Letter of Transmittal 

The Chairman           

Malta Stock Exchange        

27 Pietro Floriani Street   

Floriana VLT 14 

30 March 2001 

The Hon J Dalli FCCA CPA MBIM MP 

Minister of Finance 

Valletta 

Dear Minister 

In accordance with Section 28 (1) of the Malta Stock Exchange Act, 1990 (Cap. 345), I have the honour to transmit the Audited Financial Statements and Report on the activities of the Malta Stock Exchange for the Financial Year ended 31 December 2000. 

Yours sincerely 

Alf Mallia 

Chairman 

Chairman's report

Chairman's Report

I am pleased to be able to report another successful year for the Malta Stock Exchange, a year which, I feel, marks the coming of age of this institution. During the past twelve months, in fact, a total of eight companies from various sectors of the economy have successfully approached the market for their capital requirements. We have admitted the first company to the Alternative Companies List whilst on the corporate bond market we have listed the first bond in a foreign currency. Following this year's listings, total market capitalisation is now in the region of 2 billion Maltese liri, spread more or less equally between equity and bond issues. The Exchange has also continued to attract new listings of both local and  foreign Collective Investment Schemes. By the end of the year, in fact, the number of funds listed had risen to around 300. The number of stockbrokers licensed by the Exchange also increased this year, up from 11 to 15 in December 2000.  

As the market continues to develop, the Exchange is feeling the need for a review of both the Malta Stock Exchange   Act as well as the Bye-laws. The Act has been in place since 1990 and has served its purpose well during this time. However, rules and regulations must develop in parallel with the market that they seek to regulate. There are a number of areas where the Exchange feels that the  relevant legislation is wanting particularly where the powers of investigation at the disposal of the Exchange are concerned. We hope that the proposed amendments will be given the necessary Parliamentary approval during the coming months. 

On the administration front, we are pleased to say that work on the new offices in Castille Place is proceeding according to plan and we should be able to relocate to the new premises by end-July 2001. The Project, which will include the refurbishment of the area surrounding the main building, has involved the Exchange in a considerable investment which was made possible with the support of the Minister of Finance. 

My Council has also looked closely at the International Relations of the Exchange. After signing a Memorandum of Co-operation with the London Stock Exchange in 1999 which covered various areas of co-operation, the Council has also considered the possibility of entering into co-operation agreements with stock exchanges operating in the Mediterranean area.  In this context the Council has enlisted the support of the OECD and has agreed on the contents of the first Agreement which was signed early on in 2001 with the Cairo and Alexandria Stock Exchange.  At the same time, the Exchange also entered into a co-operation agreement with the Capital Market Board of Turkey and we look forward to signing similar agreements with other exchanges in neighboring countries.     

The Council has also been looking at various ways of actively promoting investor education in Malta. We believe that this is an integral part of the responsibilities of the Exchange as the regulator of the Capital Market. In fact, during the year the Exchange took the lead in setting up the Capital Markets Group whose main aim is to promote public debate on matters that are of general interest to the market.  It is a pleasure to note that public meetings organised by the Group have invariably been well attended. 

In October 2000, the Exchange also organised the first Chairmen's Conference. This idea behind this Conference was to bring together members of the Boards of Directors of listed companies together with their top management teams and to create a forum where the companies could discuss with the Exchange in a frank and open way topics of general interest.  We are pleased to note that both the London Stock Exchange and the FIBV participated in this conference which, we hope, will become an annual event in the local financial calendar. Indeed, as a follow-up to this conference the Exchange set up a Corporate Governance Committee whose brief is to prepare a draft Code of Corporate Governance both for listed Companies and for the Exchange itself. The Code should be ready and in operation by the middle of the year. 

Another Stock Exchange initiative in the area of investor education is focused on a series of TV programmes designed to provide viewers with the basic elements of finance and investment. Along the same lines, we are pleased to note that a booklet providing basic information on investments has been published as a private initiative and proved to be very popular. The setting up of a Shareholders Association was also a step in the right direction which I am sure, will prove to be a significant factor in furthering the interests of investors. On its part, the Exchange has during the past year also instituted the Alfred Camilleri Prize which is intended to enrich and deepen the study of the local market by University Students. Alfred Camilleri was the first Chairman of the Exchange and we thought it was very fitting that this Prize should be set up bearing his name. 

All this has been the fruit of much labour and thought.  It is only opportune, therefore, for me to thank first of all the other fellow members of the Council for their unfailing commitment to the institution.  At the same time, I must also thank all members of the staff without whose dedication and hard work we could not have achieved these results. 

Alf Mallia 

Chairman

Administration report

     Administration Report

The Council

The Chairman and Council Members appointed by the Minister of Finance in terms of Section 4 of the Malta Stock Exchange Act, 1990 (Cap. 345) and Section 5 of the  First Schedule annexed thereto, for a period of two years with effect from 1 February 1999 continued in office during the year 2000. 

Mr. Alfred Mallia, Mr. Edward Cachia Caruana and Mr. Michael Sciortino  were confirmed as Chairman and Council Members respectively, for a further two year period, effective 1 February 2001. Mr. Joseph V Laspina, a former Council Member was appointed for a two year period in lieu of Dr Galea Salamone who was unable to continue in office because of other pressing commitments. During the first meeting of the new Council, Mr. Joseph V Laspina was appointed to serve as Deputy Chairman in terms of Section 5(v) of the First Schedule of the Malta Stock Exchange Act, 1990 (Cap. 345). 

The Council met eighteen (18) times during 2000. Several sub-committees were set up, in addition to the already existing Listing and Premises committees. These are composed of a mixture of non-executive Council Members and senior executives and staff members of the Exchange. These sub-committees cover all the operations  of the Exchange, which apart from listing and premises, include IT, management and administration, CSD operations, trading and compliance. Another  sub-committee was set up specifically to review and to recommend amendments to the Act and Bye-laws. 

These sub-committees meet on a regular basis and report directly to the Council. 

The Council invited representatives from the stockbroking community, issuers, practitioners and investors, to sit on a Committee, under the Chairmanship of the Chief Executive of the Exchange, to consider the introduction of a Model Code of Good Corporate Governance to be adopted by listed companies. A first draft of the Model Code has already been drawn up and is currently being discussed by the sub-committee.  It is envisaged that the Draft Model Code on Good Corporate Governance will be presented to Council for consideration during the second quarter of 2001. 

The Exchange's Annual Special Meeting convened in terms of Section (iv) (a) of the First Schedule of the Malta Stock Exchange Act, 1990 (Cap. 345) was held on the 27 March 2000 when the Annual Report and Audited Financial Statements of the Exchange and the Compensation Fund were presented to licensed members. In his address, the Chairman highlighted various developments that had taken place in the Exchange during the previous year and he also made reference to certain future projects such as envisaged changes  to the fee structure, in particular to the removal of the fixed commission rate structure and changes to the Act and Statute. 

Tribunal 

In October the Council drew the attention of the Tribunal set up in 1999 in terms of Section 20  of the Malta Stock Exchange Act, 1990 (Cap. 345), to two cases to determine whether there were sufficient grounds for holding an investigation and, if in the affirmative, to investigate such alleged or suspected irregular practice in Exchange dealings for the Tribunal to take whatever action it may deem fit and proper. 

The Tribunal met a number of times and having deliberated at length after examining all submissions concluded in one case that there were no irregular practices in Exchange dealings. With regard to the other case, the matter is still 'sub judice'.

During the year under review, the Tribunal met with the Chairman and Council to discuss matters of mutual interest and also met Mr. Gavin Fryer, ex-Head of Listing at the London Stock Exchange and consultant to the Exchange, when primarily the role of the Exchange and the responsibilities and obligations of directors of listed companies were discussed. 

Human Resources  

During the year under review, the Exchange continued with its extensive and on-going re-structuring and reorganisation in order to better reflect and satisfy the needs  of the organisation. The two independent audits commissioned in 1999 regarding the regulatory aspects of the Exchange and IT systems and other related procedures were in fact aimed at pin-pointing any existing weaknesses and the restructuring required to ascertain standardisation of processes and level of  competencies. 

The setting up of the various sub-committees of the Council  was the first step in ensuring that the Exchange deals with various aspects involved more efficiently. The creation of an internal Admissions Committee complements the Listing Committee in order to speed up the application process by cutting down on a lot of duplication of work and centralising communication channels. At the same time, the structure of the Exchange was re-visited and certain changes were made to its organisation to provide a  clearer distinction between its regulatory, operational and support services. 

The changes in the structure of the Exchange, coupled with two (2) resignations from the staff complement resulted in a number of new vacancies some of which were filled internally by means of promotions and transfers. At the same time the recruitment process which had commenced during 1999 continued during 2000 with the recruitment of one (1) Supervisor and four (4) Clerk Bs during the year. The Assistant General Manager and a Supervisor who resigned during 2000 were replaced internally bringing the staff complement at the end of 2000 up to 35. This consists of thirteen (13) executive and managerial staff and 20 supervisory & clerical staff and 2 non-clerical staff. The recruitment process is not yet concluded and it is envisaged that there will be a further increase in the number of staff during the forthcoming year. 

The Alfred Camilleri Prize  

Over the years, the Malta Stock Exchange has made considerable efforts aimed at increasing the awareness of the investing public, school children, university students and financial services practitioners regarding its operations and functions. The Exchange felt, therefore, that the time was opportune for more in-depth and comprehensive studies in this area and considered that university students would be a good source for such studies. 

The Prize has been set up as a memorial to Alfred Camilleri, the first Chairman of the Exchange who served until his untimely demise in November 1992. Mr. Camilleri firmly believed that the only way for the new institution to develop was by educating not only participants and practitioners but also, the investing public regarding the uses and benefits of having a local capital market. The Exchange, therefore, felt it fitting that such an award scheme should be set up in his memory. 

The Prize will be awarded on an annual basis for the best thesis presented by students of the Faculty of Economics, Management and Accountancy in areas related to these subjects and will carry an award of Lm250 and a certificate. 

Staff Development  

International Conferences and Seminars  

In its continued endeavours to keep staff abreast of international developments and to give them the opportunity to discuss and exchange ideas regarding changes and problems encountered in the field of securities markets and related topics, the  Exchange continued to support its staff to attend international seminars and conferences as well as to attend training overseas. 

Some of the events attended during 2000 included: 

¥     IOSCO Market Manipulation Seminar  

¥     Directors  Meeting on Demutualisation of SROs  

¥     Stock Exchanges in the New Millenium  

¥     Clearing and Settlement in the new financial environment  

¥     FIBV Workshop on Investor Relations; and  

¥     EU related meetings.  

Training 

Following the introduction of the upgrade to the registration system, the Depo 2000, an official from Percival Software Ltd, suppliers of the system, visited the Exchange, to train staff hands-on on the new system. Later on in the year, three (3) CSD staff visited the Head Office of Percival Software Ltd in Estonia, to undergo more intensive and detailed training on the new system from both the operations and IT aspects of the newly implemented upgrade. 

At the same time, Exchange staff continued to broaden their knowledge of topics related to financial sector operations and developments by attending training courses, both internal and external, and also participating in local seminars and workshops. 

International Relations

Correspondent Exchange of the Federation of European Securities Exchanges (FESE)

During the General Assembly of the Federation of European Securities Exchanges attended by the Chairman and General Manager of the Exchange, the Malta Stock Exchange was elected as an Official Correspondent Exchange of this Organisation together with the Securities Exchanges of other EU accession candidate countries, namely Bratislava, Riga, Tallinn, Vilnius and Cyprus. 

The FESE is an association of securities exchanges from countries  in the European Economic Area and Switzerland. Its primary role is essentially to promote the common interest of European stock exchanges as regulated securities markets. It seeks to promote the development of securities markets in Europe by co-operating in the areas of trading, clearing and settlement as well as in regulatory matters and in so doing, furthers the gradual process of integration of the European capital markets. 

The Malta Stock Exchange has been a member of the Emerging Markets Forum of FESE since 192, indeed it was a founding member of this Forum, and has been an active representative during its bi-annual meetings. Indeed, the Autumn Meeting of the Forum of 1996 was held in Malta and the Malta Stock Exchange will again have the honour of hosting this prestigious meeting in October 2001, to coincide with the Official Opening of the new Stock Exchange premises in Valletta.

The election of the Malta Stock Exchange as a Correspondent Exchange of FESE came at the end of a lengthy process of assessment by Federation Officials as to the level of compliance of the Exchange's regulations vis-ˆ-vis those obtaining under EU Directives. The assessment process is continuing as the Exchange aspires to become an Associate Member of FESE during 2001. As a first step in this process, Mr. Paul Arlmann, Secretary General of FESE visited the Exchange in April when he met senior officials and began the reviewing process.  A delegation from the Secretariat of FESE and two other Member Exchanges is scheduled to visit the Malta Stock Exchange during April or May 2001, to carry out an on-site evaluation of the Exchange and its procedures, very similar to that carried out by the FIBV when assessing the Exchange for membership, but with special regard given to an overview of the status and the efforts  of Malta to achieve the requirements of the acquis communautaire. 

Meetings   

During the year under review, the Chairman represented the Malta Stock Exchange at the bi-annual meetings of the Working Committee of the International Federation of Stock Exchanges (FIBV), held in Sao Paulo and Berlin in March and June respectively. The Working Committee discussed matters of mutual interest, including pending applications for full membership of the FIBV. In October, the Chairman also participated  in the  General Assembly of the Federation, this year held in Brisbane, Australia. Also held in Australia this year, in Sydney, was the General Assembly of the International Organisation of Securities Commissions which was attended by the Chief Executive, while the General Manager participated in both the Spring and Autumn Meetings of the  Emerging Markets Forum within the Federation of European Securities Exchanges. 

Memorandum of Co-operation with the London Stock  Exchange 

Throughout its history, the Exchange has always endeavoured to create and maintain good relations and collaborate with other Stock Exchanges and in fact has a long history of collaboration with both the London and Dublin Stock Exchanges, who were instrumental in assisting the Malta Stock Exchange when it was starting operations. The Malta Stock Exchange's membership of international bodies such as the FIBV and FESE also indicates the importance it gives to international relations. During the past few months the Malta Stock Exchange has set, as part of its strategy, the strengthening of ties with other Exchanges, in particular with those within the Mediterranean region, as it feels that closer ties between Exchanges in the same geographical region which more or less have similar characteristics, will be beneficial to all concerned. In fact, the Exchange has started discussions with several Exchanges in the Mediterranean Region to sound out the possibility of drawing up formal collaboration agreements, which might eventually lead to multilateral co-operation between Exchanges in the same region. To this end, discussions are currently taking place with  the Capital Markets Board of Turkey, Cairo and Alexandria Stock Exchange. To further strengthen existing ties with the London Stock Exchange, in November  the two Exchanges signed a Memorandum of Co-operation to provide a mechanism for long term co-operation  to facilitate the development of channels of communication and to cater for a continuing relationship between the two Exchanges for the respective benefit of the financial services industry in both countries and to assist in the maintenance of orderly markets in securities in each state. 

European Union  

The EU Unit of the Exchange set  up in 1999 to review the acquis and advise the Council on relevant matters continued in its endeavours during 2000 and kept the Council up to date on what was happening in the screening process. Members of the Exchange's EU Unit also attended the TAIEX Seminar held in London during the year dealing with matters relating to accession to the EU. At the same time, the Exchange has undertaken a major review of the Malta Stock Exchange Act, in order to bring all its provisions in line with relevant EU Directives within the time frame stipulated. The Act is practically being re-drafted in its entirety, however, major changes related to exclusivity of trading and membership are envisaged and it is hoped that the proposed amendments will be discussed in  Parliament during the first  half   of 2001.

Premises  

Refurbishment works on the new  premises of the Exchange to be housed within the Garrison Church, Castille Place, Valletta, gathered pace during the latter half of 1999 and were in full swing throughout the year 2000. Excavation and preparatory works were ready by mid-year. This was followed by the erection of the steel structure within the original walls of the building, upon which the new structure would be built. At the same time the tendering process was continuing, and all tenders including mechanical and engineering, lifts, security, lighting and finishes, were concluded and awarded by the end of the year. Surveys were also commissioned and concluded regarding necessary restoration works that have to be carried out on the stone fabric of the building as well as on the wooden truss. Whilst the masonary work of the building is in fairly good condition, the wooden truss needs to be extensively restored to revert to its original condition, but this is not expected to cause unnecessary delays. 

The Exchange has also extended the existing sub-station within the Barrakka Gardens in order to provide sufficient utility and energy needs to the new Exchange building and has also undertaken to restore the main gate to the Barrakka Gardens and part of the surrounding area. 

Official Opening  

As part of the commemoration of the official opening of the premises, the Exchange has  commissioned a publication that will deal with the historical aspect of the building and the historical era during which it was built. The publication will also refer to the paintings of G Cali  which were  originally commissioned to hang in the Garrison Church (and which are now to be found in the Russian Chapel at the President's Palace, San Anton), as well as a description of the architectural design of the new building and its use as a stock exchange. 

It is envisaged that the Exchange will move to the new premises in July 2001 and the Official Opening will be held some time during the month of October and will include several cultural and social activities as well as the Autumn Meeting of the FESE Forum which is intended to be held in the Conference Hall within the new premises.    

Exchange operations and other activities

Exchange Operations

Market Performance during 2000  

During the year 2000 market turnover on the Malta Stock Exchange reached a total of Lm149 million. This figure represents a turnover of Lm81.2 million in equities; Lm4.5 million turnover in corporate bonds and Lm63 million in Malta Government Stocks.  

Although at over Lm190 million, the global turnover value for 1999 was somewhat higher than that recorded for the year 2000,  the 1999 figure included Lm74 million which represented the turnover  on the sale of the Government's shareholding in Mid-Med Bank plc to HSBC Bank Malta plc in June 1999. After allowing for this extraordinary factor, the business on the Exchange increased by Lm32.5 million during 2000,  an increase of 28% on the previous year. During the year under review,  the market was again dominated by  high levels of business in the equity sector, which far exceeded the business transacted in the Government Stock market. 

The number of deals  effected on the market reached a total of 17,057, a minimum increase of 218 over the previous year's figures. Deals concluded in equities remained practically the same (from 13,201 to 13,206), while a slight decrease in Government Stock deals ( 3,010 to 2,866) was made up for by a significant increase in the number of deals concluded in corporate bonds, which registered an increase of over 50%, from 628 in 1999 to 985 in 2000, this increase being largely the result of the increase in listed corporate bonds. 

The value of shares traded on both the Official List and the Alternative Companies List registered an increase of over 27% during 2000 when compared to 1999 figures (excluding the Mid-Med Bank plc transaction), reaching a turnover figure of Lm81.2. This increase in the turnover value for equities was not reflected in the  number of shares traded, which registered a decline of 15%, from almost 31 million in 1999 down to 26.2 million in 2000. These divergent trends can be explained  by higher equity prices during 2000, which pushed   up equity turnover figures for the year. 

In the equity market trading was heaviest in Maltacom plc shares, turnover in which accounted for 37% of all business transacted in the equity market.

During 2000, there was a noticeable increase in corporate bond business, with the total value traded exceeding Lm4.5 million, over twice the turnover value registered during 1999, due to the large increase in the number of securities listed in this sector. This increase was also reflected in the number of deals which was similarly higher, rising from 628 to 985.  Turnover in the 6.15% Bank  of Valletta plc Bond 2003/4, accounted for almost 50% of the business transacted in the Corporate Bond market.  

The Malta Stock Exchange Ordinary Share Index  

The Malta Stock Exchange Ordinary Share Index is an index of the price movements of ordinary shares listed on the Official List of the Malta Stock Exchange. 

By definition, therefore, preference shares and those shares listed on the Alternative Companies List are excluded from the computation of the Index. The Index is a weighted index and the weightings correspond to the overall capitalisation of each issue in relation to the capitalisation of the ordinary shares in the Market. The prices taken in the computation are the trade weighted average for each share recorded on a daily basis. The base date was set at the end of the session held on 27 December 1995 and the base index was set at 1000. 

Equity prices during 2000 remained fairly steady throughout the year. This was reflected in the value of the Malta Stock Exchange Ordinary Share Index, which after opening the year at 3278.48 and peaking at 3896.90 on 14 February 2000, ended the year at a value of 3375.49, an overall annual increase of 97.23 points, or 3%. Index values, in fact, remained fairly steady throughout the year, dipping slightly towards the end of the year, following the dip in equity prices as the year drew to its conclusion.  

Market Capitalisation

The market capitalisation of securities listed on the Malta Stock Exchange (excluding Collective Investment Schemes) reached a total of over Lm1,730 million at the end of 2000, an increase of Lm134 million, or 8%, over the end of 1999 value. Market capitalisation of equities reached a value of Lm882 million, an increase of Lm92 million over last year's value. A large increase was also registered in the market capitalisation for corporate bonds - from Lm41 million at the end of 1999 up 154% to Lm106 million at the end of the year under review.  Market capitalisation of Government Stocks decreased slightly by Lm22 million to end the year at a value of Lm742 million. 

At the end of the year there were also twenty six (26) local Collective Investment Schemes listed on the Malta Stock Exchange (apart from almost 200 foreign investment schemes) with a market capitalisation value of over Lm330 million.  

Trading

Horizon, the upgrade to the electronic trading system, which was installed towards the end of 1999 and which had been certified by the suppliers, EFA Software Services Ltd, as being Y2K compliant, proved to be so with flying colors, as trading continued seamlessly into the new year. 

The trading system continued to perform well, and in fact no hitches resulted from the commencement of trading in the first US Dollar denominated bond, which was listed late in October 2000. 

The first equity was listed on the new Alternative Companies List late in the year and it was agreed that as, there was still only one security listed on this Board, it would be traded under the same rules and regulations as those prevailing for securities listed on the Official List of the Malta Stock Exchange. 

The listing of the first foreign currency denominated security necessitated some amendments to the Trading and Settlement Calendar for 2000, to ensure that the settlement period did not fall below T+3. . 

The changeover to remote trading which was envisaged to take place during the year 2000, was delayed mainly for technical reasons, however, work on the project continued apace throughout the year and it is now planned that the changeover to a screen-based  scenario will take place during the first half of 2001, prior to the move to the new premises in Valletta. 

As a first step to the new environment, Contract Notes and post-trading reports, are no longer being printed but are being given to stockbrokers in electronic format in order to facilitate and speed up post-trading procedures.  

Listing  

New Admissions 

The year 2000 was another year which witnessed a considerable amount of new listings in all sectors of the market, including the first listing on the Alternative Companies List. 

Three (3) new equity issues were admitted to listing during the year under review, namely 40,000,000 Ordinary Shares of Lm1 each of International Hotel Investments plc and 9,414,000 Ordinary Shares of 20c each of Plaza Centres plc, were admitted to listing on the Official List of the Malta Stock Exchange while Datatrak Holdings plc listed 15,949,500 Ordinary Shares of 10c each on the Alternative Companies List, the first company to list its securities on the alternative listing board which was introduced in 1999. 

Subsequent to a Rights Issue, an additional 763,833 Lombard Bank (Malta) plc Ordinary Shares of 50c Nominal were admitted to the Official List in April 2000. 

During the year under review, a further six (6) medium term Government Stocks were admitted to listing, with a total Nominal value issued of over  Lm87 million. These were the 5.9% MGS 2009 (III); 6.6% MGS 2014; 5.6%  2015 and the 7% MGS 2010 (III), the latter being allocated entirely to the Foundation for Church Schools. 

Throughout the year there were also a further six (6) new Corporate Bonds admitted to listing on the Official List. Among these were the first foreign currency denominated bond - the 8% Bank of Valletta plc Bond 2010, denominated and traded in US Dollars, with a Nominal value issued of US$36,543,500. The first privatisation bonds - 100,000 Malta Government Privatisation Bonds of a Nominal value of Lm100 each were admitted to listing in December 2000 while International Hotel Investment plc listed Lm5,000,000 5% Convertible bonds 2010 at the same time it listed its equity. Other Corporate Bonds listed during the year were Lm10,000,000 Eden Finance plc Bonds 2010,  Lm4,000,000 6.75%  United Finance plc Bonds 2008 and a further bond issued by Bank of Valletta plc - Lm20,000,000 6.15% Bonds 2010. 

The year 2000 was a hugely successful year in respect to the listing of Collective Investment Schemes. The following local and overseas schemes were granted a primary or secondary listing during the year and admitted to the Official List of the Malta Stock Exchange : 

Primary Listing  

¥     Global Funds SICAV plc - 1 sub-fund 

¥     Wignacourt Fund SICAV plc - 1 sub-fund 

¥     Amalgamated Investments SICAV plc - 1 sub-fund 

¥     Melita International Funds SICAV plc - 3 sub-funds 

¥     La Valette Funds SICAV plc - 5 sub-funds 

Secondary Listing 

¥     Royal + Sun Alliance Global Investment Portfolio SICAV plc - 1 sub-fund 

¥     Lloyds TSB Money Market Fund Ltd - 12 sub-funds 

¥     Lloyds TSB Offshore Fund Ltd - 9 sub-funds 

¥     Lloyds TSB Offshore Gilt Fund Ltd 

¥     Barclays International Fund SICAV - 13 sub-funds 

¥     Barclays International Funds (Luxembourg) - 5 sub-funds 

¥     Barclays Euro Funds - 6 sub-funds 

¥     UBS (Luxembourg) Bond Fund - 13 sub-funds 

¥     UBS (Luxembourg) Strategy Fund - 15 sub-funds 

¥     Putnam World Trust II Fund - 13 sub-funds 

¥     Fidelity Funds SICAV - 7 sub-funds 

¥     HSBC International Capital Secured Growth Funds plc - 6 sub-funds 

At the end of the year there were around 300 local and overseas Collective Investment Schemes listed on the Malta Stock Exchange. 

Delisting 

Following the winding up of the Fund, the Lazard Asia Pacific Fund, a sub-fund of Lazard Global Equity Fund, was delisted from the Official List with effect from 29 February 2000. 

Suspension of Listing 

As a result of new developments within the Fund, two share classes of Fidelity Funds SICAV - the Selection International Fund and the Selection Europe Fund - were suspended from listing on 9 December 1999. The listing of these two sub-funds was subsequently cancelled with effect from 4 February 2001. 

Redemptions 

During the year twelve (12) Government Stock issues with a total Nominal value of Lm86.5 million were redeemed. 

Central Securities Depository  

The increase in the number of listed securities was reflected in the increase in the number of accounts held within the Central Securities Depository (CSD), which increased by almost 11,000 up to 110,000 when compared to the end of 1999 figure. These accounts represent approximately 60,000 individual holders.  

The number of amendments effected across all the registers held by the CSD remained largely unchanged from 1999, registering an increase of just 1,157 throughout the year when compared  to the previous year's figures.  Amendments as a result of market transactions decreased slightly, however, there was an increase in holder amendments (static details), also a reflection of the increase in the number of holders across all the registers. 

During the year under review, the CSD also processed over 113,000 dividend and interest cheques amounting to a value of over Lm49 million, an increase of over Lm2 million when compared to 1999 figures.  

In the summer months, CSD staff underwent training in Estonia at the Head Office of Percival Software Ltd on Depo 2000, the upgrade to the registration system implemented at the end of 1999. This training followed on that given to CSD at the beginning of the year by Percival Software Ltd staff who visited Malta  for the purpose shortly after the implementation of the new upgrade. Particular areas covered in the follow-up training included primary issue procedures and reporting functions. Another important area covered was IT systems on which the CSD is heavily dependent.

Compliance  

Following the Council's decision to strengthen the Exchange's regulatory function, several new members of staff joined Compliance Office at the beginning of the year while a number of internal movements took place to strengthen the Office's complement. Such  an increase in staff was considered to be a necessity in view of the envisaged number of listings as well as the move to off-the-floor trading which would require greater market monitoring, coupled with the necessity to ensure that inspections to stockbroking firms, the number of which was increasing considerably, continue to be regular and frequent. 

On-site Inspection Visits 

In April 2000, Compliance Office commenced a new programme of inspection visits to stockbroking firms based on three main areas of compliance - clients` orders and the maintenance of the order log book; other business interests as defined in the Bye-laws and accounting practices. 

The new programme of visits was designed to ensure that all areas of a firm's obligations are covered in a period of twelve months. The new programme of visits also ensures that each stockbroking firm is visited at least 3 times during a twelve-month period. 

The programme of inspection visits remained on course throughout 2000 with each Firm having already been visited twice by the end of the year. These visits also included unscheduled visits to the two new stockbroking firms which commenced operations during the year to ensure that all compliance procedures and operations were in place and in line with the requirements of the Bye-laws and other related regulations. 

Compliance Office also had occasion throughout the year to undertake a number of surprise visits to stockbroking firms or to ask stockbrokers for more information or clarifications mainly regarding particular occurrences on the market. 

At the same time, Compliance Office continued to monitor the Firms` Quarterly Reporting Statements  as well as Money Laundering procedures undertaken by the Firms.

Listing Procedures 

The increase in the number of listing applications, in particular with respect to Collective Investment Schemes, necessitated a review of the listing procedures in order to speed up the process. Besides the setting up of the Admissions Committee, which included a number of Compliance staff, Compliance Office sought to draw up checklists for all listing requirements in respect of compliance with the Bye-laws in order to assist the sponsoring stockbroker when submitting a listing application. Such checklists are presented with the listing application which in turn assist Compliance Office in determining the correctness and completeness of a listing application.  

Dealings by Directors of Listed Companies 

In the context of the review undertaken by the Exchange with regard to market practices and compliance with internationally accepted regulatory standards, the Council approved changes to the Exchange's rules on dealings by directors and employees occupying a position of trust, in the listed securities of those companies in which they are employed or hold a directorship.

The Bye-laws prohibit a director from dealing, directly or indirectly, in those securities: 

¥     when in possession of unpublished price-sensitive information; 

¥     prior to an announcement involving any price-sensitive information; and 

¥    during any close period ahead of the preliminary announcement of a company's              results and any dividends or distributions to be paid or passed.  

In line with an amendment to the Bye-laws, approved in March 2000, a director is now also prohibited from dealing in securities of the company in which he is a director, on considerations of a short-term nature. 

Furthermore, prior to any dealing as may be permitted under the Bye-laws, the amendment also requires such a director or an employee to advise in writing the Chairman or one or more other directors designated for this purpose of his intention so to deal. The listed company receiving any such advance notice of a director's intention to deal is required to maintain a  written record thereof and to confirm in writing to the director giving notice that a record of such notice has been retained.  

Complaint Form 

As investors become more knowledgeable of the procedures of the market and their dealings with their respective stockbrokers, they have become more aware whether they are receiving adequate service and if not, that they have a right to an explanation at least and perhaps some form of redress. This can be seen by the significant increase in the number of investors seeking clarifications on their dealings or making a direct complaint. 

Compliance Office has without fail tackled all customer complaints and queries however, it was felt that standard procedures should be put in place, not only to encourage investors to come forward with their complaint but also to facilitate investigations by Compliance Office and to ensure that a written record is kept of each particular complaint. 

As a result, in April 2000, the Exchange announced procedures that need to be followed when filing a complaint by a customer. 

If an investor believes that he has been subject to unfair or improper business conduct by a broker or financial intermediary and he feels that he has grounds for compliant, he is encouraged to initially try and resolve any such matter with the broker or financial intermediary with whom business was originally conducted. In this respect brokers and financial intermediaries have been advised to nominate a Complaints Officer to deal with such matters. 

Should a customer not feel satisfied with the response from the broker or financial intermediary then the customer may wish to lodge the complaint with the Exchange in which case he must now do so in writing on the appropriate form. The Exchange has set up a Customer Services Office within its Compliance Department to look into these matters. 

The brokers and financial intermediaries have been advised accordingly and they have been supplied with the Customer Complaint Forms which are also available from the Exchange.  

Continuing Listing Obligations 

During 2000 listed companies and Collective Investment Schemes issued ninety (90) Company Announcements in terms of the Bye-laws on continuing listing obligations. Compliance Office monitors listed companies` performance of these obligations rigorously in order to ensure that the general body of investors is at all times informed about the companies and securities in which they have invested or may wish to invest.  

Keeping investors informed about their investments  is considered to be of such importance by the Exchange that although listing requirements for those companies seeking a listing on the ACL are less onerous than for hose seeking admission to the Official List, continuing obligations are exactly the same for both listing boards. 

It is envisaged that in order to ensure that investors are informed of corporate news in the companies in which they have invested at the same time, Company Announcements and any other relevant company news are disseminated via the internet on the Exchange's website. In this respect, historic Company Announcements can already be found on the Exchange's website for easy reference.

The Malta Stock Exchange Act, 1990 (Cap. 345)  

Amendments to the Statute 

In July 2000, the Minister of Finance, by way of Legal Notice 124 of 2000 approved amendments to the First Schedule of the Malta Stock Exchange Act, 1990 (Cap. 345). 

One of these amendments provides for the setting up of a College of Stockbroking Firms to replace the existing Malta Stock Exchange Committee, to which stockbrokers were statutorily bound to elect representatives from within the stockbroking community. Among its terms of reference the Committee was bound to tender advice to the Council on matters of mutual interest.  

During a meeting with the Committee that the Council had in January, one of the matters raised had been the effectiveness (or otherwise) of the Committee with regards to both its advisory and self-regulatory role. It was mutually agreed that  stockbrokers found it difficult to find consensus on any subject and the frequent change in the stockbrokers` elected representatives created continuity problems. It was therefore, recommended that the Committee should be replaced by another body comprising all the licensed members. 

Following further consideration, the Council deemed it appropriate that the Committee should be abolished and replaced with a College of Stockbroking Firms composed of representatives from each stockbroking firm. 

The College was in fact set up in terms of LN 124 of 2000. It is pointed out that IOSCO, of which the Malta Stock Exchange is a full member, highly recommends that stockbrokers exercise an element of self-regulation among their own community which is one of the terms of reference of the College.  

The College has no executive powers but its terms of reference are to advise the Council on matters relating to the proper functioning of an orderly market as well as to investigate and discipline any alleged misconduct on the part of any stockbroker and to make recommendations to Council accordingly.  

The second amendment to the Statute provides for the definition of a Financial Services Organisation (FSO). An FSO is defined as any company licensed to carry on investment business in terms of the Investment Services Act including among others, banks and insurance companies. 

Under the regulations operating prior to Legal Notice 124, an employee of an FSO could freely apply to become a stockbroker member. It was, however, felt that since a license is issued in the name of the individual applicant any application made by an institution in the name of any of its employees to act as a stockbroker could be abused by the employee as he could resign from his employment and carry with him the stockbroking license  which for all intents and purposes would still be valid. 

After consideration discussion it was decided to extend to FSOs the regulations which had been applicable to the Central Bank of Malta since the enactment of the Malta Stock Exchange Act. In terms of the said regulations a stockbroker licensed by the Exchange nominated by the Central Bank would have his licence "ipso facto" withdrawn on his resignation from Central Bank employment. Legal Notice 124 aims to achieve the same results in that the stockbroker is deemed to have resigned from membership of the Exchange if the Council receives notice in writing from the FSO nominating such person that it intends to withdraw its nomination in respect of such person.  

Amendments to the Malta Stock Exchange Act, 1990 (Cap. 345)  

In 2000, ten years after its inception, the Exchange undertook an extensive review of the Malta Stock Exchange Act, 1990 (Cap. 345) setting it up, in  the light of the developments that had taken place throughout the decade. Moreover, this review was necessary to ensure compliance with EU Directives in view of Malta's application for accession to the EU as well as to ascertain continued compliance with current internationally recognised standards. A Draft Act has already been drawn up and presented to the general public during a consultative meeting held on 11 December 2000. During this meeting, the Deputy Chairman of the Exchange, Dr A Galea Salomone, explained the main areas of the Act which it was being proposed should be amended and the reasons for such proposed amendments. Amongst the main areas that are being addressed one finds exclusivity of trading, licensing criteria and investigative powers.  

Amendments to the Bye-laws of the Malta Stock Exchange  

As already mentioned elsewhere in this Report, early in the year the Council approved amendments to  Chapter 6 of the Bye-laws (Listing Requirements), concerning dealings by directors of listed companies when in possession of price- sensitive information. 

Following the issue of Legal Notice 124 amending the Statute annexed to the Act, Chapters 3 and 4 of the Bye-laws dealing with stockbrokers and stockbroking firms respectively, were amended to cater for the new provisions of the Statute. Licensing criteria and related exemptions from current Bye-laws for persons nominated by an FSO to act as stockbrokers, were included in Chapter 3 while certain exemptions in respect of stockbroking firms set up as subsidiaries of FSOs were included in bye-laws 4.01 and 4.02. 

Listing Requirements under Chapter 6 of the Bye-laws are also being reviewed to provide for the listing of foreign companies (as already provided for under the Alternative Companies List listing rules) and to endeavour to simplify the listing process.  

Council Notice 1 - Fees and Other Charges 

During the year under review, the Council considered recommendations from stockbrokers, listed companies and other practitioners in the market, regarding the possible review of the Exchange's fee structure in order to reduce costs and encourage more companies to seek a listing. 

After due consideration of such recommendations, at the beginning of December the Council approved amendments to Council Notice 1 dealing with all fees and charges levied by the Exchange, to become effective on 1 January 2001. 

The waiver, until further notice, on initial listing fees in respect of equity issues introduced in 1999 was retained while register fees were also reviewed, reducing further the costs for listed companies. 

Two major amendments carried out included the liberalisation of the fixed commission regime and the  calculation of stockbroking firm fees. 

The stockbroking firm fees, payable to the Exchange would no longer be calculated on the basis of the Gross Income of the firm, but would be calculated instead on a prescribed percentage of the market turnover of each and every firm.  

Public Relations  

Listed Companies` Seminar 

In October, the Exchange organised its first seminar for listed companies.  

The Council felt, that in the light of the interest generated and the number of new companies coming to the market, both on the main board and the ACL, it was opportune for the Exchange to discuss matters of mutual interest with listed, as well as prospective listed companies, in an endeavour to continue to strengthen and deepen the local capital market. This seminar was considered to be the first step in creating such a platform for discussion and the Exchange noted with satisfaction the attendance which included representatives from all the listed and prospective listed companies. 

The speakers were Mr. Alfred Mallia, Chairman of the Malta Stock Exchange who touched upon the future of the Exchange and the way it should develop. He was followed by Dr Louis De Gabriele, who has been involved in a diverse number of public offerings and therefore, was in a unique position to discuss the listing experience and Mr. Walter Bonnici, the Chairman of Datatrak Systems Ltd, the first company to seek a listing on the ACL who highlighted the reasons why his company sought such a listing. The final speaker was none other than Mr. Gerrit de Marez Oyens, outgoing Secretary General of the International Federation of Stock Exchanges who spoke about capital markets generally with special reference to all the new and rapid global developments that are taking place.

A special guest at the seminar was Ms Joanne Menges, Head of Global Affairs at the London Stock Exchange who was in Malta to discuss the proposed Memorandum of Co-operation between the two Exchanges, heralding a new era of co-operation and assistance. 

The Chairman and Council hosted a Gala Dinner for seminar participants and their guests to mark the closing of this seminar. The Minister of Finance who was a special guest at the Dinner, in a short after dinner address, stressed the importance of the Exchange's role as regulator and the importance of transparency in Exchange dealings.

Convention

At the beginning of the year the Malta Stock Exchange put up a stand together with the Malta Financial Services Centre at the Malta Business Convention which provided the two institutions with the opportunity to promote their services to the business community. 

During the Convention, Mr. A Mallia, Chairman and Mr. P J Spiteri, Chief Executive, spoke about the introduction of the Alternative Companies List (ACL) and why it felt that this ought to generate interest as an alternative source of capital. Mr. Mallia spoke about the role of a stock exchange and how it functions in order to fulfill its role efficiently. Mr. Spiteri referred to the introduction of the ACL and explained that the introduction of these rules give certain companies, such as new companies which do not have the necessary three year track record, an opportunity, which previously did not exist, to seek financing from the public and to list their securities on the Exchange.

In March the Malta Stock Exchange also participated in the Careers Convention organised by the Ministry of Education. The Exchange put up a stand which gave information about the Exchange's functions and operations and other material was available for distribution to those attending.

Later on the same month the Exchange hosted a Breakfast Meeting which was attended by the Hon Minister of Finance, the Council and Senior Manager and the Chairman of the Malta Financial Services Centre, and Mr. Gavin Fryer, Consultant to the Exchange, where the role of the Exchange, was discussed. 

The Alternative Companies List was again the subject of another seminar organised by the Malta Chamber of Commerce in April 2000. Mr. A Mallia and Mr. P J Spiteri, Chairman and Chief Executive of the Exchange respectively together with Mr. P V Azzopardi,Stockbroker, were speakers at this event. 

On 11 December 2000, the Exchange organised a public meeting to present proposed amendments to the Malta Stock Exchange Act, 1990 (Cap. 345) to the general public. The Deputy Chairman of the Exchange presented these proposed amendments and explained the background leading to such proposals. At the same meeting, Mr. Gavin Fryer, Consultant to the Exchange, presented a paper regarding the role of the Exchange in the listing process.  

Distinguished Visitors  

During March, the Exchange welcomed HE Mr. Didier Destremeau, the French Ambassador to Malta who paid a courtesy visit to the Exchange. His Excellency discussed matters of mutual interest with the Chairman and Senior Executives of the Exchange, and explored the possibility of the Exchange obtaining assistance from the Bourse de Paris.

In April, the Secretary General of the Federation of European Stock Exchanges (FSE), Mr. Paul Arlmann paid a short visit to the Exchange as a first step in the validation process for the Malta Stock Exchange to become a Corresponding Member (approved by the Executive. Committee of FESE in June) and eventually an Associate Member of this prestigious organisation. 

Mr. Arlmann was given a brief overview of the operations and functions of the Exchange and explained the validation process and what would be required of the Exchange in order to attain Associate Membership as soon as possible.

One of the highlights of the year for the Exchange was the courtesy visit by HE Professor Guido Demarco, President of the Republic, on 4 December 2000.  His Excellency toured all the offices of the Exchange and  had the opportunity to meet and speak to all members of the staff. In a short address the President stressed the importance of the Exchange in the financial sector and highlighted various developments that had taken place during its short history and augured well for the Exchange's continued growth and its increasing participation in both the national and international financial environment. 

As a memento of his visit to the Exchange, His Excellency was presented with a donation to the Community Chest Fund, of which he is patron.  

Members

The year 2000 saw a significant rise in the number of Stockbrokers licensed by the Council of the Malta Stock Exchange. Five (5) new Stockbrokers were licensed during the year - one, a former Accredited Representative  to operate through an existing stockbroking firm; a further three (3) to operate through two (2) newly set up stockbroking firms while the fifth prospective stockbroker was nominated by an FSO and licensed by the Council to operate through the newly set up stockbroking subsidiary of an FSO. 

At the end of the year, therefore, there were sixteen (16) licensed stockbrokers, including the Central Bank Stockbroker, operating through eleven (11) different firms while the Exchange had posted a Notice regarding the application of another prospective stockbroker, also nominated by an FSO.

Accredited Representatives 

As a result of the setting up of the new stockbroking firms and the increase in business on the Exchange, ten (10) new Accredited Representatives were approved by the Exchange following the successful completion  of the requisite training and appropriate written test (which, for the first time this year, was also undertaken by prospective stockbrokers). 

At the end of the year over 30 individuals were approved as Accredited Representatives representing all the stockbroking firms and the Central Bank of Malta.  

Financial Intermediaries  

Two (2) new Financial Intermediaries were included on the Commission Sharing Register during the year under review, while another, Valletta Investment Bank Ltd, was removed from the Register at the end of the year as this institution no longer remained in existence in its present structure. 

At the end of the year, therefore, ten (10) institutions and individuals were approved to operate as Financial Intermediaries.

Financial report and audited financial statements

Financial Report

Year ended 31 December 2000

The past twelve months have been a successful and eventful time for the Malta Stock Exchange. During this period, in fact, the Exchange registered an increase in operating income accompanied by a stronger surplus. Both revenue and expenditure continued to grow during the year 2000, the former rising by Lm 187,000 (22%) to reach Lm1,021,000 and the latter from Lm678,000  to Lm815,000 (20%).  As a result, the surplus after taxation rose by Lm27,000  (21%) over the 1999 figure to reach Lm155,000. The growth in total revenue during the year under review was mainly attributable to increased listing fees, which ensued as a result of new listings that took place during the year. 

A surplus for the year of Lm155,000 after tax

The surplus recorded for the year 2000 shows a slight improvement over the corresponding figure for 1999 (Lm129,000), and is well above the Lm22,000 budgeted for this financial year. 

Note 3 to the audited financial statements broadly splits up the Exchange's income for the year 2000 between  fees payable by stockbrokers and financial intermediaries, Lm146,000, (1999 - Lm98,000), listing fees Lm556,000, (1999 - Lm448,000) and income generated from services offered by the Central Securities Depository Lm 319,000 (1999 - Lm288,000).  Higher turnover levels during 2000 generated more business for licensed stockbrokers and financial intermediaries resulting in a significant increase in commissions earned. Furthermore, Exchange income was also enhanced as a result of the listing of 154 new investment funds during the year. 

Increase in fixed assets during 2000

Total net fixed assets which at the end of 1999 stood at Lm231,000, increased sharply during the year 2000 to reach Lm777,000. Total fixed assets went up by Lm613,000 during the year. Of these, Lm544,000 were spent on the works carried out on the new premises and Lm63,000 on upgrading of the computer system mainly in preparation for the move to remote trading. 

The total asset figure includes recognition of a deferred tax asset as required by IAS 12 (revised). This amounts to Lm16,450 (Lm14,888 Ð 1999). 

Cash flows during the year

As can be seen in the cash flow statement on page (VIII), the net cash generated from Exchange operations reached Lm139,000 in 2000 (1999 - Lm49,649). A total of Lm199,000 were invested in short-term Treasury Bills during the year. By the end of the year, all Treasury Bill holdings had been encashed with the proceeds, Lm347,000 being utilised to partially finance the new Exchange premises project. The project will be mainly financed utilising a loan facility obtained earlier in the year, by the Exchange, from the Ministry of Finance. By the end of the year, Lm200,000 or 20% of this facility had been withdrawn. 

Expectations for 2001

The Exchange expects the net operating surplus for 2001 to be in the region of Lm92,000. On the expenditure side, staff costs will increase when six new members of staff join the ranks of the Exchange during the year.  The Exchange will also be spending heavily on the new premises project which is expected to be ready by late summer. 

Furthermore, during the year 2000, the Exchange invested heavily in the acquisition of computer equipment as part of the Remote Trading Project.  One can, therefore, safely assume that expenses in connection with hardware and software maintenance will be higher during 2001. 

The year 2001 at the Malta Stock Exchange will be mainly dominated by the move to the Exchange's new premises in Valletta and the move to remote trading.  Various securities are expected to list during the year, including a number of listings on the Alternative Companies` List.  It is expected that the year ahead will prove to be another prosperous and challenging year for the Malta Stock Exchange.