T S EXCHANGE OF MAURITIUS L - Orangesemdex.intnet.mu/downloads/AnnualReport.pdfAnnual Report 2010 The Stock Exchange of Mauritius Ltd The Stock exchange of Mauritius Ltd (Member of

Annual Report 2010

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The Stock exchange of Mauritius Ltd(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

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THE STOCK EXCHANGE OF MAURITIUS LTD(Member of the World Federation of Exchanges)

table of contents GroupFinancialHighlights 2PerformanceHighlights 3

Corporate Review DirectorsReport 4 - 5BoardofDirectorsprofile 6 - 8ChiefExecutivesReport 9 - 13SeniorManagementProfile 14CorporateGovernanceReport 15 - 27InternalControlStatement 28 - 32AuditandRiskManagementCommitteeReport 33 - 34OperatingandFinancialReview 35 - 62

Financial Review DirectorsResponsibilityStatement 66AuditorsReporttotheShareholdersoftheStockExchangeofMauritiusLtd 67 - 68StatementsofFinancialPosition 69StatementsofComprehensiveIncome 70StatementofChangesinEquity-TheGroup 71StatementofchangesinEquity-TheCompany 72StatementsofCashFlows 73 - 74NotestotheFinancialStatements 75 -101

Additional Information MemberCompanies 102ListedCompanies-OfficialMarket 103-Development&EnterpriseMarket 104

group financial highlightsThe STock exchange of mauriTiuSannual reporT 2010

FINANCIAL YEAR (FY) 2010 2009 2008

For the year (Rs000)Revenue 133,872 112,170 121,622OtherIncome 26,387 28,582 23,550Administrativeexpenses (58,466) (52,906) (48,703)Operatingprofit 101,793 87,846 96,469Netprofitattributabletoequityholders 68,276 58,439 63,578OperatingCashflow 82,650 68,516 76,148At year-end (Rs000)NetCurrentassets 134,517 159,413 130,353Totalassets 335,807 276,057 230,271Totalliabilities 50,134 45,599 47,577Shareholders'funds -StatedCapital 3,350 3,350 3,350-Reserves 218,315 173,291 134,494Sharesissued(thousand) 330 330 330 For the Year (%)Revenuegrowth 19.3 (7.8) 35.7Operatingprofitmargin 76.0 78.3 79.3NetProfitMargin 42.6 41.5 43.8Cost-to-incomeratio 36.5 37.6 33.5ReturnonEquity 30.8 33.1 46.1 Per Share Data (Rs) OperatingCashFlow 250.45 207.62 230.75Basicearnings 206.90 177.10 192.66NetTangibleAssets 865.68 698.36 553.62NetDividend 70.46 59.52 64.42

Definitions

Operating Profit MarginOperating profit of the group expressed as apercentageofrevenue.

Net Profit MarginNetprofitattributabletoequityholders,expressedasapercentageoftotalrevenueofthegroup.

Cost-to-Income ratioRatio of total expenses to total revenue of thegroup.

Return on EquityProfit attributable to equity holders, expressed as apercentageofshareholders'funds.

Net Tangible assetsTotalassetslesstotalliabilitiesofthegroup,dividedbythenumberofsharesissued.

Net DividendDividendsproposeddividedbythenumberofsharesissued.

performance highlightsThe STock exchange of mauriTiuSannual reporT 2010

Key Market Statistics

Financial Year 2010 2009 % Change

Total Turnover (Value) Rs million-OfficialMarket 11,825 9,875 20-Development&EnterpriseMarket 2,957 1,213 144 NoofSessions 251 249Average Daily Turnover (Value) Rs million-OfficialMarket 47 40 19-Development&EnterpriseMarket 12 5 142 Total No of Shares Traded-OfficialMarket 322million 193million 67-Development&EnterpriseMarket 452million 156million 189

NoofSessions 251 249 - Accounts held with the Central Depository &Settlement Co Ltd NumberofSecuritiesaccountsopenedinCDS 252,842 233,669 8NumberofsharesdepositedinCDS 3.8billion 3.3billion 15AggregatevalueofsharesheldinCDS 140.0billion 112.6billion 24

Number of Listed Companies -OfficialMarket 38 40 (5)-Development&EnterpriseMarket 49 48 2

Total Market Capitalisation Rs' billion -OfficialMarket 150.8 130.7 15-Development&EnterpriseMarket 51.7 45.4 14

director's reportThe STock exchange of mauriTiuSannual reporT 2010

INTRODUCTION

The Board of Directors of the Stock Exchange ofMauritiusLtd(SEM)ispleasedtopresentitstwentyfirstAnnualReporttotheshareholdersoftheSEM,togetherwiththeauditedfinancialstatementsoftheGroupandoftheCompanyfortheyearended30June2010.

PRINCIPAL ACTIVITIES OF THE SEM

TheprincipalactivitiesoftheSEM,asdefinedbyitsConstitution,includethefollowing:

- Operatingandmaintainingasecuritiesexchangeinaccordancewithlaw.

- Providingfacilitiesforthebuyingandsellingandotherwise dealing in securities on a securitiesexchange.

- Providingandmaintaining,tothesatisfactionoftheFinancialServicesCommission,adequateandproperlyequippedpremisesfortheconductofitsbusiness.

- Havingoperatingrulesforthemarketsitoperatespursuanttolaw.

PRINCIPAL ACTIVITIES OF THE CENTRAL DEPOSITORY & SETTLEMENT CO. LTD (CDS)

The principal activities of the CDS, as defined bythe Securities (Central Depository Clearing andSettlement) Act 1996, is to provide depository,clearingandsettlementserviceinordertofacilitatedealingsinsecuritiesontheExchange.

GROUP FINANCIAL PERFORMANCE DURING THE YEAR 2010

Despite the worldwide economic slowdown andthefinancialturmoilaffectingthesecuritiesindustryworldwide, the Group has succeeded in achievingcommendable results for the financial year 2010.TheGroup recorded revenuegrowthof19.3%forthe year 2010, with revenues reaching Rs133.9millionwhencomparedwithRs112.2millionin2009.Shareholders funds increased by more than 25%in2010, toattaina total valueofRs221.7million,againstlastyearsfigureofRs176.6million.

FINANCIAL PERFORMANCE OF THE COMPANY DURING THE YEAR 2010

Onthecompanysfront,theSEMregisteredarevenuegrowthof17.8percent,achievingatotalvalueofRs83.4millioninyear2010,comparedwithRs70.8millioninyear2009.Totalprofitaftertaxincreasedby18.4percentoverlastyeartoattainatotalvalueofRs58.1millionfortheyear2010.CashandCash

equivalents of the company, including long-termdeposits,roseby49percenttoreachatotalvalueof Rs162.7 million, against an amount of Rs109.2millioninyear2009.

MAIN DEVELOPMENTS DURING THE YEAR 2010

The SEM strove to position itself as an attractivelistingvenueforglobalandspecialisedfunds.Inthisconnection,somesignificantchangeswerebroughttoChapter 16of our ListingRules to align itwiththe spirit and content of the Securities (CollectiveInvestment Schemes and closed-end Funds)Regulations2008andinenhancingourExchangescompetitiveness and appeal to a wide variety offunds.

With a view to increasing our Exchanges visibilityat the international level the SEM accelerated itslinks to Global Data Vendors and increased itsdata vendors to 4. We will continue to look fornew Data Vendors in 2010-2011 with a view toimproving our profile at the international leveland attracting more foreign investors interests inourmarket.

TheSEMhasalsobeenactiveontheCorporateSocialResponsibilityfront.TheprojectsupportedbySEMin2009-2010istheLearn-to-Earninitiativeforout-of-schoolyoungpeople.Thisprojectaimsatimpartingschooldrop-outswithawidevarietyofskillsinthefieldofartsandcrafts,withaviewtosecuringthemajobormakingthembecomesmallentrepreneursinthefieldoftraining.

In April 2010 the SEM co-sponsored with GBOTthe Annual General Meeting of the South AsianFederation of Exchanges (SAFE) and its Flag Shipconference on the following theme South AsianCapitalMarketsConference. Theeventwaswellattendedbya largenumberofdelegates fromthefinancialservicessectorinSouthEastAsiaaswellasbyinternationalinvestors.Thisconferenceconstitutedan opportunity to share SEMs achievements andinvestmentprospectstotheaudienceandhighlightthe attractiveness of African Markets as the lastfrontierofgrowthintheworld.

DIVIDENDS

On17thJune2010,inlinewiththedividendpolicyofdistributing40percentofSEMsnetprofitaftertax,thedirectorsapprovedafinaldividendpaymentamountingtoRs23,251,657 (Rs70.46pershare) inrespect of the year ended 30 June 2010. For theyear 2009, dividends amounting to Rs19,642,177(Rs59.52 per share), were paid to the ordinaryshareholdersoftheCompany.

AUDITORS

TheAuditors,MessrsKempChatterisDeloittehaveexpressedtheirwillingnesstocontinueinofficeandaresolutionproposingtheirre-appointmentwillbesubmittedatthenextAnnualMeetingoftheSEM.

InaccordancewithSection221(1)(h)oftheCompaniesAct2001,theremunerationsoftheAuditorsoftheSEMandofitssubsidiaryaredisclosedinNote17oftheauditedfinancialstatements.

ACKNOWLEDGEMENTS

The Board of Directors of the SEM wishes to extend its thanks to all its stakeholders, namely, the Ministry of Finance and Economic Development, the Financial Services Commission, the Listed Companies, the Investment Dealers, the Asset Management Companies and the investing public at large for their continuous contribution and support to the smooth running of the SEM during the course of the year.

The Board also commends the management teamandemployeesoftheSEMfortheirhardworkanddedicationduringtheyear2010.

Last,butnotleast,theBoardoftheSEMwouldliketoexpressitsheartfeltthankstotheSEMShareholdersfortheircontinuedsupport.

By order of the Board of Directors of the StockExchangeofMauritiusLtd

GatanLanHunKuenChairman

RajTapesarVice Chairman

29September,2010

corporate reviewThe STock exchange of mauriTiuSannual reporT 2010

Board of Directors Profile

DONALD AH-CHUEN,non-executivedirector,isafellowmemberoftheInstituteofCharteredAccountantsinEnglandandWales.HeholdsaM.B.A.(Strathclyde),isafellowmemberofthe InstituteCharteredAccountants inAustraliaandholdsaM.C.I.P.D.(MemberofCharteredInstituteofPersonnel&Development,U.K.).Heis currently the Chief Executive of ABC Banking Corporation Ltd. He is also theChairmanoftheTertiaryEducationCommissionofMauritius,CouncilmemberoftheMauritiusChamberofCommerceandIndustry,ExecutiveCommitteeMemberoftheChineseChamberofCommerce,andaDirectoroftheCentralDepositoryandSettlementCoLtd(CDS).

RAJ TAPESAR, non-executive director, holds a MBA(Finance). He is a licensedinvestment dealers representative and he currently occupies the position ofManagingDirectoratMCBStockbrokersLtd.HeistheVice-ChairmanoftheStockExchangeofMauritiusandisalsoadirectoroftheCentralDepository&SettlementCompanyLtd(CDS).

GAETAN LAN HUN KUEN,non-executivedirector,isafellowmemberoftheInstituteofCharteredAccountantsinEnglandandWales.HehasbeenChairmanoftheStockExchangeofMauritiusLtdsinceNovember2009.HecurrentlyholdsthepositionofFinanceDirectoratIrelandBlythLtdandalsoservesasdirectoroftheMauritianEagleInsuranceCo.Ltd.HeisalsoadirectoroftheCentralDepository&SettlementCompanyLimited(CDS).

SUNIL BENIMADHU, joined the SEM as Chief Executive in May 1998. Hewas appointed executive director of the SEM in October 2008. He holdsa M.B.A. in Finance and Investment from the University of Illinois, UnitedStates. He also holds a D.E A. in Development Economics and a Matrise inMacro-Economics from the University of Aix-Marseille, France. He has recentlybeenelectedasPresidentof theAfricanSecuritiesExchangesAssociation (ASEA)foraperiodoftwoyears.From2002to2004,hewasamemberoftheExecutiveCommitteeof theSouthAsianFederationofExchanges (SAFE),whichcomprisestwelveStockExchangesoftheSouthAsianregion.From2001to2003,hechairedtheSADCCommitteeofStockExchanges(COSSE),anassociationofstockexchangeswhichincludestenexchangesoftheSouthernAfricanregion.

Board of Directors Profile (Cont'd)

PEROOMAL GOPALLEN MOOROOGEN, non-executive director, is a fellowmemberoftheAssociationofCharteredCertifiedAccountantsandholdsaMBA.HecurrentlyoccupiesthepositionofTeamLeaderatMauritiusTelecom.HeisalsodirectorSwanInsuranceCompanyLtdandAngloMauritiusAssuranceSocietyLtd.HeisalsoadirectoroftheCentralDepository&SettlementCo.Ltd(CDS).

VINCENT LAMUSSE, non executive director, is a holder of a degree inEconomics and a Master in Management Science. He is actually SeniorManager-Investment,oftheAngloMauritiusFinancialServicesLimited.Heisalso theVice-Chairpersonof theCentralDepository&SettlementCompanyLimited(CDS).

REEDHEE BHUTTOO (MRS),non-executivedirector,holdsaB.A.(Hons)EconomicsandanAdvanceDiplomainMarketing,CIMUK.ShecurrentlyoccupiesthepositionofOfficeratSBMSecuritiesLtd.SheisalsoadirectoroftheCentralDepository&SettlementCompanyLimited(CDS)

NANDITA RAMDEWAR (MRS), non-executive director, is a fellow of theAssociation of Chartered Certified Accountants and holds a M.B.A Finance.SheoccupiesthepositionofSeniorManagerattheStateInsuranceCompanyofMauritiusLtd,wheresheisalsotheCompanySecretary.SheisalsodirectorofSicomFinancialServicesLtd,SicomGlobalFundLtdandSicomManagementLtdandoftheCentralDepository&SettlementCo.Ltd(CDS).

corporate review (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

Board of Directors Profile (Cont'd)

VIKASH TULSIDAS,non-executivedirector,holdsaB.A(Hons)LawandBusinessStudiesfromtheUniversityofWarwick,UK.HecurrentlyoccupiesthepositionofManagingDirectoratAXYSStockbrokingLtd.HeisalsoPresidentofthePortLouisStockbroking Association and a director of the Central Depository & SettlementCompanyLtd(CDS).

BILAL IBRAHIM SASSA,non-executivedirector,holdsaB.Com(Hons),UniversityofNatal,SouthAfricaandisalicensedInvestmentdealersrepresentative.HecurrentlyoccupiesthepositionofChiefBusinessDevelopmentExecutiveatCIMGroup.

Chief Executive's ReportThe STock exchange of mauriTiuSannual reporT 2010

Introduction

The evolutionof the stockmarket duringfinancialyear 2009-2010 could be summarized as a taleof two halves. The July-December period wascharacterised by a strong rebound of the marketindices,asaresultoftheunprecedentedworldwideconcertedeffortstocontaintheperniciouseffectsofthefinancialcrisis,coupledwiththeimplementationofastimuluspackageandanaggressiveslashingofinterest rates by the authorities in Mauritius. Thelocal stockmarketexpressedasignof relief to theresilienceshowninitiallybytheMauritianeconomywithregardtothejittersfromthewesternworld.Italsoreactedpositivelytotheassessmentbyleadingeconomic and financial thought-leaders that theenergetic and aggressive quantitative easing bytheFederalReserveBankandthedwindlingofkeyinterestratestonearzero intheUSand inEuropewould save international financial markets from atotalcollapse.

The January to June 2010 period saw renewedworries of a double-dip recession, following thebankruptcyofGreeceandthethreatsofbankruptcyhangingovertheotherPIGScountries.AfteranearlyspurtatthebeginningofJanuary,thestockmarketinMauritiusembarkedonadecliningtrendonthebackof investorsworriesabout the impactof theEuropeancrisisonacountrywhosegrowth is verymuchEurocentric.

In what follows, we undertake an analysis ofthe evolution of the stock market in Mauritius in2009-2010, describe some of the key initiativesimplemented by the SEM during this periodand briefly outline the focus of the SEM in thecomingyear.

A brief assessment of the evolution of the stock market in July 2009-June 2010

BetweenJuly2009-December2009,theSEMDEXandtheDEMEXgained17.2%and4.92%respectivelyonthebackofthefollowingkeyfactors:

1. The fiscal and monetary authorities swiftreactiontotheglobalfinancialcrisiscomfortedinvestors that Mauritius would be able

to fend-off the negative impact of thecrisis. A stimulus package of Rs 14.5 billion,representing5%ofGDP,hadbeenearmarkedto undertake major infrastructure projectsto modernise the countrys infrastructureframe-work,supplementanydecreaseinPrivateSectorinvestmentandprovideequityfinancingtocertainprivatesectorfirmsindifficulty.Themonetaryauthoritiesslashedkeyinterestratesby250basispointswithinasix-monthperiodtoreduceborrowingcostsandstimulatebanklendingtoprivatesectorinstitutions.

2. Themarkets reboundalsoreflected investorssentimentthattheDoomandGloomscenariothathadprevailedintheimmediateaftermathof Lehman Brothers demise was probablyoverdoneandthattheworldeconomywasnotreallyonthebrinkoffalling-offthecliff.

3. TheSeptember2008-March2009periodhadseen theMauritius stockmarket lose50%ofitsvalueandinvestorsfeltthatthereweresomebargain-huntingopportunitiesavailable in themarket.

Afteragainofnearly80%bytheSEMDEXandof33.7% by the DEMEX between March 2009 andDecember2009,thestockmarketstarted2010onarathernervousstanceandthemarketsnervousnesswasfurthercompoundedasfromendMarch2010in the lightof thebankruptcy threatsweighingonsomeEuropeancountries.Thecollapseof theEuro,coupledwiththeensuingappreciationofthedollaragainsttheMauritianRupee,underscoredthethreatsof a double-whammy on those listed companieswhose income are euro-dependent. In spite ofthis negative environment, foreign investors havebeen very active on our market during the periodJuly 2009-June 2010 and have been net positivebuyers of listed Mauritian Stocks to the tune ofRs 806 million. The Official market and the DEMrecovered some of the lost ground in June 2010following concerted efforts by the Europeanauthorities to contain the debt crisis affecting thePIGScountries.

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chief executive's report (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

Thefollowingtablescapturethemarketsevolutionduringthetwodistinctphasesdescribedaboveandtheactivitiesofforeigninvestorsontheofficialmarketduringthesametimeframe.

Table1: Market Evolution (1 July 31 December 2009)

INDICES 1-Jul-09 31-Dec-09 % change

SEMDEX 1,417.47 1,660.87 17.17%

SEM-7 321.20 360.75 12.31%

SEMTRI(Rs) 3,921.82 4,712.70 20.17%

SEMTRI(US$) 1,862.85 2,395.98 28.62%

MarketCapitalisation(Rs) 130,768,790,822.40 151,212,328,912.90 15.63%

Table 2: Market Evolution (1 January 30 June 2010)

INDICES 1-Jan-10 30-Jun-10 % change

SEMDEX 1,660.87 1,654.16 -0.40%

SEM-7 360.75 33.78 -7.48%

SEMTRI(Rs) 4,712.70 4,734.00 0.45%

SEMTRI(US$) 2,395.98 2,257.84 -5.77%

MarketCapitalisation(Rs) 151,212,328,912.90 150,818,485,754.10 -0.26%

Table 3: Foreign Investors Activity on the Official Market (1 July 2009-30 June 2010)

Purchases Sales Net Investments (Rs) (Rs) (Rs)

July2009-December2009 1,112,508,492 1,041,611,331 70,897,160

Jan2010-June2010 1,858,032,543 1,123,404,942 734,627,600

Total(July09-June2010) 2,970,541,036 2,165,016,274 805,524,761

Key Initiatives of the SEM in 2009-2010

The initiatives of the SEM in 2009-2010 wereessentiallycenteredaroundthedevelopmentofnewavenuesofgrowthfortheExchangeandendeavouredto overcome the structural constraints of a smalleconomywherethenumberofnewpotentiallistingsareinherentlylimitedinscope.

1. Positioning the SEM as a Listing Venue for Global and Specialised Funds

One of the key initiatives undertaken by theSEM in 2009-2010 concerns a fundamentalreview of the listing rules with a view to

Key Initiatives of the SEM in 2009-2010 (Cont'd)

1. Positioning the SEM as a Listing Venue for Global and Specialised Funds (Cont'd)

positioningtheSEMasanattractivevenuefortheListingofGlobalandSpecialisedFundsandmoving away from an equity based domesticexchange to a multi-product internationally-orientedexchange.Therecentchangesbroughtto the listing rules have not only enabled analignment of these rules with the Securities(Collective Investment Schemes and closed-endFunds)Regulations2008(CISRegulations),but have more importantly created the spacefor the listing of a wide variety of funds andcollective investment schemes on the SEM.Beforethesechanges,ourlistingrulescateredonly for the listing of a restricted number offundsbut todayweare inaposition to listawholespectrumoffundsincludingProfessionalCollective Investment Schemes, SpecialisedFunds, Expert Funds, Real Estate funds andmany other types of Funds. The SEM is alsocommitted to an aggressive turn-aroundtime on the processing of listing applicationswhich does not exceed two weeks. We haveadoptedalistingfeestructureforfundswhichisverycompetitive,whencomparedwithotherjurisdictionslikeDublin,Luxembourg,Bermuda,CaymanIslandsetc.

To sensitise themarket and themanagement

companies operating in the Global BusinessSector about the flexibility and effectivenessofourrules,theSEMorganizedaninformativemeeting in early 2010 with more than 150playersfromthefinancialservicessector.

2. Extending our reach at the international level through Global data vendors and Index providers

OneofthekeyobjectivesoftheSEMinrecentyearshasbeentoenhancethevisibilityoftheExchangeattheinternationallevelwithaviewto attracting more foreign investor intereston our market. In this connection, the SEMwas connected to Bloombergs network inthesecondpartof2009,enablingBloombergsubscribersworldwidetofollowourmarketona liveand real-timebasis. SEM isoneof thefew Exchanges in Africa to be connected toBloombergonareal-timebasis.

We have also in 2009-2010 extended ourcontractual relationship with Global Data

Vendors by entering into a contractual

agreement in May 2010 with Factset, aU.S based data vendor. These partnershipsconstituteapowerfulmediumtoreachouttotheinternationalpoolofinstitutionalinvestorsandextendSEMsvisibilityattheinternationallevel.

3. SEMs proactive role in furthering the national and regional agenda

In2009-2010,SEMhasbeenveryproactiveinputtingMauritiusandourstockmarketontheradar screen of International investors and infurtheringtieswith regionaland internationalassociationsofStockExchanges.

The SEM has been present and spoken at

a number of international workshops onEmerging and African markets where wevestrivedtoexplainthepotentialoftheAfrican/Mauritian markets and demonstrated theoperational and regulatory excellence oftheSEM.

We have also been very active at the level

of Stock Exchange associations such as theWorld Federation of Exchanges (WFE), theAfrican Stock Exchanges Association (ASEA)andtheSouthAsianFederationofExchanges(SAFE). In April 2010, we co-hosted withGlobal Board of Trade (GBOT) the AnnualGeneral Meeting of SAFE and its two-dayflagship conference. TheSAFE regroups theExchanges of the Indian sub-continent andaimsatpromotingthedevelopmentofcapitalmarkets in the region, while ensuring theharmonisationoftheoperationalandregulatorystandardsofthememberExchanges.

4. Setting the stage for the trading and clearing of derivatives products

In 2009-2010, the SEM and CDS have been

working on the trading and clearing ofderivativeproducts.Inthisconnection,theSEMhas organized a number of workshops withbrokers and institutional investors to explainthe mechanics, operational features and risksassociatedwithderivativesmarkets.TheSEMandCDShavealsoparticipatedinanumberofradioprogramsandpressinterviewstosensitiseinvestors about derivative products. Thoughtheoperationalandregulatoryframeworksforthelaunchingofderivativesareready,thefirst

chief executive's report (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

Key Initiatives of the SEM in 2009-2010 (Cont'd)

4. Setting the stage for the trading and clearing of derivatives products (cont'd)

derivative contract on the SEM7hasnot yet

beenlaunchedastherearestillsomepracticalhurdles thatneed tobeovercomebefore thelaunching of the first contract. One of thekey characteristics of a successful derivativesmarketistheexistenceofmarket-makerswhocan ensure liquidity on the market. We needtoenrollthesupportofmarket-makers,ontheone hand, and brokers need to mobilize theinterestoftheirclientsinameaningfulway,onthe other hand, before the rolling out of thefirstcontractontheSEM.

An overview of some initiatives earmarked for 2010-2011

2010-2011willbegearedtowardsincreasinglistedproductsandattractingmoreplayersandparticipantsonourmarket.

1. Investor Education

SEM is a strong supporter of the drive tobring the stock market within the reach andunderstandingof thegeneral public, andhasa vision to develop an investment culture inMauritius.Weprovide this support througharange of information and education services.The number of investors trading on ourExchangehasincreasedinrecentyearsontheback of the bull run that characterised ourmarket during the 2002 - early 2008 period,initiatives undertaken by investment dealersto reachout topotential investors, anumberof international road shows in which theSEMandsome listedcompanieshaveactivelyparticipated and the initiatives undertaken bythe SEM to bring the stock market activitiesclosertoMauritianhouseholds.AsatendMay2010,56,000investorsholdingnearly251,000securities accounts were registered with theCDS. These figures, though encouraging,indicate thegrowthpotential that exists.Ourtarget is to increase thenumberof registeredinvestorsto100,000by2013,ensuringtherebythat one in every five working Mauritians isa shareholder of the listed scrips traded ontheSEM.

In this context, the Exchange will launch in

2010 an Investor Education campaign underthe theme Faire de Maurice une nation

dactionnaires: 100,000 actionnaires dici2013. This campaign will comprise thelaunching of a series of in-house educationcoursesattheSEMforthepublicat large,aneducationalbrochure,radioprogrammes,pressinterviewsandnewspaperadverts.

2. Listing of multi-currency products on SEM

TheSEMhassofarfocusedessentiallyonthelistingofrupee-basedproducts.TheSEMandtheCDShaverecentlyhelddiscussionswiththeBanksandtheCentralBanktocreatethespacefor the listing of multi-currency denominatedproducts on the SEM. We have made goodprogressonthisfrontandthisinitiativeopensup the space for the SEM to engage withinternational institutions to discuss about thefeasibilityofintroducingforeigncurrencybasedproductslikeexchange-tradedfunds(ETFs)andotherproductstolistontheSEM.ThisinitiativewillfurthercontributetotheinternationalisationoftheSEMandhelptoovercomethestructuralconstraintsofasmalleconomybyoperatingupnewlistingavenuesfortheSEM.

3. Bridging regulatory and other gaps in the positioning process of the SEM as an attractive Listing Venue for Global and Specialised Funds

In2009-2010,weachievedanimportantstep

by reviewing our listing rules and renderingthemflexibleandadaptabletothespecificitiesof a wide variety of funds. In 2010-2011,our focuswill beon an aggressivemarketingof this competitive framework, but we willalso focus on initiatives to bridge regulatoryandothergapswithaviewtoenhancingthecompetitiveness of SEM as listing venue forfunds.Inthisconnection,wehaveearmarkedaspecificnumberofinternationalrecognitionsthattheSEMneedtoobtainandwewillworktowards the obtention of these recognitionstogetherwiththeFSC.

4. Moving up to an enhanced version of our trading system and implementing a new surveillance system to improve overall market surveillance.

The SEM became the second African Stock

Exchangein2001aftertheJSEtooperateafullyautomated stock market infrastructure fromtradingtosettlement.Thissystemrevolutionised

An overview of some initiatives earmarked for 2010-2011 (Cont'd)

4. Moving up to an enhanced version of our trading system and implementing a new surveillance system to improve overall market surveillance. (Cont'd)

tradingpracticesinMauritiusandempoweredtheinvestorinasignificantmannerbyenablinghim to follow the market in real-time andact upon market opportunities in real-time,whileprovidinghimwithanumberofmarketindicators toanalyse thedepthof themarketoneverysinglelistedinstrument.

ThetimehasnowcomefortheSEMtomove

up to an enhanced version of the tradingsystemandfurtherempowertheinvestor.Weare currently engaged in discussions with thesystems supplier to define the appropriatetimingfortheintroductionofthenewversionofthetradingsoftware.

We also intend to look into the introduction

of a more sophisticated surveillance systemat theSEMwhichwill enable the surveillancedepartment to carry out its functions moreefficiently.

5. Looking at partnership possibilities The stock exchange Industry has witnessed

some major changes in recent years asexchanges try to boost up liquidity, attractmore investors and position themselves asmulti-productplatforms. TheSEMcannotbeoblivioustothesefundamentalstrategicshifts

currently characterising the exchange space.Inthisconnection,2010-2011willbegearedtowardsidentifying the strategic changes and partnershipsthatcanbebeneficialtothefutureoftheSEMandof its different stockholders, including issuers andinvestors.

The SEM has come a long way since 1989. Thenext 10 years will be very challenging due to thelack-luster growth scenario in countries on whichMauritiusdepends.However,challengesdorepresentopportunitiesandwearekeentocapitalizeonsomeoftheseopportunitiestotaketheExchangetothenextstageofitsdevelopment.

We would like to express my appreciation to theMinistry of Finance and to the FSC for all theirsupport during the year. Our thanks go to SEMsChairman for his support and guidance and tothe Board of Directors for its involvement andcontribution. We owe the Management and staffof the SEM a word of appreciation for their driveandcommitment.Lastbutnotleast,wewouldliketo thank our key stakeholders, namely investmentdealers, listed issuers, investors and all SEMCommitteeMembers for supportingour initiatives.

SunilBenimadhuChief Executive

22September,2010

Sunil BENIMADHUChief Executive

management profileThe STock exchange of mauriTiuSannual reporT 2010

SunilBenimadhu joinedtheSEMasChiefExecutiveinMay1998.HewasappointedExecutiveDirectorof theSEM inOctober2008. HeholdsanM.B.A.in Finance and Investment from the University ofIllinois,UnitedStates. Healsoholds aD.EA. inDevelopment Economics and a Matrise in Macro-Economics from the University of Aix-Marseille,France..HehasrecentlybeenelectedasPresidentoftheAfricanSecuritiesExchangesAssociation(ASEA)foraperiodoftwoyears.From2002to2004,hewasamemberof theExecutiveCommitteeof theSouthAsianFederationofExchanges(SAFE),whichcomprises twelve Stock Exchanges of the SouthAsian region. From 2001 to 2003, he chaired theSADC Committee of Stock Exchanges(COSSE), anassociation of stock exchanges which includes tenexchangesoftheSouthernAfricanregion.

Darmanand VIRAHSAWMYSenior Manager/Head of Business Development

DarmanandVirahsawmyholdsaD.E.S.SinEconomicsofInformationandaMatriseinEconometricsfromtheUniversityofMontpellier,France.HejoinedtheSEMsince1989asManager,andiscurrentlySeniorManager/HeadofBusinessDevelopment.

Shamin Ahmad SOOKIAHead of Listing

Shamin Ahmad Sookia is a fellow member of theAssociation of Chartered Certified Accountantsanda fellowmemberof theChartered InstituteofManagement Accountants. He is also a holder ofan MSc (I.T) and an MBA (Marketing). He joinedthe SEM in 2005, is currently the Head of theListing Division. He is presently a member of theMIPA, ACCA Mauritius Branch & CIMA MauritiusBranch. He isalsoanactivememberof theAuditCommittee of CIMA Southern Africa Region sinceSeptember2006.

Pamela LI CHUN FONGManager, Finance and Administration

Pamela Li Chun Fong is a fellow member of theAssociationofCharteredCertifiedAccountantsandalsoholdsaDiplomainAccountancy.ShejoinedtheSEMin1995asAccountantandcurrentlyheadstheFinance and Administration Department. She is amemberoftheMIPAandACCAMauritiusBranch.

Chaitanand JHEENGUNManager, Trading and Market Information

Chaitanand Jheengun is a fellow member of the

InstituteofCharteredSecretariesandAdministratorsandhealsoholdsanM.B.A.HejoinedtheSEMin1990 as Administrative Officer. He currently headstheTradingandMarketInformationDepartmentandisalsotheCompanySecretary.HeisalsoamemberoftheICSAMauritiusBranch.

Shalini GOKHOOL Manager, Legal Affairs

ShaliniGokhoolholdsanLLB(Hons)andshehasalsocompleted the Vocational Course for Barristers atthe Mauritius Council of Legal Education in 1997.ShejoinedtheSEMin2001andcurrentlyheadstheLegalDepartment.

Nishan AUBEELUCKManager, Marketing and Market Development

Nishan Aubeeluck holds an MSc in InternationalBusinessfromtheUniversityofMelbourne,Australia.HejoinedtheSEMin2004,andcurrentlyheadstheMarketingandMarketDevelopmentDepartment.HeismemberoftheAustralianCentreforInternationalBusiness (ACIB), the Financial Services Institute ofAustralia,andtheFinanceandTreasuryAssociationofAustralia(FTA).

Vickram RAMFULCorporate Finance Manager (Listing Division)

Vickram Ramful is a Fellow of the Association ofCharteredCertifiedAccountants.Heisalsoaholderof a BA(Hons) in Accounting from the Universityof Lincolnshire and Homberside UK. and holdsan MBA(Finance).He joined the SEM in 2005 andcurrently holds the position of Corporate FinanceManager in the Listing Division. He is currently amemberoftheMIPAandACCAMauritiusBranch.

CORPORATE GOVERNANCE PRAC-TICES

The Board of Directors of the SEM reiterates itsengagement in the promotion of the sustainabledevelopmentoftheCompany,particularlyinitsrolesas market operator and commercial entity, whileensuringthat the interestsof theshareholdersandstakeholdersarebothpromotedandprotected.

TheSEMmaintainsasetofCorporateGovernanceprinciplesandpracticestoensurethattheCompanyisincompliancewiththerelevantlegislation,theCodeofCorporateGovernanceforMauritiusandtheSecuritiesAct2005.

SEMS CONSTITUTION

Section 25(1) of the Securities Act 2005 providesthat: TheSEMshallbeademutualisedexchangeconstitutedasapubliccompany.

AnewConstitutionfortheconversionoftheSEMintoapubliccompanyhasbeenapprovedbytheFinancialServicesCommissioninJune2008.TheprovisionofthenewConstitutioncomplieswiththeprovisionoftheCompaniesAct2001inrelationtopubliccompaniesandwiththeSecuritiesAct2005.

SEMbeingapubliccompany,thetransferofitssharesare not subject to pre-emption rights. However,restrictionsonownershipofsharesasrequiredbylaware reflected in clauses 10.1 and 10.4 of the SEMConstitutionasstipulatedbelow:

10.1TRANSFER OF SHARES TO BE SUBJECT TOBOARDANDFSCAPPROVAL

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.

10.4BOARD'S RIGHT TO REFUSE OR DELAYREGISTRATIONOFTRANSFER

(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 Depository, Clearing and Settlement) Act or any other enactment.

(b) 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.

corporate governance reportThe STock exchange of mauriTiuSannual reporT 2010

corporate governance report (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

BOARD OF DIRECTORS OF SEM

SEM SHAREHOLDERS FINANCIAL SERVICES COMMISSION

ExternalAuditor

SEM MANAGEMENT COMMITTEE

OPERATIONS OF THE COMPANY

Listing Executive Committee

Consultative Committee on the review of the listing Rules Committee Index Management Committee Consultative & Informative Committee

SEMBOARD COMMITTEES

Corporate Governance Committee - Nomination Committee - Remuneration Committee

Audit & Risk Management Committee

Other Stakeholders

Investors Investment Dealers Listed Companies Suppliers Employees

Conduct Audit

Supervise

Overview

Reporting

Reporting

ReportingAppointment

Election of 10 Directors Two members of Industry One Executive Director

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

ReportingAppointment

Reporting

Reporting

Appointment

PROFILE OF MANAGEMENT TEAM

TheSEMManagementCommitteeconsistsoftheChiefExecutiveandtheManagersofeachdepartment.TheprofileofeachMemberoftheManagementTeamisdisclosedonpage14oftheSEMAnnualReport.

COMPOSITION OF THE BOARD

Clause21.1ofthenewConstitutionprovidesforthenewcompositionoftheBoardasfollows:

The Board shall consist of not more than tendirectors,ofwhom:

at least two shall be members of the Industry;and

atleastoneshallbeanExecutiveDirector;

NopersonshallbeappointedasaDirectorwithoutthepriorapprovaloftheFSCpursuanttoSection24oftheFinancialServicesAct2007.

The Directors are elected in accordance with theprovisionsof theConstitutionof theCompany. ADirector,excludingtheExecutiveDirector,remainsinoffice for a period of one year and at the annualmeetingfollowingtheexpiryofthisperiodheretiresfrom office, but he is eligible for re-election orre-appointment.

DIRECTORS PROFILE

The profile of each Member of the Board ofDirectorsisdisclosedonpages6and7oftheSEMAnnualReport.

SEM BOARD AND BOARD COMMITTEE MEMBERS

During the financial year ended 30 June 2010, the following directors sat on the SEM Board andBoardCommittees:

Corporate Audit & Risk Board of the Governance ManagementName of Director SEM Committee Committee ProfessorDonaldAh-Chuen 4

MrSunilDuttBenimadhu 4 4

MrsReedheeBhuttoo 4 4

MrVishalJoyram 4

MrVincentLamusse 4

MrGatanLanHunKuen 4 4

MrPeroomalGopallenMooroogen# 4 4

MrsNanditaRamdewar 4 4

MrBilalIbrahimSassa* 4 4

MrAndrTait@ 4

MrRajTapesar 4 4 4

MrVikashTulsidas 4 4

Notes:-

MrVishalJoyramwasappointedalternatetoMrsReedheeBhuttooon10thMarch2010.

MrGatanLanHunKuenwaselectedtositasChairmanoftheBoardon12thNovember2009.

# Mr Gopallen Mooroogen resigned from the Corporate Governance Committee on 12th November 2009 and wasreplacedbyMrRajTapesar.

* MrBilal IbrahimSassaresignedfromtheAudit&RiskManagementCommitteeandwasreplacedbyMrsReedheeBhuttooon12thNovember2009.

@ MrAndrTaitwasappointedalternatetoMrBilalIbrahimSassainApril2010.


DELEGATION BY THE BOARD

While the Board has the specific responsibility fordirecting the long-term strategies and policies ofthe SEM and for approving yearly budgets of theCompany,theday-to-dayoperationalresponsibilitiesare delegated to theChief Executive and the SEMManagementteam.Toassistintheexecutionofitsresponsibilities, and in linewithSection3.5of theCode of Corporate Governance for Mauritius, theBoardhasestablishedtwoSub-Committees;namely,theAuditandRiskManagementCommitteeandtheCorporateGovernanceCommittee,whichalsoactsastheRemunerationCommitteeandtheNominationCommittee.

TERMS OF REFERENCE OF THE CORPORATE GOVERNANCE COMMITTEE

Theapproved termsof referenceof theCorporateGovernanceCommitteeareasfollows:

To ensure that the reporting requirements onCorporateGovernance,onanongoingbasis,areinaccordancewiththeprinciplesoftheCode;

Todetermine,agreeanddevelopthecompanysgeneral policy on corporate governance inaccordancewiththeprinciplesoftheCode;

To ensure that disclosures are made in theannual report incompliancewith thedisclosureprovisionsinthecodeofCorporateGovernanceforMauritius.

TERMS OF REFERENCE OF THE NOMINATION COMMITTEE

TomakerecommendationstotheBoardontheappointmentofnewexecutiveandnon-executivedirectors,includingmakingrecommendationsonthecompositionoftheBoardingeneralandthebalance between executive and non-executivedirectorsappointedtotheBoard;

ToreviewregularlytheBoardstructure,sizeandcompositionandmakerecommendationstotheBoard with regard to any adjustments that aredeemednecessary;

To identify and nominate candidates for theapproval of the Board to fill Board vacanciesas and when they arise, as well as to put intoplace plans for succession, in particular for theChairpersonandChiefExecutive;

TomakerecommendationstotheBoardforthecontinuation (or not) in services of anydirectorwhohasreachedtheageof70;

To recommend directors who are retiring byrotationforre-election;

To liaise with the Board in relation to thepreparation of the Committees report toshareholders,asrequired.

TERMS OF REFERENCE OF THE REMUNERATION COMMITTEE

Determine, agree and develop the companysgeneral policy on executive and seniormanagementremuneration;

Determine specific remuneration packages forexecutivedirectorsofthecompany,includingbutnot limited tobasic salary,benefits inkind,anyannual bonuses, performance-based incentives,shareincentives,pensions,andotherbenefits;

Determine the level of non-executive andindependent non-executive fees to berecommendedtotheshareholdersatthemeetingoftheshareholders.

Duringthefinancialyearended30June2010,theCorporateGovernanceCommitteemettwotimestodiscussonthefollowingmainissues:

To make proposals for the election of Directorsfortheyear2009-2010.

SucessionPlan-Chairman/ViceChairmanoftheSEM

To approve the Performance Bonuses of theExecutive Director and the SEM staff for thefinancialyearended30June2010.

To review the salaries of the Executive DirectorandtheSEMstafffortheyear2010-2011.

TERMS OF REFERENCE AUDIT AND RISK MANAGEMENT COMMITTEE

The terms of reference of the Audit and RiskManagementCommitteearedisclosedintheAuditandRiskManagementCommitteeReport.

SEM RISK MANAGEMENT

AreportsummarisingthekeyrisksfortheSEMandthe relative risk control mechanisms implementedbythecompany,isdisclosedintheInternalControlStatementonpage28oftheAnnualReport2010.

ATTENDANCE OF THE BOARD AND BOARD COMMITTEES

Duringthefinancialyear30June2010,theattendancerecordoftheBoardandBoardCommitteesaregiveninthetablebelow:

AUDIT & RISK CORPORATE MANAGEMENT GOVERNANCE SEM BOARD COMMITTEE COMMITTEE

Number of meetings heldduring the year 9 3 2

Name of director

ProfessorDonaldAh-Chuen 7/9 - -

MrSunilDuttBenimadhu 9/9 - 2/2

MrsReedheeBhuttoo 5/6 2/3 -

MrVincentLamusse 7/9 - -

MrGatanLanHunKuen 7/9 - 2/2

MrPeroomalGopallenMooroogen 7/9 - 1/1

MrsNanditaRamdewar 5/9 3/3 -

MrBilalIbrahimSassa 1/9 - 1/2

MrRajTapesar 7/9 2/3 1/1

MrVikashTulsidas 9/9 1/3 -

MrVishalJoyram(alternate) 3/3 - -

Average Attendance Rate 74% 67% 88%

REMUNERATION PHILOSOPHY

Theincreaseinremunerationoftheemployeesandthe performance bonuses which are paid to theemployeesoftheSEM,arereviewedandapprovedeachyearbytheMembersoftheSEMRemuneration

Committee.Thereviewisbasedontheperformanceassessment of each employee at the end of thefinancialyearandtakesintoconsideration,therateofinflationfortheyear.

0


DIRECTORS REMUNERATION PAID BY SEM AND ITS SUBSIDIARY (CDS)

RemunerationpaidtothedirectorsoftheSEMandoftheCDSfortheyearsended30June2010and2009aredisclosedinthetablebelow:

2010 2009Name of Sem Directors Rs000 Rs000

ProfessorDonaldAh-Chuen 72 51

MrSunilDuttBenimadhu* 6,302 4,860**


MrMarcLagesse - 8

MrVincentLamusse 72 51

MrGatanLanHunKuen 144 94

MrPeroomalGopallenMooroogen 104 133

MrDevanandPoonyth - 7


MrBilalIbrahimSassa 77 65

MrRamanaidooSokappadu - 7

MrRajTapesar 111 61

MrVikashTulsidas 72 61

* Totalremunerationforbothyearsincludesbasicsalaries,End-of-YearandPerformancebonuses,pensioncontribu-tionsandpassagebenefits.

** Inyear2009,theremunerationoftheExecutiveDirectorrelatestotheperiodstartingfrom01October2008to30June2009.

DIRECTORS REMUNERATION PAID BY SEM AND ITS SUBSIDIARY (CDS) (Cont'd)

Name of CDS Directors 2010 2009 (RS000) (RS000)

MrSteveLeung 127 127

MrPeroomalGopallenMooroogen 75 75

MrVikashTulsidas 40 -

MrJavedSuhootoorah 58 54


MrGaetanLanHunKuen 58 54

MrRajTapesar 70 62

MrsArunaCollendavelloo 68 79

MrDhanesswurnathThakoor 54 54

MrRamanaidooSokappadu 74 74

ProfessorDonaldAhChuen 58 62

MrVincentLamusse 77 58

MrVipinMahabirsingh 2,701 2,503


MrSuieSenHockMineAhKine 54 54

MrBilalSassa 30 94

POWERS DELEGATED BY SEMS BOARD TO THE LISTING EXECUTIVE COMMITTEE

ThepowertoactoncertainlistingmattersresidesintheBoardoftheSEM.UndertheprovisionsoftheSecuritiesAct2005,theListingExecutiveCommittee(LEC) previously the Listing Committee, deals withlistingapplicationsontheOfficialMarketandother

specificissuesasprovidedintheSEMListingRules.Furthermore,undertherulesoftheDevelopment&EnterpriseMarket(DEM),applicationsfortheadmis-sionofcompaniesontheDEMisalsoentertainedbytheLEC.


MEMBERS OF THE LISTING EXECUTIVE COM-MITTEE (LEC)

The Listing Executive Committee is comprised ofthefollowingfourRepresentativesofSEMandfourExternalMembers:

SEMs Representatives:

SunilDuttBenimadhu-ChiefExecutiveShaminAhmadSookia-HeadofListingShaliniGokhool-ManagerLegalDepartmentChaitanandJheengun-ManagerTradingandMarketInformationDepartment

External Members:

NassirRamtoola(Chairman)PrabhaChinienShardaDindoyalMargaretWongPinLun

TERMS OF REFERENCE OF THE LEC

The LEC exercises the following responsibilities inrespecttolistingmatters:

To determine the suitability of applicationsmade to the SEM for a listing after reviewinga comprehensive listing report prepared bythe staff of the Listing Division in accordancewith the requirementsof the relevant rulesandprocedures.

TorecommendchangestoListingRulesandRulesof theDevelopment&EnterpriseMarket totheBoard,includingthelistingfeeratespublishedbytheExchangefromtimetotime.

ToassesscasesofapparentbreachesoftheListingRules / rules of the Development & EnterpriseMarketandmakerecommendationtotheBoard,aftertheiradjudication.

ToassesscasesonthesuspensionorcancellationofalistingontheExchangeandtoreferthesetotheBoardforconsideration.

Twelve meetings of the LEC were held during thefinancial year 2010 whereby the following issues,interalia,wereconsidered:

Applications for new listings on the OfficialMarket

Withdrawal of a company from the OfficialMarket

ApplicationsfornewlistingsontheDEM

CancellationofadmissionsfromtheDEM

CONSULTATIVE COMMITTEE ON THE REVIEW OF THE LISTING RULES

A Consultative Committee was set up by the Board of Directors of the SEM to review the Listing Rules governing the Official Market. The Committee comprises of executives of the SEM and representatives of the securities industry. The main purpose of the Committee is to align the Listing Rules with international standards of best practices.

INDEX MANAGEMENT COMMITTEE

The Index Management Committee composed,of stockbrokers, fund managers, academics, andofficials from the Stock Exchange of Mauritius,ensuresthattheprocessofbuildingandmaintainingtheSEM-7isasinteractiveaspossible.MANDATE OF THE INDEX MANAGEMENT COM-MITTEE

TheIndexManagementCommittee:

Establishes the criteria and procedures forselectionoftheconstituentsoftheSEM-7.

Determinesthebaseperiodandvalue. Formulates a scientific and transparent

methodologyofindexcalculation. Reviews,monitorsandmaintainsperiodicallythe

SEM-7. Considersthedevelopmentofsectoralindices.

TheIndexManagementCommitteemeetsquarterlyto review the constituents of the SEM-7. Thesemeetings are held on the first Tuesday (or nearestMauritian business day after that day) of January,April,JulyandOctober.

TheinclusionorexclusionofaconstituentintheSEM-7isatthediscretionofanindependentlyconstitutedIndexManagementCommittee.ThisdiscretionshallonlybeusedinthespiritoffurtheringtheobjectivesoftheSEM-7.

The SEM holds 51 per cent of the ordinary share capital of the Central Depository and Settlement Company Ltd (CDS). At 30 June 2010, the value of the ordinary share capital issued by the CDS Ltd was Rs15 million and its total reserves amounted to Rs102.4 million.

The CDS Ltd is a private company incorporated in Mauritius. Its registered office is situated at One Cathedral Square, Level 4, Jules Koenig Street, Port Louis. The main activities of the company are to provide depository, clearing and settlement services in order to facilitate dealings in securities.

MEMBERS OF THE INDEX MANAGEMENT COM-MITTEE

The current members of the Index ManagementCommitteeare:

Messrs:VincentLamusse(Chairman)SunilBenimadhuRajTapesarMathewLamportPremBeejanBilalSassaDarmanandVirahsawmy(Secretary)

CONSULTATIVE AND INFORMATIVE COMMITTEE

The Consultative and Informative Committee hasbeen set up by the Board with the mandate todiscussissuesrelatedtotradingactivities,operationalaspectoftheATS&CDSSystems,newproductsand

developmentofthemarket.TheCommitteecomprises of representative of SEM, CDS, InvestmentDealersandCustodianBanks,anditdoesnothaveexecutivepowers.TheChiefExecutiveofSEMactsasChairpersonoftheCommittee.

TheCommitteemeetsasandwhentheneedarisesand met six times during the financial year ended30 June 2010. The main issues discussed by thecommitteeinclude:

Introduction of Futures Contracts on the StockExchange.

Intra-dayReverseTurnaroundTrades.

CISRegulations.

MarketSurveillance.

OperationalaspectsofATSandCDSSystems.

GROUP STRUCTURE OF THE SEM

SEM LTD

CDS LTD

51%shareholding


COMMON DIRECTORS AND THE SHAREHOLDING PERCENTAGES

The names of the Directors who sat in both the Boards of the SEM Ltd and the CDS Ltd during the financial year ended 30 June 2010, together with the relative shareholding percentages in SEM and CDS, are given in the table below:

Name of Director % Holding in CDS Ltd % Holding in SEM Ltd

ProfessorDonaldAh-Chuen(ABCGroupofCompanies) - 7.50%

MrsReedheeBhuttoo(SBMSecuritiesLtd) - 4.83%

MrGatanLanHunKuen(IrelandBlythGroup) - 7.50%

MrVincentLamusse(AngloMauritiusAssuranceSocietyLtd) - 7.50%

MrGopallenP.Mooroogen(MauritiusTelecom) - 7.50%

MrsNanditaRamdewar(StateInsuranceCompanyofMauritiusLtd) - 7.50%

MrBilalSassa(CimStockbrokersLtd) - 7.50%

MrRajTapesar(MCBStockbrokersLtd) - 5.44%

The tablebelowdiscloses thenumberofotherdirectorshipswhich thedirectorsof theSEMhold in listedcompaniesandthenumberofsharesheldbythem,bothdirectlyandindirectlyintheSEM.

Name of Director Number of Number of shares Number of shares directorships held directly held indirectly in listed companies in SEM in SEM

ProfessorDonaldAh-Chuen 1 Nil 0.46%

MrSunilDuttBenimadhu Nil Nil Nil

MrsReedheeBhuttoo Nil Nil Nil

MrVincentLamusse Nil Nil Nil

MrGatanLanHunKuen 2 Nil Nil

MrPeroomalGopallenMooroogen 2 Nil 0.000033%

MrsNanditaRamdewar Nil Nil Nil

MrBilalIbrahimSassa 1 Nil Nil

MrRajTapesar Nil Nil Nil

MrVikashTulsidas Nil Nil Nil

SHAREHOLDERS OF THE SEM

Thetablebelowdisclosesthelistofshareholdersandtherelativenumberofordinarysharesbeingheldbythemasat30June2010:

List of shareholders Number of Shares held % Holding

BramerSecuritiesLtd 24,750 7.50

CimStockbrokersLtd 24,750 7.50

MauritiusTelecomLtd 24,750 7.50

StateInsuranceCompanyofMauritiusLtd 24,750 7.50

TheAngloMauritiusAssuranceSocietyLtd 24,750 7.50

MirabelInvestmentsLtd 22,750 6.89

MauritianEagleInsuranceCoLtd 20,000 6.06

NewtonSecuritiesLtd 19,000 5.76

MCBStockbrokersLtd 17,936 5.44

PlasmoLtd 16,248 4.92

RametInvestmentLtee 16,000 4.85

CapitalMarketsBrokersLtd 15,943 4.83

SBMSecuritiesLtd 15,943 4.83

IslandLifeAssuranceCoLtd 14,850 4.50

ABCMotorCoLtd 12,375 3.75

ChueWing&CoLtd 12,375 3.75

IrelandBlythLtd 4,750 1.44

CompagnieD'InvestissementetdeDveloppementLimite 4,543 1.38

FlacqUnitedEstatesLimited 2,500 0.76

ForwardInvestmentAndDevelopmentEnterprisesLimited 2,500 0.76

ExcelsiorUnitedDevelopmentCompaniesLimited 2,500 0.76

TheMedineSELtd 2,500 0.76

GalvanisingCoLtd 2,000 0.61

AssociatedBrokersLtd 999 0.30

Ramet&AssociesLtee 538 0.16

Total 330,000 100


DEALINGS IN SHARES BY THE DIRECTORS

TherewerenodealingsinthesharesoftheSEMbythedirectorsoftheCompanyduringtheyearended30June2010. TheCompanyhasnoshareoptionplans.ThelasttransactioninthesharesofSEM,inthe context of a share transfer, was effected at apriceofRs550inMay2010.

There is no shareholders agreement which affectsthegovernanceoftheCompanybytheboardandtheSEMdoesnothaveanymanagementagreementwithanythirdparties.

RELATED PARTY TRANSACTIONS

During the financial year ended 30 June 2010, the following transactions took place:

Between the SEM and its subsidiary company:

Rs000PurchaseofgoodsandservicesIT services outsourced to CDS Ltd 1,114

OutstandingBalancesIntercompany transactions due to CDS Ltd 459

Between the SEM and key management personnel

CompensationofKeyManagementPersonnel

Short-term benefits 8,983Post-employment benefits 697Contributions to Pension Plans 1,063

DIVIDEND POLICY

ThedividendpolicyoftheCompanyisdisclosedintheDirectorsReportonpage4oftheSEMAnnualReport2010.

IMPORTANT EVENTS

ThefollowingtabledisclosestheimportanteventsfortheSEM:

Dividend declaration 04 June 2010

Submission of annualreports and auditedaccounts to the FinancialServices Commission 30 September 2010

Dividend payment 01 October 2010

Annual Meetingof Shareholders November 2010

CORPORATE SOCIAL RESPONSIBILITY

Duringthepasttwoyears,theSEMhasbeenmakingsmalldonationstoseveralNGOsliketheSACIM,theMauritius Mental Health Association, APEIM andChildhope.

Under Sections 50K and 50L of the Finance andAudit Act 2009, the SEM took the decision to setupaCSRfundtofinanceCSRactivitiesthatwould

help contribute to the social and environmentaldevelopmentofthecountry.

After having considered the various areas ofintervention available, the Company decidedto contribute to the CSR projects listed underthe Approved National Programme; namely, theEradicationofAbsolutePoverty(EAP).

Duringthefinancialyearended30June2010,theSEMhascontributedatotalamountofRs982,109tofinancethefollowingthreeCSRprojects:

Rs1. ProjectLearntoEarnfor Out-of-SchoolYouthCourse 672,109

2. APEIMUpgradingofSchool 160,000

3. GandhiBreedhAshram ProvisionofEquipment& otheramenitiesforthe runningofCharitableHome 150,000

982,109

POLITICAL DONATIONS

NopoliticaldonationswasmadebytheSEMforthefinancialyearended30June2010.

GatanLanHunKuenChairman

29September,2010

internal control statementThe STock exchange of mauriTiuSannual reporT 2010

Board Responsibility

TheBoardoftheSEMassumesitsoverallresponsibilityovertheGroupssystemofinternalcontrolandriskmanagement and for reviewing the adequacy andintegrity of the systems already established withintheGroup.

InordertocomplywiththeprinciplesoftheCodeonCorporateGovernanceforMauritius, theBoardoftheSEMhassetupanAuditandRiskManagementCommittee to identify, monitor and managesignificantbusinessrisksoftheCompany.

Likewise, in accordance with the CDS Rules,the Board of the CDS Ltd has set up a BusinessConduct Committee (BCC) to review and controlthebusinessandoperationalrisksoftheCDS.TheBCCalsomonitorstheriskmanagementframeworkestablishedbytheCDStoaddressthedifferenttypesofrisksthatareinherenttoclearingandsettlementorganisations, namely, counterparty, liquidity,systemicandoperationalrisks.

Key Risks for the SEM

Themain typesof risks facing theStockExchangeofMauritiuswhile conducting itsbusinessactivitiesareenumeratedinthetablewhichfollows:

KEY RISKS EXPOSURES DESCRIPTION

1 Systemic Risk Systemic risk relates to the likelihood that financialdifficultiesexperiencedbyan investmentdealermaybe transmitted or passed over to other investmentdealers and through them, to the SEM. The SEMis subject to systemic risk,which ismanagedby thevarious stakeholderswhoparticipate in thefinancialmarkets.

2 Technology and Systems Risks The operation of the SEMs Automated TradingSystem(SEMATS),isbeingoutsourcedtotheCentralDepository & Settlement Company Ltd (CDS). TheSEMATS is exposed to technology and systems riskssuch as system failure, which can result in loss ofdata.

3 Employee Fraud Risk This is the risk of employees or officers of the SEMindividually, or in collusion defraud the company orcommitanunauthorizedactivity,resultinginfinanciallossorunauthorizeduseofinformationassets,whichcanleadto:legalexposure,reputationriskandadverseimpactonoperations.

4 Negligence, Errors, Omissions Thisrelatestothenegligentacts,errorsoromissionscommittedby theemployeesor thedirectorsof theSEM,givingrisetoclaimsfromthirdpartieswhomayhavesufferedfinanciallossesasaresultofthebreachofprofessionalduty.

5 Information for Decision Making Risk

The risk that sensitive information used for decisionmakingmaynotbeaccurateandknownattherighttime.

KEY RISKS EXPOSURES DESCRIPTION

6 Integrity Risk Information Systems Infrastructure ManagementProcessIntegrityappliesto:

-applicationsystemdevelopmentandmaintenance;-logicalsecurityandsecurityadministration;-computerandnetworkoperations;and-business/datarecovery.

Withoutupdatedpoliciesandproceduresdocument,notermsofreferenceareavailabletofollowwhendealingwithcriticaldataand informationsystemsat theSEM.Furthermore, suchdocumentationprovidesaguidelineforemployeeswhendealingwithcriticaldata.

7 Information systems Infrastructure Management Process Integrity Risk

Thisrelatestotheriskofasystemfailureoccurringanddata needs to be replaced on the system by meansof backup, the backup data may be incomplete orunavailable.Thisalsorelatestotheriskthatconfidentialelectronicmailscouldbeaccessedortamperedwithbyunauthorizedpersonswithoutappropriateauthority.

8 Business Interruption Risk Shouldadisasteroccur(e.g.systemfailure)unnecessaryfinancial lossesanddamagetothereputationoftheSEMmayoccurasaresultoftheabsenceofacompletedisasterrecoveryplan.

10 Operations Risk Theriskthatoperationsarenoteffectivelyandefficientlycompletedduetolackofproperlyestablishedcontrolprocedures.

11 Relevance Risk - The risk that information is not relevant to thepurposes, forwhich it is collected,maintainedordistributed.

-Theriskassociatedwithnotgettingtherightdata/informationtotherightperson/process/systemattherighttimetoallowtherightactiontobetaken.Often arises from a failure to fully understandinformation needs and a lack of attention totimelinessissues.

12 Performance Gap Risk Theriskthatabusinessprocessdoesnotperformataworldclass levelbecausethepracticesdesignedintotheprocessareineffective.

13 Credit Risk Creditriskrelatestothelikelihoodthatclientswillfailtomeettheirfinancialobligationsasandwhentheyfalldue,thusexposingtheSEMtoafinancialloss.

14 All Risk Computer Equipment Thisrelatestothelossordamagetocomputerequipmentcaused by fire and allied perils and from accidentalcausewhilst it isatworkoratrestorduringcleaning,dismantling,movementorreassemblybytheCompany.

15 Personal injury of staff This relates to the liability at law to any employeeforpersonalinjurybyaccidentwhilstengagedintheserviceofthecompany.

Key Risks for the SEM (Cont'd)

0

internal control statement (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

The risk management strategy of the SEM hasbeentohaveriskmonitoringandriskmanagementsystemsinplacethatattempttominimizetothestrictminimum risks that the Group may be confrontedwithindischargingitsresponsibilities.Toachievethisobjective,theGrouphasimplementedthefollowingriskcontrolmechanisms:

Capital Adequacy Requirements

In accordance with the Financial Reporting ofInvestment Dealers Rules, all investment dealershavetosubmitonaquarterlybasis, inadditiontoaudited accounts, Capital Adequacy Requirementsreturns(CAR)returnsbythetenthbusinessday inthemonthfollowingthepreviousthreemonths.

AspertheFinancialReportingofInvestmentDealersRules, no investment dealer is allowed to have ashortfall in its capital, other than pursuant to aspecifictemporaryexceptiongrantedbytheSEM.TheSEMhasfulldiscretionastothenecessityandsufficiency of special adjustments in any particularcase,takingintoconsiderationallfactorspertainingtothemarketwithregardtothefinancialresourcesorfuturecontractsandtheaffairsasawholeoftheinvestmentdealerinvolved.

Internal Control System

TheSEMsinternalcontrolsystemencompassesthefollowingkeycontrolmechanisms:

Delegation of responsibilities to committeesof the Board through clearly defined terms ofreference.

Formal organizational structure, with clearlydefined duties and responsibilities for eachemployeeandwell-definedlinesofreporting.

Formalizedwritteninternalprocedures,detailingclearly the activities performed within eachdepartment.

Segregation of duties whereby tasks areapportionedbetweendifferentmembersofstafftoreducethescopeforerrorandfraud.

Annual Budgetary exercise requiring alldepartments to prepare budgets and businessplans for the forthcoming year. The annualbudget isbeingreviewedbytheAuditandRiskManagementCommitteebeforebeingapprovedbytheBoardforimplementation.

Monthly monitoring of the SEMs actualperformanceagainst theapprovedbudgetwithdetailedexplanationsonvariances.

External Audit

Astatutoryauditoftheyear-endfinancialstatementsisperformedonanannualbasisbyexternalauditorsandtheresultsarebeingdiscussedattheAuditandRisk Management Committee before approval bytheBoardoftheSEM.

IT System

TheSEMhasoutsourceditsITfunctiontoitssubsidiaryCDS,whichpossessesthenecessaryITexpertise.Theoutsourcingagreement,whichstartedsinceJanuary2001, also includes the technical management oftheAutomatedTradingSystem(ATS).Anysoftwareenhancements, modifications and additions arethoroughly tested before implementation in thelive environment. A formal Change ManagementProcedure has been implemented and during theyear,minorchangeshavebeenmadetothesystemsoftheSEMandtheCDS.

IT Security Audit

InordertoassisttheSEMandtheCDSinidentifyinganyITrisksandtoundertakeappropriatemeasurestoaddressthoserisks,thewholeITsystemisbeingsubject to a specialized independant IT audit onceeverytwoyears.

Objective of the IT Security Audit

The objective of the IT Security Audit was todeterminethestateofsecurityoftheSEMandCDSITinfrastructurewiththefollowinggoals:

Reviewing the organizations IT Security PoliciesandDisasterRecoveryPlan.

Discovering thevulnerabilities/Security issues inthe critical information systems running in thenetwork.

Assessingtheoverallbusinessimpactarisingfromanyidentifiedvulnerability(ifgetexploited).

Provide the remedial strategy andrecommendations to assist in mitigating theidentified vulnerabilities and risks during theactivity and strengthen the organizations ITSecurity.

internal control statement (Cont'd)

Scope of the IT Security Audit

TheITSecurityauditcoveredthefollowingareas:

- ReviewofITSecurityPolicy- ReviewofDisasterRecoveryPlanning- ReviewoftheNetworkSecurityArchitecture- Security audit of the network components like

routers,firewalls,switchesetc.- Security audit of the Solaris Servers and Oracle

Databases.- Internalvulnerabilityassessment.- Non-intrusiveExternalPenetrationTesting.- VerificationsofPCsonLAN.

The last IT security audit was conducted duringApril/May2009byAujasNetworkPvtLtd,anIndiancompany specialized in high-end digital securityservices.TheauditreportwassubmittedtotheSEMAuditCommitteeforexamination.Nosecuritythreatsand vulnerabilities were detected during the auditbut the auditors made some recommendations toenhancetheoverallinformationsecurityframeworkattheSEMandCDS.AlltherecommendationsmadebytheauditorswereimplementedbyDecember2009.

One of the recommendations of the IT SecurityauditorswastoimplementaWebContentFilteringmechanismtoscanandmonitortheinternetusageof users. Any unwanted site or contents can befiltered which is intended to improve the securitylevelofthenetwork.Thisrecommendationhasbeenimplemented since December 2009. A SymantecWeb Gateway has been procured and installed.TheSymantecWebGateway is an innovativeWebsecurity gateway appliance that protects againstWeb2.0threats,includingmaliciousURLs,spyware,botnets, viruses, and other types of malware andperforms web content filtering. The Gateway hasbeen configured to ensure consistency with our ITSecurityPolicy.

Disaster Recovery Plan

TheSEMhasaDisasterRecoveryPlan(DRP)tocaterforvariouspossiblescenarios.TheDRPcoversbothpreventiveandcorrectivemeasures,whichwillenableittodealwithvarioustypesofdisasters,whichcandisruptnormalATSsystemoperation.Preventionoflossofdataintheeventofmediafailuresisachievedthrough the implementation of redundant andcyclical backup tapes that are stored both on-siteandoff-site.

The ATS system is designed with High-Availabilityconfiguration with main and backup servers. Theback-updatabaseservermaintainsamirrorimageof

thedatabaseonthemainserver.Intheeventofaproblemwiththemaindatabaseserver,thebackupserver takes over without physical interventionrequiredatclientsites.Similarly,ifoneofthetwotrading engines goes down, the second tradingenginetakesoverwithin10minutes. IntheeventofamajordisastersitethatcausestheATSsitetobeunavailable,systemsandbusinessoperationswillberestoredatabackupsitewithin6to24hours.

Duringtheyear2009-2010,threesimulationsoftheDRP were performed on the following respectivedates:14thSeptember2009,16thDecember2009and30thApril2010.Thesimulationperformedon14thSeptember2009involvedtheparticipationofthe investmentdealers, custodianbanksaswell asSEMandCDSpersonnel.Nosystemsdowntimewasobservedduring2009-2010.

Compensation Fund

Section148oftheSecuritiesAct2005providesforthe creation and maintenance of a Compensationfundtoprovideforthecompensationofinvestorswhosufferpecuniarylossasaresultof:

(a) theinabilityofalicenseeunderthisActoranycollective investment scheme to satisfy claimsarising from civil liability by it in connectionwithservicesprovided;

(b) fraudordefalcationbya licensee,acollectiveinvestment scheme or any of its officers oremployees;or

(c) theinsolvencyorbankruptcyofanylicenseeorcollectiveinvestmentscheme.

The SEM Compensation Fund was established,maintainedandadministeredbytheSEMundertherepealedStockExchangeAct1988(nowSection148oftheSecuritiesAct2005). In1999,theBoardofDirectorsoftheSEMapprovedthataninitialamountofRs2.75million.-be transferredoutof theSEMsretainedearningsforthepurposeoftheFund.Thevalueof the Fundasat30 June2010amounts toRs3.9million.IncaseofanyshortfallintheFund,asper therulesandregulationsof thenewSecuritiesAct,theinvestmentdealerswouldbecalledupontocontributetotheCompensationFund.

Professional Indemnity Insurance Cover

Inthepast, theSEMtookaprofessional indemnityinsurance(P.I)coverfortheamountofRs15millioninthejointnameofSEMandallregisteredinvestmentdealers.InthelightofthenewprovisionsundertheSecuritiesAct2005,andinviewofthedifferencein

internal control statement (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

Professional Indemnity Insurance Cover (Cont'd)

thesizeofbusinessof therelative riskexposure, itwasrecommendedthateachcompanyshouldhaveitsindividualP.Icover.

On the other hand, since both the SEM and theCDS have common interests and also commondirectors sitting on both Boards, the SEM and theCDS decided to take a combined insurance policyincluding Stock Exchange Professional Indemnity /Crime Insurance / Directors & Officers Liability foran amount of Rs15 million. This decision has alsoenabledbothcompaniestoachievesynergiesandtoreduceinsurancecosts.

REPORT ON THE COMPLIANCE AUDIT (Rule 5.2.1 of SEM Business Rules)

Section24(1)(a)oftheSecuritiesAct2005providesthat in addition to its other functions, the SEMshallhaveregulatoryfunctionsandshall, interalia,ensure that it adequately supervises the marketoperations and conduct of market participants.TheSEMBusinessRuleshavebeenimplementedtoenable the SEM discharge its regulatory functionsvis--vismarketparticipantsunderthelaw.TheserulesprovideforthecriteriaandconditionsforInvestmentDealers tobeadmittedasTradingMembersof theSEM, disciplinary action against Trading Membersin the event of non-compliance with the rules,requirements on the business practices of TradingMembersanaCodeofConductwhichtheTradingMembersmustobservewhentradingonSEM.TheSEM Business Rules were approved by the FSC inOctober2008andcameintoforceinJanuary2009,followinga3-month transitionperiodgiven to theInvestment Dealers to ensure compliance with thenew rules. The SEM has set up a compliance unitwhichmonitorsonanon-goingbasiscomplianceofTradingMemberswiththerequirementsoftheSEMBusinessRules.

With the adoptionof the SEMBusiness Rules, theSEMmonitorsthefollowing:

Eligibilitycriteriaformembership

Continued compliance with Exchange require-ments, including training and certification ofparticipantsandcapitaladequacy

Tradingoperationsofparticipants,includingissueof contractnotes to clients,brokeragecharges,turnoverlimits,marginrequirements

Code of conduct for members and membersresponsibilities

Maintenance of records, annual accounts andaudit

Inspectionofparticipants

Sanctions in cases of non-compliance withregulations, rules and procedures of theExchange

The SEM undertook investigation and compliancevisitsduringthefinancialyear2008/2009withtheInvestmentDealers, in virtueof Rule5.2.1of SEMBusinessRulestoassesshowthestandardsdescribedintheBusinessRuleshadbeencompliedwith .AllTrading Members were informed in writing of theshortcomingsobservedduringtheComplianceVisit.Afollow-upvisitwascarriedoutontheshortcomingsin May-June 2009 and most of the members areadheredtotheSEMBusinessRules.AcopyofthefullreporthasbeensubmittedtotheChiefExecutive.

Thenext investigation and compliance visitwill beheldduringthesecondquarterofthefinancialyear2010-2011.

The Audit and Risk Management Committee isestablished to assist the Board in discharging itsduties relating to the safeguarding of assets, theoperation of adequate systems, control processesand thepreparationofaccurate financial reportingand statements in compliance with all applicablelegal requirements and accounting standards.The Committee also covers the risk managementfunctions.

Main Responsibilities

In relation to Auditors and External Audit:

TorecommendtotheBoardwhichfirm(s)shouldbeappointedasexternalauditor(s).

Toevaluatetheindependence,effectivenessandperformanceoftheexternalauditor(s).

Todiscussandreview,withtheexternalauditor(s)before the audit commences, the auditor(s)engagementletter,theterms,natureandscopeoftheauditfunction,procedureandengagementand,theauditfee.

Toagreeonthetimingandnatureofreportsfromtheexternalauditor(s)andmakesuggestionsastoproblemareasthattheauditcanaddress.

Toreviewtheoverallauditrole.In Relation to Financial Statements

Toexamineandreviewthefinancialstatements,theinterimreports,theaccompanyingreportstoshareowners, the preliminary announcement ofresultsandanyotherannouncementregardingthecompanysresultsorotherfinancialinformationtobemadepublic,priortosubmissionandapprovalbytheBoard.

To ensure that the financial statements are incompliancewithaccountingstandards,localandinternational,andwithlegalrequirements;

Toreviewtheannualreportandaccountstakenas a whole and, to ensure that they present abalancedandunderstandableassessmentoftheposition, performance and prospectus of thecompany.

Toreviewtheexternalauditor(s)proposedauditcertificate,managementletterandmanagementresponse.

In Relation to Internal Control and Internal Audit

Tomonitorandsupervisetheeffectivefunctioningof the internal control systems so as to ensurethattherolesandfunctionsoftheexternalauditandinternalcontrolaresufficientlyclarifiedandco-ordinatedsoastoobtainanobjectiveoverviewoftheoperationaleffectivenessofthecompanyssystemsofinternalcontrolandreporting.

In Relation to Risk Management

To receive frommanagement information as totheirprocessesfortheidentification,monitoringandmanagementofsignificantbusinessrisks;

To consider internal control and compliancestructures;

Toreviewtheadequacyofinsurancecoverage;

To review any legal matters that could have asignificantimpactonthecompanysbusiness;

To make regular assessments of the internalcontrols existing within the organisationand to review summary reports and monitormanagementsresponse;

ToensurecomplianceofinvestmentdealerswiththeFinancialReportingRequirementsoftheStockExchange.

Composition

The Audit and Risk Management Committeecomprisesfournon-executivedirectors.MembersfortheyearwereMrsNanditaRamdewar(Chairperson),MrsReedheeBhuttoo,MessrsRajTapesarandVikashTulsidas.

Reporting and Accountability

The Audit and Risk Management CommitteethroughitsChairpersonisaccountabletotheBoardfor itsactivitiesandmakesrecommendationstothe Board concerning matters arising from theCommitteesresponsibilities.

TheChairpersonoftheCommittee,or,inhis/herabsence,analternatememberattendstheannualmeetingtoanswerquestionsconcerningmattersfallingwithintheambitoftheCommittee.

audit and risk management committee report

The STock exchange of mauriTiuSannual reporT 2010

audit and risk management committee report (Cont'd)

The STock exchange of mauriTiuSannual reporT 2010

Main Responsibilities (cont'd)

Meetings

TheAuditandRiskManagementCommitteemeetsasandwhennecessaryandmetthreetimesduringthefinancialyear2009-2010.

During its meetings the Committee carried out afollowupontheinternalcontrolfunctionsandriskmanagement carried out by management. OtherissuesdiscussedbytheCommitteeincluded:

(i) Review of 2008 2009 audited financialstatementsandmanagementletter.

.

(ii) Thesettingupof thetermsandscopeof theaudit functions including the assessment ofthe reporting requirements under IAS/IFRSapplicable accounting policies, audit fees,thetimetable inrespectoftheauditexerciseand the annual report for the financial year2009-2010

(iii) Declaration of dividend for the year ending30thJune2010.

(iv) The2010/2011SEMBudget

(v) Appointment of SEM Auditors for the year2010/2011

LISTING DIVISION

The global financial crisis has highlighted theimportance of having reliable, well-operatedand regulated markets that facilitate transparentprice discovery and generate confidence to allstakeholders.SEMsobjectivetocontinuouslyreviewits listing ruleswithout,howevercompromisingonmarkettransparencyfitswellwithintheperspectiveof creating a flexible but well-regulated marketenvironment. Our efforts are aimed at striking therightbalancebetweenourregulatorydutiesandthecommercial interests of our stakeholders. We arealsocommittedtotakingintoaccountdevelopmentstakingplaceonourdomesticmarketaswellasontheglobalfront.

Amendments brought to Chapter 16 of the Listing Rules

The changes brought to Chapter 16 of SEMsListing Rules in January 2010 were done with thedualobjectivesofaligning itwiththeprovisionsofthe Securities (Collective Investment Schemes andClosed-endFunds)Regulations2008andpositioningtheSEMasalistingvenueofchoiceforglobalandspecialised funds. The new Chapter 16 allows awidervarietyoffundsandotherinvestmententitiestolistonourExchangeandisbasedonasimplifiedregulatory environment which has the necessaryingredients to cater for the evolving nature of thefundsindustryworldwide.Onekeybenefitforfundsalreadyoperating intheglobalbusinesssectorandwhichareseekingalistingontheSEMistheflexibilitybrought to the conditions of entry. The admissionrequirementshavethusbeenconsiderablyalleviatedforthesetypesofentitiesbasedonthespecificitiesoffundsingeneralandinternationalpracticeintheindustryworldwide.

Review of Related Party Transaction Rules including definition of relevant terms

TheSEMhasembarkedontheprocessofreviewingthe definitions of "related party" and "relatedpartytransactions"underChapter13oftheListingRuleswith a view to simplifying the applicationoftheabovedefinitionsinlinewithbestinternationalpracticewhiletakingintoconsiderationtheMauritiancontext.

Compliance and Monitoring

TheListingDivisioncontinuestomonitorlistedissuerscompliance with the Listing Rules by targeting itsresourcestoarangeofactivities,includingvettingofissuersdocumentsforcorporateactions,monitoringmarket activities through querying about unusual

movements in share prices / volumes tradedandprovidingguidanceand rules interpretation toqueriesemanatingfromissuersor issuers'advisers.Theaboveapproachisintendedtominimisedelaysin issuers dissemination of information to thepublic,andpromotesaself-compliantcultureamongissuers.

Improving listed issuers knowledge of the Listing Rules

Occasionallyandasthecircumstancesmaywarrant,theListingDivisionissuesguidancetoallissuersonspecifictopics thatneedtobemademoreexplicit.Also,topromoteself-compliancewiththeListingRulesby issuers, the SEM encourages issuers to improvetheir knowledge of the Listing Rules by attendingseminars organized by the Exchange. During theyear,theExchangeundertooktwoinitiativesinthisregard.AninformativemeetingwasheldinFebruary2010withkey representativesof themanagementcompaniesoperatingintheGlobalBusinessSectortoexplaintothemthekeychangesthathaverecentlybeenbroughttoChapter16oftheListingRules.Themessage that the Exchange wanted to get acrosswas to show how these changes have created anenablingandconduciveenvironmentforthe listingofglobalandspecialisedforeignfundsontheSEM.ApresentationwasmadeinJune2010oncompliancewiththeListingRulesandDEMRulesinthecontextofaone-dayconferenceonCorporateGovernanceorganized by the Institute of Chartered SecretariesandAdministrators.Similareventswith issuersandmarketpractitionershelptheSEMtoascertaintheirneeds and to facilitate mutual understanding ofregulatoryissuesthroughcontinuingdialogue.

Admissions and withdrawals during the year

As at 30 June 2010, there were 37 companies,8 authorised mutual funds and 1 internationalissuer listed on the Official Market as comparedto48companiesand1close-endedfund listedontheDEM.

ThefollowingfundswereadmittedtolistingontheOfficialMarketduringtheyear:-

Global Diversified Fund PCC -CellsNumber2 to4Shares

Africa Sustainability Fund-ClassAShares

Cerulean (Mauritius) PCC-ClassAShares

Imara Portfolio Selector PCC-ImaraFlameLilyFund

audit and risk management committee report (Cont'd)

operating and financial reviewThe STock exchange of mauriTiuSannual reporT 2010

operating and financial review (Cont'd)The STock exchange of mauriTiuSannual reporT 2010

LISTING DIVISION (Cont'd)

Admissions and withdrawals during the year (cont'd)

MonDesertAlmaLimitedandTheMountSugarEstatesCompanyLimitedwerewithdrawnfromtheOfficialMarket during the year following amalgamationswithTheSavannahSugarEstatesCompanyLimitedandHarelFrresLimitedrespectively.

Socit de Dveloppement Industriel et AgricoleLimite(SODIA)wasadmittedtotheDEMduringtheyearwhilenocancellationoftheadmissionofaDEMcompanywasregistered.

Corporate actions and other transactions during the year

AlthoughtheMauritianeconomyhasbeenshowinga great deal of resilience in the face of a worldeconomywhichislabouringtogetbackonitsfeet,Mauritian companies listedon theSEMhavebeenbusy during the year reengineering their businessprocessesandtryingtofindwaystofacethefuture.Duringthelastfewyears,wehavebeenwitnessinganincreasingnumberofcorporateactionsbylistedcompanies. The two tables below give an insightof the corporate actions and other transactions ofmajorsignificancewhichtookplaceduringtheyearonboththeOfficialMarketandtheDEM.

Type of Transaction Number

Name of listed Companies on the

Official MarketStatus as at 30/06/2010

DisclosableTransaction 3 -BritishAmericanInvestmentCo(Mtius)Ltd Completed

-DaleCapitalGroupLimited Completed

-BelleMareHoldingLtd Completed

SubstantialTransaction 1 -TheMauritiusUnionAssuranceCoLtd Completed

RelatedPartyTransaction 2 -OmnicaneLimited Completed

-ENLCommercialLimited Completed

DividendinSpecie 1 -IrelandBlythLimited Completed

LongFormAmalgamation

2 -TheSavannahSugarEstatesCompanyLimited Completed

-HarelFreresLimited Completed

Sharesplit 1 -DaleCapitalGroupLimited Completed

Placing 1 -MauritiusStationeryManufacturersLtd Inprogress

BonusIssue 1 -TheUnitedBasaltProductsLtd Inprogress

RightsIssue 1 -MauritiusStationeryManufacturersLtd Completed

Offer by Seaton Invest-ment Ltd to purchaseminorityshareholders

1 -BritishAmericanInvestmentCo(Mtius)Ltd Inprogress


Corporate actions and other transactions during the year (cont'd)

Attracting new listings

TheSEMaimsatattractingnew listings fromboththedomesticand internationalmarkets.While it isbeingrecognizedthatdomesticenterprisesarefairlywell represented on SEMs markets both sector-wise and industry-wise, we believe that there isstill scope foranumberofprivateundertakings toseeka listingwitha view to raise funds for futuregrowth.Toattractthesecompanies,theSEMwishestounderscorethepowerfulvaluecreationroleithasplayedsinceitsinceptionin1989.AlistingonSEMisbelievedtohelpthetransformationofacompanysway of doing business and facilitate its accessionto yet another level of development in its growthcycle.Withrespecttointernationalissuers,theSEMintends to pursue actively marketing initiatives toentice fundsoperating in the local global businesssector and other entities incorporated abroad orlistedonothersecuritiesexchangestochooseSEMasa listingvenue. For thecomingyear, theListingDivisionhasbeenassignedwiththetaskofhavingatleast2newdomesticcompanieslistedoneachofSEMstwomarketsandofattracting20fundsonourlistingplatform.

SEM Socially Responsible Investing Index (SEM SRI)

Although the practice of Corporate SocialResponsibility(CSR)ismuchdebatedandcriticized,proponents argue that there is a strong business

caseforCSR,inthatcorporationsbenefitinmultipleways by operating with a perspective broader andlongerthantheirownimmediateshort-termprofits.Intheincreasinglyconscience-focusedmarketplacesof the 21st century, the demand for more ethicalbusiness processes and actions is increasing.Simultaneously, pressure is applied on the industryingeneral to improvebusinessethics throughnewpublicinitiativesandlaws.TheSEMperfectlyaccordswiththephilosophyadvocatedbybusinesseswhichembrace responsibility for the impact of theiractivitiesontheenvironment,consumersandotherstakeholders.AswasannouncedinlastyearsAnnualReport,theListingDivisionhasbeencontemplatingtodevelopanewindex,theSEMSociallyResponsibleInvestingIndex(SEMSRI),asameansofidentifyingcompanieslistedonSEMsmarketsthatincorporatetheprinciplesof corporate social responsibility intotheirbusinessactivities.TheSEMSRIwhichwillbeareflectionofthedeliberateinclusionofpublicinterestintocorporatedecision-makingisdesignedtodisplaytheperformanceofsociallyresponsiblesharestradedonboththeOfficialMarketandtheDEM.

Exchange-traded funds ( ETFs )

The Listing Division has been entrusted with thetask of developing the rules relating to the listingof exchange-traded funds (ETFs). An exchange-traded fund (ETF) is an investment fund tradedonstock exchanges similarly to stocks. An ETF holdsassets such as stocks, commodities, or bonds and

Furtherissueofsecurities 3 -TriangleRealEstateInvestmentFund Completed

-AscenciaLtd Inprogress

-UnitedInvestmentsLtd Inprogress

ShareBuyBack 1 -CIELInvestmentLimited Completed

Restructuring ( includingconversion and bonusissue)

1-DeepRiverInvestmentLimited Completed

SignificantTransactions

(acquisition&disposal) 2 -CIELInvestmentLimited Completed

DividendinSpecie 1 -MedineLimited Completed

Conversion of sharesand reduction of statedcapital

1 - Southern Cross TouristCoLtd

Completed

Type of Transaction Number

Name of listed Companies on the

DEMStatus as at 30/06/2010



trades at approximately the same price as the netassetvalueofitsunderlyingassetsoverthecourseofthetradingday.MostETFstrackanindexandmaybe attractive as investments because of their lowcosts,taxefficiency,andstock-likefeatures.Typically,thetradingofETFs isreservedto largeinstitutionalinvestorswhoactuallybuyor sell sharesofanETFdirectlyfrom/tothefundmanager.ETFsofferpublicinvestorsanundividedinterestinapoolofsecuritiesandotherassetsandthusaresimilarinmanywaystotraditionalmutualfunds.

Share Split

Asharesplitorstocksplitisadecisionbyacompany'sboardofdirectorstoincreasethenumberofsharesthat are outstanding by issuing more shares to

currentshareholders.Astocksplitisusuallydonebycompaniesthathaveseentheirsharepriceincreaseto levels that are either too high or are beyondthepricelevelsofsimilarcompaniesintheirsector.Theprimarymotiveistomakesharesmoreaffordableto small investors even though the underlyingvalueofthecompanyhasnotchanged.TheListingDivision believes that there is scope on both theOfficialMarketandtheDEMforcompanieswhosesharepricesare relativelyhigh to split their shares.TheDivisionintendsduringthecourseofthecomingyear tomeetwith the top representativesof thesecompanies and persuade them to proceed with ashare split. This will have the effect of increasingliquidity in their shares and making investments intheunderlyingsharesmoreattractive.

TRADING ACTIVITIES

OFFICIAL MARKET

Market Performance

MarketperformanceontheOfficialMarketforthecurrentfinancialyearwaspositive,withtheindicesreboundingsharplyfromtheirrelativelylowlevelsofendJune2009.Inthewakeofthemarketrebound,market capitalizationof theOfficialMarket,whichhaddropped toRs130.6billionatend June2009increasedby15.3%duringfinancialyear2009/2010

to reach Rs 150.8 billion, i.e 54.4 % of GDP.Traded volumes and traded values also increasedin2009/2010.Foreign investorswhohadretreatedfromfrontiermarkets intheaftermathofthecrisismade their way back to the local stock market,generating positive investment flows on severallistedcompanies.

SEMDEX:FINANCIAL YEAR 2009 to 2010

Month

1,400

1,450

1,500

1,550

1,600

1,650

1,700

1,750

1,800

Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10

SEM

DEX

Jul-09

Official Market Indices

TheSEMDEXclosedthefinancialyearat1654.16pointsgaining16.70%ontothepreviousfinancialyear.TheSEM-7andtheSEMTRIinrupeetermsregisteredgainsof4%and21%respectively.Thefollowingtabledepictsthecomparativefiguresforthemainindicesandthemarketcapitalization.

01-Jul-09 30-Jun-10 Net Change (%)

SEMDEX 1,417.47 1,654.16 16.7

SEM-7 321.2 333.78 3.92

SEMTRI(RS) 3,921.82 4,734.00 20.71

SEMTRI(US) 1,862.85 2,257.84 21.2

MARKETCAPITALISATION(RSbn) 130.58 150.81 15.33

Thegraphsbelowhighlightthemonthlyevolutionofthemainindicesduringthefinancialyearunderreview.TheSEMDEXandSEMTRIreachedtheirhighestlevelatthestartofFebruary2010whereasthebluechipindex,SEM-7,toppedinthemonthofOctober2009.

0


TRADING ACTIVITIES (Cont'd)

OFFICIAL MARKET (Co

Documents

T S EXCHANGE OF MAURITIUS L - Orangesemdex.intnet.mu/downloads/AnnualReport.pdfAnnual Report 2010 The Stock Exchange of Mauritius Ltd The Stock exchange of Mauritius Ltd (Member of