Central Depository Settlement Co Ltd Mauritius Depository Service

Central Depository & Settlement Co. Ltd Mauritius Depository Service Provider and Systems Vendor in Partnership with Millennium Information Technologies Vipin Mahabirsingh Managing Director CDS, Mauritius 1

Ø Characteristics and Features of the Mauritius Stock Market Ø The CDS Organisation Ø Regulatory Framework Ø Risk Management Ø The CDS System Ø Implementation of depository and trading systems in partnership with Millennium Information Technologies Ø Regional Integration 2

The Mauritius Stock Market: characteristics and features • Stock Exchange of Mauritius (SEM) set up in 1989 • SEM became a full member of the World Federation of Exchanges (WFE) in 2005 • World-class stock exchange infrastructure with Automated Trading and Depository Systems developed by Millennium IT • Investors can place orders via the Internet • Modern central depository which complies with G-30 and CPSS/IOSCO Standards • Modern and disclosure-based Listing Rules 3

• Demutualised stock exchange structure which ensures proper monitoring and regulation of members and market participants • Operates under the regulatory oversight of the Financial Services Commission • Achieved strong performance over the years – Annualised Return of 9. 73% in US$ terms from 1995 to 2004 (source S&P Global Stock Market Factbook 2005), Market Cap/GDP ratio of 42. 64% • Attractive investment destination foreign investors – Av. P/E ratio of about 8 and Dividend Yield of about 4. 6 % • No exchange control, capital gains tax and tax on dividend • GDP per capita of US$ 5, 100, Growth Rate of about 5% and Inflation Rate of about 5% 4

The CDS Organisation • Provides depository, clearing and settlement services as well as IT services to securities markets • Operational since January 1997 • Efficient system that has greatly reduced risks - Meets international standards (G 30, CPSS/IOSCO) - Securities are dematerialized - Strict delivery-versus-payment - Rolling T+3 settlement cycle - Net settlement of funds through central bank followed by gross settlement of securities - Settlement guaranteed through a Guarantee Fund - Handles equity, debt and money market instruments • Compliance with international standards was verified during the Financial Sector Assessment Program (FSAP) for Mauritius that was conducted by the IMF and World Bank in 2003 5

• Shareholders of CDS cover a broad spectrum of companies in the financial sector and includes the Stock Exchange of Mauritius (51%) • Entities eligible to apply for participation in the CDS comprise licensed stockbroking companies, custodian banks and other financial institutions • Applicants and Participants must meet standards regarding financial resources, operational capabilities and settlement arrangements • CDS is organised in five departments: Systems, Operations, Risk Management, Legal, Finance and Administration • The Stock Exchange of Mauritius has outsourced the technical management of the Automated Trading System to the CDS (IT Outsourcing Agreement) to achieve synergies and cost savings • Strong IT expertise 6

Legal & Regulatory Framework • The Securities (Central Depository, Clearing and Settlement) Act 1996 (the CDS Act) provides the legal framework for the operations of the CDS • The object of the Act is “to provide for the establishment and regulation of a central, depository, clearing and settlement service in order to facilitate dealings in securities. ” • Critical success factor for the implementation of the CDS • The CDS is guided in its day-to-day management by the CDS Rules and Procedures • The CDS is under the regulatory oversight of the Financial Services Commission 7

Risk Management • Key function within the CDS • Capital adequacy requirements for Participants (must sufficient liquid capital to cover fixed expenditure and risk requirements • Strict Dv. P with simultaneous transfer of funds and securities at the end of settlement cycle • Settlement limit based on collateral submitted by each Participant • Guarantee Fund in place to deal with settlement failures • Buy-In initiated in the event of securities settlement failure • No failed trade in the CDS up to now • Internal and external audits of system of internal controls • IT Security Audit 8

The CDS System • Oracle/Unix based system developed by Millennium Information Technologies (based in Sri Lanka and Boston) • Also running in Sri Lanka, Croatia, Kenya and Ghana • Participants and registrars have online access to the CDS system from their own offices • Participants open and maintain Securities Accounts directly in the CDS system • Segregation between Clients’ Securities Accounts and Participants’ (proprietary) Securities Accounts • Ownership recorded at beneficial owner level 9

The CDS System • Parameterized rolling settlement • Real-time interface with automated trading system • Link to automated payment system • Processing of corporate actions • 3 -tier architecture with separation of logic, content and display provides flexibility, security, reliability and scalability • Web-based system (can be deployed over the Internet) • High-Availability configuration and Disaster Recovery Plan – No downtime since system went live 10

Functionalities • Participant Registration – Issuers, Brokers, Custodians can be registered with the system in their respective roles. All required regulatory company information saved in the system. • Client Registration – Client information saved, linked to multiple “registrations” representing his/her relationship with each Participant. 11

Functionalities • CDS Transactions – – – – – Record trades Trade Amendments Trade Cancellations Certificate deposits Certificate withdrawals Transfers Freeze/Release Lending & Borrowing Pledging • Online Electronic Interface – Real-time electronic interface with Trading System – Can also handle manual trade entry 12

Functionalities • Clearing & Settlement – Trade-for-trade – Dv. P – Multiple settlement banks and 1 clearing bank – Free Deliveries • Fees Module – – – – Parameter-driven Per-transaction levies Periodic levies Brokerage fees Stock Exchange fees CDS fees Regulatory fees 13

Functionalities • Member Services – Downloads (client details, transaction details etc. ) to interface with broker back-office systems – Issuer/Member/Security/Client details – Client balances – Trade histories – Reporting 14

Functionalities • Comprehensive Audit Trails – Logon failures – Status changes – Modifications to key information • Corporate Action Diary & Entitlements – Setup Corporate Actions in Diary – Automatically or Manually calculate Entitlements – Downloads and Uploads for synchronizing with Registrar 15

Implementation of depository and trading systems in partnership with Millennium Information Technologies • Millennium Information Technologies is a leading supplier of depository and trading systems that handle equity and fixed income instruments as well as derivatives and commodities • Offices in Boston (USA), Sri Lanka and Singapore (around 300 employees) • Major clients in US & Europe- Boston Stock Exchange; largest interdealer debt broker in US (daily turnover of about US$ 900 billion); one of the three primary US exchanges; Croatian Central Depository • Millennium has partnered with CDS Mauritius to implement depository systems in Kenya and Ghana (both systems went live in 2004) – Trading system currently being implemented in Kenya • CDS provides consultancy and project management services 16

Regional Integration • Cross border transactions can be facilitated by cross-linking the trading and depository systems of the national securities markets within Africa and Middle East • This vision can be implemented today thanks to technology • Main benefits of integration – Wide access to capital and liquidity across multiple markets – More visible and attractive to foreign investors – African and Middle East markets will be in a better position to face global competition – Adherence to international standards – Sharing of expertise among African and Middle East exchanges and depositories 17