ammended page fsc 1-98

To be an internationally recognised financial supervisor committedto the sustained development of Mauritius as a sound and

competitive financial services centre“ ”

A n n u a l R e p o r t 2 0 0 2 ● Page 3

CONTENTS

4671115173246636569757981828485868798

Members of the Board

Key Objects & Functions

Chairman’s Statement

Chief Executive’s Report

Industry Reports

Securities Sector

Insurance Sector

Global Business Sector

Theme Papers

Prevention of Economic Crime and Terrorist Financing

Corporate Governance

Audit Committee Report

Financial Statements

Management’s Report

Auditors’ Report

Balance Sheet

Income & Expenditure

Cash Flow Statement

Notes to the Financial Statements

Abbreviations & Acronyms

MEMBERS OF THE BOARD

F I N A N C I A L S E R V I C E S C O M M I S S I O N

Page 4 ● A n n u a l R e p o r t 2 0 0 2

B.R. Gujadhur MA (ECON)

ChairmanManaging Director Bank of Mauritius

Prior to his appointment as Chairman of the Financial ServicesCommission in August 2001, Mr Gujadhur has had a long career withthe Bank of Mauritius, of which he is currently the Managing Director.Previous positions occupied by him include the post of Director of BankingSupervision at the Bank of Mauritius. He has extensive experience of thefinancial sector of Mauritius.

R. Chellapermal FCCA

Director, Financial Policy Analysis, Ministry of Finance.

Mr Chellapermal was admitted as a member of the CharteredAssociation of Certified Accountants in 1980. He joined theMinistry of Finance in 1983 after working in the private sector for6 years. At the Ministry, Mr Chellapermal has been involved invarious projects relating to the financial services sector includingthe establishment of the Stock Exchange, review of company lawand the regulatory framework governing the offshore sector. Hehas also served on various committees including the CompanyLaw Advisory Committee and the Mauritius Accounting andAuditing Standards Committee.

D. Basset SC MA (Oxon)

Vice ChairmanLegal Practitioner, Basset Chambers

Mr Basset was sworn in before the Supreme Court of Mauritius andadmitted to the Mauritian Bar in 1975. Mr Basset was the Master &Registrar in Seychelles in 1985. After being in the judicial service for 10years, Mr Basset joined the banking sector and was the Branch Managerof BNPI in Mauritius. He returned to the legal profession in 1990 andhas provided his expertise in numerous working committees relating tocompany law matters such as the Mauritius Law Reform Commission andthe Company Law Advisory Committee. In November 2000, along withother colleagues of the Bar he set up Basset Chambers. His main areas ofpractice are company law, commercial law and civil litigation.

MEMBERS OF THE BOARD


Y. Pat Fong BSc (ECON) FCA

Partner Kemp Chatteris Deloitte & Touche

Mr Pat Fong started his audit career in the United Kingdom in1960 and moved to Mauritius in 1963 and became Partner ofKemp Chatteris Deloitte & Touche in 1966. His auditassignments have focused on banks and other financialinstitutions. Mr Pat Fong is a member of the Business ConductCommittee, set up under the Securities (Central Depository,Clearing and Settlement) Act 1996. He is currently acting asliquidator of the Mauritius Cooperative Central Bank Ltd underthe supervision of the Bank of Mauritius.

A. Timol BSc (ECON) D.E.A (ÉCONOMIE MATHÉMATIQUE ET

ÉCONOMÉTRIE)

Director Financial Services, Ministry of EconomicDevelopment, Financial Services and Corporate Affairs

Mrs. Timol has been working in the public service for the last twenty-oneyears, starting as an Economist in the Ministry of Economic Planning andDevelopment to become Deputy Director of the Budget Bureau and theEconomic Affairs Department in the Ministry of Finance before accedingto her present position. She has also worked as a Senior Lecturer inMathematical Economics and Econometrics at the University of Mauritiusfrom 1992 to 1995. Mrs. Timol has been closely associated with thedevelopment of the financial services sector over the last 10 years and hasbeen at the forefront of the recent legislative, institutional and regulatoryreforms in this sector.

J. Lallchand PhD CANTAB

Manager, Rogers Financial Services

Dr Lallchand is currently working in a senior managementposition in the financial services sector of the Rogers Group, acompany with some 140 subsidiaries. He has also worked for twoyears in the Planning & Development Department of Rogers &Co. Ltd and was actively engaged in the planning andrestructuring exercise of the entire Group in 1999-2000. He hasalso worked for the World Bank and Tate & Lyle Head Office(London). Dr Lallchand is a Board Member of the MauritiusTourism Authority. He has carried out significant research onregional financial centres and capital markets in emergingeconomies.

R. Makoond MSc TOURISM PLANNING

Executive Director Joint Economic Council

Prior to his present responsibilities at the Joint Economic Council, MrMakoond was the Deputy Secretary General of the Mauritius Chamber ofCommerce & Industry until 1993. He has also worked in the publicservice for the Ministry of Commerce, Ministry of Economic Planning &Development and the Ministry of Tourism. Mr Makoond is a member ofthe Mauritius Negotiating Team on the ACP – EU relations and theWTO Standing Committee. He is also involved at policy level in anumber of institutions such as the Business Parks of Mauritius and theBoard of Investment. Mr Makoond is a Director of the European Centrefor Development Policy Management, a Dutch foundation.

VISION

To be an internationally recognised

financial supervisor committed to the

sustained development of Mauritius as a

sound and competitive financial services

centre.

KEY OBJECTS

The Financial Services Commission was

effectively set up on 1 December 2001

upon the promulgation of the Financial

Services Development Act 2001. The key

objects of the Commission are to:

(a) ensure the sound conduct of business in

the financial services sector;

(b) elaborate policies which are directed to

ensuring the fairness, efficiency and

transparency of financial and capital

markets in Mauritius;

(c) ensure, in collaboration with the Bank

of Mauritius, the soundness and

stability of the financial system in

Mauritius.

KEY FUNCTIONS

(a) To license, regulate, monitor and

supervise the conduct of business

activities in the financial services

sector;

(b) To carry out investigations and take

measures to suppress illegal,

dishonourable and improper practices,

market abuse and financial fraud in

relation to any activity in the financial

services sector;

(c) To set rules and guidance governing

the conduct of business in the financial

services sector;

(d) To establish norms and standards in

order to preserve and maintain the

good repute of Mauritius in the

financial services sector;

(e) To establish and maintain such links

and liaison with international agencies

in the field of financial services as may

be necessary for the furtherance of its

objects.

KEY OBJECTS & FUNCTIONS



I am pleased to present the first AnnualReport of the Financial ServicesCommission (FSC). 2001 was a landmarkyear in the field of financial regulation inMauritius. By enacting the FinancialServices Development Act 2001 (FSDA),Government took the bold decision toestablish a framework for the integratedregulation of financial services inMauritius. The establishment of the FSCwas predicated on the recommendationsmade in the Report of the SteeringCommittee appointed by the HonourableMinister of Economic Development,Financial Services and Corporate Affairs,which was chaired by Mr Dev Manraj,former Financial Secretary.

Following the proclamation of the FSDAin August 2001, and more fully on 1December 2001, the FSC has taken overall the regulatory and supervisory functionsof the former Stock Exchange Commission(SEC), the Insurance Division of theMinistry of Economic Development,Financial Services and Corporate Affairs(MEDFSCA) and the Mauritius OffshoreBusiness Activities Authority (MOBAA).I am indebted for all the good work carriedout by previous Chairmen of Boards andExecutives of these organizations, whichforms the basis on which the furtherance ofFSC’s objectives will be pursued.

Since its establishment last year and inaccord with its Vision Statement, the FSChas embarked on an ambitious plan torealise the vision it has set for itself,notably to rise to a globally recognised

financial supervisor committed to thesustained development of Mauritius as asound and competitive internationalfinancial services centre.

The immediate tasks before the FSC aretwofold: first, to establish high andcommon standards of regulation, to theextent possible, for the diverse non-bankfinancial activities falling within its remitand, second, to keep even pace withinternational regulatory developments tomatch the objective of the Authorities topreserve the image of Mauritius as amodern, respected and well-regulatedfinancial centre.

To address the issue of“comprehensiveness” of the regulatoryframework as contemplated, severalinitiatives have been taken. First, theGovernment of Mauritius has enlisted thefinancial assistance of the World Bank on amulti-pronged approach to the provision ofeffective regulatory services to the financialcommunity. This project, spanning aperiod of two years, entails thedevelopment of an adequate andcomprehensive legislative package tosupport the continued adoption of soundprudential and market conduct regulatorystandards, putting in place proceduralguidelines in line with international bestpractices and embarking on a sustainedtraining programme for FSC staff to beequipped with the appropriate skills forintegrated regulation. Secondly, as aneffective regulator and in keeping with theFSC’s objective to work with the grain of

CHAIRMAN’S STATEMENT


the market, the FSC has opened upavenues for close co-operation andconsultation with market participants in abid to build substance by drawing on theexpertise of the participants.

Last year, Mauritius’ compliance with the40 Recommendations of the FinancialAction Task Force (FATF) was tested by ateam of external evaluators who carried outan FATF type mutual evaluation of thejurisdiction. We have come out quitesuccessfully in that evaluation. Its mainrecommendation, that SuspiciousTransactions Reports (STRs) on moneylaundering should be filed directly with theFinancial Intelligence Unit (FIU), hasalready been implemented by enacting theFinancial Intelligence and Anti-MoneyLaundering Act 2002 (FIAML). On theinitiative taken by Government, we areundergoing this year a Financial SectorAssessment Programme (FSAP) conductedjointly by the International Monetary Fund(IMF) and the World Bank (WB).

The FSAP is designed to assistgovernments, central banks, and nationalsupervisory agencies in assessing financialsector strengths, weaknesses, andvulnerabilities. The assessments highlightthe linkages between financial systemdevelopment and macro economicoutcomes and aim to strengthen thecontribution of the financial system togrowth and development. The expectedoutputs from the current FSAP mission arethreefold: (i) an analysis of the structure,soundness and vulnerabilities of the

financial system, (ii) an assessment of theobservance of international standards andcodes, and (iii) a review of financial sectorinfrastructure and governance framework.As a result, it will identify whether ourfinancial system is inherently stable, whatare its development needs, and acoordinated and sequenced action planthat may be formulated for the financialsector.

The timing of the FSAP exercise coincideswell with the current efforts of the FSC toachieve improved standards of regulation.There is no doubt that the FSAPassessments and recommendations for thevarious components of the financialservices sector will add greater value to ouron-going efforts to develop and give betterand well directed substance to the financialsector. Our willingness to undergo highlevel international assessments shows howexactly we wish to position the jurisdictionin the international community.

In order to sustain its reform programme,the FSC is aiming to instil a complianceculture in the industry it regulates byadopting a new approach in the dischargeof its supervisory duties. As elaboratedfurther in the Report, the FSC hasinitiated work on a range of guidelines andcompliance related documents forconsultation and adoption by the globalbusiness industry. The insurance sectorand the securities industry are receivingsimilar attention.

Section 14 of the FSDA enables




institutions carrying out financial serviceswhich were not regulated heretofore toapply to the FSC for a licence. Since thestart of its operations, the Commission hasauthorised a number of institutionsinvolved in leasing, treasury management,fund management, investmentmanagement and asset management. It isexpected that a greater number of similarinstitutions will seek to be licensed andregulated by the Commission in thecoming period under this provision of thelaw especially when product basedlegislation relating to collective investmentschemes and pension funds will be passed.

The bulk of the reforms undertaken willinevitably lie on legislative changes thatneed to be brought about to redress certaincomponents of the non-bank financialsector. Significant progress has beenachieved so far in preparing four newpieces of legislation. A new Long TermInsurance Bill, a Short Term InsuranceBill, a Pensions Bill and a Securities Billare all in the process of being finalised andwill soon be available for publicconsultation. In the chronology of events,regulations, rules and guidelines will beprepared to cover prudential standards andcodes on market conduct.

With the new regulatory framework inplace, the FSC will establish an AnnualSupervision Action Plan. This plan willprioritise the calendar of regular onsitecompliance visits based on the risk profileof the regulated entities. Work undertaken

in this respect will not only enhance therequired openness and transparency of ourfinancial sector but it will also emphasiseour commitment to internationalinitiatives to fight financial crime. Thiswork will be done in cooperation and inconsultation with the industry. The well-being of market participants and theprotection of the reputation and integrityof the financial centre of Mauritius will bethe FSC’s uppermost considerations.

The disastrous events of 11 September2001 have amplified the responsibility offinancial regulators around the world incountering the financing of terrorism. TheFSC has contacted its licence holders inorder to ascertain whether there are anylinks between their clients and terroristorganisations and individuals listed by theUnited Nations Security Council (UNSC)Sanctions Committee. I am glad to reportthat so far the responses from our licenceholders indicate that there are no linksbetween the terrorist groups and thelicensees. However, we shall continue tobe vigilant and constantly follow up withour licence holders.

The next few years will continue to bechallenging for the Commission. As theregulatory landscape evolves and as theFSC assumes a more prominent role as anintegrated regulator, the Mauritius financialsystem will be called upon to increasinglyadopt international best practices. Thismove will undoubtedly stretch our staffresources to produce far more effort in time



to come. I am pleased with the degree ofmaturity shown by Management and ourstaff members in their new environmentsince they were joined together under oneroof in mid-2002 at the fourth floor of thePort Louis Harbour Front Building. I relyon them as well as on additional staffmembers who will soon be recruited tocontinue the daunting assignment we havegiven ourselves.

Finally, I must say how fortunate I am tobe surrounded in both our moments ofdifficulty and success by the BoardMembers whose unflinching commitmentto work has enabled us to push this far theagenda of the Commission. They have allbeen extremely generous with their time toattend to the work of the Commission.Had it not been for the breadth of theirexperience and vision as well as theirrigorous approach to regulation, I wouldnot have had the opportunity to serve theunderlying objectives of the FSC so well.




B.R. GujadhurChairman

This first Annual Report of the FinancialServices Commission denotes the first andcrucial stage in the process of developingan integrated supervision of the financialsector in Mauritius. It should not bemistaken for the desired end result. Itannounces a process of change. It heralds anew regulatory structure and a newapproach to the supervision of financialservices, markets and intermediaries tomeet the overall objective of maintainingthe stability of the financial system, and ofpromoting confidence in its strength andintegrity. The Commission has as mandateconferred by Parliament the regulation,licensing and supervision of non-bankfinancial institutions generally.

The Report covers mostly that part of thelast financial year starting effectively from1st December 2001 when, by theproclamation of the full text of the FSDA,the operations of the SEC, the InsuranceDivision of the MEDFSCA and theMOBAA were brought under the soleadministrative authority of theCommission. On that date, 60 of the staffof those institutions accepted the offer ofemployment with the Commission andwere enlisted on its establishment. Thistransfer gave rise to one of the mostdaunting aspects of the integration process:that of managing the human resourceswithin the context of change. For the firsttime, staff who had little interactionpreviously, who had different backgroundsand outlooks, were called upon to worktogether and share the commonresponsibilities of a supervisory authorityacross a multi-sectoral range of financial

institutions and activities. The physicaldispersion of the staff of the Commission atthe beginning in three different locations amile away from one another did notfacilitate the task of integrating thepersonnel. They took up the challengewith the maturity and goodwill that wererequired to create cohesion within theCommission. It would be most becoming atthis early opportunity to pay tribute to thestaff ’s commitment to the Commission andits objects. Moving last June to its newpremises at the Harbour Front, theCommission could at last bring all itsmembers under one roof. The design of theoffice with its open spaces describes thenew work culture that is developing at theCommission, based on openness,neighbourliness, co-operation anddiscretion. It will allow for the emergenceof a unique corporate culture reflected bythe values of service, competence andintegrity most relevant to our mission. It isexpected that by next year the staff of theCommission will have through internalconsultation created its own Code ofEthics.

Another area of immediate concern in thefirst months of operation of theCommission was the change of regimeapplicable to Global Business activities.This change was occasioned by both theCompanies Act 2001 (CA) and the FSDA.It had a direct impact on the substance ofthe business as much as on the proceduresfor registering a Global Business Company(GBC). A coordinating committeeconsisting of different governmentdepartments and authorities was set up to

CHIEF EXECUTIVE’S REPORT


consider the representations made by theindustry concerning the implementation ofthe new laws. The fact that the Committeewas only a consultative and coordinationfacility devoid of any executive powershelped to elicit more easily thecollaboration of the various participants.By end June 2002, most of the hundreditems of representations made by theManagement Companies (MCs) and othershad been dealt with satisfactorily.

While managing the change, theCommission was alerted to the pressingissues of the day. From its first days, ittackled the ongoing investigations that hadbeen started by its predecessors. Suchexercises provided occasions to draw fromthe variety of experiences and skills of eachgroup of the staff, and to conceiveinnovative approaches and solutions. Theseveral chapters that follow further in thisReport, tend generally to support theassumption that licensing had been theparticular expertise of the Global BusinessUnit, surveillance of market conduct thatof the Securities Unit while the InsuranceUnit within the Commission had aparticular knack at applying prudentialcapital requirements. So as not to confusethe industry, care has been taken tomaintain the pattern of supervisoryinteraction as far possible as obtainedbefore the setting up of the Commission,while slowly moving internally to afunctional matrix. With the directexperience of handling the various aspectsof the work, and taking into account theexisting resources, it is likely that thestructure of the Commission will soon

evolve and settle along functional lines inorder to respond most effectively to itsobjectives. The Commission's work focuseson three essential aspects: regulating,licensing, and supervising. Support services,such as information technology,administration and finance, provide thenecessary backing to these core lines ofactivities.

In the area of Global Business activities,consultations have already started on anumber of subjects. Following suchconsultations, new rules on licenceapplication forms and procedures are beingintroduced. Operational procedures forMCs are also being prepared forconsultation by the industry. With theintroduction of the qualification of the “fitand proper" test in all licensing processesunder section 14 of the FSDA,consultation is being held to establishcriteria in the determination of thequalification. Another proposal concernsthe subject of compliance testing. Anupdate on the money laundering GuidanceNotes is equally under preparation. Similarpapers are being adapted for consultationand subsequent adoption for the securitiesand insurance businesses. Global Businesshas been under severe stress lately not onlybecause of the general economicenvironment, but also because of thechanges brought in by the local legislation.A new approach is envisioned for theGlobal Business sector: it will no more bethe objective to develop statistical numbersof GBCs but rather to focus on the valuethey bring to the Mauritius economy. Theestablishment of businesses of substance is




the key to enhancing the value-added inthis industry, as the provision of services bylocal MCs and other service providersgrow. The statistics shown further in thisReport demonstrate that, even with lessincorporations, value addition can begreater. Moreover, it is intended as amatter of good governance to carry out acleansing of the register of GBCs byeliminating all those who are not active orhave unduly failed to meet their annualfees. Only then will a clear and faithfulpicture of the industry be obtained. This isthe outcome of the segregation ofregulatory and promotional roles previouslyvested in the MOBAA. Distinct from theCommission, the Financial ServicesPromotion Agency is today explicitlymandated by law to carry out promotionalactivities for the sector, while theCommission deals solely with regulationand supervision.

The securities and the insurance laws havebeen examined for the purpose ofidentifying gaps in the regulation andpractices. A new Bill is being prepared ineach of the areas of business. It is plannedthat the draft legislation will be availablefor consultation in the course of next yearand scheduled for examination byParliament before next April. In theelaboration of the legislation, optimal usewill be made of the review to be conductedjointly by the IMF and the WB in thecontext of the FSAP. Consideration will nodoubt be given to the recommendationsmade by the mission. After preparation,the draft Bills will be submitted to the

Minister having responsibility for thesubject of financial services regarding theissue on consultation with the public.

Pending the new legislation, theCommission has attended to its duties withthe regulatory tools it has under thepresent laws. It chose to conduct on-sitevisits when institutions evinced signs offinancial weakness or where there appearedevidence of misconduct. It is developing an approach to supervisionbased on risk. Already two principles areguiding its supervisory actions. Firstly,regulatory tools are applied in accordancewith the risk profile disclosed by thefinancial institutions so that there is aparity between the nature and degree ofrisk and the severity of the sanction.Secondly, while forbearance may bejustified in limited circumstances, theCommission cannot and will not condonefailure by financial institutions to meet thecapital and solvency requirementsestablished under the law, since suchfailures may entail a risk to the stability ofthe financial system, or may seriouslyindent confidence in the system.

In the course of its activities over the pastmonths, the Commission has identified afew areas of the financial services industrythat are not covered by legislation and thusescape regulatory purview. Using its broadlicensing powers under section 14 of theFSDA, the Commission will be providingsome fundamental prudential conditions ofoperations. This has already been done forgroup treasury management, leasingactivities, and consideration is being given



to identifying licensing conditionsapplicable to fund managers andcustodians.

The coming year is crucial to theCommission for its future development.Recruitment of staff stands high on theagenda. It is the intention of theCommission to double its staff by the endof the coming financial year. Linked withrecruitment, its in-house trainingprogramme will span over the comingyears. The Commission is acutely awarethat the quality of its regulatory serviceswill depend on its capacity to recruit andretain high calibre staff, though somemeasure of outsourcing is inevitable. Withthe adoption of new laws governing theinsurance and securities industries andother areas of the financial sector, it willhave to define its supervisory approach andclearly inform the regulated entities oftheir responsibilities. The need is alreadyfelt to establish closer and formal ties withthe Bank of Mauritius in a joint pursuit tomaintain financial stability and confidencein the financial system. Equally, linkageswill have to be established with otherpublic authorities like the FIU and theRegistrar of Companies (ROC).International co-operation is anothersubject that will occupy the Commission.

The project is highly ambitious. It willneed all the support of its stakeholders todrive the changes required to make theFSC "an internationally recognised financialsupervisor". Without proper consultationand dialogue in good faith, the venturemay take longer than what theinternational financial scene may allow us.




M. I. RAJAHBALEEChief Executive

OFFICIAL MARKET

Market Analysis

Trading takes place on a daily basis via afully automated trading system, the StockExchange of Mauritius Automated TradingSystem (SEMATS).

As at end of June 2002, 44 domesticcompanies were listed on theOfficial List (against 48 at endJune 2001), offering the followingsecurities 30 equities, 9 investmentfunds and 14 debentures, and witha total market capitalisation of Rs32,866 million. In 2001, totalmarket capitalization stood at Rs36,385 million.

Two securities namely The DelphisBank Ltd and Mauritius Fund Ltd,were de-listed during fiscal year 2002. Theformer as part of the Commission’senforcement activity and the latter as aresult of the Fund converting from a close-ended investment company into an open-ended Mauritian unit trust fund.

An amount of approximately Rs 616million was raised during the period fromfresh issues of securities on the exchange.

Equities and Investment Funds

Turnover for fiscal year June 2001 to July2002 amounted to Rs 1,939 million asagainst Rs 1,398 million last year,representing a 39% growth over last year’sperformance. During the first semester,total turnover averaged Rs 153 million

while figures improved by 15% to Rs 175million over the second semester. Themarket registered particularly high turnoverin March 2002 mainly attributable to asubstantial transaction in the shares ofCourts (Mauritius) Ltd. Volume traded for the period amounted tonearly 143 million shares representing a71% increase over the same period lastyear.

For the first six months ending December2001, average volume traded amounted toapproximately 9 million shares whileduring the second semester, averagevolume traded was marked by an increaseof 7 million shares. The performance ofthe Official Market is displayed in Figure 1.

Debentures

As at end June 2001, 8 companies issued19 different types of debentures withdifferent maturities and interest rates.During the period, Rs 1,862 million worthof debentures were redeemed and therewere no new issues.

SECURITIES SECTOR


0

JULY 01 AUG 01 SEP 01 OCT 01 NOV 01 DEC 01 JAN 02 FEB 02 MAR 02 APR 02 MAY 02 JUN 02

5

10

15

20

25

30

35

40

45

TOTAL NO. OF SHARES TOTAL TURNOVER / Rs million

VOLUME AND TURNOVER ON OFFICIAL MARKET (2001-2002)Figure 1: Volume & Turnover on Official Market (2001-2002)

At end of June 2002, only 5 companiesissued 14 different types of debentures. Asindicated in Figure 2, the debenture markethas been on a downward trend mainlyattributed to the removal of fiscal incentivesgranted to debenture issues.

Stock Market Indices

The all share index, SEMDEX and theSEM-7 are the main market indices.

The SEMDEX is an index of all listedshares where each stock is weightedaccording to its share in the total marketcapitalisation. The SEMDEX started theperiod under review at 386.02 points,plummeting to 337.22 in December 2001and rising to a peak of 388.91 points inFebruary 2002. The SEMDEX averagemonthly spread for the first semester endingDecember 2001 stood at 10.26 pointsagainst 14.71 points in the second semester.Trends on the SEMDEX are indicated inFigure 3.

The SEM-7, launched in March 1998, is anindex matching international standardcomprising the seven largest shares on theOfficial List measured in terms of marketcapitalisation, liquidity and investmentcriteria. The SEM-7 started the periodunder review at 90.58 points and closed at79.17 points on 1st July 2002. A high of89.82 points was registered in July 2001 anda low of 73.60 in December 2001. TheSEM-7 average monthly spread for the firstsemester ending December 2001 stood at3.31 points against 4.32 points in thesecond semester. Trends on the SEM-7 areshown in Figure 4.

SECURITIES SECTOR



Total Volume Total Turnover (Rs)

1999-2000 2000-2001 2001-2002

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

Trends in Listed Debentures

Total Volume Total Turnover (Rs)

1999-2000 2000-2001 2001-2002

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

Trends in Listed Debentures

400

300

380

370

360

350

340

330

320

310Jul 2001 Aug 2001 Sep 2001 Oct 2001 Nov 2001 Dec 2001 Jan 2002 Feb 2002 Mar 2002 Apr 2002 May 2002

371.71 359.60 356.13 347.35 345.09 337.22 341.02 370.92 372.17 353.64 351.69387.65 370.06 366.83 356.20 349.89 348.02 373.88 388.91 376.75 372.62 355.98

Jun 2002

349.09358.65

LowHigh

Trends in SEM-7 (2001-2002)

Low High

Trends in SEM-7 (2001-2002)

92

90

88

86

84

82

80

78

76

74

72

70Jul 2001 Aug 2001 Sep 2001 Oct 2001 Nov 2001 Dec 2001 Jan 2002 Feb 2002 Mar 2002 Apr 2002 May 2002 Jan 2002

84.80 80.80 80.57 77.50 77.29 73.60 74.65 82.87 83.30 77.98 77.63 76.8589.82 84.35 83.65 80.33 78.29 77.95 84.44 87.89 84.85 83.84 79.02 79.17

Low

Low

High

High

Figure 2: Trends in Listed Debentures

Figure 3: Trends in SEMDEX (2001-2002)

Figure 4: Trends in SEM-7 (2001-2002)

Index Volatility

The volatility of SEMDEX and SEM-7relative to their quarterly average returns,as measured by the coefficient of variation,are shown in Figure 5. For the third

quarter, both indices posted a positivefigure which is indicative of improvedmarket trends.

Foreign Investment

Foreign portfolio investment which hadbeen on the decline since July 2001 reachedwas lowest in November 2001 with agradual pick up thereafter to a high ofapproximately Rs 48 million. Total foreignbuying for the period amounted to Rs 533million whereas total sales reached Rs 659million with a resultant net foreign sales ofRs 126 million, as indicated in Figure 6.

Market Capitalisation

As at end of June 2002, the Banking andInsurance sector had the largest share ofmarket capitalisation although theproportion declined from 34% in June2001 to 29% in June 2002. TheCommerce and Industry sectors’ marketcapitalisation shares have also registered acorresponding decline of 8% and 10%respectively for the period under review.General trends indicate a rise in the shareof market capitalisation for the Investment,Leisure and Hotels, Sugar and Transportsectors. Shares of market capitalisation pereconomic sectors as at end June 2001 andend June 2002 are displayed in Figures 7.1and 7.2 respectively.

SECURITIES SECTOR


Volatility of SEMDEX and SEM-7(2002/2002)

-7.00 -6.50 -6.00 -5.50 -5.00 -4.50 -4.00 -3.50 -3.00 -2.50 -2.00 -1.5 -1.00 -0.50 0 0.5 1.5 2.0 2.5 3.0 3.5 4.0

SEM-7 SEMDEX

Aprl-Jan 2002

Jan-Mar 2002

Oct-Dec 2002

Jul-Sep 2002

Foreign Investment(2001/2002)

200,000

150,000

100,000

50,000

0

-50,000

-100,000

-150,000

-200,000

60,000

40,000

20,000

0

-20,000

-40,000

-60,000

-80,000

Jul-0

1

Aug

-01

Oct

-01

Nov

-01

Dec

-01

Jan-

02

Feb-

02

Mar

-02

Apr

-02

May

-02

Jun-

02

Thousands Thousands

Foreign PurchasesForeign Sales (Rs) Net Foreign Purchases/(Sales) (Rs)

Sep

-01

Banks and Insurance29%

Transport5%

Sugar11%

Leisure and Hotels24%

Investments9%

Industry6%

Commerce16%

SHARE OF MARKET CAPITALISATION - End June 2002

nce

Banks and Insurance34%

Transport3%

Sugar8%

Leisure and Hotels10%

Investments5%

Industry16%

Commerce24%

SHARE OF MARKET CAPITALISATION - End June 2001

Figure 5: Volatility of SEMDEX & SEM-7 (2001-2002)

Figure 6: Foreign Investment (2001-2002)

Figure 7.1: Share of Market Capitalisation (June 2001)

Figure 7.2: Share of Market Capitalisation (June 2002)

Turnover and Volume

In terms of their share in total marketturnover the Banking and Insurance, Leisureand Hotels and Sugar sectors registered a riseof 3.22 %, 8.77% and 1.61% respectively inthe period under review. Other sectors,namely Commerce, Investment, Industry andTransport registered a decline in their shareof total turnover ranging from 4.02% to4.56% during the same period. The changesin share of total market turnover pereconomic sectors for the period underreview are indicated in Figure 8. TheCommerce, Leisure and Hotels sectorsregistered an improvement in theircontribution to total market volume asdepicted in Figure 9.

Liquidity

Figure 10 gives an indication of the levelof liquidity as measured by the turnoverratio by sector. It is noted that theCommerce, Leisure and Hotels, Sugar,Banking and Insurance sectors haverecorded a rise in their turnover ratios forthe fiscal year 2002 as compared to 2001.

THE OTC MARKETListed Securities

As at end of June 2002, 72 companies werequoted on the OTC market compared to68 companies as at end of last year. Therewere 6 new entrants on the market whiletwo other companies withdrew from theOTC market.

The new entrants were Albatross InsuranceCompany Ltd, Compagnie Mauricienne deCommerce Ltd, Compagnie Mauricienned’Hypermarche Ltd, Maurilait ProductionLtd, Marina Village Hotels Ltd & UnionFlacq S.E Co Ltd. Those which withdrewincluded Investment Holding Ltd andKnitting Fabrics Ind Ltd.

SECURITIES SECTOR



SHARE OF TOTAL MARKET TURNOVER (%)

40%

35%

30%

25%

20%

15%

10%

5%

0%Banks andInsurance

Leisure andHotels

Commerce

2001 - 2002

Sugar Investments Industry Transport

2000 - 2001

35%

30%

25%

20%

15%

10%

5%

0%Commerce Banks

&Insurance

Investment Leisure&

Hotels

Industry Sugar Transport

2001-2002 2000-2001

Shares of Total Volume (%)

Figure 8: Share of Total Market Turnover (%)

Figure 10: Turnover Ratio by Sector (%)

Figure 9: Share of Total Volume (%)

Sugar

Transport

Commerce

Leisure and Hotels

Investments

Industry

Banks and Insurance

2520151050

Market Turnover

For the period under review, total OTC

turnover amounted to approximately Rs

783 million against Rs 808 million.

During the first semester, total turnover

averaged Rs 48 million while figures almost

doubled to Rs 83 million for the second

semester. Turnover reached an all time

high of Rs 349 million attributed mainly to

exceptionally high volume transactions in

the shares of Compagnie Mauricienne de

Textile Ltd and Marina Village Hotel Ltd.

Total volume traded for the period

amounted to nearly 90 million shares

compared to a lower amount of 50 million

shares last year. Average volume of

transactions for the first semester was

approximately 3 million shares rising to 12

million shares during the second semester.

The OTC market trends are shown in

Figure 11.

OUTLOOK

Looking beyond fluctuations experiencedby international stock markets, the Africanand South East Asian region are expectedto continue attracting foreign investors’interests. Securities markets in the regionare upgrading rapidly in terms oftechnological developments in a bid toprovide an efficient platform for tradingand thus to capture a more significantshare of global business. Past experiencehas shown that foreign investments headtowards countries with the lowest riskfactors. This implies that offering the beststandards of transparency, liquidity,products, infrastructure, regulation andcosts of intermediation would go a longway to attract investors’ interest to ourregional markets.

DEVELOPMENTS ON THEEXCHANGE

In light of trends and challenges on theinternational capital markets, both theSEC and the stock market operator, theStock Exchange of Mauritius Ltd. (SEM),have enhanced their operationalprocedures to improve services andreinforce the Exchange’s competitive edge.The FSC is committed to the promotion ofregulations that require more disclosureand timely dissemination of corporateinformation for the benefit of investors andthe general public.

SECURITIES SECTOR


375

350

325

300

375

350

225

200

175

150

125

100

75

50

25

Jul 01 Aug 01 Sept 01 Oct 01 Nov 01 Dec 01 Jan 02 Feb 02 Mar 02 Apr 02 May 02 Jun 02

TOTAL TURNOVER/RS (MILLION) TOTAL NO.OF SHARES (MILLION)

OTC MARKET TRENDS (2001-2002)

45

40

35

30

25

20

15

10

5

0

41.05

Figure 11: OTC Market Trends (2001-2002)

TRENDS IN SECURITIESSUPERVISION AND REGULATION

Securities legislation, which in the pasthad centered around the Stock ExchangeAct 1988, is now complemented by theFSDA, which adds to it new elements ofregulation, much clearer regulatoryobjectives as well as stronger supervisoryand investigative powers for the FSC.

The new Securities Bill which will beintroduced shortly, aims to provide a soundframework for securities trading and toensure consistency in investmentregulation and to foster higher professionalstandards among market intermediaries.The provisions contained in the proposedBill will go through a consultative processwith all stakeholders prior to itsfinalisation.

IMPLEMENTATION OFRISK BASED SUPERVISION

Capital adequacy requirements are crucialto assess insolvency risks of marketparticipants and have polarised attention ofregulators in international forums likeInternational Organisation of SecuritiesCommissions (IOSCO) and InternationalAssociation of Insurance Supervisors(IAIS). The SEM and the CentralDepository and Settlement Co Ltd (CDS)have in place appropriate infrastructureand rules that govern financial resourcerequirements, “FRR”, for stockbrokingcompanies. The Commission has high onits agenda the implementation of aframework that extends capital adequacyrequirements to licensees in the securitiesindustry.

IMPLEMENTATION OFINTERNATIONAL STANDARDLISTING RULES

In 2001, the SEC and the SEM adoptedListing Rules that demand higher standardsof conduct and disclosure from companies,boards of directors and management in linewith international standards. The ListingRules also provide ongoing requirementswith regard to disclosure of financialinformation.

INVESTIGATIONS &ENFORCEMENT

In line with the FSC’s statutory object topromote the sound development of thecapital market and to ensure investor’sprotection, the Commission is committedto effective enforcement. In 2001,investigations were made in a number ofcompanies for transgression of thesecurities law.

Air Mauritius Ltd

In August 2001, the press reportedallegations of fraud and corruption againstcertain officers of Air Mauritius Ltd.

For the purposes of its enquiry AirMauritius appointed an external auditor,Messrs Ernst & Young to investigate theaffairs of the company. Given themagnitude of the sums allegedly involved,a Technical Committee led by the FSC wasset up to monitor both the conduct of theenquiry and the implementation of theredress mechanism it recommended. Areport was submitted by the auditors.

SECURITIES SECTOR



The Technical Committee met with the

auditors and highlighted issues in the

report which in its view would have

required more analysis. The FSC led

discussions in close collaboration with the

companies involved to remedy the

situation while preventing further erosion

of investor confidence. Measures

recommended by the auditors were

implemented by the listed company. The

Board of Air Mauritius and Rogers took

the decisions that were needed to comfort

their investors and demonstrated their

willingness to put in place a train of

measures to tighten control procedures.

Delphis Bank Ltd

The Commission investigated a case of

duplicate issue of shares to the major

shareholders of another listed company,

Delphis Bank Limited. The investigation

lead to the suspension of Delphis Bank Ltd

from the Official List in March 2002 and

the revocation of its banking licence by

the Bank of Mauritius. The case was

further investigated and a detailed report

compiled. It was concluded that action

should be taken against Delphis Bank Ltd.

for contravening provisions of the CA.

The matter was referred to the ROC for

further action. The Secretary and an ex-

Chief Executive of Delphis Bank Ltd. were

arrested and the investigation is being

pursued by the Police. The business of the

bank has been taken over since 7

September 2001 by a new entity, First City

Bank Ltd whilst Delphis Bank Ltd. has

been put into receivership.

MARKET MANIPULATIONCOMPLAINTS

Following complaints received at the FSC

regarding suspected market manipulation

on some shares, a thorough investigation

was carried out. Trade data were analysed

and various persons who traded in those

shares and intermediaries involved in the

trades were questioned.

Though no concrete evidence was found

that would enable the FSC to establish a

case of market manipulation the

Commission was satisfied that the

investigation had a dissuasive effect on

persons trying to act against established

good practices.

INTERNATIONAL REGULATORYORGANISATIONS

The Commission has participated actively

in the work of international regulatory

organisations including the IOSCO, and

the Committee for Insurance, Securities

and Non-Banking Financial Authorities

(CISNA).

SECURITIES SECTOR


IOSCO

The SEC has been a member of the

IOSCO since 1992, and has regularly

attended IOSCO Annual Conferences.

The IOSCO is an international body that

comprises securities regulators of both

developed and emerging markets.

It consists of a Technical Committee

comprised of developed economies and an

Emerging Markets Committee regrouping

the emerging markets. As an active

ordinary member of the IOSCO, the

Commission has not only demonstrated its

commitment to the development of the

securities industry but has also asserted its

firm willingness to regulate the local

market according to the principles of good

securities regulation, developed by the

IOSCO. Self- assessment surveys on the

extent of the Commission’s adoption of

these principles were prepared and sent out

during the year under review.

CISNA

The FSC is also a member of the CISNA,

a regional organisation comprising

regulators of capital markets, retirement

funds, collective investment schemes and

insurance companies in the Southern

African Development Community

(SADC). The main objectives of the

CISNA can be summarised as follows:

■ To establish sound regulatory frameworks

with the aim of promoting and

maintaining confidence in the financial

systems in the SADC region.

■ To prepare and promote a

comprehensive and harmonised regional

market in investment services, insurance

and retirement funds, and capital

markets.

■ To prepare the region’s regulatory

framework for free flow of capital within

SADC.

CISNA is a subcommittee of the Finance

and Investment Sector Coordination Unit

(FISCU) of the SADC. Its objective is to

promote the coordinated development of

non-banking regulatory activities in the

region.

CISNA members have prepared a Strategic

Plan to harmonise regional capital market

regulations and to provide training of

regulators. A Multilateral Agreement will

be finalised under the aegis of CISNA for

the sharing of information among regional

regulators.

In other areas the Commission continues

to strengthen cooperation with its

counterparts through information exchange

and technical cooperation.

SECURITIES SECTOR



CORPORATE HIGHLIGHTS

Official Market

The United Basalt Products Ltd (UBP)

■ UBP Ltd concluded a major transaction

which involved the sale of its surplus

freehold land at Trianon to Highway

Properties Ltd.

■ The sale transactions for a total amount

of Rs 98.4 million had a significant

effect on the financial results of the

group.

The Mauritius CommercialBank Ltd (MCB)

■ In June 2002, the Board of MCB Ltd

examined the impact of the Madagascar

crisis on the operations of the Bank.

■ A decision was taken to increase the

general provisioning levels in UCB

Madagascar and on the Bank’s overall

exposure to the EPZ sector.

New Mauritius Hotels Ltd (NMH)

■ Regarding the restructure of NMH Ltd,

the Listing Committee issued a

conditional acceptance letter to the

company in October 2001 concerning

the proposed listing of Ordinary shares

of NMH Ltd.

■ The FSC later in December 2001 gave

its approval for the circulation of the

restructure documents to the

shareholders of all companies involved.

■ NMH Ltd however failed to comply

with all conditions set down by the

Listing Committee.

■ The company had to submit a fresh

application in this regard which is

currently being examined by the FSC.

British American Insurance Co. (Mtius)Ltd (BAI)

■ In November 2001, BAI executed an

Agreement with Globe Financial

Management Plc “Globe” to merge the two

companies’ operations in Malta.

Delphis Bank Ltd (DBL)

■ The shares of DBL were withdrawn from

the Official List on 13 March 2002

following enquiries carried out by the

FSC into serious matters which had

come to its attention.

■ The Commission found that DBL had

acted inappropriately with regard to the

re-issue of its existing share certificates.

■ DBL also failed to honour its

commitments regarding the

reimbursement of loans made to its

related parties and the re-domiciliation

of its three major shareholders.

SECURITIES SECTOR


Happy World Foods Ltd (HWF)

■ In November 2001, HWF received anoffer to participate in the equity capitalof the company running “CentreCommercial Phoenix”.

■ This proposal was not accepted by theBoard of HWF.

Courts (Mauritius) Ltd

■ In March 2002, the parent company ofCourts (Mauritius) Ltd, Courts(Overseas) Ltd, concluded theacquisition of the 33.3% interest ofProtea Furnishers (SA) Pty Ltd inCourts (Mauritius) Ltd.

■ This came as a result of the strategicdecision by the parent company ofProtea Furnishers (SA) Pty Ltd, Profurnof South Africa, to focus its resources onits core businesses and exit from all jointventures.

Mon Tresor and Mon Desert Ltd(MDMT)

■ In July 2001, MTMD disposed of itsinterest in Mon Tresor (Holiday &Leisure) Ltd, a company quoted on theOTC market.

■ In November 2001, MTMD Ltd made apress announcement pursuant to section13.23 (a) of the new Listing Rulesregarding the sale of 7,000 A of land tothe Sugar Investment Trust Ltd.

Mauritius Union AssuranceCompany Ltd (MUA)

■ In November 2001, MUA effected aRights Issue of 2,040,000 ordinary sharesat Rs 20 per share in the proportion ofone new Ordinary share for every threeexisting ordinary shares payable in twocalls.

■ In December 2001, the companycontinued with an Employee ShareScheme that consisted of an issue of160,000 new Ordinary shares to itsemployees at a price of Rs 20 each.

■ Finally, MUA decided to make a BonusIssue in the proportion of one new sharefor every four shares held.

Gamma Civic Ltd

■ In October 2001, Gamma Civic Ltdentered into a strategic alliance withHolcim through the subscription byHolcim of an indirect minority stake inCiments de L’Océan Indien Limitée.

Air Mauritius Ltd

■ In October 2001, the Board of Directorsof Air Mauritius Ltd appointed MessrsErnst & Young (South Africa) to carryout an independent investigation intoalleged fraud and financial malpracticesat Air Mauritius.

SECURITIES SECTOR



The Mauritius Chemical andFertilizer Industry Ltd (MCFI)

■ MCFI had signed an Agreement withthe Malawi Development Corporation, astate-owned company responsible fordevelopment projects in Malawi, in linewith its objective to expand its activitieson the African market.

Belle Mare Holding Ltd (BMH)

■ In December 2001, BMH decided to sellall the shares it held in Constance PlageLtd to Constance Industries Ltd, asubsidiary company of Constance HotelsServices Ltd, itself an Associatedcompany of BMH.

The OTC Market

Tropical Paradise Co Ltd

■ In June 2002, Tropical Paradise Co Ltdapproved a significant restructuring of itscapital. The restructuring consisted of:

■ a reduction of the par value of the1,250,000 ordinary shares in issue fromRs 100 each to Rs 80 each;

■ the sub-division of these ordinary sharesof Rs 80 each into 10 million ordinaryshares of Rs 10 each;

■ a Bonus Issue to ordinary shareholders inthe ratio of one ordinary share for everyfour ordinary shares held.

■ The company afterwards decided toeffect a Rights Issue to its ordinary

shareholders in the ratio of one ordinaryshare for each ordinary share held afterthe Bonus Issue.

Medine Sugar Estates Co Ltd

■ In March 2002, Medine Sugar EstatesCo. Ltd decided to approve a RightsIssue of 4,347,030 ordinary and 902,970preference shares in the ratio of:

■ one ordinary share for every ordinaryshare held;

■ one preference share for every preferenceshare held;

The offer price of each new share was Rs40.

Espitalier Noel Investment Trust Ltd(ENIT)

■ ENIT Ltd made an offer to SavannahSugar Estates Co Ltd and Mon DesertAlma Co Ltd respectively regarding the100% acquisition of the Ordinary sharecapital of Savannah S.E Investments Ltdand Mon Desert Alma Investments Ltd.

Flacq United Estates Ltd (FUEL)

■ In November 2001, the shareholders ofFUEL unanimously voted in favour ofthe acquisition of Mon Loisir Co Ltd byFUEL. That course of action wasadopted by FUEL in line with thecentralisation of its sugar operationswhich have already started.

SECURITIES SECTOR


Floreal Knitwear Ltd

■ In August 2001, Floreal Knitwear Ltdapproved a re-organisation plan leadingto the creation of an integrated textileunit known as CIEL Textile Ltd.

■ Shares of Floreal Knitwear Ltd werewithdrawn from the OTC list inSeptember 2001 and were replaced bythose of CIEL Textile Ltd.

Investments Holding Co Ltd

■ In July 2001, Investments Holding CoLtd resolved to carry out a voluntarywinding up of the company.

■ Trading in the shares of that companyon the OTC market stopped in August2001.

Unit Trusts

Mauritius Fund Ltd

■ In August 2001, the Mauritius Fund Ltd“MFL” received the final approval of theauthorities in Mauritius for the re-structure of its existing Fund and thecreation of a new sub-fund under theexisting Penny Unit Trust.

■ The new fund which is known as ‘TheMFL Fund’, has been established underthe Unit Trust Act of 1989 and is anopen-ended unit trust fund.

■ That re-structure inter-alia comprised thetransfer of the existing assets of MFL,save its net current assets (includingcash), into ‘The MFL Fund’ in exchangefor units.

■ The transfer had been effected as an off-market transaction.

■ MFL was eventually de-listed from theStock Exchange in both Mauritius andLondon.

SICOM General Fund

■ In June 2001, the SICOM General Fundwas constituted under the SICOM UnitTrust with SICOM Financial ServicesLtd as the Manager, and the MauritiusCommercial Bank Ltd acting as Trustee.

■ Although subscription was closed inJune, the Fund started to operate as fromJuly 2001.

■ The Fund is open-ended and has beenestablished for a period of fifty years.

■ The total value of the SICOM GeneralFund as at 31 December 2001 stood atRs 65.04 million whereas the netamount of income available fordistribution out of the Fund for thesecond semester of 2001 was Rs 2.52million.

SBM Universal Fund

■ The SBM Universal Fund was created inearly June 2002 having as Manager, theSBM Mauritius Asset Managers Ltd andSun Insurance Co Ltd, acting as Trustee.

■ The Fund operates as an open-endedinvestment fund investing both locallyand overseas subject to some invest-ment restrictions and has a maximumduration of ninety nine years.

SECURITIES SECTOR



PROSPECTS

Mauritius has a relatively short history interms of a formalised capital market. Theprogress both in terms of market activityand evolution of the regulatory frameworkhas been well sustained. Efforts areongoing to lift the operational scope of themarket and enhance the regulatoryenvironment. At the same time, theincreased scope and sophistication of thedomestic market, as well as the globaltrend towards more rigorous application ofregulation and control with regard tofinancial services have raised thebenchmark for the evaluation of theregulatory framework, and the Commissionis set to meet the new challenges.

The SEM’s commitment to implementinternational standards are fully recognised.However the fact that the SEM remainsessentially a one-product exchange willmake it particularly vulnerable tocompetition from its Asian and SouthAfrican neighbours which operate morediversified market structures and have theadded advantage of a good scale ofbusiness. Moreover, there is scope forraising the utilisation rates of its high levelinfrastructure. In order to adjust to thechallenges of globalised financial markets,the SEM will need to develop newcompetitive strengths to capture bothglobal investors’ interests and respond tolocal needs.

The FSC will fully support the setting upof appropriate mechanisms to promote andassist the SEM in the implementation ofnew measures to this effect. It is notedhowever that the task to achieve a moreefficient and dynamic capital market willrequire an even greater commitment onthe part of all stakeholders.

SECURITIES SECTOR



Stockbroking Company Contact Details

Asmo Securities & Investment Ltd✉ PCL Building Tel (230)211 0697 / 212 1269

43 Sir William Newton Street Fax (230)208 8508Port-Louis Email [email protected]

Associated Brokers Ltd✉ 3rd Floor, Labama House Tel (230)212 3038

Sir William Newton Street Fax (230)212 6690Port-Louis Email [email protected]

Capital Markets Brokers Ltd✉ Suite G09, Ground Floor, Tel (230)212 1336

St James Court Fax (230)212 8238St Denis Street Email [email protected]

Cirne Stockbrokers Ltd✉ 6th Floor, Harbour Front Building Tel (230)211 3311

John Kennedy Street Fax (230)211 3676Port-Louis Email [email protected]

First Brokers Ltd✉ Ground Floor, BAI Building Tel (230)211 0582

25 Pope Hennessy Street Fax (230)211 0584Port-Louis Email [email protected]

General Brokerage Ltd✉ 8th Floor, Les Cascades Building Tel (230)208 7010

33 Bis Edith Cavell Street Fax (230)212 9867tPort-Louis Email [email protected]

MCB Stockbrokers Ltd✉ Raymond Lamusse Building Tel (230)202 5245

MCB Head Office Fax (230)208 9210Sir William Newton Street Email [email protected]

Ramet Associés Ltée✉ 16, Queen Street Tel (230)212 2661 / 212 3535

Port-Louis Fax (230)208 6294Email [email protected]

SBM Securities Ltd✉ Level 6, State Bank Tower Tel (230)202 1437

1 Queen Elizabeth 11 Avenue Fax (230)202 1710Port-Louis Email [email protected]

Newton Securities Ltd✉ Level 8, Happy World House Tel (230)208 8626 / 212 6741

Sir William Newton Street Fax (230)208 8749Port-Louis Email [email protected]

Cavell Securities Ltd✉ 18 Edith Cavell Street Tel (230)208 0808 / 208 4802


STOCKBROKING COMPANIES



OVERVIEW

The September 11th attacks had serious

effects on the insurance and re-insurance

industry worldwide. Several large re-

insurance companies in Europe and the

USA had to close down as a result of

massive claims on property and liabilities

by individuals and corporate bodies.

Mauritius has not been insulated from the

prevailing higher risks which characterised

business. New pressure on the cost of re-

insurance rippled world wide and in

Mauritius, bidding premium charges up

across the industry.

Insurance companies are becoming an

important segment of the domestic

financial sector, offering a variety of

insurance services ranging from long term

insurance business, such as life assurance,

pensions and permanent health insurance,

to general insurance business, such as fire,

motor, workmen’s compensation,

employer’s liability and miscellaneous

insurances.

As at 30 June 2002, 23 insurance

companies including three foreign insurers

were licensed. Total assets for the period

ending June 2001 stood at Rs 23,972

million. There have been no new entrants

in the industry.

Long term insurance funds and general

insurance funds amounted to Rs 18,592

million and Rs 523 million respectively as

at end June 2001.

Total gross premiums for long term

insurance business amounted to Rs 3,247

million, while gross premiums for general

insurance business stood at Rs 2,087

million for the period ending June 2001.

Contribution of the sector to GDP has

fluctuated around an average of 17.7% over

the past three years.

The major share of business is effected by

three leading groups of companies

representing almost 75% of assets, 83% of

retained profits, 63% of net worth and

78% of life premiums.

Although the other 20 insurers are

competing for the remaining market share,

it is expected that the insurance sector in

the economy will assume greater

importance with enhanced economic

activities, riskier job environment and an

ageing population.

INSURANCE SECTOR


REGISTERED INSURERS

As indicated in Table 1, the total number of insurers registered under the Insurance Act1987 as at 30 June 2002, stands at 23 of which, 3 are foreign insurers.

Table 1: Number of Registered Insurers

Type of business Local Foreign Total

Long Term Insurance business only 3 1 4

General Insurance business only 5 2 7

Long Term and General Insurance business 12 0 12

Total 20 3 23

The companies involved in both long term and general insurance are all locally based.For the past three years the number of both local and foreign insurers have not evolvedsignificantly except for the deregistration of a foreign insurer, Munich ReinsuranceCompany of Africa Ltd in 2001.

A list of registered insurers is found in Annex 1.

INSURANCE INTERMEDIAIRES

The number of insurance intermediaries registered over the past five years is indicated inTable 2. A rising trend in the number of those intermediaries is observed.

Table 2: Number of Insurance Agents, Brokers and Salesmen

Registered Intermediary 1998 1999 2000 2001 2002

Insurance Agents 94 106 114 144 169

Insurance Brokers 7 7 8 8 9

Insurance Salesmen 2,236 2,361 2,416 2,512 2,571

TOTAL ASSETS

The insurance sector, as a major component of the financial system, continues to play animportant role in the socio-economic development of the country. The total assets ofregistered insurers which constituted 16.3% of GDP in 1997 have grown to 18.2% ofGDP in 2001, as indicated in Table 3.

Table 3: Contribution of Assets to GDP

Year 1997 1998 1999 2000 2001

Total Assets (Rs Million) 14,130 16,672 18,635 21,123 23,972

% of GDP 16.3 17.0 17.3 17.7 18.2

INSURANCE SECTOR



Total assets in 2001 exceeded Rs 23.9 billion, representing an increase of 13.5 % over thelast year. It is also observed that the total assets of insurance companies have grown by 29%over the period 1999-2001.

The distribution of assets of insurance companies is provided in Annex 2.

Figure 1 indicates that out of the total assets of Rs 23,972 million in 2001, mortgage loansamount to 23% of total assets in 2001 compared to 25% in 2000 and 1999.

The share of land & property has decreased from 6% in 1999 to 5% in 2000 and 2001. Theshare of Government securities has increased from 6% in 1999 to 8% in 2001, and that ofshares & debentures from 30% in 1999 to 35% in 2000 and 2001.

Figure 1: Breakdown of Assets of Insurance Companies (1999 – 2001)

Distribution of the assets and liabilities of individual registered insurers for the year 2001are provided at Annexes 3 and 4 respectively.

LONG TERM INSURANCE BUSINESS

Premium and Investment Income

The gross premium income in respect of long term insurance business increased from Rs2,770 million in 2000 to Rs 3,247 million in 2001, registering an increase of 17%, asindicated in Table 4. A summary of revenue accounts for each registered insurer for theyear 2001 is found at Annex 5.

Table 4: Gross Premium & Investment income

Year 2000 2001

Gross Premium (Rs million) 2,770 3,247

Investment Income (Rs million) 1,410 1,581

Total 4,180 4,828

INSURANCE SECTOR

35

30

25

20

15

10

5

0Morttage Loans Others Loans Government

SecuritiesShares

&Debentures

Land&

PropertyDeposits

&Securities

Other Assets

%

2001 2000 1999


Given the long term nature of life insurance business, income arising from the investmentof funds plays an important role. However, we note a decline in investment income, whichwas 51% of the gross premium income in 2000, and 49% in 2001.

Benefits Payment

Payment of benefits associated with life insurance policies arise in the event of death,disability or survival at a specified age or date. It may represent a benefit on maturity or anagreed date under a life insurance policy or a periodical payment under an annuity orpension contract. The surrender of a policy before its due expiry date may also involvepayment of a sum to the life assured.

We note that total payment of benefits have increased from Rs 1,400 million in 2000 to Rs1,639 million in 2001, an increase of 17%. Survival benefits payable under endowmentpolicies and annuity payments accounted for 72% of the total payments in 2001 as against71% in 2000. Approximately 6% of the total benefits were paid in respect of death duringthe year 2001. The proportion of bonus cashed to total payments has decreased from 12%in 2000 to 11% in 2001.

GENERAL INSURANCE BUSINESS

Premium Income

The gross premium income in respect of general insurance business increased from Rs 1,966million in 2000 to Rs 2,087 million in 2001, representing a growth of 6% as compared to9% in 2000. The premium income for general insurance business for the period 1999 -2001 and its distribution over the five classes of business are displayed in Figure 2.

Figure 2: Gross Premium Income for General Insurance Business (Rs million)

INSURANCE SECTOR

Personal Accident

Transport

Miscellaneous

Fire

Motor

0 500 1000 1500 2000 2500 3000

1999 2000 2001



The share of fire insurance business

remained at the same level of 20% of total

premium income in 2000 and 2001, while

motor insurance business has increased

from 44% in 2000 to 45% in 2001.

Miscellaneous accident insurance business

comprising several sub-classes has

decreased its share of total premium

income from 21% in 2000 to 18% in 2001.

Transport insurance business is at the level

of 9% of total premium income in 2001 as

against 8% in 2000. The share of personal

accident insurance business in 2001 has

increased to 8% from 7% in 2000.

Claims Experience

Claims paid in relation to gross premium

provide an indication of the profitability of

the business operations. The incurred

claims amount is arrived at by adding the

year end outstanding claims provision to

the actual claims payments made during

the year and deducting these from the

outstanding claims provision of the

previous year. The incurred claims

position is thus dependent on the accuracy

of the estimates for outstanding claims.

Considering the different classes of general

insurance business altogether, it is noted

that the claims ratio has decreased from

59% in 2000 to 53% in 2001. The gross

claims ratio in respect of fire insurance

business is at 24% in 2001 as against 30%

in 2000 and that of miscellaneous

insurance business has decreased from 79%

in 2000 to 61% in 2001. As regards motor

insurance business, the claims ratio has

increased from 73% in 2000 to 74% in

2001.

A summary of revenue accounts in respect

of general insurance business for the year

2001 is provided in Annex 6.

LEGISLATIVE CHANGES

The FSDA, and the Insurance Act 1987

(as amended) set out the legal framework

for the conduct of insurance business in

Mauritius. The Insurance Act 1987 does

not apply to the Sugar Insurance Fund

Board, the African Reinsurance

Corporation, Lloyds - an association of

underwriters - and some organisations that

provide insurance benefits incidentally to

their main activities.

The FSDA and the Insurance Act 1987 (as

amended) confer upon the FSC powers to

ensure compliance with their provisions by

registered insurers and insurance

intermediaries, which, inter alia, require

that business is conducted on the basis of

sound insurance principles. Thus,

supervision not only requires a scrutiny of

the statutory returns and accounts but also

other aspects of insurers’ business such as

the maintenance of the statutory deposits

at the level laid down in the Act, the

constitution and maintenance of the

statutory reserve fund, investment in

INSURANCE SECTOR


securities prescribed by law, the proper

investment of funds in general, adequate

reinsurance arrangements, margin of

solvency, etc.

With a view to improving the financial

position of insurance companies, certain

provisions of the Insurance Regulations

1988, issued under the Insurance Act 1987,

were amended in 2000 to increase the paid

up share capital of insurers to

Rs 20 million with effect from 1 July 2000

and to Rs 25 million as from

1 July 2001.

New Legislation

The Insurance Act 1987 is presently being

reviewed and a new draft Insurance Bill is

currently under preparation to address

regulatory issues such as risk-based capital,

solvency margin requirements,

management of assets, corporate

governance, internal controls, etc.

The new Bill will segregate life and non-

life insurance so as to minimise contagion

and insolvency risks in the event of

company failures. It will address the issues

of good Corporate Governance and

internal control systems making it

compulsory for the Board of Directors to

manage their business on a sound basis and

to address consumer complaints. The

Insurance Bill will go through a

consultative process with all stakeholders

before being submitted to Parliament.

COMPLAINTS

The Commission has received an

increasing number of complaints from

policyholders, consumer organisations,

insurers and third parties against certain

insurance companies regarding the

unsatisfactory handling of motor claims.

Enquiries have been carried out with a

view to settle claims in genuine cases.

The number of written complaints

registered for the period 1 July 2001 to 30

June 2002 is 257 as against 180 for the

period 1 July 2000 to 30 June 2001.

ENFORCEMENT ACTIONS

Investigations were carried out on four

companies for suspected non compliance

with the insolvency and statutory reserve

requirements of the law. One company was

suspended and an administrator was

appointed.

INSURANCE SECTOR



INTERNATIONAL REGULATORY

ORGANISATIONS

IAIS

The FSC is a member of the International

Association of Insurance Supervisors

(IAIS) based in Basle, Switzerland. The

IAIS comprises national insurance

regulators and supervisors from over 100

jurisdictions. Established in 1994, the IAIS

contributes to global financial stability

through :

■ Developing cooperation among

members.

■ Setting international standards on

insurance regulation.

■ Assisting members in complying with

IAIS standards at national and

international levels.

■ Coordinating work with other national

and international financial institutions.

INSURANCE SECTOR


Insurance Company Contact Details

Albatross Insurance Company Ltd✉ 22 St George Street Tel (230)207 9007


Anglo Mauritius Assurance Society Ltd✉ Anglo Mauritius Building Tel (230)202 8600

10 Intendance Street Fax (230)208 8956Port-Louis Email [email protected]

British American Insurance Co. (Mtius) Ltd✉ 25 Pope Hennessy Street Tel (230)202 3600

Port-LouisFax (230)208 3713Email [email protected]

G.F.A. Insurance Ltd✉ Corner 5 Bourbon & Royal Streets Tel (230)210 3148


Indian Ocean General Assurance Ltd✉ 35 Corderie Street Tel (230)212 4125


Island General Insurance Co Ltd✉ 5th Floor, Labourdonnais Court Tel (230)212 8594

Labourdonnais Street Fax (230)212 8684Port-Louis Email [email protected]

Island Life Assurance Co Ltd✉ Ken Lee Building, Edith Cavell Street Tel (230)210 8686 / 89


Jubilee Insurance (Mauritius) Ltd✉ 4th Floor, PCL Building Tel (230)210 3678 / 210 3985

43, Sir William Newton Street Fax (230)212 7970Port-Louis Email [email protected]

Lamco International Insurance Ltd✉ 12 Barracks Street Tel (230)212 2221 / 212 4494 / 12


La Prudence (Mauricienne) Assurances Ltee✉ 2nd Floor, Barkly Wharf Tel (230)208 8935 / 212 3396

Le Caudan Waterfront Fax (230)208 8936Port-Louis Email [email protected]

REGISTERED INSURERSANNEX 1



REGISTERED INSURERS

Insurance Company Contact Details

Leadway Insurance Co. Ltd

✉ Pearl House Tel (230)208 4076 / 211 905016 Sir Virgil Naz Street Fax (230)211 9960Port-Louis Email [email protected]

Life Insurance Corporation of India✉ John Kennedy Street Tel (230)208 1485 / 212 5316


Llyods✉ 10 Dr Ferriere Street Tel (230)208 2811


Mauritian Eagle Insurance Company Ltd✉ 1st Floor, IBL Building Tel (230)212 4877

Caudan Waterfront Fax (230)208 8608Port-Louis Email [email protected]

Mauritius Union Assurance Company Ltd✉ 4 Leoville L’Homme Stree Tel (230)207 4185


New India Assurance Company Ltd✉ 3rd Floor, Bank of Baroda Building Tel (230)208 1442 / 210 4774

15 Sir William Newton Street Fax (230)208 2160Port-Louis Email [email protected]

Rainbow Insurance Company Ltd✉ Rainbow House Tel (230)212 5767

23 Edith Cavell Street Fax (230)208 8750Port-Louis Email [email protected]

State Insurance Company of Mauritius Ltd✉ Sir Celicourt Antelme Street Tel (230)208 5406


The Stella Insurance Company Ltd✉ 36 Sir William Newton Street Tel (230)208 0056


Sun Insurance Company Ltd✉ 2 Corner Barracks & St George Streets Tel (230)208 0769


Swan Insurance Company Ltd✉ 6-10 Intendance Street Tel (230)207 3500 / 211 2001

Port-Louis Fax (230)208 6898 / 211 2034Email [email protected]


(Percent of total)

1997 1998 1999 2000 2001

Mortgage Loans 30 26 25 25 23

Other Loans 8 5 5 5 4

Government Securities 7 9 6 7 8

Shares & Debentures 22 26 30 35 35

Land & Property 6 7 6 5 5

Deposits & Securities 16 16 17 13 15

Other Assets 11 11 11 10 10

TOTAL (Rs ‘000) 14,129,693 16,672,435 18,634,611 21,123,373 23,971,659

DISTRIBUTION OF ASSETS OF INSURANCE COMPANIESANNEX 2



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DIS

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51,

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1,02

16,

276

3,52

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3,19

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374

1,08

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123,

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Net

92,5

9175

0,99

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2,94

95,

964

52,0

055,

244

77,0

0728

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141,

863

14,2

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31,6

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14,8

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6,63

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ance

0

9,69

62,

678

961

8227

1,58

62,

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1,12

70

12,0

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Net

28,3

7038

2,72

347

5,66

87,

752

21,3

762,

942

20,4

8511

,867

83,4

9114

,405

461,

612

5,72

216

,431

106,

637

1,63

9,48

1

CO

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ISSI

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:

Rec

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d an

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able

2,99

82,

382

031

240

203

2,83

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2,54

536

38,

433

00

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,034

Paid

and

pay

able

5,55

924

,524

40,3

5316

94,

289

689

5,23

32,

654

13,8

161,

046

25,3

7872

4,21

117

,264

145,

257

Net

(2,5

61)

(22,

142)

(40,

353)

(138

)(4

,049

)(4

86)

(2,3

94)

(2,6

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(11,

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(683

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AD

MIN

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22,5

3712

5,43

315

5,18

31,

781

9,80

792

212

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9,28

233

,075

6,37

077

,162

2,57

311

,179

33,4

0750

1,04

3

TAX

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350

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602

1,36

70

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555

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5,09

821

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FUN

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5,38

3,36

51,

426,

123

52,1

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6,49

823

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215,

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55,8

5766

6,69

360

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6,58

9,87

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155,

666

738,

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7,84

66,

196,

552

1,77

0,97

853

,574

347,

777

26,3

5127

2,61

768

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748,

927

61,1

507,

482,

023

52,0

6317

8,22

885

5,08

618

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GEN

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0,83

614

7,10

173

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114,

993

70,1

4744

,846

38,5

1711

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26,9

0636

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7,79

5

BAI

9,07

50

9,07

51,

687

01,

687

01,

331

(1,3

31)

4,60

517

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GFA

24,9

394,

292

20,6

4720

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4,70

215

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565

1,81

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3,88

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916

7,94

15,

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5,15

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72,

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2,93

695

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17,5

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40,3

5512

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25,8

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13,7

2218

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9,64

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25,2

4017

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LAM

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78,0

819,

952

68,1

2956

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8,18

648

,273

1,56

48,

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11,3

243,

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1,15

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9,14

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5,47

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86,3

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163,

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137,

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17,0

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18,3

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46,0

179,

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6,59

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3,60

969

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SEC

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8,02

228

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34,6

8830

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3,84

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849

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148,

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86,1

2562

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55,9

3323

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32,0

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2,11

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77,7

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1,35

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27,1

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18,6

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68,6

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57,6

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(Lo

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6,91

81,

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1,06

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0,38

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9,77

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8,74

216

9,62

49,

118

368,

179

261,

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1,82

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GR

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976,

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1,11

0,68

81,

109,

235

450,

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658,

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233,

654

179,

429

54,2

2537

5,32

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8,70

8

* In

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st a

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nves

tmen

t In

com

e



The year under review has been marked bya number of significant internationalevents that have affected the GlobalBusiness sector, namely:

■ Uncertainties and disturbances in thefinancial markets;

■ A slowing global economy that startedin the middle of 2000;

■ Shrinking of offshore business followingthe OECD listing of tax havens andother international organisations’reviews of offshore jurisdictions;

■ The tragic events of 11 September 2001in the USA;

■ The collapse of Enron and subsequentcorporate failures in USA;

■ The decision by the High Court in NewDelhi to overturn the Central Board ofDirect Taxes' circular of April 2000;

■ Changes in the tax regime in SouthAfrica.

Mauritius has not been insulated from theslowing of the global economy. While wewill never know how much business wemight have attracted had other conditionsprevailed, we know from figures at ourdisposal (such as those presented below)that the pace of growth in the number ofapplications for Global BusinessCompanies (GBCs) has slowed.

The tragic events of 11 September 2001 inthe USA and the indescribable humantragedy that ensued had societal andeconomic implications that were feltworld-wide.The collapse of Enron in December 2001(described as the largest filing forbankruptcy in the history of the United

States) and subsequent corporate failures(including the corporate governancequestions arising) daunted confidencefurther.

Closer to home, the implications of theassessment issued by the tax authorities inMumbai (in March 2000) on certainForeign Institutional Investors (operatingin India although based elsewhere) reacheda turning point at the end of May 2002.The Central Board of Direct Taxes(CBDT) issued a circular in April 2000which stated that a Tax ResidenceCertificate (TRC) issued by the Mauritianauthorities constituted sufficient evidencethat a FII was domiciled in Mauritius. Thecircular was consequently quashed by aDelhi High Court order, which stipulatedthat Mauritius TRCs were being abused bythird-country residents to benefit from theprovisions of the Mauritius – India DoubleTaxation Avoidance Treaty. On 4 October2002, the Mauritian based Global BusinessInstitute Ltd (GBI) filed a special leave topetition with the Supreme Court of India,appealing against the High Court Order.The Government of India and the CBDThad also filed a similar appeal before theapex court. The cases filed by theGovernment of India and GBI were heardtogether and both parties challenged thepower of the Indian income tax authoritiesto question the residency of a Mauritianentity, since determination of suchresidency is the sovereign right of theMauritius government.

GLOBAL BUSINESS SECTOR


On 18 November 2002, the SupremeCourt of India ruled that the Delhi HighCourt Order of May 2002 be stayed. Theimplication of the stay of the Order meansthat the CBDT circular remains in forceuntil the final adjudication of the cases bythe Supreme Court.

A NEW FRAMEWORK

Against a backdrop of the developmentsdescribed above, the legislative changesduring the course of the year have charteda new landscape for the financial servicessector, including the Global Businesssector. The Companies Act 2001 (interalia) repealed the International CompaniesAct and the Financial ServicesDevelopment Act 2001 repealed theMauritius Offshore Business Activities Actwith effect from 1 December 2001 andintroduced the concept of "QualifiedGlobal Business". With the repeal of thesetwo Acts, neither Offshore Companies norInternational Companies exist any longer -

they have been replaced by Category 1Global Business Companies (GBC1) andCategory 2 Global Business Companies(GBC2) respectively.

GLOBAL BUSINESS APPLICATIONS

According to section 19 of the FinancialServices Development Act, QualifiedGlobal Business is "…any business or otheractivity – specified in the Second Schedule andwhich is carried on from within Mauritius withpersons all of whom are resident outsideMauritius and which is conducted in acurrency other than the Mauritiuscurrency…". An analysis of the growth inthe number of applications approved frompersons who conduct offshore globalbusiness is indicated in Figure 1 and Table1 below.


Figure 1: Analysis of Monthly Applications Approved *6600

6500

6400

6300

6200

6100

6000Jul 01 Aug 01 Sep 01 Oct 01 Nov 01 Dec 01 Jan 02 Feb 02 Mar 02 Apr 02 May 01 Jun 02

13500

13000

12500

12000

11500

11000

10500

10000

9500

9000

8500

8000

7500

Cum GBC1 Offshore Company** International Company**Cum GBC2

* Cumulative figures represent all companies on register, including those companies that have been struck off** Prior to 1 December 2001, GBC1 and GBC2 were termed as Offshore Companies and International Companies respectively.



Table 1: Analysis of Annual Applications Approved

Type 1 July 2001 30 June 2002 Change Change (%)

GBC1 6142 6546 404 6.6

GBC2 10368 12803 2435 23.5

Total 16510 19349 2839 17.2

MANAGEMENT COMPANIES

Management Companies (MCs) are domestic companies. In order for a company to act as aCorporate Trustee or as a Qualified Trustee, a Management Licence must be held.Therefore, Management Licences in issue include licences for both those legal personsacting as MCs per se and also for those acting as Trustees.

As at 30 June 2002, there were 94 MC licences in issue – which represents an increase of 1in the absolute total as at July 2001. Table 2 below indicates the number of MCs andTrustees that were licensed at the end of the period under review and compares the figureswith those twelve months before.

Table 2: Analysis of MCs

Type 1 July 2001 30 June 2002

Management Company 75 75

Trustee 18 19

Total 93 94

An exercise was initiated during the course of the year to check in detail, the auditedfinancial statements submitted by MCs for financial years ended in 2001. All holders ofManagement Licences are required (under Section 24 (4) (a) of the FSDA) to submitaudited financial statements within six months of the end of the financial year to whichthey relate.

The analysis that was undertaken indicates that the aggregate profit of 71 companiesanalysed amounted to US$10.59 million.

Table 3: Analysis of Aggregate Profits of MCs (2001)

Aggregate Profit % ofNumber of MCs % of MCs

(US$ million) Aggregate Profit

12 17% 9.5 90%

59 83% 1.09 10%

Total 71 100% 10.59 100%



Table 3 indicates that the aggregate profit generated by MCs is highly concentrated with

17% of the total number of MCs producing 90% of the total aggregate profits. Further,

profitability of the 5 highest profit generators constituted 70% of the total of MCs.

The aggregate turnover of all the 71 MCs was US$29,171,301 with the turnover of 12 MCs

accounting for 72% (US$21,035,743) of the total turnover.

Table 4 indicates the profits before tax generated by the MCs during the last four years. It

is observed that the profits slightly decreased by 5% in 1999 but subsequently increased by

35% in 2000 and 15% in 2001.

Table 4: Annual Profits Before Tax of MCs

Year 2001 2000 1999 1998

Profit before tax(US$ million) 10.6 9.2 6.8 7.2

No. MCs registered 76 72 53 45

The Commission estimates that the value added to the national GDP by MCs in 2001 was

US$ 15,537,179.

The analysis carried out indicates that a number of MCs do not have the critical mass

needed to generate any meaningful level of profit. In the coming months, the Commission

will be discussing with these companies their future plans.

The review of the audited financial statements of the MCs has been a very fruitful exercise

and has provided a substantial amount of useful information for market policy and

regulatory purposes. It is very likely that the exercise will be repeated.

COLLECTIVE INVESTMENT SCHEMES

The number of Collective Investment Schemes (CIS) has increased by one per month on

average. At the end of the period under review, the total on the register was 221 (this total

excludes those schemes already wound up or in the process of being wound up). Figure 2

below analyses the structure adopted by each of the CIS that have been licensed whilst

Figure 3 indicates the geographic distribution of the CIS.




Figure 3: Geographic Analysis of CIS Source of Business

Figure 2: Analysis of CIS by Type


India 71%

Africa and Asia Pacific5%

South East Asia8%

World wide 6%

Europe and USA5%

Far East5%

The aggregate Net Asset Value of all theschemes licensed by FSC is US$ 6.76billion as at 30 June 2002.

REGULATORY WORK

During the year under review, the FSCinvestigated around 60 GBCs. The vastmajority of these investigations are on-going.

In the period under review, representativesof the Commission have had theopportunity to meet licensees on a regularbasis both at the Commission's premisesand externally. We have also met with theAssociation of MCs on a regular basis.

Lastly, in this respect, we have alsoaccepted invitations to take part in specialmeetings convened by licensees.

A number of on-site visits to MCs havebeen initiated so far. These visits willfollow a more systematic approach infuture, and in line with an overallSupervision Action Plan which is currentlybeing worked out by the Commission.

A Guide to Fit and Proper Test has beenissued to the industry for consultation.

Closed Ended, 23%

Protected Cell Companies, 7%

Venture Capital Shemes, 7%

Open Ended, 63%


APPLICATION FORMS

The Commission invited comments from

licensees on new Application Forms that

have been prepared with a view to

streamline information on applicants for

Global Business and to enable the FSC to

minimise the time spent in processing

applications. By the end of the period

under review two drafts of the Forms had

been prepared and were under discussion.

Meanwhile the "temporary forms" that

were issued on 30 November 2001

remained operational. The Commission

has since issued the final version of the

forms.

ANTI MONEY LAUNDERING

AND COUNTERING THE

FINANCING OF TERRORISM

The FSC has ensured that as new

information was made available from the

United Nations Security Council

Sanctions Committee on proscribed

persons, the Commission has requested all

its licence holders to examine closely their

records and report any possible links

between their client companies and listed

terrorist organisations and individuals. No

report of dealings with any of the

proscribed persons has been received. This

process will continue and the onus is on

licensees to conduct this type of checking

on an on-going basis – without being

prompted by the Commission. We note

with satisfaction that some licensees who

have been inspected on-site are already

carrying out a continuous review of their

records to detect any possible links.

Meanwhile, work on the production of a

Code on the Prevention of Money

Laundering and Terrorist Financing has

reached an advanced stage. The Code was

issued recently to the industry for

consultation.

CONCLUSION

The year under review brought into focus a

number of changes in the operating

environment simultaneously. The changes

arising from the adoption of new

legislation and new rules have been

addressed. Much has been learned in the

process by both the FSC and the industry.

It is expected that the pace of change will

abate in the financial year ending June

2003. This will give time to practitioners

to adapt more fully to all the ramifications

of the new legislation. It will also open up

new avenues for productive collaboration

between the staff of the FSC and members

of the industry. Accordingly, the FSC

looks forward to contribute to the further

development of the Global Business sector

in the year that lies ahead.





Management Company Contact Details

A.A.M.I.L LTD✉ Suite 340-345, Barkly Wharf Tel (230)210 1000

Le Caudan Waterfront Fax (230)210 2000Old Pavillion Street Email [email protected] Port Louis

Abacus Financial Services (Mauritius) Limited✉ 3rd Floor, TM Building Tel (230)207 1000

Pope Hennessy St Fax (230)208 7949 / 212 4563Port Louis Email [email protected]

AMAS Trust (Mauritius) Limited✉ 3rd Floor, Li Wan Po Building Tel (230)208 8000

12 Remy Ollier Street Fax (230)211 7004Port Louis Email [email protected]

Ambit Corpfin International Inc.✉ 10, Frère Felix de Valois St Tel (230)202 3000

Port Louis Fax (230)212 5265

Anderson Ross Consulting Limited✉ Buswell Business Centre Tel (230)467 0600

23 Buswell Avenue Fax (230)467 0850Quatre Bornes Email [email protected]

Anex Management Services Limited✉ 2nd Floor, Fairfax House Tel (230)212 0202

21 Mgr Gonin Street Fax (230)212 9473Port-Louis Email [email protected]

Asiaciti Trust Mauritius Limited✉ 4th Floor, Li Wan Po Building Tel (230)208 0756

12, Remy Ollier Street Fax (230)210 7994Port-Louis Email [email protected]

Associated Consultants Ltd✉ Suite G12, St James Court Tel (230)211 3664/3017

St Denis St Fax (230)211 3016Port Louis Email [email protected]

BCM (Trustees) Limited✉ 3rd Floor, TM Building Tel (230)207 1000

Pope Hennessy Street Fax (230)208 8037Port Louis Email [email protected]

BNPI Mauritius Trust Corporation Ltd✉ 25 Pope Henessy St Tel (230)212 4440/43

Port Louis Fax (230)212 4448Email [email protected]




Businessconsult✉ 6th Floor, Nirmal House Tel (230)211 6535/6716/7484

22, Sir William Newton Street Fax (230)211 6964Port-Louis Email [email protected]

BYB Offshore Companies Management Ltd ✉ 9th Floor, Les Bachas Tel (230)211 2922/208 8324

Lislet Geoffroy St, Fax (230)208 2146Cathedral Square Email [email protected] Louis

C & M Worldwide Services Ltd✉ Appavoo Business Centre Tel (230)211 5093-97

29 Bis Mère Barthelemy St Fax (230)211 5123Port Louis Email [email protected]

Cirne Corporate & Trust Services Ltd✉ 6th Floor, Harbour Front Building Tel (230)211 2682

John Kennedy Stree Fax (230)210 7360tPort-Louis Email [email protected]

CITCO (Mauritius) Limited✉ Cathedral Square Tel (230)210 2035


CITCO Trustees (Mauritius) Limited✉ Cathedral Square Tel (230)210 2035


Cititrust (Mauritius) Limited✉ c/o DTOS Ltd

2nd Floor, Cerne House Tel (230)212 0223/5352Chaussée Street Fax (230)208 8002Port-Louis Email [email protected]

City Management (Mauritius) Ltd✉ 4th Floor, PCL Building Tel (230)210 9885/210 5228

43, Sir William Newton St Fax (230)210 9787Port Louis Email [email protected]

CKLB International Management Ltd✉ P.O. Box 80 Tel (230)216 8800

Felix House Fax (230)216 980024 Dr Joseph Riviere St Email [email protected] Louis

Claridges Trust Company (Mauritius) Limited✉ c/o Frontière Finance Ltd

2nd Floor, Barkly Wharf Tel (230)211 1395/6Le Caudan Waterfront Fax (230)211 1294Port-Louis Email [email protected]





Commonwealth Trust (Mauritius) Limited✉ 3rd Floor, St. James Court Tel (230)210 8946


Copex Management Services Ltd✉ Corner of Louis Pasteur & Tel (230)216 7000

Remy Ollier Street Fax (230)216 70016th Floor, Max City Building Email [email protected]

Corporate & Chancery Group Ltd✉ 2nd Floor, Barkly Wharf Tel (230)210 3187

Le Caudan Waterfront Fax (230)210 1109Port Louis Email [email protected]

Curatus Trust Company (Mauritius) Limited✉ 3rd Floor, Les Jamalacs Tel (230) 211 7924

Vieux Conseil Street Fax (230) 211 7925Port-Louis [email protected]

DTOS LTD✉ 2nd Floor, Cerné House Tel (230)203 8000

Chaussée St. Fax (230)208 8002Port Louis Email [email protected]

Deutsche International Trust Corporation(Mauritius) Limited

✉ 4th Floor, Barkly Wharf East Tel (230) 202 7878/211 9126Le Caudan Waterfront Fax (230) 202 7898Port Louis Email [email protected]

Ernst & Young Financial Services Ltd✉ 2nd Floor, Anglo Mauritius House Tel (230)202 4777

4, Intendance Street Fax (230)202 4700Port-Louis Email [email protected]

Fairbairn Trust Mauritius Limited✉ Suite 555, 5th Floor Tel (230)211 2206

Barkly Wharf Fax (230)211 2205/210 3154Le Caudan Waterfront Email [email protected]

Federal Trust (Mauritius) Limited✉ Suite 520, 5th Floor, Tel (230)210 9339

Barkly Wharf Fax (230)210 9338Le Caudan Waterfront Email [email protected] Email [email protected]




Fideco Offshore Services Ltd✉ 44 St George Street Tel (230)210 3386/1867


Fidei Finance International Limited✉ 4th Floor, Orchid Tower Tel (230)211 8770

20 Sir William Newton St Fax (230)211 8863Port Louis Email [email protected]

First Island Trust Company Ltd✉ Suite 308, St. James Court Tel (230)211 6636/6242

St. Denis St Fax (230)211 7489Port Louis Email [email protected]

Frontière Finance Ltd✉ 2nd Floor, Barkly Wharf Tel (230)211 1395/6


Futures Management Ltd✉ 27 St Louis St Tel (230)212 4860/212 5823


FWM International Limited✉ 7th Floor, C & R Court Tel (230)208 2306/211 3328

Labourdonnais St Fax (230)211 3327Port Louis Email [email protected]

GenPro Consulting (Mauritius) Inc.✉ c/o Intercontinental Trust Ltd

Suite 802, St James Cour Tel (230)212 7600tSt Denis Street Fax (230)210 9168Port-Louis Email [email protected]

Halifax Management Limited✉ Suite 708, St James Court, Tel (230) 210 9494/96

St Denis St Fax (230) 210 7878Port Louis Email [email protected]

Hauteville Limited✉ 1st Floor, Felix House Tel (230)216 7539

24 Dr Joseph Riviere St Fax (230)216 7655Port Louis Email [email protected]

Hemery Trust (Mauritius) Limited✉ Felix House Tel (230)242 8001

24 Dr. Joseph Rivière Street Fax (230)240 6620Port Louis Email [email protected]





Horwath Corporate Finance Limited✉ 3rd Floor, Amod Building, Tel (230)208 8684/211 3350

19, Poudrière St Fax (230)211 1967Port Louis Email [email protected]

HTM Trustees Limited✉ 245, Floor, Barkly Wharf Tel (230)208 1692


ING Trust (Mauritius) Limited✉ 355 Barkly Wharf Tel (230)210 7275

Le Caudan Waterfront Fax (230)210 7285Port Louis E-mail [email protected]

Insinger de Beaufort Trust (Mauritius) Ltd✉ Felix House Tel (230)216 4888

24 Dr. Joseph Rivière Street Fax (230)216 4889Port Louis Email [email protected]

Intercontinental Trust Limited✉ Suite 802, St James Court Tel (230)212 7600/210 9188

St Denis Street Fax (230)210 9168Port Louis Email [email protected]

International Financial Services Ltd✉ 3rd Floor, Les Cascades Tel (230)211 2000

Edith Cavell St Fax (230)211 1000Port Louis Email [email protected]

International Management (Mauritius) Ltd✉ 4th Floor, Les Cascades Tel (230)212 9800

Edith Cavell St Fax (230)212 9833/9803Port Louis Email [email protected]

Inter-Ocean Management Limited✉ Third Floor, Barkly Wharf Tel (230)210 9334

Le Caudan Waterfront Fax (230)210 8524Port-Louis Email [email protected]

Knights & Johns Management Ltd✉ Suite 350, Barkly Wharf Tel (230)211 0852/53


KPMG Peat Marwick International Ltd✉ P.O. Box 1130 Tel (230)208 0312/8000

Li Wan Po Building Fax (230)208 302612, Remy Ollier St, Port Louis Email [email protected]




L & P Corporate Services Limited✉ C/O Clarel Benoit Chambers

5th Floor, TM Building Tel (230) 211 9202Pope Hennessy Street Fax (230)211 4457Port-Louis Email [email protected]

Legis International(Financial & Management) Services Ltd

✉ 3rd Floor, Les Jamalacs Building Tel (230)210 6100/208 7930Vieux Conseil Street Fax (230)210 9100Port-Louis Email [email protected]

Lex Consult Offshore Services Ltd.✉ Suite 705, 6 Floor, Chamncery House, Tel (230)211 1278/208 8248

Lislet Geoffroy Street Fax (230)210 3793Port Louis Email [email protected]

Lindfield (Mauritius) Limited✉ 315, St James Court Tel (230)211 6475


Maigrot-Koenig✉ 5th Floor, Chancery House Tel (230)212 2215/6412

Lislet Geoffroy St Fax (230)208 2986Port Louis Email [email protected]

Mauritius International TrustCompany Limited✉ 4th Floor, Li Wan Po Bldg Tel (230)210 4000/211 3201/

12 Remy Ollier St 210 9889Port Louis Email [email protected]

Mauri-Trust Consulting &Management Limited

✉ 210 St James Court Tel (230)211 8881St Denis Street Fax (230)212 6138Port Louis Email [email protected]

Multiconsult Ltd✉ 10, Frère Felix de Valois St Tel (230)202 3000/3136


Mutual Trust Management Mauritius Limited✉ 608, St. James Court Tel (230)210 9000

St. Denis St, Fax (230)210 9001Port-Louis Email [email protected]





OCRA (Mauritius) Limited✉ 7th Floor, Happy World House Tel (230)211 5100

Sir William Newton S Fax (230)211 5400tPort Louis Email [email protected]

Offshore Incorporations (Mauritius) Limited✉ St James Court, Suite 30s Tel (230)210 3273/211 6242


PCL Legal Services (Mauritius) Ltd✉ 6th Floor, PCL Building Tel (230)212 6913/17

Sir William Newton St Fax (230)208 8351Port Louis Email [email protected]

Port Louis Management Services Ltd✉ 5 Duke of Edinburg Avenue Tel (230)212 5150/211 4321


Portcullis Trust (Mauritius) Ltd✉ c/o DTOS Ltd

Cerne House Tel (230)203 8000La Chaussee Street Fax (230)208 8002Port-Louis Email [email protected]

Premier Trustees Ltd✉ c/o International Management (Mauritius) Ltd

4th Floor, Les Cascades Tel (230) 212 9800Edith Cavell Street Fax (230) 212 9833/9803Port Louis Email [email protected]

Quorum Overseas Limited✉ 212, St James Court Tel (230)210 8588


SCF (Mauritius) Ltd✉ c/o A. Roy,

3rd Floor, Bank of Baroda Bldg Tel (230)208 4335/208 5337Sir William Newton St Fax (230)208 5537/4335Port Louis Email [email protected]

SCI Essell Offshore Services✉ 212, St James Court Tel (230)210 8588


Sovereign Trust (Mauritius) Limited✉ Suite 420, St James Court Tel (230)212 7600/210 9188

St Denis Street Fax (230)210 9168Port Louis Email [email protected]




Standard Bank Trust Company (Mauritius) Limited✉ Les Jamalacs Tel (230)202-4200

Vieux Conseil St Fax (230)202-4210Port Louis Email [email protected]

Temple Corporate Services✉ Temple Court Tel (230)211 5744

2, Labourdonnais Street Fax (230)208 1026Port Louis Email [email protected]

Trident Trust Company (Mauritius) Ltd✉ 4th Floor, Barkly Wharf Tel (230) 210 9770

Le Caudan Waterfront Fax (230) 210 1266Port-Louis Email [email protected]

Trustlink International Limited✉ D4 Tamarind Chambers, Tel (230) 210 9961

Bahemia Bldg. Fax (230) 210 674956, Sir William Newton Street Email [email protected] Louis

Voet & Co (Mauritius) Limited✉ 21 Remy Ollier Street Tel (230) 216 8837

7th Floor, Max City Building Fax (230) 216 8835Port-Louis Email [email protected]

Warwick Trust (Mauritius) LimitedFormerly known as Financial Trust (Mauritius) Limited

✉ 6th Floor, Max City Building Tel (230)217 130021 Remy Ollier Street Fax (230)217 1305Port-Louis Email [email protected]

Yale Trustees Limited✉ c/o International Management (Mauritius) Ltd

4th Floor, Les Cascades Tel (230) 212 9800Edith Cavell Street, Fax (230) 212 9833/9803Port-Louis Email [email protected]



CORPORATE TRUSTEES / CUSTODIANS


A.M.S. Trustees (Mauritius) Limited✉ c/o Intercontinental Trust Limited Tel (230)212 7600, 210 9188

802 St James Court Fax (230)210 9168St Denis Street Email [email protected]

Anchorage International Trust Limited✉ 608, St. James Court Tel (230)210 9000

St. Denis St. Fax (230)210 9001Port Louis Email [email protected]

APG Offshore Trustee Corporation✉ 2nd Floor, Barkly Wharf Tel (230)210 3187


BCB (Mauritius) Limited✉ 6th Floor Cerné House Tel (230)212 5011

Chaussée Fax (230)218 8037Port Louis Email [email protected]

Bermuda Trust (Mauritius) Limited✉ 3rd Floor, Les Cascades Tel (230)211 2000

Edith Cavell St. Fax (230)211 1000Port Louis Email [email protected]

CKLB International Trustees Ltd✉ c/o CKLB International Management Ltd

P.O Box 80, Felix House Tel (230)216 880024 Dr Joseph Rivière Street Fax (230)216 9800Port-Louis Email [email protected]

Equatorial Trust Company Limited✉ 7th Floor, Happy World House Tel (230)211 5100

Sir William Newton St. Fax (230)211 5400Port Louis Email [email protected]

Fairfield Trustees Ltd✉ c/o Horwath Corporate Finance Limited Tel (230) 208 8684/211 3350

3rd Floor, Amod Building Fax (230) 211 196719 Poudrière Street Email [email protected]

HSBC Trustee (Mauritius) Ltd.✉ 5th Floor, Les Cascades Bldg Tel (230)208 7183


CORPORATE TRUSTEES / CUSTODIANS


IFS Trustees✉ 3rd Floor, Les Cascades Tel (230)211 2000


IMM Trustees Ltd ✉ Les Cascades Tel (230) 212 9800

Edith Cavell Street Fax (230) 212 9833/9803Port-Louis Email [email protected]

MC Trust Ltd.✉ 10 Frère Felix de Valois St. Tel (230)202 3000/3136


Mutual Trust Company Mauritius Limited✉ 608, St. James Cour Tel (230)210 9000t

St. Denis St. Fax (230)210 9001Port Louis Email [email protected]

PMSL Trustees Ltd✉ c/o Port-Louis Management Services Limited Tel (230) 212 5150/211 4321

5 Duke of Edinburg Avenue Fax (230) 212 7375Port-Louis Email [email protected]

PSG International Trust Company Limited✉ c/o Intercontinental Trust Limited Tel (230) 212 7600, 210 9188

802 St James Court Fax (230) 210 9168St Denis Street Email [email protected]

Southern Global Trust Company Ltd✉ Corporate and Chancery Chambers Tel (230) 210 3187

2nd Floor, Barkly Wharf, Fax (230) 210 1109Le Caudan Waterfront Email [email protected]

The Meridian Trust Co. Ltd✉ c/o Ernst and Young Financial Tel (230) 202 4777

Services Ltd Fax (230) 202 47002nd Floor, Anglo Mauritius House Email [email protected], Intendance StreetPort-Louis

The Oceanic Trust Co. Ltd✉ c/o Ernst & Young Financial Services Ltd Tel (230) 202 4777

2nd Floor, Anglo Mauritius House Fax (230) 202 47004, Intendance Street Email [email protected]

Turnstone Trusts and Securities Limited✉ c/o Fidei Finance International Limited Tel (230) 211 8770

4th Floor, Orchid Tower Fax (230) 211 886320 Sir William Newton Street Email [email protected]



PREVENTION OF ECONOMIC CRIME & TERRORIST FINANCING

The countering of money laundering andcombatting terrorist financing have nowbecome an integral part of the agenda ofmany countries and a number ofmultilateral institutions. Over the pastyears, and more particularly in 2001,Mauritius has been actively engaged inadopting a series of measures in respondingto the international battle against moneylaundering and terrorism.

During the course of the year, threeimportant pieces of legislation wereadopted in Parliament, namely thePrevention of Terrorism Act, thePrevention of Corruption Act, and theFinancial Intelligence and Anti MoneyLaundering Act. These legislations haveprovided a comprehensive framework toaddress simultaneously the problems ofterrorism, fraud, corruption and moneylaundering which are all inter-linked andhave taken a new dimension following the11 September 2001 terrorist attacks in theUSA and the new trends on theinternational level regarding moneylaundering.

Mauritius has committed itself toimplement the UN Security CouncilResolution (UNSC) 1373 on Terrorismwhich was adopted unanimously by theUN and which makes the measuresmandatory on all Member States.Mauritius has also fully endorsed theCommon Position of the Council of theEuropean Union on terrorism. Ourcountry is also presently party to a numberof International Conventions relating toterrorism, among which is the 1999International Convention for the

Suppression of Financing of Terrorism.

Financing of terrorism constitutes animportant aspect of the overriding acts ofterrorism. In this respect the Prevention ofTerrorism Act has considered thiscomponent of terrorism by definingterrorist financing and its criminalisation.The Financial Action Task Force (FATF)which is the principal anti-moneylaundering multilateral organisation in theworld, has extended its authority to combatterrorist financing as well. The FATF hasmade a number of specialrecommendations on the prevention ofterrorist financing and has called on itsmember states as well as other countries toimplement these recommendations. It is tobe noted that a number of theserecommendations have been implementedin the Prevention of Terrorism Act and theFinancial Intelligence and Anti MoneyLaundering Act – these are summarisedbelow:

• Countries should ratify the relevant UNinstruments, which includes the UNSC1373 and the other resolutions.

• To criminalise financing of terrorist actsand organisations.

• To freeze and confiscate assets andresources of terrorists.

• To provide for Suspicious TransactionReports (STRs) that relate to terrorism.

• To provide for international assistanceon investigations and prosecution ofterrorist financing.




In engaging itself in fighting moneylaundering, Mauritius has adhered to anumber of international conventions,organisations, and initiatives among whichare:

• The FATF’s 40 recommendations

• The Vienna 1988 Convention

• The UN Minimum Standards AgainstGlobal Money Laundering

Mauritius has participated actively in theFATF style regional body called theEastern and Southern Africa Anti-MoneyLaundering Group which was created in1999.

Furthermore, the Financial SectorAssessment Programme which is currentlybeing carried out, contains a componentrelating to Anti-Money Laundering andCombating the Financing of Terrorism(AML/CFT). The methodology used bythe FSAP is based on reviews relating tothe FATF (40 AML Recommendations and8 CFT Recommendations) and thesupplementary criteria prepared by theFATF. The FSAP assessment aims atreviewing the current AML/CFT legalframework, institutional capacity andeffectiveness of supervised financial sectoractivity, and activities subject to criminallaw. In addition, the FSAP assessmentincludes reviews on customer identificationrequirements, record keeping, monitoringand reporting of suspicious activities,compliance and audit, and cooperationwith supervisors and competent authorities.The ultimate assessment culminates in anAML/CFT Report on Observance ofStandards and Codes (ROSC).

The Financial Intelligence and AntiMoney Laundering Act provides for theestablishment of a Financial IntelligenceUnit ("FIU") which is the "…centralagency in Mauritius responsible forreceiving, requesting analysing anddisseminating to the investigating andsupervisory authorities disclosures offinancial information…". A distinction ismade between "intelligence" (which fallswithin the remit of the FIU) and"investigation" (which falls within theremit of the Independent CommissionAgainst Corruption - ICAC). The FIUenables a clear distinction betweendetection and the gathering of intelligenceon the one hand and enforcement andinvestigation on the other. The FIU is anintermediary position between thefinancial sector and the investigative bodyand can, therefore, contribute moreeffectively in monitoring anti-moneylaundering procedures in cooperating withother investigatory and supervisoryagencies.

The Financial Intelligence and AntiMoney Laundering Act, which hassuperseded the Economic Crime and AntiMoney Laundering Act 2000 retains manyof its predecessor's anti moneylaundering provisions – it has alsostrengthened many other provisions,among which is the fight against terrorismfinancing. STRs have been more broadlydefined to includeterrorism as a predicate offence.



The FIU reports to the ICAC on terrorismfinancing, and most importantly, theconfidentiality provisions relating to theBank of Mauritius and the FSC may berelaxed in specified circumstances forterrorism financing.

The compliance culture the FSC is aimingto instil, is directed towards inculcating aculture amongst its licence holders of beingconstantly alerted on the risks associatedwith money laundering and terroristfinancing. One aspect of this culturewould be to develop a degree of sensitivitytowards STRs. One method of achievingthis is to familiarise licence holders withthe legislation, regulations and guidancenotes that have been and will bepublished.

Stockbroking companies, insurers andinsurance intermediaries are encouraged todevelop their own compliance proceduresmanual for providing guidance to staff andstandardising procedures, and to adoptappropriate mechanisms regarding STRs.

The FSC has just completed thepreparation of guidance notes in the formof a Code, which has been circulated forconsultation. The Code is a statement ofminimum criteria that the FSC will use toassess how licensees conduct their business.It describes the integral role of effective"Know Your Customer" procedures andimposes an obligation upon licensees toverify the identity of "Applicants forBusiness" (and their "Principals"). TheCode introduces the concept of "Eligible orGroup Introducer" on whom licensees mayrely in respect of identifying “Applicantsfor Business”. Existing clients must be

identified - in the same way the Codeproposes new clients must be identified.Lastly in this respect, the Code identifiessome of the procedures that licenseesshould adopt in respect of anti moneylaundering.

The Code applies to MCs but additionalCodes will be published in due course inrespect of the other non-banking financialbusinesses that the Commission supervises.Practitioners must realise that potentially -at this very moment - but certainly on anon-going basis, money launderers willconsider whether and if so how they canuse Mauritius to launder their money.Perversely, our good reputation is anattraction in itself. Our common role is tothwart their plans by making such abuse sodifficult and costly that they will give up.

Money launderers are most vulnerable todetection at the “placement” stage of theprocess. However, it is probable thatMauritius is more exposed to “layering”and “integration” than to placement.There is more than one reason for this.Firstly, there is a statutory limitation thatapplies to payments in cash. Secondly, avery large amount of money is likely to beobvious because of its size relative to theaverage amount that flows through thefinancial system in Mauritius. Afterplacement, money launderers frequently tryto create a web of financial structures(including trusts and corporate entities)through which they channel manytransactions to make detection impossibleor at least as difficult as possible.



Consequently, money launderers are likelyto try to use MCs to assist them toestablish trusts and corporate vehicles, thusmaking them very vulnerable at a stage inthe money laundering process whereidentification of the true purpose of thepeople involved is difficult to detect. Inorder to assist MCs to prepare adequately,the first Code has been addressed to them.

However other precautions should also betaken. For example, it is advisable to readand to update on the types of scams thathave taken place elsewhere. Typologiesdescribed above are excellent resourcesthat can be used for this purpose.Licensees are encouraged to develop AntiMoney Laundering and Terrorist FinancingProcedures Manuals. On-going training(both in house and external) should beoffered to all members of staff of licenceholders – but especially to those involvedin procedures that lead to the acceptanceof new clients. The Commission believesthat every licensee should appoint aMoney Laundering Reporting Officer –who should be trained specifically for thisrole.

Our financial sector has an important rolein the development of our economy, and itis imperative that its reputation andcredibility be preserved. Perversely, thesame attributes that create the potential foran efficient payments system and thatfacilitate mobility of capital within aninternational financial services centre canbe used very easily to launder money or toraise money for terrorist activity. In orderto defend Mauritius from those who wouldabuse our financial system, we need to

adopt an appropriate compliance culture.Effective anti-money laundering procedureswill be an integral part of such a culture.

It is hoped that licensees will realise theimportance of establishing appropriatecontrols and procedures or where suchexist already to consider whether and if sohow they might be refined. Meanwhile,the FSC is open to provide assistance tolicensees with regards to any operationalissues that might arise in respect ofAML/CFT concerns.

Licensees have been made aware already ofthe Commission's intention to institute on-site compliance testing. The first cycle ofvisits will include a particular focus on antimoney laundering and verification ofidentity procedures already established bylicensees including the application of the"Know Your Customer" criterion.Licensees are reminded that failure to takeappropriate measures to guard against thelicensee or its services being used tocommit or to facilitate a money launderingoffence constitutes an offence.



INTRODUCTION

Corporate Governance is a matter whichhas become the major preoccupation ofmany nations world wide as its impact on anation’s economic health, developmentand social progress cannot leave policymakers indifferent. Sometimes defined as a“field of economics that investigates how tosecure or motivate efficient management ofcorporations” or again as “the ways in whichsuppliers of finance assure themselves ofgetting a return on their investment” it maybe useful to give the OECD definitionwhich is more or less consistent with theone presented by Sir Adrian Cadbury. TheOECD defines corporate governance as “thesystem by which business corporations aredirected and controlled. The corporategovernance structure specifies the distributionof rights and responsibilities among differentparticipants in the corporation, such as theboard, managers and stakeholders and spellsout the rules and procedures for makingdecisions on corporate affairs. By doing this,it also provides the structure through which thecompany objectives are set and the means ofattaining those objectives and monitoringperformance’’

Some commentators believe that toonarrow a view is taken when one speaks ofcorporate governance. It should describeall the influences affecting institutionalprocesses including those for appointingregulators involved in organising theproduction and sale of goods and services.It thus includes all types of organisationswhether incorporated under the law or not.

Globalisation and liberalisation ofeconomies as well as the spate of financialcrises and scandals are pushing the issue ofcorporate governance to the forefront. AsMr J. Wolfensohn, President of the WorldBank said: “to-day, the need for propergovernance is not only of companies but ofcountries which have to demonstrate that theyhave credible systems of governance andregulation to take a rightful place in the globaleconomy”.

CORPORATE GOVERNANCEDEVELOPMENTS IN MAURITIUS

For some years now, CorporateGovernance has been very high on theagenda of the Mauritian Government. Thecorporate governance framework inMauritius needed to be strengthened tomake it fairer and more transparent withthe objective of ensuring that the publicretains its faith in the free market system.Priority has been to undertake reforms thatwould empower boards to supervisecompanies better, make accountingpractices more transparent, and makeauditing more effective. It is consideredthat good Corporate Governance is ameans of achieving a sustainable regimeof economic and social objectives.

CORPORATE GOVERNANCE




Thus, the fundamental principles of goodgovernance – accountability, transparency,responsibility, fair treatment, meritocracy,management disciplines, and fight againstcorruption - need to be ingrained in allpublic and private organisations. To thatend a concerted effort of all stakeholders(regulators, policy makers, directors,investors, and employees) is needed forachieving higher standards of responsibilityand transparency. In this respect,Government has, amongst other initiativesto improve the corporate governanceregime in Mauritius, established aCommittee on Corporate Governance inSeptember 2001.

The Term of Reference of the Committeeis to strengthen the competitiveness ofcompanies in the global market. The workof the Committee has been directed at:

• raising awareness on the significance ofcorporate governance,

• forging consensus on concepts andmethods of corporate governance, and

• developing and implementing actionplans in collaboration with allstakeholders.

The tasks of the Committee were to :

(a) review all work done to date inrelation to corporate governance inMauritius,

(b) assess the challenges and needs ofthe corporate sector,

(c) review existing institutional capacity(in Mauritius and overseas) forpromotion of corporate governancethrough education and information,and

(d) study the operation of institutionswhich promote corporategovernance on the regional and/orinternational arena.

Based on its findings, the Committee iscurrently considering the introduction of a“Code of Best Practice on CorporateGovernance” in Mauritius. It has to thateffect established five task teams toundertake this exercise. The task teamsare being assisted by Mr Mervyn King, theauthor of the King II Report in SouthAfrica.

The Bank of Mauritius issued its ownGuideline on Corporate Governance inJanuary 2001 under section 20 of the Bankof Mauritius Act. The Guideline whichcame into effect on 1 June 2001, applies toall banks, domestic and offshore, and non-bank deposit-taking institutions. They takeinto account the relevant requirements ofthe Banking Act and the Companies Act.The Joint Economic Council has on itspart issued its Model Code of Ethics forDirectors and Employees of Private SectorCompanies.



Another major input in the drive toestablish proper corporate norms forMauritian companies is the assessmentundertaken as part of a joint World Bank –IMF programme of ROSC. The assessmentprovides a benchmark against the relevantOECD Principles of Corporate Governanceof listed companies in Mauritius.

THE ROSC

The OECD Principles of CorporateGovernance focus mainly on publiclytraded companies. Though the importanceof conducting an assessment of listedcompanies cannot be underestimated,restricting the study of corporategovernance to publicly traded companieswould limit investigation into the mostefficient institutional arrangements forundertaking productive activities.However the study was a good startingpoint as it revealed from the outset thateven among our ‘best blue chip’corporations there were some importantstructural weaknesses in ownershipstructure which could render compliancewith codes of corporate governance alreadywell established in many developedmarkets difficult. The assessmentrecognises that the enactment of theCompanies Act 2001, the Listing Rulesand the consolidation of financialregulation within the Financial ServicesCommission have enhanced shareholderprotection and contributed to corporategovernance improvements. But ithighlighted the need for a review ofcompany law as well as ensuring that theforthcoming securities legislation contains

corporate governance provisions that willcontribute to improvements in thepractice of corporate governance at leastamong financial institutions.

Government has also requested theWB–IMF team to conduct an ROSCassessment on Accounting and AuditingServices with a view to assessing thecomparability of Mauritius accounting andauditing standards with InternationalAccounting Standards (IAS) andInternational Standards on Auditing(ISA), respectively; and the degree towhich Mauritian corporate entities complywith established accounting and auditingstandards in Mauritius. The preliminaryassessment exercise has already beencompleted and in December 2002, anofficial of the WB will be in Mauritius tocomplete the assessment on-site.Government has also recently requested aROSC on Insolvency and Creditor Rights.This initiative aims at identifyingprinciples and guidelines for soundinsolvency systems and for thestrengthening of related debtor-creditorrights.

There has also been other initiatives takento foster sound Corporate Governance.The Joint Economic Council of Mauritiushas issued its Model Code of Conduct.Some companies, like the State InvestmentCorporation, have published their owninternal guidelines for CorporateGovernance.



Furthermore, after the Asian crisis, duringthe last decades of the last century themost important international financialinstitutions have come forward with bestpractice standards that have to becomplied with by countries participating inthe global financial system. InternationalStandards have been developed by majorpolicy initiatives to help financialregulators formulate prudential policies,increase transparency and improveinstitutional and market infrastructure. Forinstance, the Basle Committee hasestablished core principles for effectivebanking supervision, the IOSCO haspublished its Objectives and Principles ofSecurities Regulation while the IAIS hasdeveloped Insurance SupervisoryPrinciples. These standards are expectedto reinforce the stability of theinternational financing system. It is in theself-interest of the FSC not only toimplement these standards but to adhere tothem as much as possible. The basicresponsibility for ensuring theimplementation and monitoring of thestandards rests with the FSC as theRegulator for the non-banking financialservices. The FSAP exercise which isbeing conducted jointly by the World Bankand the IMF will indicate the extent towhich Mauritius conforms to thesestandards and any gap or non-conformitywill need to be identified.

The Bank of Mauritius and the FSC,which are both members of the abovestandard-setting organisations, will need to

comply with the standards set by thesebodies which are aimed at ensuring thatFSC has processes that can identify risks,limit contagion and reduce thevulnerability of the financial system.

CONCLUSION

From a regulatory viewpoint, corporategovernance rules will play a prominent rolein assisting the Regulator to reach itsobjective of both maintaining financialstability and protecting consumers. Theserules will focus on:

(i) the structure and responsibilities ofthe Board of Directors,

(ii) the role of Directors,

(iii) disclosure,

(iv) transparency and exchange ofinformation,

(v) accounting and auditing standards,

(vi) independence of external auditors,

(vii) risk and risk management systems

It is not as a matter of chance thatCorporate Governance assumes such animportance in the regulatory frameworkbut it has asserted itself as an indispensableimplement in proper regulation.




THE ROLE OF THE FSC INCORPORATE GOVERNANCE

The FSDA has entrusted to the FSC thevery important mandate of ensuring “withthe collaboration of the Bank of Mauritius, thesoundness and stability of the financial systemin Mauritius”.

Generally one speaks of financial stability(which is the result of financial soundnessat its optimum) when a financial system iscapable of efficiently allocating resourcesand absorbing shocks, preventing thesefrom exercising a disruptive effect on thereal economy or on other financial systems.To ensure both soundness and stability, theFSC must be able to assess the macro riskprofile – the existence of risks to theoverall financial system. This can be doneonly if a system of laws, regulations andpractices which promote the culture ofopenness, transparency, and fairness is putin place for the governance of institutionswhose activities have an impact on theMauritian financial system

These laws and the quality of theirenforcement by Regulators and the Courtsare essential elements of CorporateGovernance. The FSC is by virtue ofsection 13 of the FSDA empowered tomonitor and enforce compliance with therelevant Acts (The Insurance Act, TheStock Exchange Act and others). Thesepieces of legislation provide for theprotection of investors’ rights, disclosureand accounting rules, rules governing theissue and sale of securities, related partytransactions, meeting of shareholders andvoting and fiduciary duties of Directors of

companies. The FSC’s role is dulysupported by Government. In July 2002,the Finance Act 2002 amended the FSDA,in sections 26 and 27, to provide the FSCwith effective powers and resources toobtain information, to inspect books andrecords of companies at their businesspremises and to seize documents forinvestigation purposes.

The FSC’s role in promoting soundCorporate Governance practices extendsconsiderably beyond enforcement. TheFSC is also responsible for disclosure ofinformation, the oversight of the operationof the Stock Exchange and licensing ofproviders of financial services. Thus, theFSC cannot afford to take a narrow view ofCorporate Governance. The financialinstitutions, markets falling under itspurview must comply with corporategovernance guidelines aimed at mitigatingrisks common to their enterprises anddemonstrate that they have riskmanagement systems in place.

More importantly, the FSC recognises thatcorporate governance has become a wellestablished global issue. Internationalsupervisory organisations have highlightedits importance. Whilst governance isimportant for a public or private entity, fora Regulator it is critical to the economy’swell being. When the capital formationprocess is disrupted because of inefficientregulation it distorts the way resources areallocated throughout society.


At the 28th Board meeting of theFinancial Service Commission (FSC) heldon 11 November 2002, the Board decidedto establish an Audit Committee (theCommittee), operating under its writtencharter. The Committee consists of threenon-executive Board members, namely MrYon Yan Pat Fong (Chairman), Mr RadhaKrishna Chellapermal and Dr JawaharlallLallchand. The Secretary of the Board, MrR. Sokappadu acts as secretary of theCommittee meetings.

1. Terms of Reference

The Role of the Committee as detailed inthe Charter is to evaluate the effectivenessof the system of internal control, to ensurethat the commission is conducting itsaffairs ethically in compliance with thepertinent laws and regulations and toensure that the financial disclosures madeby management in its financial reportingreasonably reflect the results of itsoperations, plans and commitments.

2. Responsibilities of Management,External Auditors and the Committee

Management has the primary responsibilityfor the Commission’s financial statementsand the reporting process, including thesystem of internal controls. Chokshi &Chokshi Chartered Accountants, as theexternal auditors for the FSC for the periodunder review, are responsible for

performing an independent audit of theFSC’s financial statements in accordancewith auditing standards and to issue areport thereon. The Committee’sresponsibility is to monitor these processes.

3. Activities of the Committee

In this context, the Committee has metand held discussions with management andthe external auditors. The externalauditors represented to the Committee thatFSC’s financial statements were prepared inaccordance with the InternationalAccounting Standards and accountingprinciples generally accepted in Mauritiusand at international level. The Committeehas reviewed and discussed the financialstatements with the external auditors, withand without management present, andprovided its advice and guidance on anumber of issues raised by the externalauditors.

4. Conclusion

In reliance on the reviews and discussionsreferred to above, the Committee issatisfied with the quality of financialreporting and recommends that the Boardapprove the audited financial statementsfor inclusion in FSC’s Annual Report2001-2002.

AUDIT COMMITTEE REPORT

REPORT OF THE AUDIT COMMITTEE TOTHE CHAIRMAN OF THE BOARD OF FINANCIAL SERVICESCOMMISSION.



The staff structure set up with a view tointegrate the activities of the non-bankingfinancial institutions appears to bedeveloping reasonably well. As and whennew legislations are being introduced andexisting legislation revamped, certain keypositions which are at present still vacantneed to be filled. Serious considerationneeds to be given to the appointment of aninternal auditor and a legal complianceofficer so that the critical risk areas may beaddressed.

5. Auditors Remuneration

Fees relating to the assignment of theexternal auditors for the period underreview amount to US$ 9,500 plus out ofpocket expenses.

The Committee has reviewed the abovefees and is of the view that they arereasonable and fair and are notincompatible with the external auditors’independence.

The Committee supported the decision ofthe Board that the appointment of externalauditors for the next two years will bemade through a tender exercise.

Yon Yan Pat Fong (Chairman)

Radhakrishna Chellapermal (Member)

Jawaharlall Lallchand (Member)

AUDIT COMMITTEE REPORT


The management presents its report and the audited financial statements of theCommission for the period ended 30 June 2002.

REVIEW OF ACTIVITIES

The Financial Services Commission (the Commission) has been established on the 01August 2001 to regulate the non banking financial services sector. The Commissionlicenses, regulates, monitors and supervises the conduct of business activities in the saidsector.

STATEMENT OF MANAGEMENT’S RESPONSIBILITIES IN RESPECT OF THEFINANCIAL STATEMENTS

Management is responsible to prepare financial statements for each financial year whichgive a true and fair view of the state of affairs and income and expenditure account of theCommission.

In preparing those financial statements, management is required to:

• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable accounting standards have been followed, subject to any

material departures as explained in the financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate

to presume that the Commission will continue in business.

Management confirms:

• that they have complied with the above requirements in preparing the financialstatements;

• that they have not received directions from the Minister for Economic Development,Financial Services and Corporate Affairs (the Minister) with respect to andpertaining to the functioning and accounts of the Commission;

Management is responsible for keeping proper accounting records which disclose withreasonable accuracy at any time the financial position of the Commission. They are alsoresponsible for safeguarding the assets of the Commission and hence for taking reasonablesteps for the prevention and detection of fraud and other irregularities.

M. I. RAJAHBALEECHIEF EXECUTIVE

02 December 2002, Port Louis, Mauritius.

MANAGEMENT’S REPORT

REPORT OF THE INDEPENDENT AUDITORS TOTHE CHAIRMAN OF THE BOARD OF FINANCIAL SERVICES COMMISSION

(Under Section 8 of the Statutory Bodies (Accounts & Audit) Act 1982 as amended)

We have audited the Financial Statements of the Financial Services Commission (The

Commission) for the period ended 30th June, 2002 which are set out on pages 84 to 97.

These financial statements have been prepared under the historical cost convention and on

the basis of the accounting policies set out on pages 87 to 89.

RESPONSIBILITIES OF THE BOARD OF THE COMMISSION

The Board of the Commission is responsible for the preparation of the financial statements

and safeguarding the assets of the Commission and hence taking reasonable steps for the

prevention of fraud and other irregularities.

RESPONSIBILITIES OF THE AUDITORS

It is our responsibility to form an independent opinion, based on our audit, on those

financial statements and to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with the International Standards on Auditing. An

audit includes an examination, on a test basis, of evidence relevant to the amounts and

disclosures in the financial statements. It also includes an assessment of the significant

estimates and judgements made by the Board of the Commission in the preparation of the

financial statements, and of whether the accounting policies are appropriate to the

Commission’s circumstances and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations

which we considered necessary in order to provide us with sufficient evidence to give

reasonable assurance that the financial statements are free from material misstatements. In

forming our opinion we also evaluate the overall adequacy of the presentation of the

information in the financial statements. We believe that our audit provides a reasonable

basis for our opinion.

AUDITORS’ REPORT




REPORT OF THE INDEPENDENT AUDITORS

We have no relationship with, or interests in the Commission other than in our capacity as

auditors.

OPINION

• we have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purpose of the audit;

• proper books of account have been kept by the Commission as far as appears from

our examination of those books;

• the balance sheet and the statement of income and expenditure of the Commission

are in agreement with the books of account;

• the financial statements give a true and fair view of the income and expenditure for

the period and of the state of affairs, of the Commission, as at 30 June 2002;

• in relation to the accounts, this Act has been complied with and no directions have

been received from the Minister;

• as far as could be ascertained from our examination of the accounts, no expenditure

was of an extravagant or wasteful nature judged by normal commercial practice and

prudence.

For CHOKSHI & CHOKSHI

Chartered Accountants

M.R.Chokshi, Partner

02 December 2002

Port Louis, Mauritius.



BALANCE SHEET AS AT 30 JUNE 2002

NOTE Rs

ASSETS

Fixed assets

Tangible 4(a) 20,241,609

Intangible 4(b) 1,082,930

21,324,539

Non current assets 6 2,311,948

Current assets

Debtors and prepayments 7 39,883,850

Treasury Bills 105,615,475

Bank and cash balances 8 74,584,410

Bank deposits 546,574

220,630,309

244,266,796LIABILITIES

Non current liabilities

Retirement benefit obligations 10 7,710,000

Current liabilities

Creditors and payables 11 75,847,113

83,557,113

NET ASSETS 160,709,683

REPRESENTED BY GENERAL FUND 9 160,709,683

Approved by the Board of the Commission on 2 December 2002Signed on their behalf

B.R. GUJADHUR D. BASSET M. I. RAJAHBALEECHAIRMAN VICE CHAIRMAN CHIEF EXECUTIVE

The accounting policies on pages 87 to 89 and the notes on pages 90 to 97 form an integral part of these financial statements


AUDITED FINANCIAL STATEMENTS

INCOME AND EXPENDITURE STATEMENT FOR THE PERIOD

1 AUGUST 2001 TO 30 JUNE 2002

NOTE Rs

INCOME

Fees 92,699,309

Interest 12 5,877,317

Grant 13 100,000,000

198,576,626

EXPENDITURE

Salaries and allowances 14 28,852,989

Training and seminars 15 2,225,888

Legal and professional fees 1,668,997

Office and administrative 16 12,529,885

Depreciation and amortisation 4(a) &(b) 1,907,741

Non recurrent 17 24,000,000

71,185,500

SURPLUS OF INCOME OVER EXPENDITURE 127,391,126

Exchange fluctuation gain 126,801

TRANSFER TO FUND 127,517,927





CASH FLOW STATEMENT FOR THE PERIOD


NOTE Rs

Cash Flow from operating activities 18 124,413,370

Cash Flow from investing activities

Interest 5,877,317

Assets transferred from MOBAA (4,555,485)

Assets transferred from SEC (654,712)

Fixed Assets (18,022,083)

Treasury Bills (105,615,475)

Non Current Asset (2,311,948)

Net Cash (used in) from investing activities (125,282,386)

Cash flow from financing activities *

Receipt of grant 100,000,000

Non Recurrent Expenditure (24,000,000)

Net Cash (used in) from financing activities 76,000,000

Net Increase in Cash/cash equivalents 75,130,984

Cash/Cash Equivalents at 30 June 2002 75,130,984

* These include finance for use in operating activities



NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD


1. ESTABLISHMENT

The Commission has been established under the Financial Services DevelopmentAct 2001 on 1 August 2001 to regulate the non banking financial services sector.The initial economic dependency of the Commission has been on the appropriationsfrom the Government of Mauritius. All assets and liabilities of Mauritius OffshoreBusiness Activities Authority (MOBAA), Stock Exchange Commission (SEC) andthe Government in respect of the Insurance Division, have been transferred to theCommission with effect from1 December 2001.

2. ACCOUNTING POLICIES

The principal accounting policies adopted by the Commission are as follows :

2.1 Basis of Preparation

These financial statements have been prepared on accrual basis, are in accordancewith the historical cost convention, and comply with the International AccountingStandards. The presentation of the financial statements in accordance with theInternational Accounting Standards and generally accepted accounting principlesrequires the management to make estimates and assumptions that affect the reportedamount and disclosures in the financial statements. Actual results could differ fromthose estimates.

2.2 Revenue

Grant received as initial financial support to the Commission from the Governmenthas been recognised as income for the period.

Revenues arising from processing, annual licence, registration and brokerage, whereno significant uncertainty as to its collectibility exist, have been accounted onaccrual basis.

Interest on bank deposits and state treasury bills have been accounted for on accrualbasis.

2.3 Expenditure

All expenses have been accounted on accrual basis.

Non recurrent expenditure represents funding of Financial Services PromotionAgency (FSPA).







2.4 Employee entitlements

The Commission contributes to a defined benefit plan for non-contractual employees,the assets of which are held independently and administered by an Insurancecompany, taking account of the recommendations of independent qualified actuaries.

For defined pension benefit plans, the pension costs are assessed using the projectedunit credit method. The costs of providing pension is charged to the incomestatement so as to spread the regular cost over the service lives of employees inaccordance with the advice of the actuaries who carry out a full valuation of theplans. The pension obligation is measured as the present value of the estimatedfuture cash outflow using interest rates of government securities which have terms tomaturity approximating the terms of the related liability. Actuarial gains and lossesare recognised over the average remaining service lives of the employees.

2.5 Tangible Fixed Assets and Depreciation

Assets are recorded at cost of acquisition except in respect of assets transferred fromMauritius Offshore Business Activities Authority (MOBAA), Stock ExchangeCommission (SEC) and Insurance division of the Government of Mauritius, inrespect of which the written down value as at 30 November 2001 has been taken asthe acquisition cost.

Depreciation is calculated on the straight line method to write off the cost of eachasset to their residual value over their estimated useful life as follows:

Item %

Motor Vehicles 20

Furniture 20

Office Equipments 20

Computer Equipment 33.33

Renovations / Fitting out at office premises over the lease period





2.6 Intangible Assets

Computer Software transferred from MOBAA and not having any estimated usefullife has been amortised fully.

Computer Software development costs are considered as Intangible Assets and will beamortised over the period of utilisation.

2.7 Cash and cash equivalents

Cash comprises cash at bank and in hand and bank deposits. Cash Equivalents areshort term, highly liquid investments that are readily convertible to known amountsof cash and which are subject to an insignificant risk of change in value.

2.8 Foreign Currency Translation

Assets and liabilities denominated in foreign currencies are translated to Mauritianrupees at the rates of exchange ruling at the end of the financial year. Transactionduring the year are translated at the rates of exchange ruling at the date oftransaction. Gains or losses resulting from settlement of such transactions and fromthe translation of monetary assets and liabilities denominated in foreign currencies,are recognised in the Income and Expenditure account.

2.9 Taxation

The Commission is exempt from the provisions of the Income Tax Act, 1995 (asamended).

2.10 Comparatives

This being the first accounting period, the figures for the previous year are notapplicable.






3. TRANSFER OF ASSETS, RIGHTS AND LIABILITIES

In terms of section 31 of the Financial Services Development Act 2001, thefollowing assets and liabilities as per audited financial statements of the respective bodiesas at 30 November 2001 and rights and obligations on as is where is basis have beentransferred to the Commission on the 01 December 2001

INSURANCE

MOBAA SEC DIVISION TOTAL

Rs Rs Rs Rs

Fixed assets 4,555,485 654,712 - 5,210,197

Non current assets/liabilities 2,246,858 (1,360,000) - 886,858

Net current assets 27,634,836 (540,135) - 27,094,701

General fund 34,437,179 (1,245,423) - 33,191,756

All the licensing, fees thereto which inter alia include pertaining to prior years,regulatory and monitoring rights stand vested under the Commission.

Fixed deposits, representing statutory security deposit certificates of insurance companies,held with the Insurance division of the Government amounting to Rs.343,530,067have been transferred to the custody of the Commission

All the pension liabilities with their corresponding respective funds, pertaining to theemployees transferred other than those of the Insurance division of the Government ofMauritius, stand vested with the Commission. In respect of those of and pertaining toInsurance division, the additional liabilities, if any, would be appropriately dealt with inthe year of retirement.

All the contingent liabilities in respect of the pending law suits with claims estimated atRs. 9,078,550 stand transferred to the Commission. Consequential claims arisingtherefrom cannot be quantified. The Commission is of the view that the liabilities, ifany, that may arise therefrom shall be appropriately dealt with in the year of settlementof the claims.


AU

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Rs

Rs

Rs

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9,29

91,

269,

699

611,

764

554,

463

3,43

5,22

5

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0,54

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9,75

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16,8

99,8

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1,14

9,84

81,

345,

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187

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156,

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332,

428

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188,

139

3,82

7,03

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8,32

613

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20,2

41,6

09






(b) Intangibles Rs

COST

Computer software transfer from MOBAA * 1,120,260

Purchases 39,295

Computer software- Development in progress 1,082,929

At 30 June 2002 2,242,484

AMORTISATION

Charge for the period (1,159,554)

At 30 June 2002 (1,159,554)

NET BOOK VALUE

At 30 June 2002 1,082,930

* Net book value as at 30 November 2001 has been takenas cost to the Commission

5. CAPITAL COMMITMENTS

The Commission leases office accomodation at Harbour Front Building, Port Louis. Thelease expires on 31.12.2005 and the rentals payable upto the date of expiry amount to Rs 31,677,072 (amount due within one year Rs 9,050,592

The Commission is in the process of developing computer software for internal use andthe amounts committed under the contract not provided for isRs 1,534,044 (amount due within one year Rs 1,534,044)

Other capital commitments not provided for Rs Nil.

6. NON CURRENT ASSETS

A special fund is being managed by State Insurance Company of Mauritius Ltd.(SICOM) on behalf of the Commission to provide for pension of an employee whotook early retirement during the previous year in the former MOBAA which has nowbeen transferred to the Commission. As at 30 June 2002 the balance is Rs 2,311,948.





7. DEBTORS AND PREPAYMENTS Rs

Debtors (Unsecured, considered good)

Debtors 15,669,351

Staff loan

Receivable within one year 2,900,785

Receivable beyond one year 7,683,251 10,584,036

Other receivables 10,110,772

Prepayments

Prepayment 152,602

Accrued interest on Treasury bills 3,367,089

39,883,850

8. BANK & CASH BALANCES

Cash in hand 549

Bank Balances 74,583,861

74,584,410

9. GENERAL FUND

Balance transferred from MOBAA 34,437,179

Balance transferred from SEC (1,245,423)

Balance transferred from Insurance Division -

Surplus for the year 127,517,927

At 30 JUNE 2002 160,709,683






10. RETIREMENT BENEFIT OBLIGATIONS

The pension scheme is a defined benefit plan and is partly funded. The assets of thefunded plan are held independently and administered by SICOM.

Rs

Present value of funded obligations 20,960,000

Fair value of plan assets (15,430,000)

Transferred from SEC 1,330,000

Unrecognized actuarial gain 850,000

Liability in the balance sheet 7,710,000

The amount recognised in the Income and Expenditure Account are as follows:

Current Service cost 770,000

Interest cost 1,240,000

Expected return on plan assets (1,048,959)

Total included in staff cost 961,041

Actual return on plan assets 790,000

Movement in liability recognised in the balance sheet

As determined by the Actuarial Valuation 6,470,000

As taken over from the Stock Exchange Commission 1,330,000

Expense for the year 961,041

Contribution paid (1,051,041)

As at the close of the year 7,710,000

The principal actuarial assumptions used for accounting purposes were:

Discount rate 10.50%

Expected return on plan assets 11%

Future salary increase 5%

Future pension increase 7.50%





11. CREDITORS & PAYABLESRs

Accruals 3,211,800

Other Creditors 14,316,907

Prepaid Licence Fee 58,318,406

75,847,113

12. INTEREST

Treasury Bills 5,002,280

Bank Deposits 532,535

Staff Loans 206,156

Non current asset 136,346

5,877,317

13. GRANT

Grant from the Government of Mauritius 100,000,000

100,000,000

14. SALARIES AND ALLOWANCES

Staff Salaries and Allowances 23,628,805

Passage Benefits 1,135,575

Board and Committee Fees 2,567,500

Travelling 1,341,197

Staff Welfare 179,912

28,852,989

15. TRAINING AND SEMINARSOverseas Conferences and Seminars 1,850,052

Staff Training 375,836

2,225,888






16. OFFICE AND ADMINISTRATIVE EXPENSESRs

Rental & Maintenance of Office Premises 8,816,222

Post, Telephone, Internet and Fax Charges 951,928

Electricity 690,776

Stationery 639,145

Subscriptions 569,914

General office expenses 671,450

Vehicle Expenses 190,450

12,529,885

17. NON-RECURRENT EXPENDITURE

Included under Non-Recurrent Expenditure is an amount of Rs. 24,000,000, being

contribution made by the Commission to the Financial Services Promotion Agency, in

terms of the provisions of section 37(13)(a) of the Financial Services Development Act

2001. In terms of post balance sheet event, as per section 37(13)(a) of the Financial

Services Development Act 2001 as amended by Act No. 20 of 2002, the economic

dependency of FSPA on the Commission shall cease as from 01 July 2002.





18. EXPENDITURE TO NET CASH FLOW FROM OPERATINGEXPENSES

Rs

Surplus of Income over Expenditure 127,517,927Adjustments for:

General Fund transferred from MOBAA 34,437,179

General Fund transferred from SEC (1,245,423)

Interest Income (5,877,317)

Government Grant (100,000,000)

Non Recurrent Expenditure 24,000,000

Increase in Retirement benefit obligations 7,710,000

Depreciation and Amortisation 1,907,741

Cash flow from operating activities, before working capital changes 88,450,107

Increase in Debtors (15,669,351)

Increase in Staff Loan (10,584,036)

Increase in Interest Receivale (3,367,089)

Increase in Other Receivables (10,110,772)

Increase in Prepayments (152,602)

Increase in Accrued Expenses and Other Payables 75,847,113

Net Cash Flow from operating activities 124,413,370

19. INTERNAL CONTROL SYSTEMS, RISK MANAGEMENT AND CORPORATE GOVERNANCE

This being the first accounting period, the Commission is in the process of establishinginternal control and risk management policies. The commission has taken steps toendeavour best corporate governance practices and inter alia has set up an auditcommittee and other technical committee.

20. CURRENCY

The financial statements have been presented in Mauritian Rupees.



AML / CFT Anti Money Laundering & Combatting the Financing of Terrorism

CA Companies Act 2001

CBDT Central Board of Direct Taxes

CDS Central Depository and Settlement Co. Ltd.

CISNA Committee for Insurance, Securities and Non-Banking Financial Authorities

FATF Financial Action Task Force

FIAML Financial Intelligence and Anti Money Laundering Act 2002

FIU Financial Intelligence Unit

FSAP Financial Sector Assessment Program

FSC Financial Services Commission

FSDA Financial Services Development Act 2001

GBC Global Business Company

IAIS International Association of Insurance Supervisors

IAS International Accounting Standards

ISA International Standards on Auditing

ICAC Independent Commission Against Corruption

IMF International Monetary Fund

IOSCO International Organisation of Securities Commissions

MEDFSCA Ministry of Economic Development, Financial Services and Corporate Affairs

MC Management Company

MOBAA Mauritius Offshore Business Activities Authority

OECD Organisation of Economic Cooperation and Development

OTC Over The Counter

ROC Registrar of Companies

ROSC Report on Observance of Standards and Codes

SADC Southern Africa Development Community

SEC Stock Exchange Commission

SEM Stock Exchange of Mauritius Ltd.

SEMATS Stock Exchange of Mauritius Automated Trading System

STR Suspicious Transactions Report

TRC Tax Residence Certificate

UNSC United Nations Security Council

WB World Bank

ABBREVIATIONS & ACRONYMS

Exchange Rates (as at 30 June 2002)

1 US$ = Rs 29.61 EUR = Rs 28.7

PHO

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