stock exchange of mauritius stock exchange of mauritius ltd 08 p. gopallen mooroogen, non-executive...

ANNUAL REPORT 2016

Stock Exchange of Mauritius(Member of the World Federation of Exchanges)

4th Floor, One Cathedral Square Building16, Jules Koenig Street

Port Louis, Republic of MauritiusTel : (230) 212 9541 - Fax : (230) 208 8409

Email : [email protected] : www.stockexchangeofmauritius.com

Stock Exchange of Mauritius Annual Report 2056

Annual Report 2016

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SEM is committed to becoming a World Class Stock Exchange. We will strive to position the Exchange as a service-driven and operationally excellent organisation with world-class trading and settlement capabilities, which incorporate and maintain the fundamental principles of market integrity, investor protection and efficient discovery. We undertake to actively pursue startegies that contribute to the growth of the capital market activities in Mauritius. In the pursuance of our mission, we endeavour to further the interests of the investing community, the business community, the government and nation, and our members, shareholders and employees.

SEM’S MISSION STATEMENT

ANNUAL REPORT 2016

Annual Report 2016

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ANNUAL REPORT 2016

TABLE OF CONTENTS

PagesGroup Financial Highlights 04Performance Highlights 05

Corporate Review 06Board of Directors Profile 08-09SEM Management Profile 10-11Directors’ Report 12-13Chief Executive’s Report 14-16SEM Corporate Governance Report 17-36

Operating and Financial Review: 37• Listing activities 38-42• Trading activities 43-52• Marketing activities 52-53• Legal activities 54-55• Financial review 56-62

Financial Reports 63Directors’ Responsibility Statement / Certificate from the Company Secretary 64-65Auditors’ Report to the Shareholders of the Stock Exchange of Mauritius Ltd 66-67Statements of Financial Position 68Statement of Comprehensive Income 69Statement of Changes in Equity – The Group 70Statement of Changes in Equity – The Company 71Statements of Cash Flows 72Notes to the Financial Statements 73-97

Additional Information 98Member Companies 100-101Listed Companies - Official Market (OM) 102-103 - Development & Enterprise Market (DEM) 104

The Stock Exchange of Mauritius Ltd

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FINANCIAL YEAR (FY)2016 2015

For the year (Rs’m)Revenue 152.2 200.7Other Income 40.7 38.9Administrative expenses (78.3) (79.6)Operating profit 114.7 160.0Net profit attributable to equity holders 79.4 109.6

At year-end (Rs’m)Net Current assets 66.3 34.8Total assets 609.0 591.1Total liabilities 69.6 89.0Shareholders’ funds (Rs’m)- Stated Capital 50.1 3.4- Reserves 378.4 389.3Number of shares issued 5,000,000 330,000

Revenue growth (%) (24.2) 21.9Operating profit margin (%) 75.4 79.7Net Profit Margin (%) 41.2 45.7Cost-to-income ratio (%) 40.6 33.2Return on Equity (%) 18.5 27.9

Per share Data (*)Basic earnings (Rs) 15.9 21.9Net Tangible Assets (Rs) 107.9 100.4Net Dividend (Rs) 8.7 11.9

* 2015 figures have been restated due to Bonus issue of 4,670,000.

DefinitionsOperating Profit MarginOperating Profit Margin is the operating profit of the group expressed as a percentage of revenue.Net profit MarginNet profit Margin is the net profit attributable to equity holders, expressed as a percentage of total revenue of the group.Cost-to-income ratioIt is the ratio of total expenses to total revenue of the group.Return on EquityIt is the net profit attributable to equity holders, expressed as a percentage of shareholders’ funds.Net tangible assetsIt is the total assets less total liabilities of the group, divided by the number of shares issued.Net dividendIt is calculated as the dividends proposed divided by the number of shares issued.

GROUP FINANCIAL HIGHLIGHTS

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Key Market Statistics

FINANCIAL YEAR2016 2015 % Change

Total Turnover (Value) Rs’bn

OM 13.1 19.3 -32

DEM 1.6 2.9 -43

Number of Sessions 253 249

Average Daily Turnover (Value) Rs’m

OM 51.9 77.5 -33

DEM 6.4 11.5 -44

Total Number of Shares Traded (m)

OM 2,192.5 4,098.3 -47

DEM 75.9 275.3 -72

Accounts held with the Central Depository &Settlement Co. Ltd (CDS)

Number of Securities accounts opened 436,228 414,601 5

Number of Shares Deposited (bn) 38.4 37.2 3

Aggregate value of shares held (Rs’bn) 226.7 244.3 -7

PERFORMANCE HIGHLIGHTS

The Stock Exchange of Mauritius Ltd Annual Report 2016

CORPORATE REVIEW


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P. Gopallen Mooroogen, Non-Executive Director, is a fellow member of the Association of Chartered Certified Accountants and holds a MBA. He is the Chairperson of the Stock Exchange of Mauritius (SEM). He currently occupies the position of Senior Executive - Finance Transformation at Mauritius Telecom. He is a fellow of the Mauritius Institute of Directors. He is a director of Swan General Ltd and Swan Life Ltd and is also a Non-Executive Director of the Central Depository & Settlement Co. Ltd (CDS).

Prof. Donald Ah-Chuen, Non-Executive Director, is a fellow member of (a) the Institute of Chartered Accountants in England and Wales, and (b) the Institute of Chartered Accountants of Australia. He holds a M.B.A. degree (Strathclyde) and is also a M.C.I.P.D. (Member of Chartered Institute of Personnel & Development, U.K.). He is the Vice Chairperson of the SEM and a member of its Strategic Development Committee. He is currently the Chief Executive of the ABC Group and the Managing Director of ABC Banking Corporation Ltd. He was President of the Mauritius Chamber of Commerce and Industry in 2000 and 2006, and is an Executive Committee member of the Chinese Chamber of Commerce.

Reedhee Bhuttoo, Non-Executive Director, is an Associate member of the Chartered Institute of Securities and Investments (UK). She also holds an Advanced Professional Diploma in Marketing from The Chartered Institute of Marketing (UK) and a Degree (Hons) in Economics from the M.S University of Baroda, Gujrat, India. She is currently the Head of SBM Securities Ltd, member of the SBM Group of companies. She is also currently a Non-Executive Director of the CDS, and the President of the Port Louis Stockbroking Association.

BOARD OF DIRECTORS’ PROFILE

DIRECTORS

CHAIRMAN

VICE CHAIRMAN

Sunil BenimadhuJoined the SEM as Chief Executive in May 1998. He was appointed Executive Director of the SEM in October 2008. He holds a M.B.A. in Finance and Investment from the University of Illinois, United States. He also holds a D.E A. in Development Economics and a Maîtrise in Macro-Economics from the University of Aix-Marseille, France. Sunil is the Chairman of Global Finance Mauritius, the apex body of private sector operators in the Financial Services Industry in Mauritius. He was elected in October 2014 for a three-year term on the Board of the World Federation of Exchanges (WFE), an association of the World’s leading Stock Exchanges. Sunil was the President of the African Securities Exchanges Association (ASEA), an association of 23 Exchanges operating on the continent, from August 2010 to November 2014. From 2002 to 2004, he was a member of the Executive Committee of the South Asian Federation of Exchanges (SAFE), which comprises twelve Stock Exchanges of the South Asian region. From 2001 to 2003, he chaired the SADC Committee of Stock Exchanges (COSSE), an association of stock exchanges which includes ten exchanges of the Southern African region.

Nitish Benimadhu, Non-Executive Director, holds a Honours Degree and a Masters Degree in Economics from the University of Ottawa, Canada. He currently holds the postition of Senior Manager - Capital Markets and leads the non-insurance cluster of SWAN. Nitish has more than 10 years’ experience in the finance industry and has expertise in the life & pension business, general insurance, reinsurance and asset management. He also holds directorship positions on a number of companies in various sectors of the economy. He is a member of the investment committee of SWAN.

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André Chung Shui, Non-Executive Director, Chairman of the Audit and Risk Committee and member of the Strategic Committee, holds a degree from the London School of Economics and is a Fellow of the Institute of Chartered Accountants in England & Wales. He trained to qualify as a Chartered Accountant with KPMG in London. He was previously a Senior Executive of the Happy World Group. André held the position of Managing Director of Mauritian Eagle Insurance Co Ltd from 2011-2014. During that period, he was a Vice President and subsequently President of the Insurers’ Association of Mauritius. He is currently an Executive Director at LCF Securities Ltd, a licensed investment dealer. He is also a fellow of the Mauritius Institute of Directors. He is a Non-Executive Director of the CDS and chairs the Audit and Risk Committee.

Dev Kumar Gopy, Non-Executive Director, holds a D.E.A in Finance and a Maîtrise in Financial Management from L’Institut D’Administration Des Entreprises of University of Montpellier II, France. He currently occupies the position of Chief Investment Officer at the State Insurance Company of Mauritius Ltd. He is also a Director of the SICOM Financial Services Ltd, Cyber Properties Investments Ltd and Haute Rive Azuri Hotel Ltd.

Shivraj (Kevin) Rangasami, Non-Executive Director, is a Fellow of the Association of Chartered Certified Accountants, UK. He reckons more than 15 years of experience in the financial services industry and has spent the last 10 years in the Capital Markets and Securities sectors in a senior management role. He is currently the Managing Director of MCB Stockbrokers Ltd and is also a Non-Executive Director of the CDS.

Vikash Tulsidas, Non-Executive Director, holds a B.A (Hons) Law and Business Studies from the University of Warwick, UK. He currently occupies the position of Managing Director of AXYS Stockbroking Ltd and is also a director of other companies within AXYS Group. He has held several executive positions including the President of the Port Louis Stockbroking Association. He is the Chairperson of the CDS.

Dipak Chummun,Non-Executive Director, is a Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW) and holds a degree in computer science from the University of Manchester. He is the Group CFO of IBL Ltd and Chairman of Mauritian Eagle Insurance Company Limited, both listed on the SEM. He is Director of DTOS, Manser Saxon, Princes Tuna, Winhold and a number of companies within the IBL group as well as a Director of the Mauritius Renewable Energy Agency (MARENA). An experienced international banking professional, Mr Chummun has for two decades held a number of senior positions with Standard Chartered, Barclays, EmiratesNBD and Deutsche Bank in London, Dubai, Singapore and Frankurt and has previously served as an International Advisory Board member of ICAEW in London.

BOARD OF DIRECTORS’ PROFILE

DIRECTORS


10 SEM MANAGEMENT PROFILE

SUNIL BENIMADHUChief Executive

Please refer to Directors’ Profile on page 6 of this Annual Report.

DARMANAND VIRAHSAWMYSenior Manager/Head of Business Development

Darmanand holds a D.E.S.S in Economics of Information and a Maîtrise in Econometrics from the University of Montpellier, France. He joined the SEM in 1989 as Manager and currently holds the position of Senior Manager/Head of Business Development.

VIICKRAM RAMFULHead of Listing

Vickram is a Fellow of the Association of Chartered Certified Accountants. He holds a BA (Hons) in Business Accounting from the University of Lincolnshire and Humberside (UK) and a MBA in Finance. He joined the SEM in 2005 as Financial Analyst and was appointed as Corporate Finance Manager in November 2007. On 15th July 2016, he was appointed as Head of Listing. He is a member of the Mauritius Institute of Professional Accountants (MIPA) and the ACCA Mauritius Branch.

PAMELA LI CHUN FONGManager Finance and Administration

Pamela is a Fellow of the Association of Chartered Certified Accountants and also holds a Diploma in Accountancy. She joined the SEM in 1995 as Accountant and currently holds the position of Manager Finance and Administration. She is a member of the Mauritius Institute of Professional Accountants (MIPA) and the ACCA Mauritius Branch.

Annual Report 2016

11SEM MANAGEMENT PROFILE

CHAITANAND (RISHI) JHEENGUNManager,Trading and Market Information/ Company Secretary

Rishi is a Fellow of the Institute of Chartered Secretaries and Administrators (ICSA) and he also holds a M.B.A. He joined the SEM in 1990 as Administrative Officer and currently holds the position of Manager Trading and Market Information. He is also the company Secretary of both SEM and CDS and is a member of the ICSA Mauritius Branch.

SHALINI GOKHOOLManager, Legal Affairs

Shalini holds an LLB ( Hons) and has also completed the Vocational Course for Barristers at the Mauritius Council of Legal Education in 1997. Having acquired experience in legal firms and in the banking sector, she joined the SEM in 2001 as Manager Legal Affairs.

NISHAN AUBEELUCKManager, Marketing and Market Development

Nishan holds a MSc in International Business from the University of Melbourne, Australia. He joined the SEM in 2004 as Manager Marketing and Market Development. He is a member of the Australian Centre for International Business (ACIB), the Financial Services Institute of Australia and the Finance and Treasury Association of Australia (FTA)


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The Board of Directors has the pleasure of presenting the twenty seventh (27th) Annual Report of the Stock Exchange of Mauritius (SEM) for the year ended 30 June 2016.

This Annual Report, which comprises the audited financial statements of the Group and the Company, the Corporate Governance Report and other statutory disclosures pursuant to Section 221 of the Companies Act 2001, have been approved by the SEM’s Board at a meeting held on 14th September 2016.

Principal activities of the Group and the CompanyThe principal activities of the SEM, as defined by its Constitution, are: 1) to operate and maintain a securities exchange in accordance with law; 2) to provide facilities for the buying and selling and otherwise dealing in securities on a securities exchange; 3) to provide and maintain, to the satisfaction of the Financial Services Commission (FSC) adequate and properly equipped premises for the conduct of its business; and 4) to have operating rules for the markets it operates pursuant to law.

The principal activities of its Subsidiary Company, the Central Depository and Settlement Co. Ltd (CDS), as defined by the Securities (Central Depository, Clearing and Settlement) Act 1996, are to provide depository, clearing and settlement services in order to facilitate dealings in securities on the Exchange.

Group Results The total revenues of the Group for the financial year 2016 reached Rs 192.9m, a decrease of 19.5% over the preceding financial year (FY 2015: Rs 239.6m). Total expenses of the Group were contained at Rs78.6m, representing a decrease of 2.3% as compared to the last financial year (FY 2015: Rs 80.5m). Group profits reached Rs 96.6m, a decrease of 28.4% over the last year’s Group profits of Rs 134.9m. Shareholders’ funds showed an increase of 9.1% over the preceding year, reaching a total value of Rs428.4m as at 30 June 2016 (FY 2015: Rs 392.6m).

Company ResultsThe total revenue of the SEM for the financial year 2016 amounted to Rs 136.6m, a decrease of 18.8% over the last financial year (FY 2015: Rs 168.2m). Total expenses were contained at Rs 53.1m, showing a decrease of 2% over the preceding year (FY 2015: Rs 54.1m). This resulted in Net Profit After Tax for the SEM of Rs 72.2m, a decrease of 27.2% over last year (FY 2015: Rs 99.2m).

As at 30 June 2016, the Shareholders’ funds reached a total value of Rs 331.4m, showing an increase of 9.6% as compared to FY 2015 which was Rs 302.5m.

Bonus Issue of SEM SharesAt a Special Meeting held on 10th November 2015, the Shareholders of the SEM approved a Bonus Issue in the proportion of 14.151515 new Ordinary Shares of Rs10.00 each for every one (1) share held, representing a total distribution of 4,670,000 new Ordinary Shares of Rs10.00 each. As a result of the Bonus issue, the Stated Capital of the SEM has increased from Rs3,350,000 to Rs50,050,000.

DIRECTORS’ REPORT

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DividendsAt its meeting held on 28th June 2016, in line with the approved dividend policy of the Group, the Board of Directors approved a dividend payment of 60% of the net profit after tax for the year ended 30 June 2016. Dividends amounting to Rs 43.3m will be paid to the Ordinary Shareholders of the SEM (Rs 8.67 per share). For the year ended 30 June 2015, dividends paid to the Ordinary Shareholders of SEM were Rs 59.5m (Rs11.91 per share, restated after bonus issue).

AuditorsThe Auditors, Messrs Deloitte have expressed their willingness to continue in office and a resolution proposing their re-appointment will be submitted at the next Annual Meeting of the Company.

In accordance with Section 221 (1) (h) of the Companies Act 2001, the Remuneration of the Auditors is disclosed in note 17 of the audited financial statements.

Note of AppreciationWe would like to express our gratitude to all stakeholders, namely the Ministry of Financial Services, Good Governance and Institutional Reforms, the Financial Services Commission, the Listed Companies, the Investment Dealers, the Asset Management Companies and the Investors for their valuable support and contribution towards the smooth operation of the market and development of the Exchange.

On behalf of the Board, we would like to convey a special note of appreciation to Mr Gaëtan Lan Hun Kuen who retired on 31st December 2015. A note of thanks to Mr Derek Wong Wan Po, who was appointed as Director on 1st January 2016 and resigned on 10th August 2016. We also welcome Mr Dipak Chummun, who has newly been appointed as Director on 24th August 2016.

Finally, we would also like to extend our thanks to our fellow Directors, the Chief Executive, SEM Management and Staff Members for their dedicated efforts and hard work during the year. A special note of thanks to Mr Shamin Sookia, who resigned on 15th July 2016.

P. Gopallen Mooroogen Professor Donald Ah ChuenChairman Vice Chairman

Date: 15th September 2016

DIRECTORS’ REPORT


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The operational backdrop of 2015 was one of heightened uncertainty and of tenuous market volatility for emerging markets. These markets witnessed an unprecedented net foreign portfolio outflow of USD 735bn in 2015, the first net outflow since 1989. The stock market rout in many emerging markets was triggered by the convergence of a number of factors ranging, amongst others, from the slowdown in China, the sharp drop of commodities’ prices, the steep depreciation of emerging markets’ currencies against the leading international currencies and the announced tapering-off of quantitative easing in the US.

The Stock Exchange of Mauritius was not left unscathed amidst this emerging market turmoil and recorded a net foreign outflow of Rs 5.1bn in 2015, its highest outflow since the exchange was opened to foreign investors in 1994. The SEM’s leading index, SEMDEX, dropped by 11.5% in 2015 and this drop was largely fuelled by the sell-off from foreign institutional investors. Foreign investors, however, continue to be important players of our stock market and currently hold Rs 35bn worth of shares in the companies listed on SEM.

Exchanges around the world, specially emerging markets, experienced sharp drops in trading revenues in 2015-2016. The double-digit drops in revenue for the SEM during the year and the ensuing negative impact on bottom-line profits were essentially triggered by the 32% drop in trading fees on the Official Market and 45% on the DEM on the 2014-2015 figures. However, it needs to be noted that the trading fees generated in 2014-2015 depicts a marked variance from the average level of trading fees received by SEM during the last five years. These unusual trading fees emanate from a high level of one-off transactions arising from specific corporate actions on a few listed companies. As such, the 2014-2015 trading fees cannot, therefore, be used as a benchmark for assessing SEM’s potential trading revenues.

Overview of the salient developments in 2015-2016In spite of the strong headwinds described above, the SEM’s embracement of its innovative thrust continued unabated. In September 2015, the SEM launched its sustainability index to bring its contribution to the sustainability agenda of positioning Mauritius as a sustainable island, add a social and environmental dimension to its mandate and join the league of international stock exchanges that have put sustainability at the forefront of their developmental agenda.

In September 2015, the SEM was also awarded for the third time the “Most Innovative African Stock Exchange” award by Africa Investor. This recognition is a reflection of the SEM’s improved visibility at the international level and encourages SEM’s management to pursue its internationalisation strategy with a higher level of commitment and drive.

2015-2016 was also marked by a few innovative breakthroughs. In March 2015, SEM became the first Exchange in Africa to list a CoreShares S&P 500 ETF and a CoreShares S&P Global Property ETF. These two international products have the merit of offering to our local retail and institutional investors access to 500 of the largest international companies and 40 of the well-established international companies involved in the global real-estate sector. These two innovative listings was followed by the listing of the first ever ETF tracking Indian Sovereign bonds. In essence, the SEM has during the last five years been working closely with local and international service providers to introduce new international products for the benefit of our investors.

The year under review was also a successful one for SEM as a multi-currency capital-raising platform. Rs 45bn was raised during financial year 2015-2016, out of which Rs 5bn was raised through the new issue of rupee-denominated financial instruments and Rs 40bn was raised via the issue of foreign-currency denominated instruments.

CHIEF EXECUTIVE’S REPORT

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Projecting into the futureIn early September, the SEM is planning to add two new indices to its suite of indices; namely the SEM-All Share Index (SEM-ASI) and the SEM-VWAP Index.

SEM-ASI is an index which will track the price performance of all companies listed on the Official Market, including the foreign-currency denominated companies, provided they meet the free-float requirements of the SEM. The creation of SEM-ASI has been inspired by the listing of a growing number of Global Business companies on the SEM. These companies have not only grown in size but they have also been involved in appreciable trading activities. The time has therefore come to track their price performance by including them in the soon to be created index SEM-ASI. SEM-ASI will not only increase SEM’s market capitalisation, but it will better reflect the real size of the Exchange and help to improve its visibility as an attractive capital-raising and listing platform for foreign currency denominated companies.

The SEM-VWAP index will partially help to neutralise index fluctuations triggered by small volume trades from time to time. The introduction of SEM-ASI will trigger some incidental changes to the SEMDEX which will henceforth, track only rupee-denominated companies listed on the Official Market.

With a view to keep expanding our product offerings, we will introduce dual-currency trading on products which are listed in USD and other key international currencies. These products will be traded simultaneously in an international currency and in Mauritius rupee, enabling local institutional and retail investors to invest in these products as part of the universe of local products. We expect this initiative to boost trading and liquidity in international products and global business companies that are listed on SEM, enhancing the attractiveness of SEM as a listing and trading platform for Global Business companies.

SEM is also keen to discuss with local and international service providers to see whether the business case exists for the positioning of the SEM as an attractive listing and trading platform for Masala Bonds, that is, Indian-rupee bonds issued by Indian corporate entities. The pertinence of this initiative needs to be assessed in the light of the revision of the Mauritius/India DTAA, which potentially positions Mauritius as an attractive jurisdiction to structure investments into Indian-rupee bonds issued by Indian corporates.

The recent Budget has announced that GBC2 companies will be allowed to invest in SEM listed companies. We need to engage with Management Companies to assess the potential of this initiative, discuss about its implementation and how to market it to GBC2 companies.

Another initiative that we intend to pursue during the year is to reach out to private companies with a solid balance sheet and a good growth potential to present the SEM’s platform to them and discuss how it can be used to help them achieve some of their goals and growth objectives. We would also like to reach out to South African companies to market SEM’s competitive multi-currency capital-raising and listing platform which can be of interest to those issuers which aim at raising capital to fund their international expansion.

ConclusionThe last seven years have been among the most enticing years for the Exchange in terms of new initiatives, breakthroughs and defining changes. Even if the Exchange environment worldwide is fraught with uncertainties, the SEM remains committed to its development strategy and aims at leveraging on its attractive and competitive advantages to make further meaningful inroads and generate value-add services in its drive to scale up its activities.



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AcknowledgementI would like to take this opportunity to thank the SEM’s Chairman and my fellow Board members for their guidance and unfailing support.

This year’s accomplishments would not have been possible without the commitment of our staff to deliver on the key elements of our strategy and I would like to convey my deep appreciation to them. I am confident that together, we will maintain the momentum that we have successfully built over the past few years towards growing and internationalising our Exchange.

I also acknowledge with deep appreciation the support that the SEM has received from the Ministry of Financial Services, Good Governance and Institutional Reforms and the Financial Services Commission, as well as from our listed issuers, investment dealers, members of SEM Committees, the CDS and the investment community. We look forward to earning your continued support in the years ahead.

Sunil BenimadhuChief Executive

16th August 2016


Annual Report 2016

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IntroductionThe Board of the SEM is accountable to its shareholders for the overall direction and control of the Company. It is committed to high standards of governance designed to protect the interests of its shareholders and all other stakeholders while promoting the highest standards of integrity, transparency and accountability.

Compliance with Governance StandardsThe SEM’s Board is committed to ensuring that its policies and practices in the critical areas of financial reporting, remuneration reporting and corporate governance, meet high levels of disclosure and comply with the Code of Corporate Governance for Mauritius, the Securities Act 2005, the Financial Services Act 2007 and with the relevant regulations and rules made under these Acts.

SEM’s BoardAs per the provisions of the SEM’s Constitution, the Board of Directors currently consists of ten (10) Directors, including nine (9) Directors who are independent of the management of the Exchange and one (1) Executive Director. The Chief Executive of the SEM is the Executive Director.

The Board is of the view that the current size of the Board is appropriate and that it has the right mix of skills and experience which can enable the Board to carry out its duties and responsibilities in an effective and competent manner.

Terms of officeReferring to Clause 21.3(c) and Clause 23.1(b) of the SEM Constitution, the term of office of the Directors is for two years and the term of office of the Chairman and the Vice Chairman is for a maximum of two continuous terms of two years, or such shorter period as the Board may decide.

Directors’ ProfileThe profiles of the Directors sitting on the Board of the SEM for the financial year ended 30 June 2016, are disclosed on pages 08 to 09 of the Annual Report.

SEM CORPORATE GOVERNANCE REPORT 2016


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SEM’s Governance FrameworkThis section of the report illustrates the Corporate Governance framework adopted by the SEM and describes the activities of the Board and its Committees for the financial year 2016.

SEM CORPORATE GOVERNANCE REPORT 2016 (CONT’D)

OTHER STAKEHOLDERS: Investment Dealers Listed Companies Investors Data Vendors Suppliers

OTHER COMMITTEES OF THE SEM: Listing Executive Committee Index Management Committee Consultative & Informative

Committee

EXTERNAL AUDITORS

FINANCIAL SERVICES

COMMISSION

SEM’S GOVERNANCE FRAMEWORK

SHAREHOLDERS OF THE SEM(Appointment)

(Appointment)

(Appointment)

(Reporting)

(Reporting)

(Reporting)

BOARD OF DIRECTORS OF THE SEM

SEM MANAGEMENT COMMITTEE

OPERATIONS OF THE SEM

SEM BOARD COMMITTEES Corporate Governance Committee: - Nomination Committee - Remuneration Committee Audit & Risk Management Committee Sub-Committee on the supervision of Listing

matters SEM Investment Committee Strategic Committee

Election of 10 Directors:- 2 Members of Industry- 1 Executive Director

Approval of appointment (Pursuant to section 24 of the Financial Services Act 2007)

(Overview) (Reporting)

(Supervise) (Reporting)

(Conduct Audit)

Annual Report 2016

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Board Meetings and ProceduresSEM’s Board CharterIn order to assist the Directors in the discharge of their duties, the SEM has adopted a Board Charter, which sets the framework for the composition, responsibilities, duties, procedures, powers, authority and accountability of its Board. The SEM’s Board Charter also embodies the rules of conduct of Board Members of the SEM and the commitment of the Board of Directors to ensuring that the company’s governance processes and structures comply with the Mauritius Code of Corporate Governance and international best practice.

Board ProceduresThe agenda of each Board meeting is finalized by the Chairman. Meeting papers are prepared by management under the supervision of the CEO to provide relevant facts, analysis and recommendation to enable informed decision-making by the Board. The agenda and papers for meetings are furnished to Directors and Board Committee members well in advance, to enable them to prepare for these meetings. During meetings, the Chairman encourages constructive and effective debates and Directors are given the chance to freely express their views or share information with their peers in the course of deliberation as a participative Board. Any Director/ Board Committee member who has a direct or deemed interest in the subject matter to be deliberated abstains from deliberation and voting on the same during the meeting.

The Company Secretary ensures that there is a quorum for all meetings and that such meetings are convened in accordance with the relevant terms of reference. The minutes prepared by the Company Secretary memorises the proceedings of all meetings, including the tabling of pertinent issues and the decisions made. In doing so, the Company Secretary internalises the governance principles in the Company and keeps the Board updated on the follow-up action arising from the Board’s decisions and/or requests at subsequent meetings. This allows the Board to perform its fiduciary duties and fulfil its oversight role via the respective Board Committees towards instituting a culture of transparency and accountability in the Company.

Supply of and access to informationThe Directors have individual and independent access to the advice and dedicated support services of the Company Secretary in ensuring the effective functioning of the Board. The Directors may seek advice from the Management on issues under their respective purview. In addition, the Board may seek independent professional advice at the Company’s expense on specific issues to enable the Board to discharge its duties in relation to the matters being deliberated.

Conflicts of InterestsThe SEM’s Board Charter contains provisions relating to the management of conflicts of interest and the rules of conduct for Directors. Clause 10 of the SEM’s Board Charter provides that ‘a Director should make a best effort to avoid conflicts of interest or situations where others might reasonably perceive there to be a conflict of interest’.

Where a conflict of interest arises or may arise, a Director must disclose the conflict to the Chairperson. On declaring their interest and ensuring that it is entered on the Register of Interests of the company, a Director can participate in the debate and/or indicate their vote on the matter, although such vote would not be counted. The Director must give careful consideration in such circumstances to the potential consequences it may have for the Board, Company and him/her.



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Board MeetingsThe Directors’ attendance at the Board meetings of the SEM during the past financial year 2016 are detailed in the table below: SEM BOARD Remuneration

CommitteeAudit & Risk Mgt

Committee

Name of Director MH MA MH MA MH MAMr Gaetan Lan Hun Kuen (R) 6 2Mr André Chung Shui 6 6 3 3Mr Vikash Tulsidas 6 6Mr Peroomal Gopallen Mooroogen 6 6 3 3Mr Dev Gopy 6 3 3 2Mr Sunil Benimadhu 6 6 3 3Professor Donald Ah-Chuen 6 6Mr Shivraj Kevin Rangasami 6 6 3 2 3 3Mr Nitish Benimadhu 6 2 3 3Mrs Reedhee Bhuttoo 6 4MR Derek Wong Wan Po (A)(R) 6 4

MH: Represents the number of meeting held during the year.MA: Represents the number of meeting attended during the year.

Directors resigned during the FY 2016(R) Mr Gaetan Lan Hun Kuen resigned as Director on 31.12.2015.

Directors appointed during the FY 2016. (A) Mr Derek Wong Wan Po was appointed Director on 1st January 2016.(R) Mr Derek Wong Wan Po resigned on 10th August 2016.

SEM Board Committees and Sub-Committees

The Board of the SEM is accountable to shareholders for the strategic direction of the Company and the pursuit of value creation for shareholders. The Board delegates the implementation of its strategy to its management within a formal delegation framework. However, the Board remains ultimately responsible for corporate governance and the affairs of the Company.

The Board has established the following Committees and has entrusted them with specific responsibilities to oversee the affairs of the Company, with authority to act on behalf of the Board in accordance with their respective Terms of Reference (TOR): • Corporate Governance Committee, which encompasses the Nomination and the Remuneration

Committees; • Audit and Risk Management Committee; • Sub-Committee on the supervision of listing matters; • Strategic Committee; • SEM Investment Committee.


Annual Report 2016

21

Sem Board

Corporate Governance Committee

Approved Terms of Reference

- Ensure reporting requirements on Corporate Governance are in accordance with the principles of the Code;

- Determine, agree and develop policies on corporate governance in accordance with the principles of the Code;

- Ensure disclosures are made in the Annual Report in compliance with the disclosure provisions in the Code of Corporate Governance for Mauritius.

Nomination Committee Approved Terms of Reference- Recommend the appointment of Executive and Non-Executive Directors;- Make recommendations on the Board structure, size and composition;- Identify and nominate candidates to fill Board vacancies and put in place plans for succession;- Recommend continuation of service for Directors reaching the age of 70;- Recommend Directors retiring by rotation for re-election.

Remuneration Committee Approved Terms of Reference- Determine, agree and develop the Company’s policy on executive and senior management

remuneration;- Determine specific remuneration packages for Executive Directors of the company;- Determine the level of Non-Executive & independent Non-Executive Directors fees.

Audit & Risk Management Committee


- Recommend the appointment of external auditors to the Board; - Review the audit strategy and agree on the timing and nature of reports from the external

auditors;- Examine and review the financial statements and ensure they comply with the accounting

standards and with legal requirements;- Monitor and review the effective functioning of the internal control systems and reporting;- Monitor and review the risk management framework.

Sub-Committee on the Supervision of Listing matters


- To review the quarterly report of the Listing Division on matters pertaining to the continuing listing obligations of listed companies;

- To approve, in specific cases, proposed sanctions taken by the SEM against listed companies;- To report to the Board of Directors on matters that may result in the eventual suspension or

withdrawal of a listed company. Strategic Committee Approved Terms of Reference

- To discuss on matters pertaining to the Strategic Policy of the SEM;- To report to the Board of Directors on any outcome of matters pertaining to the - Strategic Policy of the SEM.

Investment Committee Approved Terms of ReferenceTo determine and review the Investment Policy and Guidelines to be adopted by SEM Management for taking investment decisions; To ensure that investments made by the SEM, is in line with the approved Investment Policy and Guidelines;To consider and approve proposals from SEM Management that may exceed the maximum percentage stipulated in the Investment Policy and Guidelines;To assess, analyze and review the performance of the investments undertaken by the SEM;To report to the Board on the investments undertaken by the SEM on an annual basis;To review and amend the Investment Policy and Guidelines from time to time, in line with the changing market environment and the evolution of the financial market.



22

Membership and MeetingsCorporate Governance Committee, Nomination and Remuneration CommitteeThe Corporate Governance Committee, Nomination and Remuneration Committee comprises three Non-Executive Directors and one Executive Director. During the FY 2016, the following persons sat as Members of the Committee : Mr. Gopallen Mooroogen (Chairperson & Non-Executive Director), Messrs Dev Gopy (Non-Executive Director), Shivraj Rangasami (Non-Executive Director) and Sunil Benimadhu (Chief Executive and Executive Director) . The Manager Finance and Administration acts as secretary to the Committee.

Reporting and AccountabilityThe Corporate Governance Committee, Nomination and Remuneration Committee through its Chairperson is accountable to the Board for its activities and makes recommendations to the Board on matters falling under its responsibilities.

MeetingsThe Remuneration Committee (RC) meets as and when necessary, and met three times during the FY 2016. As per their scope of work, the RC approved the performance bonuses of the CEO and the SEM staff for the FY 2016 and reviewed the remuneration of the Chief Executive and the SEM staff for the FY 2017. During these meetings, the RC also carried out a review of the SEM Pension Scheme and hired a consultancy firm to benchmark the salaries of SEM employees with institutions of similar type and size.

Remuneration PhilosophyAt the end of each financial year, the increase in the employees’ remuneration package and the performance bonus paid to all SEM employees are reviewed and approved by the Members of the RC. The salaries are reviewed as per the recommendations of the Chief Executive and takes into consideration the rate of inflation for the year. The remuneration strategy also includes assessing whether remuneration is market competitive and designed to attract, motivate and retain employees.

Audit and Risk Management CommitteeThe Audit and Risk Management Committee comprises three Non-Executive Directors. Members for the financial year 2016 were: Messrs Andre Chung Shui (Chairperson), Nitish Benimadhu and Shivraj Rangasami. The Chief Executive and the Manager Finance and Administration also attend the Committee meetings by invitation. The Company Secretary acts as secretary to the Committee.

Reporting and AccountabilityThe Audit and Risk Management Committee, through its Chairperson, is accountable to the Board for its activities and makes recommendations to the Board on matters falling under its responsibilities.

The Chairperson of the Committee, or, in his/her absence, an alternate member attends the annual meeting to answer questions concerning matters falling within the ambit of the Committee.

MeetingsThe Audit and Risk Management Committee meets as and when necessary and met three times during the financial year 2015 -2016. In line with its terms of reference, the scope of work of the Committee included; follow up on the internal control functions and risk management, implementation of recommendations of IT Security Auditors, Capitalisation of SEM Reserves and Bonus Issue, review of audited accounts, annual report, budget, declaration of dividend and appointment of auditors and fixing of their remuneration.


Annual Report 2016

23

Membership and Meetings (cont’d)Sub-committee on the supervision of listing mattersThe sub-committee on the supervision of listing matters comprises two Non-Executive Directors. Members for the year were: Mr. P.Gopallen Mooroogen (Chairperson), and following the resignation of Mr Gaëtan Lan Hun Kuen as Director on the SEM Board, he was replaced by Prof Donald Ah Chuen on the sub-Committee on the supervision of listing matters. The Chief Executive and the Head of Listing are also members of the Sub-committee. The Manager Legal Affairs acts as secretary to the Sub-committee.

Reporting and AccountabilityThe sub-committee on the supervision of listing matters through its Chairperson is accountable to the Board for its activities and makes recommendations to the Board on matters falling under its responsibilities;

MeetingsThe sub-committee on the supervision of listing matters scrutinises quarterly reports submitted to it by the Listing Division of the SEM. Meetings of the sub-committee may be held as and when necessary to consider specific cases referred to it by the SEM. Regular reports were submitted to and considered by the sub-committee during the financial year 2015 -2016. However, no meeting of the sub-committee was held during this period.

Strategic CommitteeThe Strategic Committee comprises three Non-Executive Directors and one Executive Director. The following Directors were elected to sit as Members of the Strategic Committee for the FY 2016: Messrs Gopallen Mooroogen (Chairperson & Non-Executive Director), Professor Donald Ah Chuen (Non-Executive Director), André Chung Shui (Non-Executive Director), and Mr. Sunil Benimadhu (Chief Executive and Executive Director). The Manager Finance and Administration acts as secretary to the Committee.

Reporting and AccountabilityThe Strategic Committee through its Chairperson is accountable to the Board on all matters pertaining to the Strategic Policy of the SEM and makes recommendations to the Board on all matters pertaining to the Strategic Policy to be adopted by the SEM;

MeetingsThe Strategic Committee meets as and when necessary to discuss on matters pertaining to the strategic policy of the SEM.

Directors’ Shareholdings and InterestsUnder Clause 11 of the SEM’s Board Charter:The Secretary of the Board shall maintain a register of interests, pursuant to S 190 (2) (c) of the Companies Act 2001. Upon appointment to the Board, a Director shall be required to provide the Secretary to the Board with a complete list of his directorships and/or material interests in any security listed or traded on SEM and in any Member Company of SEM or any interests as defined by S147 of the Companies Act 2001 for entry in the interests register. ‘Material interest’ is defined as any interest of 5% or more in the share capital of the company.

Notwithstanding the provisions of S148 of the Companies Act, 2001, a Director shall forthwith inform the Secretary to the Board of any changes in his directorships and/or shareholdings which would have the effect of increasing or reducing his shareholding above or below the level of material interest disclosure.



24

Directorships in listed companies The number of other directorships which the Directors of the SEM Board hold in listed companies and the number of shares held by them, both directly and indirectly in the SEM, are disclosed in the table below:

Name of Director Number of Directorships in

Listed Companies

Number of shares held directly in SEM

Number of shares held indirectly in SEM

Professor Donald Ah-Chuen 3 Nil 0.46%Mr. Sunil Dutt Benimadhu Nil Nil NilMr. André Chung Shui Nil Nil NilMr. Dev Kumar Gopy Nil Nil NilMr Derek Wong Wan Po 1 Nil NilMr Peroomal Gopallen Mooroogen 2 Nil 0.000033%Mr. Shivraj Rangasami Nil Nil NilMr. Nitish Benimadhu Nil Nil NilMr Vikash Tulsidas Nil Nil NilMrs Reedhee Bhuttoo Nil Nil Nil

Dealings in shares by the DirectorsThe Directors of SEM have followed the principle of the model code on securities transactions as detailed in Appendix 6 of the SEM Listing Rules.

There were no dealings in the shares of the SEM by the Directors of the Company during the year ended 30 June 2016. The Company has no share option plans.

Shareholders’ AgreementThere is no shareholders’ agreement which affects the governance of the Company by the board and the SEM does not have any management agreement with third parties.

Management AgreementThere is a management agreement between SEM and the CDS for the provision of Information Technology (IT) Services to the Company.


Annual Report 2016

25

Directors’ RemunerationThe total remuneration paid to the Directors of the SEM and the CDS for the financial year ended 30 June 2016 and for the previous year 2015, are disclosed in the table below:

SEM CDSName of Director FY 2016

Rs’000FY 2015 Rs’000

FY 2016 Rs’000

FY 2015 Rs’000

Professor Donald Ah-Chuen 135 126 - 45Mr. Nitish Benimadhu 89 95 - -Mr Sunil Dutt Benimadhu 8,346 9,060 - -Mrs. Reedhee Bhuttoo (pd to SBM Securities) 51 - 58 -Ms Aruna Radhakeesoon Collendavelloo - - 168 153Mr Bhogunsingh Chikhuri - - 74 -Mr André Chung Shui 110 110 136 72Mr. Dev Kumar Gopy 93 93 - 35Mrs Tilotma Gobin Jhurry - - - 23Mr Vishal Joyram (pd to SBM Securities) - 63 - -Mr Gaëtan Lan Hun Kuen 48 120 48 86Mr Steve Leung Sock Ping - - 134 112Mr Vipin Mahabirsingh - - 3,565 4,228Mr Peroomal Gopallen Mooroogen 210 150 106 47Mr Shivraj Rangasami 113 92 130 100Mr Sameer Kumar Sharma - - 108 65Mr Ramanaidoo Sokappadu - - 33 112Mr Vikash Tulsidas 90 90 316 288Mr Derek Wong Wan Po 42 - - -



26

Internal Control ReportThe Board of Directors has overall responsibility for the Company’s system of internal control and risk management and for reviewing the adequacy and integrity of the system. The system of internal control covers inter alia, governance, risk management, financial, organisational, operational and compliance control.

This section of the Report discloses the risk control mechanisms implemented at the SEM and gives an overview of the system of internal controls existing within the organisation. The risks control mechanisms already in place at the SEM include:

• Capital Adequacy RequirementsIn accordance with the Financial Reporting of Investment Dealers Rules, all investment dealers have to submit, in addition to the audited accounts, Capital Adequacy Requirements returns (CAR) by the tenth business day of the quarterly period in respect of the close of business for the previous three months, reflecting the investment dealer’s risk positions and its financial resources.

As per the Stock Exchange ( Financial Reporting of Investment Dealers ) Rules 2010, no investment dealer is allowed a shortfall in its capital, other than pursuant to a specific temporary exception granted by the SEM.

The SEM has full discretion as to the necessity and sufficiency of special adjustments in any particular case, taking into consideration all factors pertaining to the market with regard to the financial resources or future contracts and the affairs as a whole of the investment dealer involved.

• Compensation FundSection 148 of the Securities Act 2005 provides for the creation and maintenance of a Compensation Fund to provide for the compensation of investors who suffer pecuniary loss as a result of:

- the inability of a licensee under this Act or any collective investment scheme to satisfy claims arising from civil liability by it in connection with services provided;

- fraud or defalcation by a licensee, a collective investment scheme or any of its officers or employees; or- the insolvency or bankruptcy of any licensee or collective investment scheme.

The SEM Compensation Fund was established, and is maintained and administered by the SEM under the repealed Stock Exchange Act 1988 (now Section 148 of the Securities Act 2005). In 1999, the Board of Directors of the SEM gave its approval for an initial amount of Rs2.75m to be transferred out of the SEM’s retained earnings for the purpose of the Fund. The value of the Fund as at 30 June 2016 amounted to Rs 4.7m. In case of any shortfall arising in the Fund, the investment dealers, as per the requirements of the SEM Business Rules, would be called upon to contribute to the shortfall in the Compensation Fund.

In addition to the above, depending upon the size of its business and its relative risk exposure, each investment dealer is required to take a Professional Indemnity insurance cover as per the requirements of the SEM Business Rules.


Annual Report 2016

27SEM CORPORATE GOVERNANCE REPORT 2016 (CONT’D)

Internal Control Report (cont’d) • Audit of Internal Controls

The SEM Audit Committee took the decision to undertake an audit of the internal controls once every two years. The last external audit was performed by the audit firm KPMG in April 2014 and all the recommendations as per the audit report have been implemented. In November 2015, the SEM received the visit of the inspectors of the Financial Services Commission (FSC) for an on-site inspection and audit of SEM’s books and accounting records. By and large, the SEM has demonstrated compliance and met the expectations of the FSC in the context of the on-site inspection and audit. The next audit of the internal controls is scheduled for the beginning of 2017.

• External AuditAt each year-end, an audit of the financial statements is performed by external auditors who are duly registered with the Mauritius Institute of Professional Accountants and licensed by the Financial Reporting Council. The audited financial statements, together with the recommendations of the auditors, are then discussed at the level of the Audit and Risk Management Committee before approval by the Board of Directors of the SEM.

• Stock Exchange Professional Indemnity/Crime Insurance/ Directors & Officers Liability Insurance CoverSince SEM and CDS have common interests and common Directors who sit on both Boards, the management of SEM and CDS decided to take a comprehensive joint- insurance policy which includes the Stock Exchange Professional Indemnity, Crime Insurance and Directors & Officers Liability insurance, for a total amount of Rs25m. This decision has enabled both companies to achieve synergies and reduce their insurance costs.

• IT SystemThe SEM has outsourced its IT function to its subsidiary, CDS, which possesses the necessary IT expertise. The outsourcing agreement, which has been effective since January 2001, also includes the technical management of the Automated Trading System (ATS). Any software enhancements, modifications and additions are thoroughly tested before implementation in the live environment. A formal Change Management Procedure has been implemented so as to ensure that the IT Systems are being regularly updated.

• IT Security AuditIn order to assist the SEM and the CDS in identifying any IT risks and to undertake appropriate measures to address these IT risks, the whole IT system is being subject to a specialized external IT Security Audit once every two years. During the financial year 2015, an IT Security Audit was carried out by PricewaterhouseCoopers Ltd.

The high- level findings and recommendations of the IT Security Audit were discussed at the level of SEM and CDS Audit Committees and a joint-decision was taken to implement all the recommendations included in the IT Audit Report during this financial year 2015-2016. As at to-date all the recommendations of the IT Auditors have already been implemented.


28

Internal Control Report (cont’d) • Disaster Recovery Plan

The SEM has a Disaster Recovery Plan (DRP) to cater for various possible scenarios. The DPR covers both preventive and corrective measures, which will enable it to deal with various types of disasters that can disrupt normal ATS system operation. Prevention of loss of data in the event of media failures is achieved through the implementation of redundant and cyclical backup tapes that are stored both on-site and off-site.

The ATS system is designed with High-Availability configuration with main and backup servers. The back-up database server maintains a mirror image of the database on the main server. In the event of a problem with the main database server, the backup server takes over without physical intervention required at client sites. Similarly, if one of the two trading engines goes down, the second trading engine takes over within 10 minutes. In the event of a major disaster that causes the ATS site to be unavailable, systems and business operations can be restored at a back up site within 6 to 24 hours.

During the financial year 2015-2016, 3 simulations of the DRP were performed on the following respective dates: 16th September 2015, 23rd December 2015 and 6th May 2016. The simulation performed on 16th September 2015 involved the participation of the Investment Dealers, Custodian Banks as well as the employees of SEM and CDS. The results of the three simulations were all successful as no systems downtime was observed.

Report on the Members’ Compliance Visit (Rule 5.2.1 of SEM Business Rules)Section 24(1)(a) of the Securities Act 2005 provides that in addition to its other functions, the SEM shall have regulatory functions and shall, inter alia, ensure that it adequately supervises the market operations and conduct of market participants.

The SEM’s Business Rules have been implemented to enable the SEM to discharge its regulatory functions vis à vis market participants. These rules provide for the criteria and conditions for Investment Dealers to be admitted as Trading Members of the SEM, disciplinary action against Trading Members in the event of non-compliance with the rules, requirements on the business practices of Trading Members and a Code of Conduct which the Trading Members must observe when trading on SEM.

The SEM’s Business Rules were approved by the FSC in October 2008 and came into force in January 2009, following a 3-month transition period given to the Investment Dealers to ensure compliance with the new rules. The SEM has set up a compliance unit under the leadership of the Senior Manager which monitors on an on-going basis compliance of Trading Members with the requirements of the SEM’s Business Rules.

With the adoption of the SEM’s Business Rules, the SEM monitors the following: - Eligibility criteria for membership; - Continued compliance with Exchange requirements, including training and certification of participants and

capital adequacy; - Trading operations of participants, including issue of contract notes to clients, brokerage charges, turnover

limits, margin requirements; - Code of conduct for members and members’ responsibilities;- Maintenance of records, annual accounts and audit;- Inspection of participants;- Sanctions in cases of non-compliance with regulations, rules and procedures of the Exchange.


Annual Report 2016


Report on the Members’ Compliance Visit (cont’d)(Rule 5.2.1 of SEM Business Rules) (cont’d)A thorough investigation and compliance visit was undertaken with the Investment Dealers in virtue of Rule 5.2.1 of the SEM’s Business Rules to assess how the standards described in the Business Rules had been complied with. The audit started on 18th January 2016 and was completed on 28th February 2016, and was held in the presence of a Senior Officer and the Compliance officer of the Investment Dealer.

Surprise visits were done to the offices of Trading Members during trading hours so as to verify whether transactions carried out on the stock exchange through the ATS are in conformity with the Trading Rules & Procedures and the Rules made under the Securities Act 2005. A questionnaire type form derived from the Business Rules was used during the audit exercise, which covered specific and general aspects of the trading operations of the Trading Member, such as the Admission of Applicants as Trading Members; Continuing Obligations of Trading Members; Business Practices of Trading Members and Code of Conduct of the SEM Business Rules.

The main components of the audit exercise comprised a « walk through » of a complete trade cycle process, i.e. opening of Clients’ Accounts in CDS, deposit of securities, receipt buy or sell orders from a client, input of order details in ATS, collection and despatch of Contract Notes, executions of trades and post trade functions.

All Trading Members have been informed in writing of the shortcomings observed during the Compliance Visit. A follow-up visit was carried out in March 2016 to verify if the shortcomings identified had been addressed. It was noted that all Trading Members are compliant with the Business Rules. A copy of the full report has been submitted to the Chief Executive of the SEM.

Special Remark:With regard to Bramer Capital Brokers Ltd (BCBL), a meeting was held in the presence of Mr Lo Voon Kim Lo Tiap Kong, representative of the Special Administrator and Mr Muhammad Rawat of Bramer Asset Management on Friday 26 February 2016. Following the meeting, a letter highlighting all the weaknesses and non-compliance with the SEM Business Rules was issued to the Special Administrator. In the afternoon, following the Cease Trade Order issued against Bramer Capital Brokers Ltd (BCBL) in accordance under Section 133 of the Securities Act 2005 by the FSC, BCBL was not allowed, as from Monday 29 February 2016, to execute any trades through the SEM’s Automated Trading System until further notice. The Special Administrator did not respond to the above letter dated 26 February 2016. An electronic mail dated 17 March 2016 also remained unattended by the Special Administrator.

Other Sub-Committees of the SEMAlong with the SEM Board Committees, the SEM has also set-up three other Sub-Committees, namely; - the Consultative and Informative Committee - the Index Management Committee - the Listing Executive Committee


30

Other Sub-Committees of the SEM (cont’d)

CONSULTATIVE AND INFORMATIVE COMMITTEE

INDEX MANAGEMENT COMMITTEE

LISTING EXECUTIVE COMMITTEE

Approved Terms of Reference Approved Terms of Reference Approved Terms of Reference

Discuss issues related to trading activities, operational aspect of the ATS & CDS Systems, new products and development of the market.

Establish the criteria and procedures for selection of the constituents of the SEM-10;

Determine the suitability of applications for listing;

Determine the base period and value and to formulate a scientific and transparent methodology of index calculation;

Recommend changes to Listing Rules and DEM Rules to the Board;

Review, monitor and maintain periodically the SEM-10 and consider the development of sectoral indices.

Assess cases of apparent breaches of the Listing Rules / DEM Rules and make recommendations to the Board for their adjudication;

The inclusion or exclusion of a constituent in the SEM-10 is at the discretion of an independently constituted IMC. This discretion shall only be used in the spirit of furthering the objectives of the SEM-10.

Assess cases on the suspension or cancellation of a listing on the Exchange and refer to the Board for consideration.

Membership and MeetingsConsultative and Informative Committee (CIC)The CIC comprises of representative of SEM, CDS, Investment Dealers and Custodian Banks. It does not have executive powers, but can make recommendations to the Board. The Chief Executive of SEM acts as Chairperson of the Committee.

MeetingsThe Committee meets as and when the need arises and met once during the year. The main issues discussed by the Committee included; operational aspects of ATS and CDS Systems, review and creation of new indices, promotion of new products, short selling and reverse turnaround trades on the Exchange.

Index Management Committee (IMC)The Index Management Committee, which is composed of stockbrokers, fund managers, academics, and officials from the Stock Exchange of Mauritius, ensures that the process of building and maintaining the SEM-10 Index is as interactive as possible.


Annual Report 2016


Membership and Meetings (cont’d)Index Management Committee (IMC) (cont’d)Members who sat on the IMC for the year ended 30 June 2016 are : Mr Prem Beejan (Chairman), Mr Sunil Benimadhu, Mr Raj Tapesar, Mr Mathew Lamport, Mr Vikash Tulsidas, Mr Nitish Benimadhu and Mr Darmanand Virahsawmy (Secretary)

Meetings The Index Management Committee (IMC) meets quarterly to review the constituents of the SEM-10 and the Reserve List. These meetings are held on the first Tuesday (or nearest Mauritian business day after that day) of January, April, July and October.

Listings Executive Committee (LEC)Members who sat on the LEC for the year ended 30 June 2016 were: Mr Sunil Benimadhu (CEO), Mr Shamin Ahmad Sookia (Head of Listing), Ms Shalini Gokhool (Manager Legal Affairs), Mr Chaitanand Jheengun (Manager Trading and Market Information) and external Members as follows: Mr Nassir Ramtoola (Chairman), Mrs Prabha Chinien, Mr Deva Marianen, Mr Jean Michel Ng Tseung, Mr Ravindra Chetty, Mr Jean Pierre Lim Kong, Mr Bilal Sassa( term of office ended in March 2016 ), Mrs. Margaret Wong Ping Lun (term of office ended in July 2015) and Mrs Sharda Dindoyal (term of office ended in July 2015).

The power to act on certain listing matters resides with the Board of the SEM. Under the relevant legal and regulatory provisions, the LEC deals with listing applications on the Official Market and other specific issues as provided for in the SEM Listing Rules. Furthermore, under the DEM Rules, applications for the admission of companies on the DEM are also entertained by the LEC.

MeetingsDuring the financial year 2015-2016, sixteen (16) meetings of the LEC were held whereby the following issues, inter alia, were considered: Applications for listings on the Official Market and the DEM, withdrawals from the Official Market, Corporate actions for both the Official Market and the DEM and cancellations of admission from the DEM.

Fees paid to external Members of the Listing Executive Committee (LEC)The remuneration of the LEC Members for the financial year 2016 and for the previous financial year 2015, are disclosed in the table below:

Name of LEC Member FY 2016 ( Rs’k)

FY 2015 ( Rs’k)

Mr Nassir Ramtoola (Chairman) 105 122Mr Ravindra Chetty 75 -Mrs Prabha Chinien 86 94Mrs Sharda Dindoyal - 86Mrs Margaret Wong Pin Lun - 78Mr Jean Pierre Lim Kong 25 -Mr Deva Marianen 82 86Mr Jean Michel Ng Tseung 74 -Mr Bilal Sassa 51 90


32

Membership and Meetings (cont’d)SEM Management Committee (MC)The SEM MC is composed of the Chief Executive, the Senior Manager, the Head of Listing, the Manager Finance and Administration, the Manager Trading and Market Information, the Manager Legal Affairs, the Manager Marketing and Market Information and the Executive Secretary.

MeetingsThe Members of the MC meet regularly to discuss on the day-to-day management and business operations of the SEM. Any relevant issues raised at board level which need to be channelled to management, are also discussed at the MC before implementation by the management team.

Profile of Management TeamThe profile of each Member of the Management Team is disclosed on pages 10 to 11 of this Annual Report.

Social, Ethical, Safety, Health and Environmental IssuesAll the employees of the SEM are bound by the internal rules and regulations, as detailed in the SEM Employee Handbook. The SEM Employee Handbook is regularly updated to take into account changes in the legislation and to reflect the provisions of the New Employment Rights Act 2008. In the discharge of its duties, the SEM staff is committed to the highest standards of integrity and ethical conduct.

Staff WelfareThe SEM has also established a staff welfare programme where the sporting activities of the employees of the SEM are sponsored, in line with the approved budget. The SEM has also provided for medical insurance and 24-hour accident covers for all its employees.

Dividend Policy of the SEMThe dividend policy adopted by the Company is disclosed in the Directors’ Report on page 13 of the Annual Report.

Group Structure of the SEMThe SEM holds 51% of the ordinary share capital of the CDS. The main activities of the CDS are to provide depository, clearing and settlement services in order to facilitate dealings in securities. The total value of the ordinary share capital issued by the CDS is Rs15m and its total reserves as at 30 June 2016 amounted to Rs190.5m.


Annual Report 2016


Common Directors and the shareholding percentagesThe table below lists the names of common Directors who sat on both the Boards of the SEM and CDS during the financial year ended 30 June 2016, together with their shareholding percentages in SEM and CDS respectively:

Name of Director Name of Shareholder % shareholding in SEM Ltd

% shareholding in CDS Ltd

Mr Gopallen Mooroogen Mauritius Telecom Ltd 7.50Mr. André Chung Shui Newton Securities Ltd 5.76 -Mr Kevin Rangasami MCB Stockbrokers Ltd 5.44 -Mrs Reedhee Bhuttoo SBM Securities Ltd 4.83 3.33Mr. Vikash Tulsidas Medine Ltd /Excelsior United

Development Co Ltd1.52 -

Related Party Transactions (RPT)A list of the significant related-party disclosures between the Company and its subsidiaries, and between the Group and other related parties, including relevant key management personnel, for FY 2016, is set out in Note 22 of the Financial Statements.

(51% Shareholding)

SHAREHOLDERS OF THE SEM

SEM Ltd

CDS Ltd


34

SEM Shareholders and the percentage shareholdingsAt the special Meeting held on 10th November 2015, the Shareholders approved a Bonus Issue in the proportion of 14.151515 new Ordinary shares of Rs10.00 each for every one (1) Ordinary share held, representing a distribution of 4,670,000 new Ordinary shares of Rs10.00 each.

The table below discloses the list of shareholders of the SEM and the relative number of Ordinary shares held by them as at 30 June 2016:

List of shareholders of the Stock Exchange of Maurtius Ltd

Number of shares held at 30 June 2016

% Holding

1 Swan Life Ltd 750,000 15.002 IBL Ltd 443,833 8.883 Swan General Ltd 375,000 7.504 State Insurance Company of Mauritius Ltd 375,000 7.505 Mauritius Telecom Ltd 375,000 7.506 Mirabel Investments Ltd 344,697 6.897 Newton Securities Ltd 287,879 5.768 MCB Stockbrokers Ltd 271,757 5.449 Azelbourne Financial Services Ltd 247,712 4.9510 Plasmo Ltd 246,182 4.9211 Ramet Investment Ltd 242,424 4.8512 SBM Securities Ltd 241,561 4.8313 Island Life Assurance Co Ltd 225,000 4.5014 Chue Wing & Co Ltd 187,500 3.7515 ABC Motors Co Ltd 187,500 3.7516 Medine Limited 37,879 0.7617 The Bee Equity Partners Ltd 37,879 0.7618 Excelsior United Development Companies Limited 37,879 0.7619 Alteo Limited 37,879 0.7620 Galvanising Co Ltd 30,303 0.6121 Associated Brokers Ltd 15,136 0.3022 The Mauritius Development Investment Trust Co Ltd 2,000 0.04

Total 5,000,000 100.00


Annual Report 2016


Restrictions on the ownership of SEM shares SEM being a public company, the transfer of its shares are not subject to pre-emption rights. However, restrictions on ownership of shares as required by law are reflected in the following clauses 10.1 and 10.4 of the SEM Constitution:

Clause 10.1: Transfer of Shares to be subject to Board and FSC approval:-“Notwithstanding the rights conferred upon the Board by clause 10.4. hereof, all transfers and transmissions of Shares shall have to be approved by the Board. Any document relating to or affecting the title to any Shares shall be registered with the Company, after having been approved by the Board, without payment of any fee. No Shares shall be transferred except with the approval of the FSC pursuant to Section 23 of the Financial Services Act 2007”.

Clause 10.4 : Board’s right to refuse or delay registration of transfer:-(a) “The Board may, subject to compliance with sections 87 to 89 of the Act, refuse or delay the

registration of any transfer of any Share to any person, whether that person be an existing Shareholder or not, where:(i) so required by law;(ii) a holder of any such Share has failed to pay on the due date any amount payable thereon either

in terms of the issue thereof or in accordance with the Constitution (including any Call made thereon);

(iii) the transfer is not accompanied by such proof as the Board reasonably requires of the right of the transferor to make the transfer;

(iv) the Company is required or authorised to do so under the provisions of the Securities (Central Depositary, Clearing and Settlement) Act or any other enactment.

(v) Notice of the decision of the Board refusing or delaying a transfer of any Share, stating the reasons for the refusal, shall be sent to the transferor and the transferee within twenty-eight (28) days of the date on which such transfer was delivered to the Board”.

Important DatesDividend declaration 28th June 2016Submission of audited accounts & annual reports to the Financial Services Commission (FSC)

27th September 2016

Dividend payment 28th October 2016Annual Meeting of Shareholders of the SEM November 2016


36 SEM CORPORATE GOVERNANCE REPORT 2016 (CONT’D)

SEM Corporate Social ResponsibilityThe SEM CSR policy is to contribute towards CSR programmes or activities that will help to “Eradicate Absolute Poverty”. For the FY 2016, in line with its approved CSR guidelines, the SEM financed various CSR programmes through nine NGO’s as listed below:

Name of NGO Amount sponsored

(Rs’000)1 Openmind Project 5402 Maison Familiale Rurale du Nord 2593 Les Amis de Zippy 2474 APSA 2165 T1 Diams 1356 A.P.E.I.M 1357 S.A.C.I.M. 1358 Fondation pour l’enfance, Terre de Paix 1359 PILS 135

Total amount sponsored 1,937

Political donationsNo political donation was made by the SEM during the financial year 2016.

P. Gopallen Mooroogen Date: 14th September 2016Chairman

OPERATING AND FINANCIAL REVIEW



38

New Listings Year 2015-2016 saw a marked increase in the number of Specialist securities listings, with 17 of the 24 new securities listed during the year being Specialist securities. The number of Specialist debt listings rose considerably and there was also a lot of interest for the listing of Global Business Companies, which subsequently embraced cross-listings on the Johannesburg Stock Exchange or The Namibian Stock Exchange. Moreover, 3 new Exchange Traded Funds (ETFs) were admitted to listing on the Official Market (OM) of the SEM, providing the ETF holders with an efficient means of tracking the performances of foreign indices, including the S&P Global Property 40 Index, the Vanguard S&P 500 ETF and the ZyFin India Sovereign Bond Liquid Index.

In 2015-2016, the SEM also gathered considerable momentum in line with its internationalisation strategy, with nearly half of the new securities admitted on the SEM’s markets being international. In the coming year, international listings are expected to pursue the same growth path as in 2015-2016.

LISTING ACTIVITIES

New listings on the Official Market

New listings in 2013-2014 New listings in 2014-2015 New listings in 2015-2016

0

1

2

3

4

5

6

DomesticCompanies

Global Business

Companies

Global &Specialized

Funds

DebtSecurities

Specialist Debt

Instruments

ExchangeTradedFunds

Structuredproducts

Annual Report 2016

39LISTING ACTIVITIES (CONT’D)

Break-down of new listings on the Official Market in 2015-2016

New listings Securities ListedDOMESTIC COMPANIESNew Mauritius Hotels Limited Convertible Preference sharesGLOBAL BUSINESS COMPANIESCMB International Ltd Ordinary sharesAstoria Investments Limited Ordinary sharesTrevo Capital Ltd Preference sharesTadvest Limited Ordinary sharesStonebridge Properties Limited Ordinary sharesMainland Real Estate Ltd Ordinary sharesSPECIALISED DEBT INSTRUMENTSNew Mauritius Hotels Limited EUR Fixed Rate NotesNew Mauritius Hotels Limited MUR Floating Rate Tranche A NotesNew Mauritius Hotels Limited MUR Floating Rate Tranche B NotesOSWA Capital Limited Fixed Rate NotesCompagnie de Beau Vallon Limitée Class A BondsCompagnie de Beau Vallon Limitée Class B BondsEXCHANGE TRADED FUNDS (ETF)CoreShares S&P 500 ETF Ordinary sharesCoreShares S&P Global Property ETF Ordinary sharesMCB India Sovereign Bond ETF Participating shares

New listings on the DEM

New listings in 2013-2014



1

2

3

DomesticCompanies

Debt securities


40

Break-down of new listings on the DEM in 2015-2016

New listings Securities ListedDOMESTIC COMPANIESAttitude Property Ltd Ordinary sharesAscencia Limited Convertible Preference sharesABC Banking Corporation Limited Ordinary sharesDEBT SECURITIESAscencia Limited BondsABC Motors Company Limited NotesUnited Investments Ltd Bonds

The charts below provide an overview of issuers listed on the OM and DEM (by sector of activity), as at the end of June 2016:

LISTING ACTIVITIES (CONT’D)

Banks & Insurance andOther Finance [7]

Commerce [6]

Industry [7]

Investments [13]

Leisure &Hotels [5]

PropertyDevelopment [1]

Sugar [1]

Transport [1]Debt [5]

Foreign [1]

Global & SpecialisedFunds [20]

Specialised debtsecurities [9]

Global BusinessCompanies [13]

Exchange TradedFund [6]

Structured Products [2]

Official Market

Annual Report 2016

41LISTING ACTIVITIES (CONT’D)

DEM

0

2

4

6

8

10

12

Banks & Insurance andOther Finance [2]

Commerce [4]

Debetures [3]

Industry [11]

InformationTechnology [1]

Investments [7]

Leisure & Hotels [4]

Mineral & Exploration [1]

Others [6]

Sugar [3]

Transport [1]

Property development [2]

Withdrawals In August 2015, Focus Cell 1 of Fidelis Opportunity Fund PCC was withdrawn from the OM of the SEM due to its level of operation which was deemed insufficient to warrant the continued listing of the cell shares, and in March 2016, the three cells of AIGO Holdings PCC, namely AIGO UK Residential Property Fund, AIGO Commercial Property Fund and AIGO Natural Resources Fund, were withdrawn from the OM following the surrender by AIGO of its Collective Investment Scheme License in the context of its Restructuring.

On the DEM, the admission of Vital Water Bottling Co. Ltd was cancelled in December 2015 following its amalgamation with and into Quality Beverages Limited. The admission of Société de Développement Industriel et Agricole Limitée was also cancelled in December 2015 following the winding up of the company.

In January 2016, following a Share Buyback, the cancellation of the admission of Cargohub Capital Ltd was effected and in the same month, the cancellation of the admission of ENL Investment Limited was effected after its amalgamation with and into ENL Land Ltd.

Break-down of new listings on the DEM in 2015-2016 (cont’d)


42

Corporate Transactions on the OM and the DEMThere was an increase in the number of private placements, substantial transactions, capitalisation issues and amalgamations in 2015-2016. The following chart shows a break-down of the corporate transactions that were undertaken during the year:

LISTING ACTIVITIES (CONT’D)

Break-down of corporate transactions in 2015-2016

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Amalgamation

Capitalisation issue

Consideration issue

Disclosable transaction

Employee share option scheme

Further issue

Private placement

Related party transaction

Rights issue

Share split

Subtantial transaction

Other developmentsIn the year 2015-2016, the SEM revised the Listing Rules and DEM Rules to introduce an accreditation process, whereby professionals wishing to act as Independent Professional Experts, Independent Financial Advisors and Independent Valuers would henceforth need to be accredited with the SEM prior to undertaking assignments on behalf of listed issuers on both the OM and the DEM. The purpose of this accreditation process is to ensure a heightened level of scrutiny by independent and suitably qualified professionals during the preparation of Business Plans and Valuation Reports, so as to provide more comfort to investors who may be relying on these Reports when making their investment decisions.

During the year, the SEM published a Guidance Note on Business Plans, with the view to ensuring that Business Plans submitted to the SEM in the context of listing applications/corporate actions are clearly written, comprehensive, and demonstrate clearly the financial sustainability and sustained viability of the issuer/applicant issuer. The SEM also published a Guidance Note on Interactions with investment analysts and media persons, to provide guidance to listed issuers, Directors of listed issuers or other authorised representatives of listed issuers with regard to the treatment of price sensitive information in the context of interactions between listed companies and these external parties.

In the coming year, as Mauritius consolidates its position as a springboard for channelling investments into Africa, the SEM will also focus on attracting listings and facilitating capital raising exercises by investment vehicles with an African nexus. The Listing Division also intends to actively market the SEM’s value proposition for the listing of Specialist securities.

Following the launch of the SEM Sustainability Index (SEMSI) in the year 2015-2016, the SEM intends to use SEMSI as a tool to encourage the mainstreaming of sustainability in business decisions.

Annual Report 2016

43TRADING ACTIVITIES

Official MarketMarket PerformanceThe financial year 2015-2016 was marked by substantial capital raising activities on the SEM. A total of Rs 42bn were raised on the Official Market. Following the opening of the SEM’s platform for the listing of companies operating in the Global Business sector and the implementation of a multi currency trading platform, 14 GBC 1 companies have been listed since the year 2012. 93% of total capital raised during the period under review was carried out by the GBC 1 companies. As depicted in the below chart, Rs 115bn was raised during last four years.

Capital Raised on Official Market

10

15

20

25

30

35

40

45

2012-2013 2013-2014 2014-2015 2015-2016

21.5

21.5

29.9

42.1

Rs B

n

Financial Year

The year was also marked by the launching a new index, namely the SEMSI on the 7th September 2015. The SEMSI tracks the price-performance of companies listed on both the Official Market and the DEM which demonstrate strong sustainability practices. It offers a useful tool for domestic and international investors with an appetite for responsible investment in frontier markets. At end of June 2016, the SEMSI covered 12 companies with a total market capitalization of Rs 92.1bn.

Market indices evolved in negative territory throughout the year under review. Market capitalization on the Official market closed the session of 30th June at of Rs 199.1bn representing around 49% of the country’s GDP. The price earnings ratio and the dividend yield stood at 12.05 and 4.09% respectively at end of June 2016. The table below shows some salient market indicators at end of June 2016.


44

Official Market (cont’d)Market Performance (cont’d)

Official Market Indicators 30th June 2016SEMDEX 1,752.41 SEM-10 337.25 SEMTRI (Rs) 5,974.07 SEMTRI (US$) 2,573.65 SEMSI 98.92 Market Capitalisation ( Rs bn ) 199.07 Market Cap / GDP (%) 49 Total Value Traded (Rs bn ) 13 Total Volume Traded (m) 2,192 Market PER 12.1 Market Dividend Yield (%) 4.1

Evolution and Performance of Market Indices

TRADING ACTIVITIES (CONT’D)

Evolution of SEMDEX & SEMTRI (Rs) - FY 2015 - 2016

5,900

6,100

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7,100

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-16

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SEM

TRI (

Rs)

SEM

DEX

SEMDEX SEMTRI (RS)

As shown in the above chart, most of the times market indices evolved in negative territory during the year under review. The local market picked up slightly at end of January 2016 but failed to maintain its upward momentum and ended the financial year 2015-2016 on a negative note. The main index, SEMDEX finished the year at 1752.41 points losing 11.5% during the year. The total return index, SEMTRI ended at 5974.07 points. The Blue chip index, SEM-10 index closed the last session of the year at 337.25 points. The SEM Sustainability Index (SEMSI) which was launched at 100 points on 7th September 2015 ended the year at 98.92 points losing 1.1% of its value.

Annual Report 2016

45TRADING ACTIVITIES (CONT’D)

Official Market (cont’d)Evolution and Performance of Market Indices (cont’d)

The table below shows the comparative figures for the market indices and market capitalization.

Index Performance 1-Jul-15 30-Jun-16 Change (%)SEMDEX 1,980.90 1,752.41 (11.5)SEM-10 378.45 337.25 (10.9)SEMTRI (Rs) 6,549.88 5,974.07 (8.8)SEMTRI (US$) 2,879.31 2,573.65 (10.6)SEMSI (launched on 7th September 2015) 100.00 98.92 (1.1)Market Capitalisation ( Rs bn ) 220.23 199.07 (9.6)

Turnover and Volume TradedA total amount of Rs 13.1bn were traded during the last twelve months representing 6.6% of the total market capitalization. Average daily turnover stood at Rs 51.9m compared to Rs 77.5m last year. The top trading sector was the Banks, Insurance & other Finance sector which accounted for 45.2% of the total value traded. As illustrated on the chart below, during the last three financial years, a total amount of Rs 46.3bn were traded on the Official market.

Turnover & Volume Traded on the Official Market

13.9

19.3

13.1

2,287

4,098

2,192

0

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0

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FY 13/14 FY 14/15 FY 15/16

Millio

n

Rs B

n

Turnover

Total volume of shares traded stood at Rs 2.2bn at end of June 2016. Average daily volume over the 253 sessions held throughout the financial year of 2015-2016 stood at 8.7m shares. As shown in the chart below, the highest volume of shares was noted in the month of August 2015 where 306.1m shares were traded whereas February 2016 recorded the highest turnover to the tune of Rs 2.7bn.


46

Official Market (cont’d)Turnover and Volume Traded (cont’d)


Turnover & Volume Traded : FY 2015-2016

0

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0

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1,000

1,500

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Volum

e Tr

aded

(m)

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m

Value Traded (Rs) Volume Traded

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-16

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Turnover by Investor Types

0%

50%

100%

2013-2014 2014-2015 2015-2016

40.0 32.3 43.0

40.0 48.8 35.8

20.0 19.0 21.2

% o

f Tot

al Va

lue T

rade

d

Foreign Investors Local Institutions Local Individuals

Investor profile by categoryThe chart below shows the breakdown of total value traded by different category of investors. Foreign investors involvement in the market was higher during the year under review and accounted for 43% of the total value traded compared to 32.3% for last year.

Annual Report 2016


Official Market (cont’d)Investments by Foreign InvestorsNet foreign investments during the financial year 2015-2016 amounted to an outflow Rs 1.4bn compared to a net sell-off of Rs 4.6bn last year. During the last twelve months, foreigners accounted for 43% of total transaction value but the larger proportion were outflows rather than inflows. The following chart depicts the net foreign investments on a monthly basis during the period July 2015 to June 2016.

Net Foreign Investments - FY 2015/2016

PURCHASES(Rs) SALES(Rs) NET PURCHASES

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16

Market Capitalization At end of June 2016, market capitalization stood at Rs 199.1bn representing some 49% of country’s GDP. As shown in the pie chart below, the Banks, Insurance & other Finance sector represented 42.1 % of the total market capitalization.

Market Capitalisation by Sector - June 2016

BANKS, INSURANCE & OTHER FINANCE

42.1%

COMMERCE 7.3%

INDUSTRY 6.8%

INVESTMENTS28.3%

LEISURE & HOTELS12.2%

PROPERTY & DEVELOPMENT

0.4%

SUGAR 2.1% TRANSPORT

0.6% FOREIGN 0.1%


48

Official Market (cont’d)Top ten companies in terms of Total ReturnThe following table shows the top ten companies in terms of total return for the financial year under review which ranges from 0.5% to 102.9%.

Total Return IndexCompanies Listing Date 1-Jul-15 30-Jun-16 Change (%)Automatic Systems Ltd 12-Oct-94 218.3 442.8 102.9 Air Mauritius Ltd 17-Feb-95 70.1 84.2 20.1 Phoenix Beverages Ltd 10-Jun-93 2,553.6 2,950.8 15.6 Dale Capital Group Ltd 28-Dec-07 6.4 7.2 13.8 Ireland Blyth Ltd 17-Aug-94 1,729.3 1,920.4 11.1 Rockcastle Global Real Estate Company Ltd 5-Jun-12 285.9 295.3 3.3 United Basalt Products Ltd 5-Jul-89 6,398.7 6,476.7 1.2 MCB Group Limited 5-Jul-89 21,555.1 21,766.1 1.0 Go Life International Ltd (USD) 7-Jul-11 23.7 24.0 0.9 Belle Mare Holding Ltd 7-Mar-94 2,666.6 2,679.1 0.5

Development & Enterprise Market (DEM)Market PerformanceOn the DEM, market indices reached new heights during the financial year 2015-2016. On the back of good performance of DEM companies, the main index, DEMEX and the total return index, DEMTRI closed at their all time high level on 16th September 2015. The DEMEX ended the session of 16th September at 209.18 points whereas the DEMTRI closed at 262.69 points. The year was also marked by the listing of ABC Banking Corporation Limited, the first bank to be listed on the DEM. Total market capitalization on DEM stood at Rs 44.5bn at end of June 2016. A total amount of Rs 2.9bn was raised on the DEM growing by 38% when compared to last year’s figure of Rs 2.1bn. The market was trading at a PE ratio of 11.05 and dividend yield of 3.26%. The table below demonstrates some market indicators at end of June 2016.

DEM Indicators 30th June 2016DEMEX 193.91 DEMTRI (RS) 249.83 DEMTRI (US) 216.52 Market Capitalisation ( Rs bn ) 44.48 Market Cap / GDP (%) 11 No. of Companies 42 Total Value Traded (Rs bn ) 1.6 Total Volume Traded (m) 75.9 No. of Trading Sessions 253 Market PER 11.1 Market Dividend Yield (%) 3.3


Annual Report 2016


Development & Enterprise Market (DEM) (cont’d)Evolution and Performance of Market Indices

DEMEX & DEMTRI (Rs) - FY 2015 - 2016

230

240

250

260

270

190

200

210

220

The DEMEX and the DEMTRI reached new heights on 16th September 2015

Jul-1

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DEM

TRI (R

s)

DEM

EX

DEMEX DEMTRI (RS)

After reaching their peak in mid September 2015, the DEMEX and the DEMTRI evolved in negative territory thereafter. The DEMEX ended the year at 193.91 points losing 6.2% during the year whilst the DEMTRI registered a loss of 3.4% during the same time period and closed at 249.83 points. The table depicts performance of the indices during the period under review.

Index Performance 1-Jul-15 30-Jun-16 Change (%)DEMEX 206.81 193.91 (6.2)DEMTRI (RS) 258.63 249.83 (3.4)DEMTRI (US) 228.72 216.52 (5.3)Market Capitalisation ( Rs bn ) 49.15 44.48 (9.5)


50

Development & Enterprise Market (DEM) (cont’d)Turnover and Volume Traded


Turnover & Volume Traded : FY 2015-2016

Value Traded (Rs) Volume Traded

Jul-1

5

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270.3 13

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e (m

)

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over

(Rs

m)

The DEM ended the year with a total value traded of Rs 1.6bn representing a 43.4% fall when judged against last year’s figure of Rs 2.9bn. A total volume of 75.9m shares were exchanged during the period under review. As shown in the chart above, the highest value and volume traded were recorded in the month of February 2016 and December 2015 respectively. The top trading sector during the period under review was the Investment sector which accounted for 24.9% of the total amount traded.

Value Traded by Sector - FY 2015-2016

BANKS & INSURANCE22.1%

ICT 0.01%

COMMERCE1.3%

INDUSTRY1.2%

INVESTMENTS

24.9%

LEISURE & HOTELS 5.8%

OTHERS

24.1%

PROPERTY DEVELOPMENT

2.1%

SUGAR

9.0%

TRANSPORT

0.01%

DEBENTURES

9.5%

Annual Report 2016


Development & Enterprise Market (DEM) (cont’d)Foreign InvestmentOn the DEM, total sales carried out by foreign investors were larger than their purchases resulting in a net outflow of Rs 50.1m during the 12 months period. However, during the second half of the year, foreigners restated their interest on the DEM and this was represented by a net inflow of Rs 80.2m. The chart below shows the evolution of net foreign investments on a monthly basis for the financial year 2015-2016.

-120

-70

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30

80

Net Foreign Investments - FY 2015/2016

Rs m

Jul-1

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-7

7 9

-91

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2412

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62

Market CapitalizationTotal market capitalization on the DEM stood at Rs 44.5bn at end of June 2016. As depicted in the table below, most of the sectors performed well during the period under review. The Banks & Insurance Sector registered a growth of 64.7% during the year owing to the listing of ABC Banking Corporation Ltd on the 18th

January 2016.

SECTORS 30th June 2015 30th June 2016 Change (%) BANKS & INSURANCE 2.4 4.0 64.7 COMMERCE 1.0 0.9 (7.8) INFORMATION COMMUNICATION & TECHNOLOGY 1.0 0.1 (87.7) INDUSTRY 3.2 3.3 3.4 INVESTMENTS 14.8 10.6 (28.9) LEISURE AND HOTELS 7.8 6.9 (11.1) MINERAL & EXPLORATION 0.8 0.9 8.9 OTHERS 9.5 8.9 (6.8) PROPERTY DEVELOPMENT - 1.6 - SUGAR 8.4 7.1 (15.5) TRANSPORT 0.2 0.2 (1.7)


52

Development & Enterprise Market (DEM) (cont’d)Top ten companies in terms of Total ReturnThe following table shows the top ten companies in terms of total return for the financial year under review which ranges from 3.5% to 82.5%.

Total Return IndexCompanies Listing Date 1-Jul-15 30-Jun-16 Change (%)The Bee Equity Partners Ltd 4-Aug-06 322.7 589.0 82.5 Les Moulins de La Concorde Ltée (Ordinary) 4-Aug-06 495.3 678.7 37.0 Livestock Feed Ltd (Ordinary) 4-Aug-06 653.0 749.9 14.8 Excelsior United Development Companies Ltd 4-Aug-06 413.5 470.3 13.8 Swan Life Ltd 4-Aug-06 681.8 774.5 13.6 Novus Properties Ltd 20-Oct-14 87.6 98.8 12.8 Ciel Textile Ltd 4-Aug-06 414.0 456.2 10.2 Compagnie Immobiliere Limitee 4-Aug-06 402.1 442.3 10.0 Margarine Industries Ltd 10-Jan-07 1,892.1 1,995.8 5.5 Phoenix Investment Company Ltd 4-Aug-06 743.0 769.2 3.5

MARKETING AND MARKET DEVELOPMENT ACTIVITIES

Financial year 2015-2016 was an interesting year underpinning some key initiatives by SEM’s Marketing and Market Development Department to further improve the experience of market players and investors using our Exchange. Emphasis was placed on training of market players, boosting of data service operations, which is slowly becoming a sustainable fixed income revenue stream, and improvement of investor services.

Key Undertakings during FY 2015/16SEM opened its website for select advertising since start June 2016. A new-look homepage version of the SEM website went live on 01 June 2016 to incorporate ‘select’ advertising as a new web component, for market stakeholders choosing to advertise their services and product offerings on SEM’s platform. The advertising covers one year whereby adverts can be changed four times during that period and adverts roll in a ‘carousel format display’.

SEM only accepts advertising that adheres to criteria which do not compromise the regulatory restrictions under which the Exchange operates. As per standard practice, adverts on SEM’s website issued by licensees of the Financial Services Commission and the Bank of Mauritius are subject to guidelines issued and approval by the relevant regulatory authorities.

SEM is confident that its website will enhance visibility of potential advertisers with its growing select audience of local and international stakeholders which includes, amongst others, international investors, issuers, index providers, data vendors, investment management firms, management companies and a wide variety of other international stakeholders.


Annual Report 2016

53MARKETING AND MARKET DEVELOPMENT ACTIVITIES (CONT’D)

Key Undertakings during FY 2015/16 (cont’d)Data Business DevelopmentData business with global data vendors constitutes a powerful marketing medium for the Stock Exchange in reaching out to institutional investors globally with a view to attracting more foreign investor interest for our listed stocks. Being tracked by global data vendors also enhances SEM’s visibility at the international level while also fostering its integration within the international financial markets.

Over the last two years, data vendors have been encouraged to connect via VPN over the internet in order to receive live market data from the SEM. VPN presents a more cost-effective option in terms of market data connectivity for both the data vendors and the SEM, compared to rental of leased lines by the data vendors directly with a telecommunications company. Over the last financial year, following active marketing efforts, the SEM has managed to double VPN revenue coming from data vending services. Data Business Services, although at its infancy stage, is slowly becoming a sustainable fixed income revenue stream.

Education and Training for market practitionersIn June 2016, the SEM entered into an agreement with a specialized program instructor in the area of ‘’securitization’’ to introduce a new potential area of business for stakeholders of the financial services sector. The program instructor specialises in Equity, Debt Capital Markets and Securitization.

The course scheduled for beginning September 2016, aims at analysing the concept of ‘Securitization’, identifying the key aspects of the regulatory framework that should underpin the securitization of financial assets and explaining how to create securitized products and how to ensure the successful development and listing/trading of securitized products. Designed for market practitioners in the capital markets, banking, insurance, asset management, accounting and global business industries, this training course also looks at practical examples of how to create and value securitized assets like mortgage-backed securities and other forms of asset-backed securities. Overall, the objective is to focus on how to structure, launch, and price securitised products through detailed examples of products ranging from corporate related assets to consumer related assets.

Encouraging listed issuers to adopt best practices in Investor RelationsIn a world where competition for capital is intensifying, strengthening the adoption of international best practices in Investor Relations is a key differentiator for listed issuers. Since 2013, SEM has endeavoured to assist its listed issuers to enhance their ability to attract and retain the interest of investors via training courses, and more recently, by encouraging listed companies to have an automated display of their market share price along with other investor services data on their websites. These services entail having a secured access to SEM’s servers, a service provided by SEM for listed issuers in partnership with Mauritius Telecom in an endeavour to foster investor relations.

Twenty listed companies are presently subscribed to SEM’s market data and they are encouraged to transform their company market data into interactive infographics on their website for maximum impact for investors and web users at large. The same infographics can also be used in their quarterly press releases and presentations for their financials. Providing such enhanced features on the website for listed issuers will also further assist in empowering investors at large and bringing the stock market even closer to the wider public audience.


54

During the financial year 2015-2016 a number of changes have been brought to the regulatory set-up within which the Exchange operates to align with international best practice, enhance liquidity in products traded on the SEM and raise the level of investor confidence in our markets. A description of the various initiatives undertaken on the regulatory front, with the continued collaboration of the market regulator, is provided below.

Amendment to the brokerage fee structure for Exchange Traded Funds with foreign debt securities as underlyingTo align the brokerage fees for Exchange Traded Funds (ETFs) on foreign debt securities with the reduced fee structure recently implemented for corporate bonds and debentures, the SEM and the CDS in consultation with the investment dealers have proposed to bring down the brokerage fees for ETFs on foreign debt securities to the same level as is currently applicable to debentures/ corporate bonds. Consequently, discussions have been initiated with the FSC to amend the Securities (Brokerage Fees for Exchange Traded Funds on Foreign Underlyings) Rules 2013 to slash down the fees from 0.35% to 0.10% representing a reduction of 71%. Ad-valorem fees have also been proposed for transactions in ETFs on foreign bonds/ debt securities below the threshold of MUR 75,000.

The Board of the FSC granted its approval to the proposed fee structure for ETFs on foreign bonds/ debt securities on 16th February 2016. The FSC subsequently brought amendments to the Securities (Brokerage Fees for Exchange Traded Funds on Foreign Underlyings) Rules 2013 which were published in the Government Gazette and came into operation on 4th April 2016. The reduced brokerage fees are expected to stimulate trading activity on ETFs that are currently listed and traded on SEM.

Proposed amendment to the ATS Schedule of Procedures for the adjustment of the closing price where there has been no trade in an Exchange Traded Fund during a trading sessionAs a measure to boost the listings of Exchange Traded Funds (ETFs) on the Exchange and align with international best practice, the SEM has proposed amendments to the ATS Schedule of Procedures (Trading Procedures) for the purpose of adjusting the closing price of an ETF where there has been no trade in that instrument during a trading session. Given that an ETF normally tracks underlying securities or indices whose prices are dynamic, publishing the closing price based on the last time when an ETF was traded may not reflect the true value of the ETF, where there has been no trade in the ETF during a trading session. To better reflect price movements in an ETF’s underlyings and ultimately the intrinsic value of the ETF, the Trading Procedures have been amended to adjust the closing price of an ETF to the latest NAV level available to the SEM at the close of trading if there has been no trade in that ETF during a trading session. The proposed amendments to the ATS Schedule of Procedures have been approved by the Board of Directors of the SEM and submitted to the FSC for approval.

Setting up of a Government of Mauritius Securities and Bank of Mauritius Securities Segment on the SEMDiscussions amongst the relevant stakeholders in relation to the project for the setting up of a Government of Mauritius Securities and Bank of Mauritius Securities Segment on the SEM were reactivated during this financial year. Proposed amendments to the Rules of the SEM which had previously been submitted to the FSC, have been approved on 30th May 2016. The regulatory and operational set-up at the level of SEM and CDS are now ready for the creation of the new board for the trading, clearing and settlement of Government of Mauritius Securities and Bank of Mauritius Securities. The Bank of Mauritius needs to establish the rules for Primary Dealers that will trade on this Segment.

LEGAL ACTIVITIES

Annual Report 2016

55LEGAL ACTIVITIES (CONT’D)

Proposal for amendment of the Financial Services Act 2007 to allow corporations holding a Category 2 Global Business Licence to invest in securities listed on the SEMFollowing representations from stakeholders with regard to the possibility of allowing corporations holding a Category 2 Global Business Licence (GBC2) under the Financial Services Act 2007 (FSA) to invest in listed securities, the SEM engaged with the FSC to propose changes to the law with the view to allowing GBC2 to invest in securities listed on SEM. The current situation of the law was reviewed and a proposal was made to the FSC to amend Section 73 of the FSA to remove the restrictions imposed on GBC2 with regard to dealing in listed securities and to allow a GBC2 to enter into a business relationship with investment dealers licensed under the Securities Act 2005. The proposed amendments to the FSA have been considered by the FSC and have been recommended for implementation in the context of the legal amendments to be proposed following the Budget 2016-2017.

Amendments to the SEM Listing Rules and Rules of the Development & Enterprise Market to cater for the accreditation of professionals by the SEM

The SEM has introduced new requirements in the Listing Rules and Rules of the Development & Enterprise Market (DEM Rules) to cater for the accreditation of certain professionals such as Independent Professional Advisers, Independent Financial Advisors and Independent Valuers. These professionals will be granted accredited status by the SEM provided they satisfy the key criteria as laid down in the Rules. The addition of a new Appendix 9 to the Listing Rules and a new Schedule Eleven to the DEM Rules in relation to the accreditation of professionals is expected to increase the level of scrutiny on the reports prepared by those professionals and provide more confidence to the market as investors are likely to place more reliance on such reports in relation to their investment decisions. The proposed amendments to the Listing Rules and DEM Rules have been approved by the FSC and are effective since 18th November 2015.

Amendment to the Trading Rules on off-market transfers of listed securitiesThe Stock Exchange (Conduct of Trading Operations) Rules 2001 (Trading Rules) have been amended to include an enforcement provision in the event of a breach of the Rule relating to off-market transfers. Rule 3A of the Trading Rules lays down the general principle that all trading in listed securities must be conducted through the Automated Trading System (ATS) of SEM, except for some specific circumstances as prescribed by the Rules. The proposed amendment to the Trading Rules sets out the action to be taken by the SEM in the event of breach of Rule 3A of the Rules. The amendments to the Trading Rules have been approved by the FSC and have become effective since 22nd September 2015.


56

ANALYSIS OF REVENUES The different components of the revenues generated by the SEM during the financial year 2016 are illustrated below:

FY 2016 Rs’m %

Transaction fees 67.7 50%Annual Listing & Application fees 27.6 20%Corporate Actions, service fees and annual membership fees 3.5 3%Sale of Information, advert on SEM website & SEM publications 6.4 5%Investment Income 18.2 13%Dividends 10.7 8%Foreign exchange gains 0.3 0%Accreditation fee & Misc. Income 2.2 2%Total Revenues 136.6 100%

FINANCIAL REVIEW 2016

Analysis of Revenues - FY 2016

Transaction fees

Annual Listing & Application fees

Corporate Actions, Service fees andAnnual Membership feesSale of Information, Advert onSEM WEB site & SEM publicationsInvestment Income

Dividends

Foreign exchange gains

Accreditation fee & Misc. Income

50%

20%

2%

5%

13%

8%

0% 2%

It can be observed that the revenues from ‘transaction fees’ and ‘Listing & Application fees’ were the main sources of revenues for the SEM. During FY 2016, revenue derived from ‘transaction fees’ amounted to Rs 67.7m and constituted 50% of the total revenues of the SEM. ‘Annual Listing and Application fees received were Rs 27.6m and represented 20% of the total revenues generated. Revenue emanating from Investment income reached Rs18.2m and constituted 13% of the SEM’s total revenues, while Dividends receivable from CDS were estimated at Rs10.7m and represented 8% of the total revenues of the SEM.

Revenue generated from ‘Advertisement on the SEM Website’, ‘sale of Information’ and ‘SEM publications’ totalled Rs 6.4m and represented altogether, 5% of the SEM’s total revenues. Income derived from ‘Corporate Actions’, ‘Service fees’ and ‘Annual Membership fees’ amounted to Rs 3.5m and together, constituted 3% of the total revenues generated by SEM. Revenues from ‘Accreditation fees’ and ‘other income’ received by SEM were accounted at Rs2.5m and represented 2% of total revenues generated.

Annual Report 2016

57FINANCIAL REVIEW 2016 (CONT’D)

EXPENSESThe charts below illustrates the different components of expenses incurred by the SEM during the financial year 2016 and indicates the percentage that each component of expense represents over the total expenses of the SEM.

FY 2016 Rs’m %

Staff costs and related expenses 31.7 60%ATS expenses 4.5 8%Marketing & Development Expenses 2.1 4%Depreciation 3.3 6%Administration expenses & insurances 2 4%Registration fees 1.7 3%Corporate Social Responsibility 1.9 4%Audit & Professional Fees 1.1 2%Other Operating Expenses 4.8 9%

53.1 100%

Analysis of Expenses - FY 2016

60%

8%

4%

6%

4%3%

4%

2% 9% Staff costs and related expenses

ATS expenses

Marketing & Development Expenses

DepreciationAdministration expenses & insurances

Registration fees

Corporate Social Responsibility

Audit & Professional Fees

Other Operating Expenses

The main constituents of expenses for the SEM are ‘Staff costs and related expenses’, which amounted to Rs31.7m and represented 60% of SEM total expenses. ‘ATS expenses’ accounted for Rs 4.5m and ‘Other Operating Expenses’ amounted to Rs 4.8m and constituted each, 9% of the SEM’s total expenses for the year. ‘Cost of Depreciation’ was evaluated at Rs 3.3m and represented 6% of the total expenses of the SEM. While, ‘Marketing Expenses’ , ‘Administration and Insurance’ and ‘Corporate Social Responsibility’, each represented 4% of the SEM total expenses. Finally, ‘Registration costs’ and ‘Audit & Professional fees’ were accounted at Rs1.7m and Rs 1.1m respectively and constituted 3% and 2% respectively of SEM’s total expenses for the year.


58

COSTS, REVENUES AND COST TO INCOME RATIOThe table below, discloses the total revenues, total costs and the Cost to Income ratio of the SEM for the past five years 2012 to 2016.

Financial Year Total Revenues Rs’m

Total Costs Rs’m

Cost/Income Ratio %

2012 98.8 41.3 422013 108.3 44.3 412014 138.4 51.8 372015 168.1 54.0 322016 136.6 53.1 39

It can be observed that for the past five years, the total revenues of the SEM increased by an overall percentage of 38.3% from Rs 98.8m in year 2012 to Rs136.6m in year 2016. Total Costs were contained at a relatively low increase rate and showed an overall increase of 28.6% from Rs 41.3m in year 2012 to Rs 53.1m in year 2016. The ‘Cost to Income’ ratios were kept relatively low and in fact showed a decrease of 7.1% from 42% in year 2012 to 39% in year 2016.

The chart below illustrates the trend of ‘Total Revenues’, ‘Total Costs’ and ‘Cost to Income’ ratio over the 5-year period 2012 to 2016.

FINANCIAL REVIEW 2016 (CONT’D)

Total Revenues, Total Costs, Cost / Income Ratio

Rs'm

illion

0

50

100

150

200

2012 2013 2014 2015 2016

Total Revenues Rs'M Total Costs Rs'M Cost/Income Ratio %

Annual Report 2016


PROFIT MARGINThe table below displays the Total revenues, the Net income and the Net Profit Margin of the SEM over the last five years 2012 to 2016.

Financial Year Total Revenues Rs’m

Net Income Rs’m

Net Profit Margin (Net Income/Total

Revenue) %

2012 98.8 57.5 582013 108.3 64.1 592014 138.4 86.6 632015 168.1 114.1 682016 136.6 83.6 61

The total revenues of the SEM over the last five years, demonstrated a total increase of 38.3% from Rs 98.8m in year 2012 to Rs 136.6m in the year 2016.

Net Income, which is total revenues less total costs, on the other hand, showed an overall total increase of 45.4% over five years, from Rs 57.5m in FY 2012 to Rs 83.6m in FY 2016.

The Net Profit Margin showed an increase of 5.2% over the last five years, from 58% in FY 2012 to 61% in FY 2016.

The chart below depicts the trend of the Total Revenues, Net Income and the Net Profit Margin over the last five years 2012 to 2016.

Net Profit Margin - Financial Years 2012 to 2016

98.8108.3

138.4

168.1

136.6

57.5 64.1

86.6

114.1

83.6

58 59 63 68 61

0

20

40

60

80

100

120

140

160

180

2012 2013 2014 2015 2016

Rs'm

illion

Financial Years

Total Revenues Net Income Net Profit Margin


60

RETURN ON EQUITY (ROE)The table below displays the figures over the last five years 2012 to 2016 of the Net Income, the Shareholders Funds and the ROE (ROE = Net income / Equity).

Shareholders funds and return on equity (ROE)

Financial Year Net Income Rs’m

Equity Rs’m

Return on Equity %

2012 57.5 211.3 272013 64.1 233.4 272014 86.4 262.8 332015 114.1 302.5 382016 83.6 331.4 25

As illustrated by the chart below, the SEM Shareholders funds (Equity) over the past five years increased significantly by 56.8%, from Rs 211.3m in FY 2012 to attain a total value of Rs 331.4m in FY 2016.

Net Income increased significantly by an overall percentage of 45.4% over the five years from financial year 2012- Rs 57.5m to financial year 2016 - Rs 83.6m.

The Return on Equity for the past five years decreased by 7.4% over the past five years from 2012 to 2016.


ROE (Net Income/Equity) - Financial Years 2012 to 2016

Net Income Rs'M Equity Rs'M Return on Equity %

Financial Years

57.5 64.186.4

114.183.6

211.3233.4

262.8

302.5 331.4

27 27 33 3825

0

50

100

150

200

250

300

350

2012 2013 2014 2015 2016

Net i

ncom

e, E

quity

Rs'

m&

ROE(

%)

Annual Report 2016


CASH AND CASH EQUIVALENTS‘Cash and cash equivalents’ increased significantly over the last five years showing an overall total percentage increase of 51.8% from Rs 186.1m in FY 2012 to reach Rs 282.5m in FY 2016. The trend of ‘Cash and Cash Equivalents’ of the Company over the past five years is illustrated in the table and chart below.

FY 2016 Rs’m

FY 2015 Rs’m

FY 2014 Rs’m

FY 2013 Rs’m

FY 2012 Rs’m

Cash and Cash Equivalents 282.5 276.5 237.3 206.6 186.1

Cash and Cash Equivalents - Financial Years 2012 to 2016

Rs'm

illion

Cash and Cash Equivalents

0

50

100

150

200

250

300

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016


62

WEALTH CREATED AND DISTRIBUTED BY THE COMPANY

2016 2015 2014Rs’m % Rs’m % Rs’m %

Turnover 98.8 129.0 105.6Other Income 37.8 39.1 32.8Administrative Expenses -18 -18.9 -18.7TOTAL WEALTH CREATED 118.6 100% 149.2 100% 119.7 100%DISTRIBUTED AS FOLLOWS:Members of StaffSalaries and other benefits 31.7 27% 32.3 21% 30.7 26%Providers of CapitalDividends to ordinary shareholders 43.3 36% 59.5 40% 44.0 37%Government - taxation 11.3 10% 14.7 10% 13.1 11%

54.6 46% 74.2 50% 57.1 48%Wealth reinvested in the Company to maintain and develop operations:Profit retained 29.0 24% 39.7 27% 29.3 24%Depreciation 3.3 3% 3.0 2% 2.6 2%

32.3 27% 42.7 29% 31.9 27%TOTAL WEALTH DISTRIBUTED AND RETAINED 118.6 100% 149.2 100% 119.7 100%


Wealth created & distributed 2014 - 2016

FY 2014 % FY 2015 % FY 2016 %

Government & taxation Salaries and other benefits

Wealth reinvested in the Company

Dividends to ordinary shareholders

11

26 26

37

10

21

29

40

10

27 27

36


FINANCIAL REPORTS


64

The following statement, which should be read in conjunction with the Report of the Auditors set out on pages 66 to 67, is made with a view to distinguishing the respective responsibilities of the Directors and of the auditors in relation to the financial statements.

The Directors are required by the Companies Act 2001 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit and loss and cash flow for the financial year.

The Directors consider that in preparing the financial statements on pages 68 to 97 the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been followed.The Directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies Act 2001.

The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and Group and to prevent and detect fraud and other irregularities.

Other responsibilities of the Directors include overseeing the implementation and upholding of good Corporate Governance practices and ensuring that effective systems of internal controls and risk management have been maintained.

P.G. Mooroogen Sunil Benimadhu (Chairman) (Executive Director)

DIRECTORS’ RESPONSIBILITY STATEMENT

Annual Report 2016

65CERTIFICATE FROM THE COMPANY SECRETARY

I certify that, to the best of my knowledge and belief, the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Companies Act 2001 in terms of Section 166 (d).

Chaitanand Jheengun, FCISSecretary


66 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF THE STOCK EXCHANGE OF MAURITIUS LTDThis report is made solely to the company’s shareholders, as a body, in accordance with section 205 of the Mauritius Companies Act 2001. Our audit work has been undertaken so that we might state to the company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Report on the Financial StatementsWe have audited the financial statements of The Stock Exchange of Mauritius Ltd and its subsidiary on pages 68 to 97 which comprise the statements of financial position as at 30 June 2016 and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information.

Directors’ responsibilities for the financial statements The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Mauritius Companies Act 2001. They are also responsible for such internal controls as they determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements on pages 68 to 97 give a true and fair view of the financial position of The Stock Exchange of Mauritius Ltd and its subsidiary as at 30 June 2016, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the requirements of the Mauritius Companies Act 2001.

Annual Report 2016

67INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF THE STOCK EXCHANGE OF MAURITIUS LTD (CONT’D)Report on other legal requirements

In accordance with the requirements of the Mauritius Companies Act 2001, we report as follows: • we have no relationship with, or interests in, the company or the subsidiary other than in our capacities as

auditor and tax advisor; • we have obtained all information and explanations that we have required; and• in our opinion, proper accounting records have been kept by the company as far as appears from our

examination of those records.

Deloitte Jacques de C. Du Mée, ACA Chartered Accountants Licensed by FRC

September 14th, 2016


68

THE GROUP THE COMPANY Notes 2016 2015 2016 2015

Rs’000 Rs’000 Rs’000 Rs’000ASSETSNon-current assetsProperty, plant and equipment 5 51,589 51,826 31,658 30,980 Intangible assets 6 96 171 - - Investment in subsidiary 7 - - 7,650 7,650 Deposits 8 385,157 383,564 230,757 237,458 Stock Exchange Compensation Fund 9 4,730 4,617 4,730 4,617 Other receivables 11 42,527 37,446 24,921 25,458

484,099 477,624 299,716 306,163 Current assetsInventories 10 309 278 - - Trade and other receivables 11 33,334 27,129 35,374 32,346 Deposits 8 81,180 70,621 49,113 37,493 Bank balances and cash 10,113 15,432 2,583 1,589

124,936 113,460 87,070 71,428 Total assets 609,035 591,084 386,786 377,591

EQUITY AND LIABILITIESCapital and reservesStated capital 12 50,050 3,350 50,050 3,350 Retained earnings 378,386 389,258 281,305 299,115

Equity attributable to owners of the company 428,436 392,608 331,355 302,465 Non-controlling interest 110,994 109,434 - - Total equity 539,430 502,042 331,355 302,465

Non-current liabilitiesRetirement benefit obligations 13 4,226 4,134 - - Deferred taxation 14 2,024 1,606 1,208 904 Stock Exchange Compensation Fund 9 4,730 4,617 4,730 4,617

10,980 10,357 5,938 5,521 Current liabiltiesTrade and other payables 15 12,470 13,341 4,251 6,496 Taxation 14 2,820 5,807 1,907 3,572 Dividends 16 43,335 59,537 43,335 59,537

58,625 78,685 49,493 69,605

Total liabilities 69,605 89,042 55,431 75,126 Total equity and liabilities 609,035 591,084 386,786 377,591

Approved by the Board of Directors and authorised for issue on 14th September 2016

P.G. Mooroogen Sunil Benimadhu (Chairman) (Executive Director)

STATEMENTS OF FINANCIAL POSITION AT 30 JUNE 2016

Annual Report 2016

69STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

THE GROUP THE COMPANY Notes 2016 2015 2016 2015

Rs’000 Rs’000 Rs’000 Rs’000Revenue 18 152,266 200,677 98,840 129,009 Other income 19 40,681 38,889 37,752 39,163 Administrative expenses (78,282) (79,561) (52,961) (54,057)Operating profit 114,665 160,005 83,631 114,115 Contribution to Guarantee Fund 21 (218) (820) - -Profit before taxation 17 114,447 159,185 83,631 114,115 Income tax expense 14 (17,728) (24,118) (11,293) (14,767)Profit after taxation 96,719 135,067 72,338 99,348 Transfer to Stock Exchange Compensation Fund 9 (113) (121) (113) (121)PROFIT FOR THE YEAR 96,606 134,946 72,225 99,227

Other Comprehensive (Loss)/Income:-Items that will not be reclassified subsequently to profit or lossActuarial (loss)/gain on defined benefit pension plan 13 (487) 628 - -TOTAL COMPREHENSIVE INCOME FOR THE YEAR 96,119 135,574 72,225 99,227

Profit for the year attributable to:-Owners of the company 79,411 109,591 72,225 99,227 Non-controlling interest 17,195 25,355 - -

96,606 134,946 72,225 99,227

Total comprehensive income attributable to :Owners of the company 79,163 109,912 72,225 99,227 Non-controlling interest 16,956 25,662 - -

96,119 135,574 72,225 99,227

Earnings per share 20 Rs 15.88 21.92 *

* Restated due to bonus issue


70

(a) THE GROUP

NotesShare capital

Share premium

Retained earnings

Attributable to owners

of the company

Non controlling

interestTotal

equityRs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Balance at 1 July 2014 3,300 50 338,883 342,233 95,577 437,810 Profit for the year - - 109,591 109,591 25,355 134,946 Other comprehensive income for the year - - 321 321 307 628 Total comprehensive income for the year - - 109,912 109,912 25,662 135,574 Proposed dividends for 2015 16 - - (59,537) (59,537) - (59,537)Dividends paid to non-controlling interest - - - - (11,805) (11,805)Balance at 30 June 2015 3,300 50 389,258 392,608 109,434 502,042 Profit for the year - - 79,411 79,411 17,195 96,606 Other comprehensive income for the year - - (248) (248) (239) (487)Total comprehensive income for the year - - 79,163 79,163 16,956 96,119 Bonus Issue of Shares 12 46,700 - (46,700) - - - Proposed dividends for 2016 16 - - (43,335) (43,335) - (43,335)Dividends paid to non-controlling interest - - - - (15,396) (15,396)Balance at 30 June 2016 50,000 50 378,386 428,436 110,994 539,430

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

Annual Report 2016

71STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)(b) THE COMPANY

NotesShare capital

Share premium

Retained earnings Total equity

Rs’000 Rs’000 Rs’000 Rs’000Balance at 1 July 2014 3,300 50 259,425 262,775 Profit for the year - - 99,227 99,227 Other comprehensive income for the year - - - -Total comprehensive income for the year - - 99,227 99,227 Proposed dividends for 2015 16 - - (59,537) (59,537)Balance at 30 June 2015 3,300 50 299,115 302,465 Profit for the year - - 72,225 72,225 Other comprehensive income for the year - - - -Total comprehensive income for the year - - 72,225 72,225 Bonus issue of shares 12 46,700 - (46,700) - Proposed dividends for 2016 16 - - (43,335) (43,335)Balance at 30 June 2016 50,000 50 281,305 331,355


72

THE GROUP THE COMPANY 2016 2015 2016 2015

Rs’000 Rs’000 Rs’000 Rs’000CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 114,447 159,185 83,631 114,115 Adjustments for:Depreciation of property, plant and equipment 5,205 4,611 3,323 3,084 Amortisation on intangible assets 81 74 - -Profit on disposal of property, plant and equipment (338) (497) (338) (416)Interest receivable (28,905) (27,376) (18,256) (17,016)Retirement benefit obligations (395) (195) - -Profit on exchange (230) (956) (230) (1,149)Dividend receivable - - (10,710) (16,025)

OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 89,865 135,130 57,420 82,877 Increase in inventories (31) (56) - -(Increase)/decrease in trade and other receivables (1,393) 6,831 (1,460) 4,492 (Decrease)/increase in trade and other payables (871) 771 (2,245) 1,931

CASH GENERATED FROM OPERATIONS 87,570 142,676 53,715 89,300 Income tax paid (20,277) (25,694) (12,634) (16,954)

NET CASH GENERATED FROM OPERATING ACTIVITIES 67,293 116,982 41,081 72,346

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (5,293) (15,455) (4,326) (9,702)Proceeds from sale of property, plant and equipment 663 1,757 663 1,214 Purchase of intangible assets (6) (96) - -Dividend received - - 16,025 12,287 Interest received 18,879 11,994 11,777 6,012 Investment in Non-current Fixed deposits (51,900) (110,158) (24,500) (65,258)Proceeds from Non current Fixed deposits 50,307 49,500 31,201 28,500

NET CASH GENERATED FROM/(USED IN) INVESTING ACTIVITIES 12,650 (62,458) 30,840 (26,947)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid to shareholders of holding company (59,537) (44,041) (59,537) (44,041)Dividends paid to non-controlling interest (15,396) (11,805) - -

NET CASH USED IN FINANCING ACTIVITIES (74,933) (55,846) (59,537) (44,041)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 5,010 (1,322) 12,384 1,358 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 86,053 86,226 39,082 36,575 Effects of exchange rates on cash and cash equivalents 230 1,149 230 1,149 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 91,293 86,053 51,696 39,082

REPRESENTED BY:Deposits - Current (Note 8) 81,180 70,621 49,113 37,493 Bank balances and cash 10,113 15,432 2,583 1,589

91,293 86,053 51,696 39,082

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016

Annual Report 2016

73

1. GENERAL INFORMATIONFollowing enactment of the Securities Act 2005, The Stock Exchange of Mauritius Ltd (the “company”) has adopted a new constitution and changed its status from private to public company on 6th October 2008. Its principal place of business and registered office is situated at One Cathedral Square Building, Level 4, 16, Jules Koenig Street, Port Louis.

The main activities of the company and its subsidiary are: The Stock Exchange of Mauritius Ltd : To provide facilities for buying, selling and otherwise

dealing in securities on the Stock Exchange.The Central Depository & Settlement Co Ltd: To provide depository, clearing and settlement service in

order to facilitate dealings in securities.

The company and its subsidiary are collectively referred to as the “group”.

2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

In the current year, there has been no new and revised IFRSs issued by the International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are relevant to the group’s and the company’s operations and effective for accounting periods beginning on 1 July 2015.

New and revised Standards in issue but not yet effectiveAt the date of authorisation of these financial statements, the following relevant standards and Interpretations were in issue but effective on annual periods beginning on or after the respective dates as indicated:

IAS 1 Presentation of Financial Statements - Amendments resulting from the disclosure initiative (effective 1 January 2016)

IAS 7 Statement of Cash Flows - Amendments as result of the Disclosure initiative (effective 1 January 2017)

IAS 12 Income Taxes - Amendments regarding the recognition of deferred tax assets for unrealised losses (effective 1 January 2017)

IAS 16 Property, Plant and Equipment - Amendments regarding the clarification of acceptable methods of depreciation and amortisation (effective 1 January 2016)

IAS 16 Property, Plant and Equipment - Amendments bringing bearer plants into the scope of IAS 16 (effective 1 January 2016)

IAS 19 Employee Benefits - Amendments resulting from September 2014 Annual Improvements to IFRSs (effective 1 January 2016)

IAS 27 Separate Financial Statements - Amendments reinstating the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity’s separate financial statements (effective 1 January 2016)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016


74 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS (IFRSs) (CONT’D)New and revised Standards in issue but not yet effective (cont’d)

IAS 38 Intangible Assets - Amendments regarding the clarification of acceptable methods of depreciation and amortisation (effective 1 January 2016)

IAS 39 Financial Instruments: Recognition and Measurement - Amendments to permit an entity to elect to continue to apply the hedge accounting requirements in IAS 39 for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities when IFRS 9 is applied, and to extend the fair value option to certain contracts that meet the ‘own use’ scope exception (effective 1 January 2018)

IFRS 7 Financial Instruments: Disclosures - Amendments resulting from September 2014 Annual Improvements to IFRSs (effective 1 January 2016)

IFRS 7 Financial Instruments: Disclosures - Additional hedge accounting disclosures (and consequential amendments) resulting from the introduction of the hedge accounting chapter in IFRS 9 (effective 1 January 2018)

IFRS 9 Financial Instruments - Finalised version, incorporating requirements for classification and measurement, impairment, general hedge accounting and derecognition (effective 1 January 2018)

IFRS 10 Consolidated Financial Statements - Amendments regarding the sale or contribution of assets between an investor and its associate or joint ventures (deferred indefinitely)

IFRS 10 Consolidated Financial Statements - Amendments regarding the application of the consolidation exception (effective 1 January 2016)

IFRS 12 Disclosure of Interests in Other Entities - Amendments regarding the application of the consolidation exception (effective 1 January 2016)

IFRS 15 Revenue from Contracts with Customers - Original issue (Applies to an entity’s first annual IFRS financial statements) (effective 1 January 2018)

IFRS 15 Revenue from Contracts with Customers - Classification to IFRS 15 (effective 1 January 2018)

The directors anticipate that these amendments will be applied in the financial statements for the annual periods beginning on the respective dates as indicated above. The directors have not yet assessed the potential impact of the adoption of these amendments.

3. SIGNIFICANT ACCOUNTING POLICIES(a) Basis of preparation of financial Statements The Financial statements are prepared under the historical cost convention and in accordance with

International Financial Reporting Standards (IFRS).

(b) Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and entities

controlled by the company. Control is achieved when the company: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns

Annual Report 2016

75NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)(b) Basis of consolidation (cont’d) The company reassesses whether or not it controls an investee if facts and circumstances indicate that

there are changes to one or more of the three elements of control listed above.

Where the company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The company considers all relevant facts and circumstances in assessing whether or not the company’s voting rights in an investee are sufficient to give it power including:

• the size of the company’s holding of voting rights relative to the size and dispersion of holding of the other vote holders;

• potential voting rights held by the company, other vote holders or other parties; • rights arising from other contractual arrangements; and • any additional facts and circumstances that indicate that the company has, or does not have, the

current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the company obtains control over the subsidiary and ceases when the company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the company gains control until the date when the company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the company and to the non-controlling interest. Total comprehensive income of subsidiaries is attributed to the owners of the company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows, relating to transactions between members of the Group are eliminated in full on consolidation.

Non-controlling interests in the net assets (excluding goodwill) of the consolidated subsidiary are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of original business combination and the non-controlling interests’ share of changes in equity since the date of the combination. Total comprehensive income of the subsidiary is attributable to the owners of the company and non-controlling interests even if this results in the non-controlling interests having a deficit balance.

(c) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents revenue

from transaction fees, listing fees and service fees.

Revenue from services are recognised when the services have been performed and are billable.


76

3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)(c) Revenue recognition (cont’d) Other income include interest receivable, sale of information, and consultancy fees which are recognised

on an accrual basis while dividend income is recognised when the shareholders’ rights to receive the dividend have been established.

(d) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated

impairment losses.

Profit or loss on disposal of property, plant and equipment is determined by the difference between the carrying value of the assets and its net disposal proceeds and is accounted for in profit or loss.

Depreciation is calculated so as to write off the cost of property, plant and equipment less their residual values over their estimated useful lives using the straight line method as follows:

Freehold office premises - 50 Years Office furniture and equipment - 5 - 8 Years Computer equipment - 5 Years Motor vehicles - 5 - 8 Years

(e) Intangible assets Computer Software Computer software that is not considered to form an integral part of any hardware equipment is recorded

as intangible assets. The software is capitalised at cost and amortised over its estimated useful lives of 131/2 years.

Development Cost Cost associated with developing or maintaining computer software are recognised as an expense as

incurred. Costs that are directly associated with the production of identifiable and unique software controlled by the group and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.

The Computer software development costs recognised as assets are amortised using the straight line method over their estimated useful lives (5 years).

(f) Investment in subsidiary In the company’s separate financial statements, investment in subsidiary is stated at cost. The carrying

amount is reduced if there is any impairment in value.

(g) Inventories Inventories are valued at the lower of cost (determined on the weighted average basis) and net realisable

value. Cost of inventories comprise all costs of purchase and other costs incurred in bringing such stocks to their present condition and location. Net realisable value is the estimate of the selling price in the ordinary course of business less selling expenses.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)

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77

3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)(h) Foreign currencies Items included in the financial statements are measured using Mauritian Rupees. The financial statements

of the Group and the Company are presented in Mauritian Rupees, which is the Group’s and the Company’s functional and presentation currency.

Transactions in foreign currencies are translated to Mauritian Rupees at the rate of exchange ruling at the date of transaction. Monetary assets and liabilities outstanding at year end are translated to Mauritian rupees (“Rs”) at the rates of exchange ruling at the reporting date.

Exchange differences arising on the settlement and the retranslation of monetary items are recognised in profit or loss.

(i) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.

Current Tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as

reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date.

Deferred Tax Deferred tax is provided on the comprehensive basis using the liability method.

Deferred tax liabilities are recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised.

(j) Retirement benefits The company operates a defined contribution pension plan. Its subsidiary, The Central Depository &

Settlement Co Ltd (CDS) operates a defined benefit pension plan.

(i)Definedcontributionpensionplanandstatepensionplan The company’s contributions to the defined contribution pension plan are charged to profit or loss in

the year in which they fall due.



78 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)(j) Retirement benefits (cont’d) (ii)Definedbenefitpensionplan For defined benefit retirement plans, the cost of providing benefits is determined using the projected

unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.

Defined benefit costs are categorised as follows: - Service cost (including current service cost, past service cost, as well as gains and losses on

curtailments and settlements). - Net interest expense or income. - Remeasurement.

The Group presents the first two components of defined benefit costs in profit or loss in the line administrative expenses. Curtailment gains and losses are accounted for as past service costs.

(iii) State pension plan Contributions to the National Pension Scheme are charged to profit or loss in the period in which they

are due.

(k) Provisions Provisions are recognised when the group has a present obligation as a result of a past event, and it is

probable that the group will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date. Provisions are reviewed at the end of each reporting date and adjusted to reflect the current best estimate.

(l) Financial instruments “Financial assets and liabilities are recognised on the statement of financial position when the group has

become party to the contractual provisions of the financial instruments.”

The classification of financial instruments depends on the nature and purpose of financial instruments and is determined at the time of initial recognition.

These instruments are measured as set out below: (i) Held-to-maturity investments Held-to-maturity investments are financial assets with fixed or determinable payments and fixed

maturity that the company has the positive intent and ability to hold to maturity. They are measured at amortised cost, less any impairment loss. The interest accrued is recorded as interest income in profit or loss.

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79

3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)(l) Financial instruments (cont’d) (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash, and deposits) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction cost and other premium or discounts) through the expected life of the financial asset, or where appropriate, a shorter period.

(iii) Cash and cash equivalents Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at the end

of each reporting period.

For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in deposits with maturity of within 1 year.

(iv)Otherfinancialliabilities Other financial liabilities are stated at their amortised cost.

(v)Derecognitionoffinancialassets The Group derecognises a financial asset only when the contractual rights to the cash flows from

the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.



80

3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)(l) Financial instruments (cont’d) (vi)Derecognitionoffinancialliabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are

discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

(vii)Impairmentoffinancialassets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial

assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 7 days, as well as observable changes in local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

(m) Impairment of other assets At the end of each reporting date, the group reviews the carrying amounts of its assets to determine

whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any, and the carrying amount of the asset is reduced to its recoverable amount.

(n) Related parties Related parties are individuals and companies where the individual or company has the ability, directly

or indirectly to control the other party or exercise significant influence over the other party’s financial and operating decisions.

(o) Stated capital Ordinary shares are classified as equity.


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4. ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of financial statements in accordance with IFRSs requires the directors and management to exercise judgement in the process of applying the accounting policies. It also requires the use of accounting estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Judgements and estimates are continuously evaluated and are based on historical experience and other factors, including expectations and assumptions concerning future events that are believed to be reasonable under the circumstances. The actual results could, by definition therefore, often differ from the related accounting estimates.

Where applicable, the notes to the financial statements set out areas where management has applied a higher degree of judgement that have a significant effect on the amounts recognised in the financial statements, or estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Property, plant and equipmentThe cost of the property, plant and equipment is depreciated over the estimated useful life of the asset. The estimated useful life is based on expected usage of the asset and expected physical wear and tear, which depends on operational factors. Management has not considered any residual value as it is deemed immaterial.

Unquoted investment in subsidiaryDetermining whether investment in subsidiary is impaired requires an estimation of the value in use of the investment. In considering the value in use, the directors have taken into consideration the management accounts and cash flow projections of the subsidiary. The actual results could however differ from estimates.

Allowances for doubtful debtsAllowance for doubtful debts for the group is determined using a combination of factors to ensure that the trade receivables are not overstated due to non-recoverability. The allowance for doubtful debts for all customers is based on a variety of factors, including the overall quality and ageing of the receivables, continuing credit evaluation of the customer’s financial conditions. Also,specific provisions for individual accounts are recorded when the company becomes aware of the customer’s inability to meet its financial obligations such as in the case of deterioration in the customer’s operating results or financial position.



82 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)5. PROPERTY, PLANT AND EQUIPMENT(a) THE GROUP

Freehold Office

Premises

Office furniture

and equipment

Computer equipment

Motor vehicles Total

Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Cost At 1 July 2014 38,873 8,556 18,917 9,309 75,655 Additions - 2,367 2,854 10,234 15,455 Disposals - - (51) (7,458) (7,509)Assets written off - (411) (364) - (775)At 30 June 2015 38,873 10,512 21,356 12,085 82,826

At 1 July 2015 38,873 10,512 21,356 12,085 82,826 Additions - 218 2,275 2,800 5,293 Disposals - (3) - (1,800) (1,803)At 30 June 2016 38,873 10,727 23,631 13,085 86,316

Accumulated depreciationAt 1 July 2014 3,015 7,913 15,560 6,926 33,414 Charge for the year 757 535 1,358 1,961 4,611 Disposals - - (51) (6,199) (6,250)Assets written off - (411) (364) - (775)At 30 June 2015 3,772 8,037 16,503 2,688 31,000

At 1 July 2015 3,772 8,037 16,503 2,688 31,000 Charge for the year 757 732 1,553 2,163 5,205 Disposals - (3) - (1,475) (1,478)At 30 June 2016 4,529 8,766 18,056 3,376 34,727

Net book valueAt 30 June 2016 34,344 1,961 5,575 9,709 51,589 At 30 June 2015 35,101 2,475 4,853 9,397 51,826

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83

5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)(b) THE COMPANY

Freehold Office

Premises

Office furniture

and equipment

Computer equipment

Motor vehicles Total

Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Cost At 1 July 2014 22,463 4,419 7,167 6,802 40,851 Additions - 1,411 1,673 6,618 9,702 Disposal - - (51) (5,002) (5,053)Assets written off - (411) (364) - (775)At 30 June 2015 22,463 5,419 8,425 8,418 44,725

At 1 July 2015 22,463 5,419 8,425 8,418 44,725 Additions - 105 1,421 2,800 4,326 Disposal - - - (1,800) (1,800)At 30 June 2016 22,463 5,524 9,846 9,418 47,251

Accumulated depreciationAt 1 July 2014 1,717 3,892 5,257 4,825 15,691 Charge for the year 429 382 816 1,457 3,084 Disposal - - (51) (4,204) (4,255)Assets written off - (411) (364) - (775)At 30 June 2015 2,146 3,863 5,658 2,078 13,745

At 1 July 2015 2,146 3,863 5,658 2,078 13,745 Charge for the year 429 454 1,000 1,440 3,323 Disposal - - - (1,475) (1,475)At 30 June 2016 2,575 4,317 6,658 2,043 15,593

Net book valueAt 30 June 2016 19,888 1,207 3,188 7,375 31,658 At 30 June 2015 20,317 1,556 2,767 6,340 30,980



84

6. INTANGIBLE ASSETSTHE GROUP

Computer Software

Development Cost Total

Rs’000 Rs’000 Rs’000Cost At 1 July 2014 6,673 250 6,923 Additions 96 - 96 At 30 June 2015 6,769 250 7,019 Additions 6 - 6 At 30 June 2016 6,775 250 7,025

AmortisationAt 1 July 2014 6,620 154 6,774 Charge for the year 24 50 74 At 30 June 2015 6,644 204 6,848 Charge for the year 35 46 81 At 30 June 2016 6,679 250 6,929

Net book valueAt 30 June 2016 96 - 96 At 30 June 2015 125 46 171

7. INVESTMENT IN SUBSIDIARY

2016 and 2015Rs’000

The CompanyUnquoted InvestmentAt 1 July and 30 June 7,650

The investment in subsidiary represents 51% of the ordinary share capital of Central Depository & Settlement Co Ltd (“CDS”), a company incorporated in Mauritius. At the end of the reporting period, the directors are of the opinion , that there has been no objective evidence of impairment.


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85

7. INVESTMENT IN SUBSIDIARY (CONT’D)Central Depository & Settlement Co. Ltd

The core business of the CDS is to provide centralised depository,clearing and settlement services to securities markets.

2016 2015Rs’000 Rs’000

Current Assets 48,841 58,153 Non-current assets 192,114 179,192 Current Liabilities 30,398 40,598 Non current Liabilities 5,042 4,836

2016 2015Rs’000 Rs’000

Revenue 68,607 88,961 Expenses (33,516) (37,217)Profit for the year 35,091 51,744 Other comprehensive (loss)/income for the year (487) 628 Total comprehensive income for the year 34,604 52,372 Net cash generated from operating activities 26,213 44,634 Net cash used in investing activities (2,165) (23,224)Net cash used in financing activities (31,422) (24,091)Net decrease in cash and cash equivalents (7,374) (2,681)

8. DEPOSITS


Rs’000 Rs’000 Rs’000 Rs’000Maturity falling:- Within one year 81,180 70,621 49,113 37,493- Between one to five years 385,157 383,564 230,757 237,458

466,337 454,185 279,870 274,951

The deposits bear interest at rates ranging from 0.4% to 10 % p.a. (2015: 0.4% to 9.65 % p.a.).



86 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)9. STOCK EXCHANGE COMPENSATION FUND(a) The Board of Directors of The Stock Exchange of Mauritius Limited decided on 3 August 1998 to create

a compensation fund, in accordance with section 40 of The Stock Exchange Act 1988. This fund was set up in accordance with sections 40 to 45 of the Stock Exchange Act 1988, which has now been replaced by Section 148 of the Securities Act 2005. Its objective is to compensate persons suffering from pecuniary losses from any default committed by member companies. An initial amount of Rs2,750,000 was transferred out of the company’s retained earnings for this purpose in 1999. Movements on the fund are detailed below:

THE GROUP AND THE COMPANY2016 2015

Rs’000 Rs’000Balance at 1 July 4,617 4,496 Add: Interest receivable from investments made on behalf of Compensation Fund 133 142

4,750 4,638 Less: Income tax charge (20) (21)Balance at 30 June 4,730 4,617 Net movement for the year 113 121

(b) For cash flow purposes


Rs’000 Rs’000Movement for the year (excluding tax provision) 133 142

10. INVENTORIES

THE GROUP2016 2015

Rs’000 Rs’000Stationery, at cost 309 278

11. TRADE AND OTHER RECEIVABLES


Rs’000 Rs’000 Rs’000 Rs’000Non -CurrentInterest receivable from fixed deposits 35,865 33,722 20,940 23,411 Loan to employees 3,642 3,192 2,757 1,993 Other receivables 3,020 532 1,224 54

42,527 37,446 24,921 25,458 Current Trade receivables 9,336 12,547 6,845 8,596 Interest receivable from fixed deposits 18,515 10,764 14,617 5,800 Other receivables and prepayments 4,188 2,763 2,399 1,371 Loan to employees 1,295 1,055 803 554 Dividend receivable from subsidiary - - 10,710 16,025

33,334 27,129 35,374 32,346

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11. TRADE AND OTHER RECEIVABLES (CONT’D)The average credit period on sales of services is 7 days for the company and 30 days for the subsidiary. No interest is charged on the trade receivables. Before accepting any new customer, an assessment is made of the potential customer’s credit quality. There are no past due debts which require a provision for doubtful debts as at 30 June 2016 as the directors consider them to be fully recoverable.

Loans to employees are unsecured, repayable on demand and granted in line with the approved policy of the company and interest rates on these loans are charged at the current market rates which are reviewed every six months.

Non-current other receivables include deferred expenditure in relation to car grant scheme to staff.

Ageing of past due but not impaired debts


Rs’000 Rs’000 Rs’000 Rs’0008 -30 days 2,512 4,313 38 36531 - 90 days 1,408 453 1,391 450More than 90 days 470 59 470 59

4,390 4,825 1,899 874

12. STATED CAPITAL


Rs’000 Rs’000Issued and fully paid5,000,000 ordinary shares of Rs10 each (2015: 330,000 Shares of Rs 10 each) 50,000 3,300 Share Premium 50 50

50,050 3,350

Ordinary shares are not redeemable, carry voting rights, entitlement to dividends or distributions and on winding up to any surplus on assets of the company.

During the year, the company capitalised part of its reserves through a bonus issue of 4,670,000 new ordinary shares of MUR 10 each.

13. RETIREMENT BENEFIT OBLIGATIONS(i) Defined benefit pension plan

The Group operates a defined retirement benefit plan for all qualifying employees of its subsidiary. The plan is a defined benefit arrangement, with benefits based on salary at the time the benefit starts. It provides for a pension at retirement and a benefit on death or disablement before death. The assets of the Scheme are invested entirely in a Deposit Administration Policy with the Metropolitan Life (Mauritius) Ltd.



88

13. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)(i) Defined benefit pension plan (cont’d)

Under the plan, the employees are entitled to post-retirement yearly instalments amounting to 1.67% of the final salary for each year of service until the retirement age of 60. The pensionable salary is limited to 66.7% of the final salary.

The pension plan typically exposes the Group to actuarial risks such as: concentration risk, interest rate risk, longevity risk and salary risk.

Concentration risk: As the plan assets are invested primarily in one class of invesment, that is in the Deposit Administration Fund, the plan may expose the entity to concentration of the Fund Market Risk.

Interest risk: The present value of the defined benefit obligation is calculated using a discount rate based on the pension fund’s rate of return. As the fund is fully invested in Deposit Administration Fund managed by Metropolitan Life (Mauritius) Ltd increases or decreases in the discount rate will have significant impact on the liabilities.

Longevity risk: The present value of the defined benefits obligation is calculated by reference to the best estimate of plan participants mortality after retirement.

Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. Sensitivity analysis of salary increase assumption has been performed to assess its significance on the liability.

The amounts recognised in the statement of financial position are as follows:

THE GROUP2016 2015

Rs’000 Rs’000Present value of funded obligations 23,182 19,776 Fair value of plan assets (18,956) (15,642)Liability in the statement of financial position 4,226 4,134

The amounts recognised in the statement of profit or loss and other comprehensive income are as follows:

THE GROUP2016 2015

Rs’000 Rs’000Fund Expenses 229 211 Current service cost 1,289 1,163 Interest cost 1,395 1,507 Net actuarial (Gain) recognised in the year (226) -Expected return on plan assets (1,158) (1,165)

Pension costs included in employee benefit expenses 1,529 1,716

Remeasurement recognised in OCI 487 (628)487 (628)

Total 2,016 1,088


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89

13. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)(i) Defined benefit pension plan (cont’d)

Movements in the liability recognised in the statement of financial position:

THE GROUP2016 2015

Rs’000 Rs’000Net Liability at start 4,134 4,957 Net expense recognised in profit or loss 1,529 1,716 Net actuarial losses/ (gains) recognised in OCI 487 (628)Contributions & direct benefits paid (2,074) (1,911)Effect of Additional Emoluments 150 - Net Liability at end 4,226 4,134

Actual return on plan assets 1,470 1,205

Movements in the present value of the defined benefit obligations:

THE GROUP2016 2015

Rs’000 Rs’000Opening defined benefit obligation 19,776 17,724 Current service cost 1,214 1,163 Interest cost 1,395 1,507 Liability loss/ (gain) 797 (618)Closing defined benefit obligation 23,182 19,776

Movements in the fair value of the plan assets :

THE GROUP2016 2015

Rs’000 Rs’000Opening fair value of plan assets 15,642 12,767 Expected return on plan assets 1,158 1,165 Actuarial gain 311 10 Contributions from the employer 2,074 1,911 Fund Expenses (229) (211)Closing fair value of plan assets 18,956 15,642

Distribution of plan assets at end of period :-The assets of the scheme are invested entirely (100%) in a Deposit Administration policy with the Metropolitan Life (Mauritius) Ltd.

The principal actuarial assumptions used were as follows:

THE GROUP2016 2015

% %Discount rate 7.00 7.00 Expected return on plan assets 7.00 7.00 Future salary increases 4.50 4.50 Future pension increases 1.50 1.50



90 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)13. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)(i) Defined benefit pension plan (cont’d)

The sensitivity analysis on defined benefit obligation at the end of each reporting period is:

THE GROUP2016 2015

Rs’000 Rs’0001% increase in discount rate (19,506) 16,503 1% decrease in discount rate 27,868 23,971 1% increase in Salaries 26,035 22,447 1% decrease in Salaries (20,706) (17,469)

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of financial position.

Retirement benefit obligations have been based on the report submitted by Feber Associates Limited, Actuaries and Consultants dated 24 June 2016.

(ii) Defined contribution pension plan


Rs’000 Rs’000Contributions paid 2,103 1,952

(iii) State pension plan


Rs’000 Rs’000 Rs’000 Rs’000National pension scheme contributions charged 349 337 215 208

14. TAXATION(i) Income taxIncome tax is calculated at the rate of 15% (2015 : 15%) on the profit of the year as adjusted for income tax purposes.

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14. TAXATION(i) Income tax (cont’d)


Rs’000 Rs’000 Rs’000 Rs’000(a) Tax Liability

At 1st July 5,807 7,919 3,572 6,044 Paid during the year (5,807) (7,896) (3,572) (6,021)(Over) provision in respect of previous year - (23) - (23)Provision for the year 17,310 23,628 10,989 14,526Stock Exchange Compensation Fund (note 9) 20 20 20 20 APS Paid (14,490) (17,820) (9,082) (10,953)Compensation Fund (20) (21) (20) (21)At 30 June 2,820 5,807 1,907 3,572

(ii) Tax ChargeProvision for the year 17,310 23,628 10,989 14,526

Deferred tax movement 418 490 304 24117,728 24,118 11,293 14,767

(iii) Deferred taxation

2016 2015 2016 2015Rs’000 Rs’000 Rs’000 Rs’000

At 01 July 1,606 1,116 904 663 Movement for the year 418 490 304 241 At 30 June 2,024 1,606 1,208 904

Deferred tax is made up of :2016 2015 2016 2015

Rs’000 Rs’000 Rs’000 Rs’000

Accelerated capital allowances 2,024 1,606 1,208 904

(iv) Tax reconciliation

2016 2015 2016 2015% % % %

Tax at the applicable rate 15.00 15.00 15.00 15.00 Tax effect of:- Expenses not deductible for

tax purposes 1.16 0.81 1.04 0.66 - Exempt income (2.27) (0.97) (2.90) (2.93)Effective tax rate 13.89 14.84 13.14 12.73



92

15. TRADE AND OTHER PAYABLES


Rs’000 Rs’000 Rs’000 Rs’000Trade payables 5,367 4,816 436 427 Other payables and accruals 7,103 8,525 3,549 5,973 Amount due to subsidiary company - - 266 96

12,470 13,341 4,251 6,496

The amount due to subsidiary company was unsecured, interest free with no fixed terms of repayment.

The average credit period of trade payables is 30 days. The group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

16. DIVIDENDSFollowing a board resolution dated 28th June 2016, a final dividend amounting to Rs 43,335,462 (Rs 8.67 per share) 2015: Rs 59,536,624 (Rs 180.41 per share) was declared in respect of the year ended 30 June 2016.

17. PROFIT BEFORE TAXATIONProfit before taxation is arrived at after charging the following items:


Rs’000 Rs’000 Rs’000 Rs’000Staff costs 45,905 41,827 30,214 25,739 Depreciation on property, plant and equipment 5,205 4,611 3,323 3,084 Amortisation of intangible assets 81 74 - - Auditors’ remuneration: - Audit fees to group auditors 247 246 247 246 - Audit fees to auditors of subsidiary 254 244 - - Corporate Social Responsibility 3,151 2,733 1,937 1,747


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18. REVENUE


Rs’000 Rs’000 Rs’000 Rs’000Transaction fees 108,886 161,932 67,744 101,756 Listing fees 41,733 37,550 30,436 26,538 Service fees 585 595 330 355 Annual Membership fees 1,062 600 330 360

152,266 200,677 98,840 129,009

19. OTHER INCOME


Rs’000 Rs’000 Rs’000 Rs’000Other income includes the following:Sale of information 3,939 3,771 3,939 3,771 Advertising income 2,400 805 2,400 805 Interest receivable 28,772 27,234 18,123 16,874 Profit on disposal of property, plant and equipment 338 497 338 416 Miscellaneous income 3,209 2,222 1,879 (19)Profit on exchange 230 1,149 230 1,149 Dividend receivable - - 10,710 16,025 Interest for compensation fund 133 142 133 142 Consultancy fees 1,660 3,069 - -

40,681 38,889 37,752 39,163

20. EARNINGS PER SHAREThe calculation of earnings per share is based on group earnings of Rs 79,411,000 (2015: Rs109,591,000) and 5,000,000 ordinary Shares in issue as at 30 June 2016. Following the bonus issue of shares made in November 2015, EPS for the year ended 30 June 2015 has been restated accordingly.

21 GUARANTEE FUND (a) Section 3(8) of the Securities (Central Depository, Clearing and Settlement) Act 1996 requires

the Central Depository & Settlement Co Ltd (CDS) to establish and maintain a Guarantee Fund for the purpose of providing an indemnity against any default in respect of payments for or delivery of securities by any participant and of obligations of participants towards CDS.

The Fund is independently managed by the Business Conduct Committee (BCC) and not by the Board of Directors of CDS. The BCC consists of a majority of independent members who are not directors of the CDS.



94 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (CONT’D)21 GUARANTEE FUND (CONT’D)The assets of the Guarantee Fund consist of all money accruing lawfully to that fund and of such contributions as may be specified in the CDS rules. The Guarantee Fund is made up as follows:-

THE GROUP2016 2015

Rs’000 Rs’000MCB deposit account 28,770 28,070 Savings account 3,688 6,211 Current account 4 1 Temporary cash deposit (1) (3,101)Contributions due on value of transactions 14 60 Cash deposit from Investment dealers (410) (303)Income tax payable (42) (35)Interest receivable 749 1,333

32,772 32,236 Movements on the fund are detailed below:-Balance at 01 July 32,236 30,444 Contribution made by CDS 218 820 Contribution from New Participant - 645 Refund to Participant (662) (682)Interest 1,153 1,187 Income tax (173) (178)

536 1,792 Balance at 30 June 32,772 32,236

22. RELATED PARTY TRANSACTIONS


Rs’000 Rs’000 Rs’000 Rs’000(i) Outstanding balances

Amount due to subsidiary company - - 266 96 (ii) Purchases of goods and services

Purchases of services Subsidiary - - 1,542 1,542

(iii) Compensation of key management personnelShort term benefits 15,190 17,019 11,625 12,791 Post employment benefits 1,556 1,168 821 779

16,746 18,187 12,446 13,570 (iv) Remuneration of directors

- Non executive 2,197 2,059 981 935 - Executive 12,646 13,288 8,346 9,060

(v) Dividend income - - 10,710 16,025(vi) Dividend receivable from subsidiary - - 10,710 16,025 (vii) Dividend payable 43,335 59,537 43,335 59,537

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23. FINANCIAL RISK MANAGEMENTCapital risk managementThe group manages its capital to ensure that it will be able to continue as a going concern while maximising the returns of the stakeholders. The capital structure of the group and the company consists of stated capital and retained earnings.

The Board of Directors of the SEM has a policy of maintaining a non-distributable reserve included under retained earnings, representing 24 months budgeted expenditure to ensure its own business continuity and to provide a shock absorber to cover the ultimate risk when all other risk mechanisms have been exhausted.

Significant accounting policiesDetails of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.

Categories of financial instruments


Rs’000 Rs’000 Rs’000 Rs’000Financial assetsLoans and receivables:Deposits:- Current 81,180 70,621 49,113 37,493 - Non current 385,157 383,564 230,757 237,458 Bank balances and cash 10,113 15,432 2,583 1,589 Trade and other receivables:- Current 30,457 24,008 33,574 30,975 - Non current 42,527 37,446 24,921 25,458

549,434 531,071 340,948 332,973 Financial liabilitiesAmortised cost:Trade payables 5,367 4,816 436 427 Other payables and accruals 7,103 8,525 3,549 5,973 Amount due to subsidiary company - - 266 96 Dividends payable 43,335 59,537 43,335 59,537

55,805 72,878 47,586 66,033

Foreign Currency riskExcept for bank balances in US Dollars, Australian Dollar and Great Britain Pound Sterling amounting to Rs 8,577,213 (2015: Rs 7,671,798) for the group and Rs 8,500,498 (2015: Rs 7,669,931) for the company at 30 June 2016, and a Gold notes balance denominated in AUD amounting to Rs 3,316,455 (2015: Rs 3,406,542) for the group, there are no other financial instruments denominated in foreign currencies.

The group and company are mainly exposed to currency risk of USD and AUD relative to MUR.



96

23. FINANCIAL RISK MANAGEMENT (CONT’D)Foreign currency risk (Cont’d)The following table details the group’s and company’s sensitivity to a 5% increase in United States Dollars and Australian Dollars against the Mauritian Rupee. A positive number below indicates an increase in profit where United States Dollars and Australian Dollars strengthen 5% against Mauritian Rupee. For a 5% weakening of United States dollars and Australian Dollars against the relevant currency, there would be an equal and opposite impact on the profit.


Rs’000 Rs’000 Rs’000 Rs’000Increase in Profit and EquityUSD 425 384 425 383AUD 170 170 - -

Credit riskThe group’s credit risk is primarily attributable to its trade receivables. At year end, the group considers that all the trade receivables are recoverable.

Interest rate riskThe group and the company are not significantly exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on their financial position and cash flows as they do not hold significant variable interest bearing instruments.

The interest rate profile of the group’s and the company’s financial assets as at 30 June 2016 is as follows:


% %Deposits 0.4 - 10 0.4 - 9.65

Liquidity risk managementUltimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the group’s short, medium and long-term funding and liquidity management requirements. The group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.


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23. FINANCIAL RISK MANAGEMENT (CONT’D)Liquidity risk management (Cont’d)The maturity profile of the financial liabilities is summarised as follows:

THE GROUP Less than 1

monthLess than 1

Year 1-5 Years TotalRs’000 Rs’000 Rs’000 Rs’000

2016Trade and other payables 26 12,444 - 12,470 Dividends - 43,335 - 43,335

26 55,779 - 55,805

2015Trade and other payables - 13,341 - 13,341 Dividends - 59,537 - 59,537

- 72,878 - 72,878

THE COMPANYLess than 1

monthLess than 1

Year 1-5 Years TotalRs’000 Rs’000 Rs’000 Rs’000


- 47,586 - 47,586


- 66,033 - 66,033

Fair value of financial instrumentsThe directors consider that the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate their fair values.



ADDITIONAL INFORMATION


100 ADDITIONAL INFORMATION

MEMBER COMPANIES11 investment dealers operate on the Stock Exchange of Mauritius . Each investment dealer holds a license granted by the Financial Services Commission. Investment dealers are required to have at least one duly licensed representative who shall be entitled to carry out the functions of the investment dealer.

Name Address / E-MailRepresentatives

of Investment dealersAssociated Brokers Ltd 3rd Floor, Travel House

Cnr Sir William Newton Street & Royal Street Port-Louis Tel: 212-3038 Fax :212-6690 E-Mail: [email protected]

- Mr Pierre de Chasteigner du Mée- Mr François Cayeux- Mrs Roselyn Phanjoo- Mrs Patricia Kolfir- Mrs Sharon Chung- Mrs Kaminee Syea- Mrs Irene Landinaff

AXYS Stockbroking Ltd 6th Floor, Dias Pier BuildingLe Caudan WaterfrontCaudanPort-LouisTel:405-4000Fax:213-3478E-Mail: [email protected]

- Mr VikashTulsidas- Mrs Adlette Rioux- Mr Bhavi k Desai- Mr Melvyn Chung Kai To

Bramer Capital Brokers Ltd Level 11, Bramer House66C2,CybercityEbeneTel: 403-4100Fax: 467-9732Email: [email protected]

Capital Markets Brokers Ltd Alexander House,35 Cybercity, Ebene.Tel: 402-0280Fax: 454-0430 E-Mail: [email protected]

- Mr Tommy Lo Seen Chong- Mr Kamlesh Ramjee- Mr Reshad Tegally- Mrs Sunita Bissessur-Alleck- Ms Neetusha Aubeeluck

IPRO Stockbroking Ltd 3rd Floor, Ebène SkiesRue de l’Institut, EbèneTel: 403-6740Fax: 465-1200Email: [email protected]

- Mr Arnaud Leclézio- Mrs Fabiola Yit Niuc

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MEMBER COMPANIES (CONT’D)

Name Address / E-MailRepresentatives

of Investment dealersLCF Securities Ltd Suite 108,

1st Floor, Moka Business Centre,Mont Ory RoadMokaTel: 433-8388Fax: 433-5953EMail: [email protected]

- Mr André Chung Shui- Mr Rajiv Lutchmiah

MCB Stockbrokers Ltd 9th Floor ,MCB Centre11-12 Sir William Newton StMCB Head OfficePort LouisTel: 202-5245 / 202-5427Fax: 208-9210E-Mail: [email protected]

- Mr Kevin Rangasami- Mr Sunil Seeam- Mrs Michella Garnier- Mr Ashveen Chummun- Mrs Marie Ange Tse Rai Wai- Mrs Micheline Ng Yuen Yan- Mrs Reena Ramsurrun

Prime Securities Ltd Ground Floor,Unit 17,Air Mauritius Centre6, President John Kennedy Street,Port-LouisTel: 212-3500 / 212-4040Fax: 211-2424E-Mail: [email protected]

- Mrs Banoomatee Veerasamy - Mr Soodesh Seechurn - Mrs Sweta Ramtohul

PSG Securities (Mauritius) Ltd

Suite 305Barkly WharfCaudan WaterfrontPort Louis Tel: 212-3535 Fax: 208-6294 E-Mail: mathilde.leclé[email protected]

- Mrs Mathilde Leclézio

SBM Securities Ltd Level 3, State Bank Tower 1, Queen Elizabeth II Ave Port Louis Tel :202-1437 / 202-1438 / 202-1430 Fax: 212-1710 E-Mail: [email protected]

- Mrs Reedhee (Anoushka) Bhuttoo

- Mrs Patricia Dholah - Mr Dharmeshsing Mohadewo

Swan Securities Ltd 3rd Floor, Swan Centre 10, Intendance Street Port-Louis Tel: 208-7010 Fax: 212-9867 E-Mail: [email protected]

- Mr Neeraj Umanee - Ms Aisha Bibi Yoosoof Parak - Mr Pourbarlen Comarasawmy - Mrs Dona Narayanam - Mrs Krishma Mungur (Jeetah)

ADDITIONAL INFORMATION (CONT’D)


102 LISTED COMPANIES

OFFICIAL MARKETBANKS, INSURANCE & OTHER FINANCEBramer Banking Corporation Ltd (suspended)Cim Financial Services Ltd MCB Group LimitedMauritian Eagle Insurance Co. LtdMauritius Union Assurance Cy. Ltd SBM Holdings LtdSwan General Ltd

COMMERCE Compagnie des Magasins Populaires LtéeENL Commercial LtdHarel Mallac LtdInnodis LtdIreland Blyth LtdVivo Energy Mauritius Ltd

INDUSTRY Gamma Civic LtdGo Life International LtdMauritius Oil Refineries LtdPlastic Industry (Mtius) LtdPhoenix Beverages LtdUnited Basalt Products LtdThe Mauritius Chemical & Fertilizer Industry Ltd

INVESTMENTS Alteo LimitedBelle Mare Holding LtdCaudan Development LtdCIEL LimitedENL Land Ltd (Ordinary)ENL Land Ltd (Preference)Fincorp Investment LtdNational Investment Trust LtdPromotion and Development Ltd

INVESTMENTS (Cont’d)P.O. L. I. C. Y LtdRogers & Co. LtdTerra Mauricia Ltd The Mauritius Development Investment Trust Co. LtdUnited Docks Ltd

LEISURE & HOTELS Automatic Systems LtdLux Island Resort LtdLottotech LtdNew Mauritius Hotels Ltd (Ordinary)New Mauritius Hotels Ltd (Preference)Sun Limited

PROPERTY DEVELOPMENTBlueLife Limited

SUGAROmnicane Limited

TRANSPORT Air Mauritius Ltd

DEBTLux Island Resorts Ltd F/P Convertible BondsMCB Group Limited NotesSBM Holdings Class A 1 Series BondsSBM Holdings Class B 1 Series BondsUnited Basalt Products Ltd Bonds

EXCHANGE TRADED FUNDSCoreShares S&P 500 ETFCoreShares S&P Global Property ETFMCB India Sovereign Bond ETFNewFunds S&P GIVI South Africa Top 50 Index ETF Portfolio

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103

OFFICIAL MARKET (CONT’D)EXCHANGE TRADED FUNDS (Cont’d)NewGold Issuer Limited (RF) Gold Bullion DebenturesNewGold Issuer Limited (RF) Platinum Debentures

FOREIGN Dale Capital Group Limited

GLOBAL AND SPECIALISED FUNDSACM Aussie LtdACM European LtdACM India Focus Fund LtdAfrAsia Special Opportunities Fund (Class A)AfrAsia Special Opportunities Fund (Class B)Africa Sustainability FundGlobal Diversified Fund PCCGlobal Investment Opportunities Fund Global Windsor Capital Fund LimitedImara African Opportunities Fund LimitedImara Global Fund LimitedIPRO African Market Leaders FundIpro Growth Fund LtdKotak Investment Opportunities FundNovare Africa Fund PCCRSJ Prop, PCCSanlam Africa Core Real Estate Investments LimitedSummit Funds PCCTriangle Real Estate India Fund LLCUniversal Golden Fund

GLOBAL BUSINESS COMPANIESAstoria Investments LimitedAtlantic Leaf Properties LimitedBayport Management Limited

GLOBAL BUSINESS COMPANIES (Cont’d)CMB International LimitedColina Holdings LimitedGreenbay Properties LtdMainland Real Estate LtdMara Delta Property Holdings LtdNew Frontier Properties LtdRockcastle Global Real Estate Company LimitedStonebridge Properties LimitedTadvest LimitedTrevo Capital Ltd (Preference)

STRUCTURED PRODUCTSAbsa Bank Limited Series ASN.D0001 Credit Linked NotesAbsa Bank Limited Series ASN.D0002 Credit Linked Notes

SPECIALIST DEBT SECURITIESCompagnie de Beau Vallon Limitee Class A BondsCompagnie de Beau Vallon Limitee Class B BondsNew Mauritius Hotels Ltd EUR Fixed Rate NotesNew Mauritius Hotels Ltd MUR Floating Rate Tranche A NotesNew Mauritius Hotels Ltd MUR Floating Rate Tranche B NotesOmnicane Limited Multicurrency Medium Term Note ProgrammeOSWA Capital Limited NotesTC Mauritius HoldingsThe Mauritius Union Assurance Cy. Ltd Floating Rate Subordinated Notes

LISTED COMPANIES (CONT’D)


104 LISTED COMPANIES (CONT’D)

DEVELOPMENT & ENTERPRISE MARKETBANKS & INSURANCE & OTHER FINANCEABC Banking Corporation LtdSwan Life Ltd

COMMERCE ABC Motors Company LimitedAssociated Commercial Co LtdChemco LtdCompagnie Immobiliere Limitee

INFORMATION TECHNOLOGYBharat Telecom Ltd

INDUSTRY Bychemex Ltd Forges Tardieu LimitedLes Gaz Industriels LteeLes Moulins de la Concorde Ltee (Ordinary)Les Moulins de la Concorde Ltee (Preference)Livestock Feed Limited (Ordinary)Livestock Feed Limited (Preference)Margarine Industries LimitedMauritius Cosmetics LimitedMauritius Secondary Industries LtdPaper Converting Company LimitedQuality Beverages LimitedSoap & Allied Industries Limited

INVESTMENT Ascencia Ltd (Class A)Ascencia Ltd (Class B)Ascencia Ltd (Preference)ENL Limited (Preference)Excelsior United Development Companies LimitedPhoenix Investment Company LimitedRHT Holding LtdThe Bee Equity Partners LtdUnited Investments Ltd

LEISURE & HOTELS Constance Hotels Services LimitedMorning Light Co LtdSouthern Cross Tourist Company LimitedTropical Paradise Co Ltd (Ordinary)Tropical Paradise Co Ltd (Preference)

MINERAL AND EXPLORATIONShumba Energy Limited

PROPERTY DEVELOPMENT Attitude Property LtdNovus Properties Ltd

SUGAR Constance La Gaiete Company LimitedMedine Limited The Union Sugar Estates Co Ltd

TRANSPORT United Bus Service Ltd

OTHERS Compagnie Des Villages de Vacances L’Isle de France Limitee (COVIFRA) CIEL Textile LtdHotelest LimitedMedical And Surgical Centre LimitedMFD Group LimitedSIT Land Holdings Ltd (Options)

DEBTABC Motors Company Ltd NotesAscencia Limited Redeemable BondsUnited Investments Ltd Bonds

ANNUAL REPORT 2016

Stock Exchange of Mauritius(Member of the World Federation of Exchanges)

4th Floor, One Cathedral Square Building16, Jules Koenig Street

Port Louis, Republic of MauritiusTel : (230) 212 9541 - Fax : (230) 208 8409

Email : [email protected] : www.stockexchangeofmauritius.com

Stock Exchange of Mauritius Annual Report 2056

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