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

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

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

4 Demutualised stock exchange structure which ensures proper monitoring and regulation of members and market participants Operates under the regulatory oversight of the Financial Services Commission Achieved strong performance over the years – Annualised Return of 9.73% in US$ terms from 1995 to 2004 (source S&P Global Stock Market Factbook 2005), Market Cap/GDP ratio of 42.64% Attractive investment destination for foreign investors – Av. P/E ratio of about 8 and Dividend Yield of about 4.6 % No exchange control, capital gains tax and tax on dividend GDP per capita of US$ 5,100, Growth Rate of about 5% and Inflation Rate of about 5%

5 The CDS Organisation Provides depository, clearing and settlement services as well as IT services to securities markets Operational since January 1997 Efficient system that has greatly reduced risks - Meets international standards (G30, CPSS/IOSCO) - Securities are dematerialized - Strict delivery-versus-payment - Rolling T+3 settlement cycle - Net settlement of funds through central bank followed by gross settlement of securities - Settlement guaranteed through a Guarantee Fund - Handles equity, debt and money market instruments Compliance with international standards was verified during the Financial Sector Assessment Program (FSAP) for Mauritius that was conducted by the IMF and World Bank in 2003

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

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

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

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

1010 Parameterized rolling settlement Real-time interface with automated trading system Link to automated payment system Processing of corporate actions 3-tier architecture with separation of logic, content and display provides flexibility, security, reliability and scalability Web-based system (can be deployed over the Internet) High-Availability configuration and Disaster Recovery Plan – No downtime since system went live The CDS System

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

1212 Functionalities CDS Transactions –Record trades –Trade Amendments –Trade Cancellations –Certificate deposits –Certificate withdrawals –Transfers –Freeze/Release –Lending & Borrowing –Pledging Online Electronic Interface –Real-time electronic interface with Trading System –Can also handle manual trade entry

1313 Functionalities Clearing & Settlement –Trade-for-trade –DvP –Multiple settlement banks and 1 clearing bank –Free Deliveries Fees Module –Parameter-driven –Per-transaction levies –Periodic levies –Brokerage fees –Stock Exchange fees –CDS fees –Regulatory fees

1414 Functionalities Member Services –Downloads (client details, transaction details etc.) to interface with broker back-office systems –Issuer/Member/Security/Client details –Client balances –Trade histories –Reporting

1515 Functionalities Comprehensive Audit Trails –Logon failures –Status changes –Modifications to key information Corporate Action Diary & Entitlements –Setup Corporate Actions in Diary –Automatically or Manually calculate Entitlements –Downloads and Uploads for synchronizing with Registrar

1616 Implementation of depository and trading systems in partnership with Millennium Information Technologies Millennium Information Technologies is a leading supplier of depository and trading systems that handle equity and fixed income instruments as well as derivatives and commodities Offices in Boston (USA), Sri Lanka and Singapore (around 300 employees) Major clients in US & Europe- Boston Stock Exchange; largest interdealer debt broker in US (daily turnover of about US$ 900 billion); one of the three primary US exchanges; Croatian Central Depository Millennium has partnered with CDS Mauritius to implement depository systems in Kenya and Ghana (both systems went live in 2004) – Trading system currently being implemented in Kenya CDS provides consultancy and project management services

1717 Regional Integration Cross border transactions can be facilitated by cross-linking the trading and depository systems of the national securities markets within Africa and Middle East This vision can be implemented today thanks to technology Main benefits of integration –Wide access to capital and liquidity across multiple markets –More visible and attractive to foreign investors –African and Middle East markets will be in a better position to face global competition –Adherence to international standards –Sharing of expertise among African and Middle East exchanges and depositories