EASEA CROSS LISTING FORUM WRAP UP SESSION

1
EASEA CROSS LISTING FORUM WRAP UP SESSION

• By
• Mr. Jonathan Njau
• Chief Executive Officer
• Dar-es-Salaam Stock Exchange

2
Table of Contents

• SUMMARY OF THE ISSUES
• Rules and Regulations
• Operational and Structural Impediments to Cross
  Border Trading
• Question Answer Session

3
SUMMARY OF ISSUES

• Rules and Regulations

4
Summary of Issues

• Enabling legislation should be in place to ensure
  clarity of rules and minimal bureaucracy in
  Tanzania e.g.
• The Applicant shall use the services of licensed
  Tanzanian professional advisors
• Reporting Accountant and Auditor to be 2
  independent advisors
• Issue of negative working capital
• Disclosure of material contracts
• Comprehensive legal opinion
• CMSA even controls the content and placement of
  advertising materials in the media
• Insistence of Kiswahili Information Memorandum
• Shareholder resolution to cross list is
  considered unnecessary as long as a Board
  resolution is available
• Bank of Tanzania and CMSA should lift
  restrictions on the Capital Account for the
  Tanzanian Capital Markets

5
Summary of Issues

• Lack of parity in the taxation environment
• Minimise duplication of resources to cut down the
  time and costs of doing business e.g.
• reporting accountants and other advisors from
  each jurisdiction (primary and secondary),
• The preparation and submission of an information
  memorandum to each regulator
• It was proposed that since cross listing is
  usually an introduction, the company could make
  available copies of its latest accounts for easy
  access by prospective investors
• Licensed Market intermediaries who operate across
  all 3 jurisdictions can drastically reduce
  transaction advisory fees

6
Summary of Issues

• Fees should be market determined
• Reducing bureaucracy and the documentation in the
  process with naturally reduce fees
• Are the Securities Exchanges prepared to wavier
  cross listing fees and generate revenues from
  trading in the cross listed securities?

7
SUMMARY OF ISSUES

• Operational and Structural Impediments to Cross
  Border Trading

8
Summary of Issues

• The infrastructure for clearing, settlement and
  trading of cross listed securities needs to be in
  place
• How can the process of moving from one depository
  to another in the different jurisdictions be
  facilitated?
• Trading in a certificated and non certificated
  market is cumbersome and in turn reduces
  liquidity
• Verification processes.
• The issues of both settlement and liquidity must
  be considered seriously-
• There is need to sensitise the public on how they
  can use these financial securities to meet
  immediate liquidity needs
• The process of converting securities into cash
• Delivery versus payment issues

9
Summary of Issues

• High registration fees in Uganda
• Lack of registered custodians in Tanzania
• Can the Real Time Gross Settlement (RTGS) system
  be used on a regional basis?
• The process of cross listing should be managed
  such that liquidity and investment does not flow
  only to the more developed market but is evenly
  distributed

10
Summary of Issues

• The scope of these proposals should also consider
  companies listed on the AIMS segment
• The Securities Exchanges are not marketing
  themselves to prospective issuers of capital
  most CEOs of private companies do not understand
  the benefits of issuing capital on the securities
  exchanges
• Companies can look at cross listing as a form of
  marketing future prospects

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Summary of Issues

• Can IPOs be marketed on a regional basis? Start
  with the KenGen IPO
• EASEA can use examples of cross listing in the
  SADC securities exchanges
• The Central Banks can be a catalyst for regional
  integration by cross listing Government Bonds
• There is need to build trust and confidence
  across national boundaries show that cross
  listing will benefit all the markets involved
• The proposals should go further and consider the
  establishment of a East African Financial
  Services Zone

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SUMMARY OF ISSUES

• Question Answer Session

13
Summary of Issues

• Where are the regulators?
• First phase of the consultative process, the
  technical committee will then incorporate the
  regulators
• What is the point of listing if there is no
  trading?
• It is a process, list first and then trading will
  occur relative to the market and the
  jurisdiction
• Advisory fees?
• These are just indicative amounts
• They should be market determined
• What is the way forward?
• This is a consultative process, we are trying to
  be more proactive by reducing the costs of cross
  listing and we shall continue to work with
  issuers who are interested in cross listing.
• We shall provide you with an updated report, but
  EASEA is committed to finalising the process in
  2006, and should we not do so, we will tell you
  why.