DEMUTUALIZATION OF KARACHI STOCK EXCHANGE INTRODUCTION & IMPLEMENTATION

What is Demutualization The “Demutualization” means the segregation of majority ownership of a stock exchange from the right to trade on such stock exchange. Demutualization is the process of continuing an organization from its ‘mutual’ ownership structure to ‘share’ ownership structure. The process, as per Stock Exchanges (Corporatization, Demutualization and Integration) Act, comprises of: obtaining regulatory consents; converting membership rights into distinct trading rights and shares; and transfer of a strategic stake to an investor; public issuance and listing. DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

ExistingProposed COMPANY LIMITED BY GUARANTEE COMPANY LIMITED BY SHARES Corporate Structure DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

ExistingProposed 10 directors to include: 5 member directors; 4 SECP’s nominee directors 1 Managing Director Initially, 11 directors to include: 4 directors from amongst the TRE certificate-holders; 6 SECP’s nominee directors (to be replaced with directors representing strategic investor and general public) 1 Managing Director Subsequently, all directors, except the Managing Director, will be elected to the Board through votes of shareholders. Constitution of the Board DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Shareholding structure 100% shares to be allotted equally among 200 existing members of KSE 40% under house account of existing members 60% in CDC’s blocked account under KSE’s participant ID, to be operated by the Board, and later on, to be divested in the following manner: Upto 40% to strategic investor(s) Upto 20% to general public through offer for sale Any remaining share to financial institutions DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Powers of Demutualization Committee (i)To approve the valuation of KSE undertaken and revised by Deutsche Bank AG. (ii)To enter into negotiations, finalize and execute agreements for sale of upto 40% of the total issued share capital of KSE out of the shares to be deposited into CDC’s blocked account with one or more strategic investors or financial institutions at a price that is equal to or greater than the above valuation. (iii)To accept or reject an offer from a strategic investor, if the price offered is less than the valuation as referred to above. (iv)To determine the offer price for offer for sale to general public of not less than 20% of the total issued share capital of the Exchange out of the shares to be deposited into CDC blocked account. As proposed in the EOGM DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Timelines The Stock Exchanges (Corporatization, Demutualization and Integration) Bill was passed by the National Assembly on October 08, 2009 and by the Parliament, in its joint session held on March 27, The President of Pakistan signed the Stock Exchanges (Corporatization, Demutualization and Integration) Act on May 07, 2012 (“t 0 ”) initiating a defined roadmap, as explained in the following slides. DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

t 30 June 06, 2012 [Target: May 29] Action pointReferenceComments KSE’s EOGM has to be held to ratify the already existing Demutualization Committee and to empower the Committee. Section 3EOGM for the purpose is in session. DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

t 45 June 21, 2012 CONTINUED Action pointReferenceComments Exchange has to submit the following to the SECP: Section 4(1) 1.Valuation by Financial Advisor/ Investment Bank (can be extended to 120 days by SECP) (a)Deutsche Bank retained to revise its earlier valuation. 2.Revaluation of assets & liabilities by a firm of Chartered Accountants approved by SECP (b)FAMCO Associates retained along with Iqbal A. Nanjee & Co. 3.Proposed authorized and paid-up capital and number of Rs.10/- par value (c)Based on report on re-valuation of KSE’s assets and liabilities 4.Names of all existing members of KSE to act as initial shareholders along with the number and value of shares to be allotted to each (d)Based on final list of members as at a specific cut-off date and report on re-valuation of assets and liabilities DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

t 45 June 21, 2012 Action pointReferenceComments 5.Names of four (4) out of current member directors to act as interim directors until the new Board is constituted under the Act (e)Proposed in this meeting 6.Proposed plan for segregation of commercial and regulatory functions of KSE (f)M/s. Ahmed & Qazi appointed to develop the plan 7.Draft Memorandum & Articles of Association of the demutualized Exchange (g)M/s. Ahmed & Qazi appointed to review & revise the previous draft 8.Proposed 5-year development plan along with capital expenditure estimate and sources of finance (h)Being developed in-house Note:Items 2 to 8 above are to be approved by the Board before submission to the Commission DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments Within 30 days from the submission of documents, SECP would approve Items above and also provide to the Exchange, names of six (6) nominee directors Section 4(2) t 75 July 21, 2012 [Target: July 20] DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments Issuance of notice of EOGM by the Exchange for the purpose of adoption of new and approved Memorandum & Articles of Association of the Exchange, through Special Resolution Section 5(1) t 84 July 30, 2012 [Target: July 24] DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments Within 30 days after SECP’s approval, Exchange must: Section 5(1) hold EOGM to adopt via Special Resolution, KSE’s Memorandum & Articles of Association (a) allot shares to approved initial shareholders in scrip-less form (b) deposit 60% of shares allotted to each initial shareholders in a blocked account (c) issue a certificate to each initial shareholder certifying the number of shares deposited in the blocked account (d) issue Trading Right Entitlement (TRE) certificate to each initial shareholder (e) t 105 August 20, 2012 [Target: August 15] DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments Within 7 days after EOGM, Exchange must deliver to concerned Registrar, the following: Section 5(3) Certified copy of Special Resolution for adoption of Memorandum & Articles of Association (a) Certificate from KSE’s auditors, certifying issue of all shares to initial shareholders in dematerialized format (b) Certificate from CDC certifying deposit of 60% of allotted shares in blocked account (c) t 112 August 27, 2012 [Target: August 22] DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments Registrar to issue Certificate of Re- registration as evidence of change of status of the Exchange from a ‘company limited by guarantee’ to ‘company limited by shares’ Section 6(1) t 119 September 03, 2012 [Target: August 29] Note:KSE will become a corporatized and demutualized exchange from the date of receipt of the Certificate of Re-registration. DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments Issuance of notice for EOGM by the Exchange for purpose of election of four first directors of the demutualized Exchange Section 10(2) t 128 September 12, 2012 [Target: September 05] DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

Action pointReferenceComments EOGM, elections and constitution of new Board of KSE Section 10(2) t 149 October 03, 2012 [Target: September 28] DEMUTUALIZATION OF KARACHI STOCK EXCHANGE: INTRODUCTION & IMPLEMENTATION

ANY FURTHER QUESTIONS?