INTRODUCTION TO IRAN CAPITAL MARKET

Securities & Exchange Organization of Iran

I R A N

Area: 1’648’195 Km2 (18th)

Population: 76’064’623 (17th)

Official Language: Persian

Government: Islamic Republic

Capital: Tehran

Provinces: 32

Neighbors: Turkey, Armenia,

Azerbaijan, Turkmenistan, Afghanistan,

Pakistan, Iraq, [Oman, U.A.E, Qatar,

Bahrain(Persian Gulf neighbors)]

History of Iran

Iran is one of the world’s oldest civilizations• 4000 B. C.

Medes, Achaemenids, Parthians, Sassanids, • 625 B.C – 625 A.D

Islamization of Iran

• 632 - 1501

Safavids, Afshars, Zandies, Ghajars, Pahlavis• 1501 - 1979

Islamic Revolution

• 1979 - Current

General Information Education:

Highest ratio of female to male school enrollment, 1.22 female per male student Science:

World's fastest growth rate in science and technology, 1000% increase of science and technology output in 9 years

Space Program, 9th country in the world capable of both producing and sending satellite to space from a domestically made launcher

Stem cell research and nanotechnologies, amongst the top 10 in the world. Geophysics:

Most accurate calendar in use, Iranian calendar Climate:

Among 4 countries with most diversified weather, the smallest country among them Industry:

Largest producer of Turquoise, Largest reserves of Zinc World's largest producer and exporter of handmade carpets leading manufacture industry in the Middle East, car-manufacture and transportation,

construction materials, home appliances, food and agricultural goods, pharmaceuticals, information technology, power and petrochemicals

Agriculture: Largest pistachio producer, output of 230,000 tons Largest saffron producer, 93.7% of world's total production Largest caviar producer Largest producer of berries Largest producer of stone fruits Largest producer of Berberis

Humanitarian: Host to the world's largest population of foreign refugees

Economy of IranCurrency: Iranian Rial (IRR)Gross Domestic Product (PPP) (18th):

Total: $928.9 BillionPer Capita: $12,200

Gini Index: 44.5 (medium)HDI: 0.71 (high)Growth Rate: 2.5%Stock Markets Capitalization: $135 Billion

Founding Member of UN, NAM, OIC and OPECIran ranks SECOND in the world in natural gas and oil reserves. It holds 10% of the world's proven oil reserves and 15% of its gas. It is OPEC’s second largest exporter and the world's fourth oil producer. Tourist attraction rank in the world: 10th

I ran Economic Sectors

Financial Sector

Real Sector

Foreign Sector

Financial Sector

Financial Sector

Insurance

Money Market

Capital Market

Securities & Exchange

Organization

Stock Exchange

Iran Mercantile Exchange

Financial Institution

sAssociations OTC

Market

Central Securities Depository

Public Joint Stock

Companies

Iran Capital Market History

1936

•Introduction of capital market concept in Iran

1966

•Ratification of Stock Exchange Act by Iranian Parliament

1967

•Official commencement of Tehran Stock Exchange (TSE) operations

1970s

•Economic growth and capital market expansion

Iran Capital Market History (cont’d)

1989

•Re-commencement of trades in TSE after Iran-Iraq war

1990s

•More listings and stock market growth

2005

•Introduction of new Iranian Capital Market Law

2006

•Establishment of Securities & Exchange Organization (SEO), Demutualization and incorporation of TSE (November 2006)

Law CharacteristicsSeparation of supervision and trading

operations

More regulations on primary market specially for disclosure

Possibility to introduce new Islamic financial instruments

Severe punishments for insider trading, non-disclosure and market manipulation

Demutualization and incorporation of exchanges

Establishment of Central Securities Depository

Possibility to launch new Islamic financial institutions and supervising them

Securities & Exchange Organization (SEO) Main TasksTo Prepare by-laws, rules & regulations regarding capital market

To supervise the good performance of Law and related rules and regulations

To issue, suspend or cancel licenses of Exchanges, Associations, OTCs and Financial Institutions

To take necessary measures for preventing violations in the securities market

To supervise activities of Exchanges, Associations and financial institutions

SEO Organization ChartBoard of Directors

President

Dept. of Research, Development & Islamic Studies

Dept. of Public Relations &

International Affairs

Secretariat of the High Council Security Office Internal Auditor

Deputy of Supervision on

Exchanges & Issuers

Dept. of Supervision on

Exchanges

Dept. of Supervision on

Primary Market

Dept. of Supervision on

Issuers

Board of Cooperation

with Auditors & Accountants

Executive Deputy

Dept. of Information Technology

Dept. of Financial

AffairsDept. of Human

Resources & Logistics

Deputy of Supervision on

Financial Institutions

Dept. of Supervision on Financial Institutions

Dept. of Supervision on Brokers

Deputy of Legal Affairs

Dept. of Criminal &

Judicial AffairsDept. of Offence

Prosecution

Secretariat of the Arbitration

Board

Secretariat of the Board of Directors

Boardof Directors' Steering Committees

SEO Main ObjectivesDeveloping Islamic financial instruments, institutions and securities

markets

Developing infrastructure and Information Technology in capital market

Improving investor education

Expanding relationships with foreign supervising entities and related international entities

Systemic Risk Management

Market integrity

Investor protection

SEO Main Fulfilled Goals

Launch of IME international floor in Kish free zone

Launch of new issuers mechanized information system (CODAL) with digital signature

Introduction of new markets (Over The Counter)

Launch of new trading system

MoUs Signed with Some other similar entities

Developing more regulated financial institutions (Investment banks, Investment Advisors, Mutual funds, ….)

Introduction of new Islamic Financial instruments such as Islamic Futures, Mosharakah, Ijarah, Murabaha, etc.

Introduction of Financial Institutions and Instruments Development Act

Introduction of On line Trading and Telephone trading

Introduction of crude oil trade in Iran Mercantile Exchange

SEO Future Plans

Creating a more regulated and transparent market

Implementing severe punishments for non-disclosure, manipulation, fraud and insider trading

To enhance risk management in financial institutions

Tehran Stock Exchange & Iran FarabourseDate of establishment: 1967 & 2009

Markets:• Main Board (A&B)• Secondary Board

# of Listed Companies: 339 & 32

# of Brokers: 87

Main indices: • TSE all share price (TEPIX)• Industrial index• Financial index• TSE - 50

Clearing & settlement: T + 3

Tehran Stock ExchangeBest performing market in 2011

• 29.25 percent return in index

The most diversified Industrial Classification• 36 industrial sectors based on ISIC

Best performing market in the past decade• 583 percent return in index, 1,343 percent increase in Market Capitalization,

and 1,464 percent increase in turnover

Market returns in 2009, 2010 and 2011• 30, 67 & 32 percent respectively

One of lowest P/E ratios in the world• around 6

Red carpet welcome for foreign investors

Iran Mercantile ExchangeDate of establishment: 2007

# of brokers: 75

Traded commodities:

• Metal & Industrial: Steel, Copper, Aluminum, Minerals, Gold

• Multi-commodity: Bitumen group, and agricultural: Cereals, Oil cake and seeds group, Dried and trans products, Crop group

• Petrochemical and Oil Products:, Chemical products, Polymer group, Extract group, Oil group, Naphtha group

Iran Mercantile Exchange(IME)

The most diversified commodities market in the region

Trading in 4 rings, 11 main groups and 181 by products

• 4 main rings: Industrial, Oil and Petrochemicals, Agricultural and Futures

One of very few Commodities Market that trade Steel contracts

Export Ring in Kish Island (Free Trade Zone)

Trade in all different contracts in IME, spot, futures, credit, forward and options

Securities & Exchange

Organization of Iran

April 2012