Director's Report
The Board of Directors of
Islamabad Stock Exchange (Guarantee) Limited is pleased to present the
Annual Report for the financial year 2001-2002, and the Audited Accounts
together with the Auditor's Report for the year ended June 30, 2002.
HIGHLIGHTS OF FINANCIAL
RESULTS
During the year under review, the ISE showed a splendid financial
performance due to dedicated efforts of the ISE management. Besides boosting
revenue from traditional sources of income such as annual listing renewal
fee, additional listing fee on bonuses and right issues of companies and
trading fee from the members, the ISE also succeeded in recovering
substantial arrears that were past due from some of the companies listed at
our Exchange.
Salient highlights of the accounts are as follows:
|
2001-2002
(Rs. in Million) |
2000-2001
(Rs. in Million) |
Percentage
Change |
Income |
41.06 |
14.73 |
+179% |
Expenditure |
16.96 |
13.26 |
+28% |
Surplus before Tax |
24.10 |
1.47 |
+1539% |
The Exchange earned a record
surplus (before tax) of Rs. 24.10 million, which represents a landmark
improvement over last year's surplus. However, along with the improvement in
revenue, the Exchange also recorded increase in expenditure, mainly due to
increased spending on advertisement, traveling & lodging and audit fee.
Besides, an amount of Rs. 4.100 million was also incurred during 2002 for
software development.
STOCK MARKET OPERATIONS
Despite a worldwide setback to the financial services industry resulting
from events of 11/09/2001, the Pakistani stock market quickly recovered to
gain prominence as the best performing markets in the world. It is no small
feat that during a period of international stock market meltdown, the
Pakistani markets demonstrated an unmatched quality of maturity and very
strong level of stability. The credit for such historic performance of our
markets goes to the Securities and Exchange Commission of Pakistan (SECP)
that created a dynamic enabling environment through its wide-ranging market
related reforms pursued during the last few years. It is only because of
these reforms that the Pakistani stock markets have grown in their stature
to compete with some of the best markets in the world today.
Islamabad Stock Exchange, which also started the year under review on a low
note, followed the high growth path of the other two stock exchanges of the
country and ended the year at a sharply higher level. During the year, the
ISE index, which stood at 3918.87 on 1 st January 2002 went up to 5283.8 by
24th November 2002 showing an escalation of 35%. It is really heartening to
note that our market still continues its ascending path and promises good
prospects to our investors.
Here, it would not be out of place to mention that in addition to the SECP
led reforms, the ISE also made significant contributions at an operational
level so as to play a critical role in the system of self-regulation.
Measures such as introducing a policy of annual system audit of all
active broker Members, strengthening of surveillance & risk assessment
system and increased spending on trading software/automation were all
aimed at helping in the consolidation of our market and to limit the risks
associated with stock market operations. These actions not only added
further credence to our market but also enabled us to emerge as a preferred
market of choice in our region by augmenting the confidence of investors in
our stock market.
RESTRUCTURING OF ISE
One of the prime reforms introduced by the SECP has been in the
direction of improving the governance mechanism of the stock exchanges in
Pakistan. These reforms called for installing independent and professional
Managing Directors/CEOs at the stock exchanges and also mandated for
restructuring of the Board of Directors. While the ISE not only espoused the
changes towards restructuring of its Board of Directors through amendments
in its Articles of Associations, but also took a step further by introducing
a matching internal structure so as to implement the essence of these
reforms. The ISE has also appointed a highly professional Managing Director
to independently run the affairs of the ISE.
We, at ISE, believe that these changes will not only lead us to maximize our
efficiency but will also enable us to revitalize our operations for the good
of our investors.
CORPORATE GOVERNANCE AT ISE
In the wake of recent criticism on fraudulent accounting practices in
some of the bestknown corporate entities in the World, the issue of
corporate governance has assumed much greater importance. Following the
formulation of a comprehensive code of corporate governance by the SECP, all
three bourses also adopted this code in their listing regulations so as to
enable the listed companies to follow purposeful disclosure and accounting
policies.
Due to the central role of the Stock Exchanges as the front line regulators
in checking compliance of the listed companies with this code, the ISE Board
of Directors has thought it proper to first apply the strictures of this
code on itself for bringing more transparency in the business of the
exchange. As a first step towards this policy, the ISE Board of Directors
has recently approved a new mission statement that broadly describes our
corporate purpose and leads to the formulation of our strategy in harmony
with the expectations of our stakeholders. Next, the ISE has also taken on
an idiosyncratic motto " Prosperity through Transparent Market." It is hoped
that the motto will serve to convey a unique corporate image of ISE by
effectively communicating a message that will appeal to our investors and
the listed companies alike.
In line with our policy towards implementation of all facets of the code of
corporate governance, the Board of Directors further declares that:
- The
financial statements for the year ended June 30,2002, together with the
notes thereon have been prepared in conformity with the Companies
Ordinance 1984. These statements fairly present the financial and
operational health of the Exchange.
-
Proper books of accounts have been maintained at the ISE.
-
Appropriate accounting policies have been consistently applied in
preparation of financial statements and accounting estimates are based on
reasonable and prudent judgment.
- The
system of internal control is sound in design and has been effectively
implemented and monitored.
- The
Exchange is viable to continue as a going concern.
- There
has been no material departure from the best practices of corporate
governance.
- The
Board of Directors held I 1 meetings during the year. Overall 56%
attendance was witnessed in these Board meetings.
- The
Board members including Chairman and directors are not paid any
honoraria/remuneration for serving on the board. Only the Managing
Director of ISE serves as the full time paid executive on the Board.
AUDITORS
The present auditors, M/s S.M Masood & Co. Chartered Accountant stand
retired and being eligible have offered themselves for reappointment.
Besides, M/s Jamil & Co. Chartered Accountant have offered themselves for
appointment as auditors of the Exchange for the year 2002-2003. Their offer
has been proposed by one of the Members of the Exchange.
SHAREHOLDINGS IN
RELATED COMPANIES
During the year, the ISE continued the expansion of its stake in related
companies so as to
get an opportunity to represent ISE on the Board of Directors of these
companies. This policy is aimed at furthering the interests of ISE by
obtaining representative stake in those
related
companies that stand to provide services to the investment communities. In
this regard, the ISE invested an amount of Rs 5.00 million for 10% equity
stake in the newly formed National Commodity Exchange Limited. The NCEL has
been established to conduct and regulate the trading of future commodities
in the country. It may be mentioned that the ISE also holds stakes in M/s
JCR VIS Credit Rating Company Limited, Central Depository Company of
Pakistan Limited, and National Clearing Company of Pakistan Limited.
ELECTION OF
DIRECTORS AND CHAIRMAN
The Directors and Chairman retire on the date of Annual General Meeting. The
elections for the appointment of new member directors will be held on the
eve of the AGM in accordance with the provisions of the Articles of
Association of Islamabad Stock Exchange (Guarantee) Limited. The Chairman of
the Board of Directors will be elected by the newly constituted Board from
amongst the elected directors.
ACKNOWLEDGEMENTS
The Board places on record its gratitude to the Chairman and other officials
of the Securities and Exchange Commission of Pakistan, the Ministry of
Finance, State Bank of Pakistan and other government
functionaries/departments/ agencies for their continued support and guidance
in all matters related to the Exchange throughout the year.
The Board also expresses its appreciation for the valuable services, loyalty
and laudable efforts continuously rendered by the employees of the Exchange.
The Board recognizes that they continue to be the most valuable asset for
the Exchange.
The Board also thanks all outgoing Directors and the Members of the Exchange
for their wholehearted support and co-operation in all matters. The Board
also takes this opportunity to welcome all new members who have been elected
during the year 2002.
CONCLUSION
The Board of Directors hopes that all stakeholders will find the progress
made by the Exchange as satisfactory and will continue their patronage for
making this Exchange as one of the important markets for capital generation
in the country.
For and on
behalf of the Board of Directors
Aftab Ahmad Ch.
Managing Director |