The Stock Exchange of Mauritius: Driving the change process in Africa Presented by Sunil Benimadhu Chief Executive Stock Exchange of Mauritius AMEDA, Maritim Hotel, Balaclava May 23 rd, 2008

Presentation Outline Quantitative assessment of the evolution of the SEM since Qualitative assessment: An overview of some key milestone achievements. Constraints and challenges facing SEM & Capital markets in Mauritius. Addressing the constraints and challenges: Strategic priorities.

Presentation Outline (continued) Scaling up the SEM and driving the change process in Africa: Key initiatives The Mauritius Financial Services Centre 10 years from now: Indicators of success

Quantitative Assessment of the SEM Official and Development & Enterprise Markets No of Listed Companies691 Total Turnover (Rs Million)1412,790 Market Capitalisation (Rs Billion) Market Cap/GDP (%) SEMDEX SEMTRI 100 1,852 4,869

SEM Evolution:Value-creation in some of the Top Listed Companies

Broad equity market index performances among WFE members Ten best performing broad market indexes last year, in local currency terms (source: WFE 2007 Market Highlights)

Qualitative Assessment: An overview of some milestone achievements SEM is widely considered as a reference Exchange in Africa. First Exchange in Sub-Saharan Africa to move to fully-automated stock market infrastructure. SEM & CDS have been very active and successful in exporting services to Exchanges and financial services institutions in Africa. CDS, in partnership with MIT, has automated the market infrastructure in Kenya, Botswana, Ghana, Tanzania and Lusaka (forthcoming) SEM was ranked No 2 Exchange in Africa after the JSE by Africa Investor in 2007, in terms of market infrastructure, modern & flexible regulatory environment, and innovative initiatives to develop capital markets.

Qualitative Assessment: An overview of some milestone achievements SEM & JSE are currently the two Exchanges in Africa running a second market for medium-sized companies. SEM, JSE and Egypt are the Exchanges in Africa to be full-fledged members of WFE. First Exchange in Africa to demutualise. SEM is one of the three Exchanges in Africa included in the newly launched MSCI frontier emerging markets Index.

What next? The key question that we have now to answer is “What next?” How do we leverage on our strong positioning within the region and Africa to scale up our activities and transform the SEM to not only better support economic growth but also to become overtime a regional powerhouse? More importantly, how do we position the SEM to capture a bigger share of the growing interest for African markets? Before answering these critical questions, we need, to look at the constraints, domestic challenges as well as the global challenges facing the SEM.

Constraints and challenges facing SEM & Capital markets in Mauritius. Capital markets in Mauritius is currently essentially a single-asset class market. Capital market activities intricately linked to fortunes of local economy / local companies. Many of the flagship companies already listed on SEM Scope for future listings of meaningful local companies currently restricted to an additional universe of about 40.

Constraints and challenges facing SEM & Capital markets in Mauritius. Free-float of large companies have substantially increased over the years (exceeding 80% in some cases), but those of the smaller ones are still at 30% of market cap. Banks remain a primary source of financing in the local context. Capital raising by listed companies have been fairly muted in spite of strong market appetite for equity (controlling shareholders not wishing dilution). Investors are on the look for new products.

Constraints and challenges facing SEM & Capital markets in Mauritius. Absence of an active secondary market in government debt has severely constrained the emergence of a corporate debt market. Industry players are essentially local and have been servicing local investors. Product innovation has been lagging behind. Penetration opportunities in the region, while very real, remain largely untapped. Mauritian investors are growingly developing a global investment perspective and trend will intensify with further opening up of our economy.

Global Challenges facing the SEM

A ddressing the Constraints & Challenges: Strategic Priorities Review the current capital markets industry model to diversify services & revenue streams. Enter new asset classes and diversify product offerings by moving up in the value-chain of products (derivatives, ETF’s, etc.). Attract new foreign players to the market to scale up activities of the industry and foster product innovation. Increase our penetration and reach within the region so as to export services to the region. Share ensuing benefits of volume growth with stakeholders by bringing transaction costs down significantly. Improve operational excellence and trading performance. Strive for the emergence of a well-integrated financial services sector in Mauritius.

Implementation of Strategic Priorities: Different options Setting up of a regional platform in collaboration with other exchanges of the Southern African region and trade on a single trading platform a much wider universe of products and asset-classes. Capitalise on the competitive advantage of Mauritius (totally open economy, no taxes on Dividends + no capital gains tax, stable economy, efficient and flexible regulatory framework, modern stock market technology) to position the SEM as an obvious choice for the listing of African Securities and underlying derivative products

Scaling up the SEM and driving the change process: Key initiatives Shift from a single asset-class Exchange into a multi-asset class Exchange: A few concrete examples - Introduce and trade derivatives contracts on African products - Work with African institutions to construct sectoral indices and introduce derivatives trading on these sectoral indices - Introduce and trade ETF’s on selected African indices - Leverage on the presence of Global Funds & of a number of global companies to position Maurtitius as a Centre for the listing of Funds and GDR’s.

Scaling up the SEM and driving the change process into a regional powerhouse Position Mauritius as a research and Data Centre for African securities / companies. Leverage on the market intelligence on African securities / companies to develop specialized asset-management business focusing on African companies. Attract more foreign institutions to set up business in Mauritius and use Mauritius to service a much wider regional client/investor pool. Enter into agreements with other Exchanges to trade ETF’s & other derivative products to capture the arbitrage opportunities that may arise due to Mauritius’ specific time zone location. Enhance SEM’s visibility at the international level.

The Mauritius Financial Services Centre 10 years from now: Indicators of success. Variety of product offerings and services. A properly integrated not artificially segmented centre, servicing Mauritius as well as the region. Presence of global providers of financial services. Operating as a fully open centre where all related services (including legal)are open to foreigners. World-class financial market infrastructure and systems. Quality human resource pool which is transferable to other efficient financial centres. Improved market liquidity, depth and breadth.

The Mauritius Financial Services Centre (10 years later) Banking Sector Capital Markets Insurance Sector Other Financial Services Global Business Sector Servicing Africa and the rest of the world