significant costs. Out transformed world, which we are still attempting to understand has however been used to facilitate 124

crime, to virtually erase geographical boundaries and create a borderless world, which enable the commission of crime impacting across the world without even leaving your room in your home. How then can we make use of this forum in our fight against crime. We need to talk about policies that should be incorporated into our laws, how we can co-operate with each other to implement them, how we can enhance knowledge and skills of our Judiciary, the Lawyers and the law enforcement; how we render mutual assistance in a professional way without becoming victims of beauracratic red tape. That SAARCLAW exists and that we have thereby a forum to discuss these concerns is indeed a formidable step forward. Let's make optimum use of this opportunity. On a personal note, my involvement in SAARCLAW has been long and rewarding. I functioned as its Secretary General from the inception for eight years and after a two years break took over as its President. In May this year as I relinquish office after my two year term I will have the great satisfaction of knowing that the presence of SAARCLAW is strong and is vibrant. I wish to thank the Secretary General Mr. Hemant Batra who has performed his functions with efficiency and commitment and the Committee for their continued attachment to everything that is SAARCLAW I would ask all of you to make use of this opportunity to interact with your colleagues in other SAARC countries because it is only through such interactions that we can surely inspire each other to dispel prejudices and cultivate a sense of solidarity so needed in this region.

THE KARACHI DECLARATION

ISSUED ON THE EVE OF THE SEVENTH CHIEF JUSTICES CONFERENCE HELD AT KARACHI
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SHERATON AND TOWERS ON 21 FEBRUARY 2004

We, the Chief Justices of the SAARC countries, having gathered here in Karachi, this 21st Day of February 2004 and believing in the objectives of the SAARC and the SAARCLAW; Sharing the common aspirations of our people in the region to live in peace, freedom, justice - social and economic; Conscious that in order to realize they said objectives it is necessary to develop people to people cooperation; Realizing that we have common problems in the administration of justice in our respective jurisdictions and that those problems can be addressed by collective efforts; Considering that the judiciary in every country is the ultimate guardian of the rights and liberties of the people and that good governance is the fountainhead of the emerging new social, economic, political and legal order; Committed to making efforts aimed at eliminating discrimination, victimization and exploitation; Recognizing that the attainment of ultimate goal of a just society is possible only with the establishment of rule of law; Observing that rapid progress in information technology has caused radical shifts in the philosophical perspectives of law; Accepting that it is equally the judiciary's responsibility to address itself and rise to the challenges of change; do hereby resolve, declare and undertake through the karachi declaration :To strengthen the rule of law and recognition of merit in our countries by providing effective judicial support to the efforts aimed at curbing malpractices, 126

malfeasance, corruption, favoritism and discrimination in any form; To make concerted and collective efforts to exterminate, root and branch, the chronic malady of delay in the disposal of cases by introducing innovative changes including changes in procedures aimed at improving management and operations of the courts of the SAARC countries and re-defining the work patterns of our judiciaries for optimal utilization of the resources so as to keep pace with the increase of litigation To evolve mechanisms that ensure positive cooperation and support of the Bar in regulating hearings and accelerating the process of administration of justice through collaborated and coordinated efforts; To ensure selection of competent and independent Judges; To ensure assessment and analysis of workloads of various courts and take appropriate remedial measures including increase in the number of courts along with requisite infrastructure; To establish judicial academies, or strengthen the institutional capacity of academies already in existence, to improve the professional competence of the judges for improving dispensation of justice To emphasize the need for amendments in the judicial service rules to make induction level training necessary for such duration as may be suitable to the jurisdictions concerned, and to link promotions with successful completion of inservice training To bring about collaboration of the judiciaries of the region with the judicial academics to plan and develop seminars for training in management, planning and research to foster interaction, cooperation and exchange of knowledge and information amongst various judicial institutions.

SAARC

LIMITED

MULTILATERAL

AGREEMENT AND

ON

AVOIDANCE OF DOUBLE TAXATION

MUTUAL
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ADMINISTRATIVE ASSISTANCE IN TAX MATTERS

PREAMBLE
The Governments of the SAARC (South Asian Association for Regional Cooperation) Member States comprising the Peoples Republic of Bangladesh, the Kingdom of Bhutan, the Republic of India, the Republic of Maldives, the Kingdom of Nepal, the Islamic Republic of Pakistan and the Democratic Socialist Republic of Sri Lanka; Desiring to conclude an Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in tax matters with a view to promoting economic cooperation amongst the SAARC Member States Have agreed as follows:

ARTICLE GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the context otherwise requires: (a) the term Member State means one of the States as per Schedule-I;

(b) the term "person" includes an individual, a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Member States; (c) the term tax means, tax covered as per Schedule-II, as the context requires; (d) the term Competent Authority means Competent Authority as per

Schedule III; (e) the term "national" means any individual possessing the nationality of a Member State; and

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(f) the term fiscal year means the year as defined in Schedule IV. 2. As regards the application of the Agreement at any time by a Member State any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that Member State for the purposes of the taxes to which the Agreement applies and any meaning under the applicable tax laws of that Member State prevailing over a meaning given to the term under other laws of that Member State.

ARTICLE PERSONS COVERED

This Agreement shall apply to persons who are residents of one or more of the Member States, in respect of which it has entered into force in accordance with Article 16.

ARTICLE TAXES COVERED

1. This Agreement shall apply to taxes on income imposed by or on behalf of the Member States. 2.There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property and taxes on the total amounts of wages or salaries paid or deemed to be paid by enterprises. 3. The existing taxes to which the Agreement shall apply are listed in ScheduleII. 4. The Agreement shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The Competent Authorities of the Member States shall notify the SAARC Secretariat of any significant changes that have been 129

made in their respective taxation laws.

ARTICLE RESIDENT

1. For the purposes of this Agreement, the term "resident of a Member State" means any person who, under the laws of that Member State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that Member State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that Member State in respect only of income from sources in that Member State. 2. Where, by reason of the provisions of paragraph 1, an individual is a resident of more than one Member State, his/her status shall be determined as follows: a) he/she shall be deemed to be a resident only of the Member State in which he/she has a permanent home available to him/her; if he/she has a permanent home available to him/her in more than one Member State, he/she shall be deemed to be a resident only of the Member State with which his/her personal and economic relations are closer (centre of vital interests); b) if the Member State in which he/she has his/her centre of vital interests cannot be determined, or if he/she has not a permanent home available to him/her in any Member State, he/she shall be deemed to be a resident only of the Member State in which he/she has an habitual abode; c) if he/she has an habitual abode in more than one Member State or in neither of them, he/she shall be deemed to be a resident only of the Member State of which he/she is a national; d) if he/she is a national of more than one Member State or of none of them, the Competent Authorities of the concerned Member States shall settle the question

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by mutual agreement. 3. Where, by reason of the provisions of paragraph 1, a person other than an individual is a resident of more than one Member State, it shall be deemed to be a resident only of the Member State in which its place of effective management is situated. If the Member State in which its place of effective management is situated cannot be determined, then the Competent Authorities of the concerned Member States shall settle the question by mutual agreement.

ARTICLE EXCHANGE OF INFORMATION

1. The Competent Authorities of the Member States shall exchange such information, including documents and public documents or certified copies thereof, as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Member States concerning taxes covered by this agreement insofar as the taxation thereunder is not contrary to the Agreement. Any information received by a Member State shall be treated as secret in the same manner as information obtained under the domestic laws of that Member State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes covered by the agreement. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Member State the obligation: (a) to carry out administrative measures at variance with the laws and administrative practices of that or of the other Member State; (b) to supply information, including documents and public documents or certified copies thereof, which are not obtainable under the laws or in the normal course of 131

the administration of that or of the other Member State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

ARTICLE ASSISTANCE IN THE COLLECTION OF TAXES

1. The Member States shall lend assistance to each other in the collection of revenue claims. The Competent Authorities of the Member States may, by mutual agreement, settle the mode of application of this Article. 2.The term "revenue claim" as used in this Article means an amount owed in respect of taxes covered by the Agreement together with interest, penalties and costs of collection or conservancy related to such amount. 3. When a revenue claim of a Member State is enforceable under the laws of that Member State and is owed by a person who, at that time, cannot, under the laws of that Member State, prevent its collection, that revenue claim shall, at the request of the Competent Authority of that Member State, be accepted for purposes of collection by the Competent Authority of the other Member State, and that revenue claim shall be collected by that other Member State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other Member State. 4. When a revenue claim of a Member State is a claim in respect of which that Member State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the Competent Authority of that Member State, be accepted for purposes of taking measures of conservancy by the Competent Authority of the other Member State. That other Member State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a 132

revenue claim of that other Member State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned Member State or is owed by a person who has a right to prevent its collection. 5. The provisions of this Article shall be invoked on request of a Member State only after all permissible measures of recovery under the domestic laws of that Member State have been exhausted. 6. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Member State for purposes of paragraph 3 or 4 shall not, in that Member State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that Member State by reason of its nature as such. In addition, a revenue claim accepted by a Member State for the purposes of paragraph 3 or 4 shall not, in that Member State, have any priority applicable to that revenue claim under the laws of the other Member State. 7. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Member State shall only be brought before the courts or administrative bodies of that Member State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Member State. 8.Where, at any time after a request has been made by a Member State under paragraph 3 or 4 and before the other Member State has collected and remitted the relevant revenue claim to the first-mentioned Member State, the relevant revenue claim ceases to be: (a)in the case of a request under paragraph 3, a revenue claim of the firstmentioned Member State that is enforceable under the laws of that Member State and is owed by a person who, at that time, cannot, under the laws of that Member State, prevent its collection, or (b) in the case of a request under paragraph 4, a revenue claim of the firstmentioned Member State in respect of which that Member State may, under its 133

laws, take measures of conservancy with a view to ensure its collection. The Competent Authority of the first-mentioned Member State shall promptly notify the Competent Authority of the other Member State of that fact and, at the option of the other Member State, the first-mentioned Member State shall either suspend or withdraw its request. 9.In no case shall the provisions of this Article be construed so as to impose on a Member State the obligation: (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Member State; (b) to carry out measures which would be contrary to public policy (ordre public); (c)to provide assistance if the other Member State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practices; (d) to provide assistance in those cases where the administrative burden for that Member State is clearly disproportionate to the benefit to be derived by the other Member State.

ARTICLE SERVICE OF DOCUMENTS

1. At the request of the applicant Member State the requested

Member State

shall serve upon the addressee, documents and public documents including those relating to judicial decisions, which emanate from the applicant Member State and which relate to a tax covered by this Agreement. 2.The requested Member State shall effect service of documents, including public documents: (a) by a method prescribed by its domestic laws for the service of documents of a 134

substantially similar nature; (b) to the extent possible, by a particular method requested by the applicant Member State or the closest to such method available under its own laws. 3. A Member State may effect service of documents directly through the post on a person in another Member State. 4. Nothing in the Agreement shall be construed as invalidating any service of documents by a Member State in accordance with its laws. 5. When a document is served in accordance with this Article and it is not in English language, the same should be accompanied by a translation into English.

ARTICLE PROFESSORS, TEACHERS AND RESEARCH SCHOLARS

1. A professor, teacher or research scholar who is or was a resident of the Member State immediately before visiting the other Member State for the purpose of teaching or engaging in research, or both, at a university, college or other similar approved institution in that other Member State shall be exempt from tax in that other Member State on any remuneration for such teaching or research for a period not exceeding two years from the date of his/her arrival in that other Member State. 2.For the purposes of this Article, an individual shall be deemed to be a resident of a Member State if he/she is resident in that Member State in the fiscal year in which he/she visits the other Member State or in the immediately preceding fiscal year. 3.For the purposes of paragraph 1 approved institution means an institution which has been approved in this regard by the Government of the concerned Member State.

ARTICLE

9
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STUDENTS
1. A student who is or was a resident of one of the Member States immediately before visiting the other Member State and who is present in that other Member State solely for the purpose of his/her education or training shall, besides grants, loans and scholarships and any payments received from sources outside that State for the purpose of his/her maintenance, education or training, be exempt from tax in that other Member State on remuneration which he/she derives from an employment which he/she exercises in the other Member State if the employment is directly related to his/her studies. 2. The exemption available under paragraph 1 above in respect of remuneration from employment shall not exceed an amount equal to US$ 3000/- per annum. 3.The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, but in no event shall any individual have the benefits of this Article, for more than six consecutive years from the date of his/her first arrival in that other Member State.

ARTICLE TRAINING

10

1.The Member States shall endeavour to hold and organise training programmes, seminars and workshops for the tax administrators with the objective of: (i) providing a common forum for senior tax administrators to meet and discuss problems of common concern; (ii) enhancing the technical and administrative knowledge and skills of tax administrators; and (iii) evolving strategies to combat common tax problems like tax avoidance/evasion in the SARC region.

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ARTICLE SHARING OF TAX POLICY

11

1.Each Member State shall endeavour to bring out a yearly report on changes made in its tax laws. This may also cover introduction of new systems or techniques for circulation among the Member States. 2. A Member State may, on request, make available its pool of talented experts to other Member States for the purposes of drafting and organising legislation, tax procedures, operational management, on-the-job training programmes, information system and technology etc.

ARTICLE 12 IMPLEMENTATION
The Member States shall hold periodic consultations, as appropriate, of Competent Authorities, with a view to facilitating the effective implementation of this Agreement.

ARTICLE 13 REVIEW
The Member States shall meet in order to review this Agreement on request or at the end of five years from the date of its entry into force, unless they notify the SAARC Secretariat, in writing, that no such review is necessary.

ARTICLE 14 AMENDMENTS
This Agreement may be amended by consensus. Any such amendment will

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become effective upon the deposit of instrument(s) of acceptance with the Secretary-General of SAARC by all Member States and issuance of notification thereof by the SAARC Secretariat. Such an amendment shall have effect in the Member States from the date of commencement of their respective fiscal year following the issuance of notification by the SAARC Secretariat.

ARTICLE 15 DEPOSITARY
This Agreement will be deposited with the Secretary General of SAARC, who will furnish a certified copy thereof to each Member State.

ARTICLE ENTRY INTO FORCE

16

1. This Agreement shall enter into force on the thirtieth day after the notification issued by the SAARC Secretariat regarding completion of all formalities, including ratification, wherever applicable, by all Member States. 2. The provisions of this Agreement shall have effect: (i) In Bangladesh (a) in respect of taxes withheld at source, in respect of amounts paid or credited on or after the first day of July next following the date upon which the Agreement enters into force; (b) with regard to other taxes, in respect of tax years beginning on or after the first day of July next following the date upon which the Agreement enters into force; (ii) In Bhutan (a) in respect of taxes withheld at source, in respect of amounts paid or credited on or after the first day of July next following the date upon which the 138

Agreement enters into force; (b) with regard to other taxes, in respect of tax years beginning on or after the first day of July next following the date upon which the Agreement enters into force (ii) In India, in respect of income derived in any fiscal year on or after the first day of April next following the date upon which the Agreement enters into force; (iv) In Maldives in respect of income derived in any fiscal year on or after the first day of January next following the date upon which the Agreement enters into force; (v) In Nepal in respect of income arising in any year of income beginning on or after the first day of Nepalese fiscal year starting mid-July next following the date upon which the Agreement enters into force; (vi) In Pakistan: (a) in respect of taxes withheld at source, in respect of amounts paid or credited on or after the first day of July next following the date upon which the Agreement enters into force; (b) with regard to other taxes, in respect of tax years beginning on or after the first day of July next following the date upon which the Agreement enters into force; and (vii) In Sri Lanka in respect of income derived on or after the first day of April of the year next following the date upon which the Agreement enters into force;

ARTICLE TERMINATION

17

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This Agreement shall remain in force indefinitely until terminated by a Member State. A Member State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of five years from the date of entry into force of the Agreement. In such event, the Agreement shall cease to have effect: (i) In Bangladesh, in respect of income derived in any fiscal year on or after the first day of July next following the expiration of six months period from the date on which the written notice of termination is given; (ii) In Bhutan, in respect of income derived in any fiscal year on or after the first day of July next following the expiration of six months period from the date on which the written notice of termination is given; (iii) In India, in respect of income derived in any fiscal year on or after the first day of April next following the expiration of six months period from the date on which the written notice of termination is given; (iv) In Maldives, in respect of income derived in any fiscal year on or after the first day of January next following the expiration of six months period from the date on which the written notice of termination is given; (v) In Nepal, in respect of income derived in any fiscal year on or after the first day of mid-July next following the expiration of six months period from the date on which the written notice of termination is given (vi) In Pakistan, in respect of income derived in any fiscal year on or after the first day of July next following the expiration of six months period from the date on which the written notice of termination is given; and (vii) In Sri Lanka, in respect of income derived on or after the first day of April of the year next following the expiration of six months period from the date on which the written notice of termination is given;

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IN WITNESS WHEREOF, the undersigned, duly authorized thereto, have signed this Agreement. DONE at Dhaka, Bangladesh, On This The Thirteenth Day of November Two Thousand Five, In Nine Originals In English Language, All Texts Being Equally Authenti

PROTOCOL
On formalization, this SAARC Limited Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in Tax Matters shall be applicable only in the Member States where an adequate Direct Tax Structure is in place. Further, in case of a Member State where such a structure is not in place, this Agreement shall become effective from the date on which such a Member State introduces a proper Direct Tax Structure and notifies the SAARC Secretariat to this effect. Further that in the event of a conflict between the provisions of this Limited Multilateral Agreement and that of any bilateral Double Taxation Avoidance Agreement between the Member States, the provisions of the Agreement signed or amended at a later date shall prevail. DONE at Dhaka, Bangladesh, On This The Thirteenth Day of November Two Thousand Five, In Nine Originals In English Language, All Texts Being Equally Authentic

SCHEDULE I MEMBER STATES TO THE AGREEMENT

1. 2. 3. 4. The Peoples Republic of Bangladesh Kingdom of Bhutan Republic of India Republic of Maldives

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5. 6. 7.

Kingdom of Nepal Islamic Republic of Pakistan Democratic Socialist Republic of Sri Lanka

SCHEDULE II TAXES COVERED

The existing taxes to which this Agreement shall apply: 1. 2. 3. 4. 5. 6. 7. In Bangladesh In Bhutan In India In Maldives In Nepal In Pakistan In Sri Lanka Taxes on income that is direct tax Income Tax imposed under Income Tax Act 2001 and the rules thereof Income Tax, including any surcharge thereon Taxes on income that is direct tax Income Tax imposed under the Income Tax Act, 2058 Taxes on Income Income tax including the income tax based on the turnover of enterprises licensed by the Board of Investment

SCHEDULE III COMPETENT AUTHORITY

The term Competent Authority means : 1. 2. 3. 4. In Bangladesh In Bhutan In India In Maldives National Board of Revenue or its authorized representative The Ministry of Finance or its authorized representative The Finance Minister, Government of India, or its authorized representative Department of Inland Revenue, Ministry of Finance and Treasury

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5. 6. 7.

In Nepal In Pakistan In Sri Lanka

His Majestys Government of Nepal, Ministry of Finance or its authorized representative Central Board of Revenue or its authorized representative Commissioner General of Inland Revenue

SCHEDULE IV FISCAL YEAR

The term fiscal year means: 1. 2. 3. 4. 5. 6. 7. In case of 1st July 30th June 1st July 30th June 1st April 31st March 1st January 31st December The fiscal year beginning mid-July 1st July 30th June 1st April 31st March

Bangladesh In case of Bhutan In case of India In case of Maldives In case of Nepal In case of Pakistan In case of Sri Lanka

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SAARC MOOTS TRADE TREATY IN SERVICES BS REPORTER / NEW DELHI APRIL 03, 2007

In a significant move, Saarc foreign ministers today proposed an agreement on trade in services among the member countries.

The proposal is to look at both the options: to make it a part of Safta or negotiate a separate agreement in trade in services, Foreign Secretary Shiv Shankar Menon said.

The Council of Ministers, which met prior to the Saarc Summit beginning tomorrow, decided to region.

explore the possibility of such a pact in view of the growing role of services in economies of the

In India, services contribute 56 per cent of Gross Domestic Product. Even in countries like Pakistan, an important engine of growth. With inclusion of services, the overall trade in the region is expected to increase from the present

Sri Lanka and Maldives, services such as tourism, banking, telecom and financial sector are becoming

level of mere $7 billion. Menon said the council had different views whether or not Pakistan is in asked to work in this direction. Safta, which became operational from July 2006, has failed to make much of an impact because goods face non-tariff barriers in India. Menon also announced today that India and Pakistan may have a common map for Sir Creek, thereby signalling that this particular conflict between the countries sees an end in sight.

compliance with Safta. He said the discussions would continue and ministerial process had been

Pakistan continues to deny market access to India and meet its obligation. Pakistan has also alleged its

Menon also confirmed that defence secretaries of the two countries would be meeting on April 6 in Islamabad to discuss the more intractable issue of the Siachen glacier. Giving no other details on this meeting, Menon signalled that the government had adopted a more cautious approach on the issue.

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