DEPOSITARY RECEIPTS Depositary Receipt presentation RFCA ... · Integral part of IPO/Program...
Transcript of DEPOSITARY RECEIPTS Depositary Receipt presentation RFCA ... · Integral part of IPO/Program...
Depositary Receipt presentationDEPOSITARY RECEIPTS
Gregory Roath, Vice President
The Bank of New York
RFCA/LSE Conference
Almaty, Kazakhstan
February 1st, 2007
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CONTENTS
What are Depositary Receipts and the DR MarketThe DR DecisionDR MechanicsCross Border IssuesMarket Activity (Investors and Counterparties)
mericanA
Global
What are Depositary Receipts?
Certificates representing home-market securities
Typically U.S. dollar denominated
Trade freely in the United States and Europe
Can be used to list on an exchange or to raise capital in the U.S. or globally
Can be adapted to meet specific marketing needs
DRs
No Difference Between ADRs or GDRs
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DR Capital Raising Amountsby Exchange, 2006 ($bn)
20.6
8.4
5.7
5.2
4.8 0.3London
New York
PORTAL
NASDAQ
Luxembourg
Other/None
DR Capital Raising Amountsby Country, 2006 ($bn)
10.2
4.2
4.12.52.1
18.4
Russia
Korea
UK
Kazahstan
China
Other
Annual DR Capital Raising ValuePrimary and Follow-on Offerings ($bn)
0
10
20
30
40
50
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06
InternationallyListed
U.S. Listed
Depositary Receipts in Perspective
Annual DR TradingInternational Order Book
0
100
200
300
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06
Value ($bn)
Kazakhstan
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Depositary Receipts in Perspective
DR Trading ValueBy Country, 2006 ($bn)
215
1501078066
794
252
236
BrazilUKRussiaChinaMexicoFranceNetherlandsOthers
New Sponsored DRsBy Country, 2006
10977
6
5139
10
IndiaChinaRussiaBrazilUkraineUKKoreaOthers
Total Sponsored DRsBy Country, 2006
119
115
107
106101
1056
234
146IndiaUKAustraliaRussiaTaiwanHong KongBrazilOthers
Total Sponsored DRs
0
500
1,000
1,500
2,000
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06
U.S. Listed Level I GDR
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Dual Listing Considerations
Positives/Concerns
Positives of a Dual-ListingBroader investor baseMore comparable companiesInternational (U.S./European) research coverageHigher profileAccess to international specialists as well as domestic/retail fundsPotentially higher valuations achievable
ConsiderationsAdditional and ongoing disclosure requirements, including:
- Sarbanes-Oxley requirements(for U.S. listing)
Additional costs
Key Areas of FocusValuation
Peer groupLiquidityIndex inclusion
Disclosure/Governance Accounting standards/pro formaRigor of disclosure requirementsBoard compositionOfficer and Director liabilityCost of listing/ongoing compliance
Depth of Capital Market/Investor BaseDepth of equity capital invested in marketLiquidity in primary/secondary marketsEfficiency of capital raising Investor familiarity with Sector
Overview of Key Considerations, Positives and Concerns
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Dual Listing Considerations
The Investors Perspective
Investors can choose from nearly 2,000 Depositary Receipts from over 70 countries
Quotes and dividends are in U.S. dollars
Clear and settle according to international standards
Overcome foreign investment restrictions
Global custodian charges are eliminated
Often are more tax efficient
Improve information flow
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Implications of Dual Listing for Eastern European CompaniesResearch has demonstrated…
Companies experience a permanent value enhancement – Oxford Metrica
Empirical findings show a significant and sharp market value increase around international cross listings
A strong run-up in prices in the pre-listing period is observed, pointing to a general positive market reaction to a cross listing
Stock liquidity improves after an international listing – Local liquidity increases on an average by 34% for the six months post a GDR listing
Foreign trading venues attract new investors and do not deteriorate local capital markets' quality
May assist with future financing
Dual Listing Considerations
Source: Return Performance and Liquidity of Cross-Listed CEE Stocks,Piotr Korczak and Martin Bohl, European University Viadrina Frankfurt, May 2003Oxford Metrica 2003
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Role of the Depositary BankIntegral part of IPO/Program Establishment Process
Deposit Agreement / Prospectus / IPO GDR Settlement
Daily TradingService cross-border settlement for brokers/investors
Administrator of program for clientProcess AGMs for DR Holders
Pay stock dividends
Communicate with investors
Configure local practices (tax reclaim, stamp tax, etc)
Corporate Actions processing (Secondary Offerings/ Rights Offerings/ M&A/ Employee Programs)
Registrar and Stock Transfer Agent
Advise on Investor RelationsCorporate Governance
Advise on Market Developments
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Trading GDRs - Settlement ProcessIssuance Cancellation
--Buy Shares--
Issue DRs
Sell Shares Buy Shares
-- Sell Shares --
Int’l Broker
Local Broker
Int’l Broker
Local BrokerKASE
Local Custodian
The Bank of NY
LSE Int’l Investor
Local Investor
Int’l Investor
Local Investor
Cancel DRs--Buy DRs- -- Sell DRs --
Deposit Shares
ReleaseShares
Confirm Deposit
Instruction to Release
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The Relationship between the Depositary Bank and the GDR Holders
Record of DR holders maintained by depositary bank
Registered DR holders
Clients of banks and brokers (may include
further nominal holders)
DTC/Euroclear/nominee of participants holding
DRs
Participant banks and brokers
(maintain books and records for clients who have invested in DRs)
The Depositary, DTC, Euroclear, Clearstream & the Registered Holders
Depositary Bank
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DR Program Comparison
Level I ADR Over-the-Counter (OTC) Traded
Level I (RegS)GDRUnlisted
Level II ADRU.S. Listed
Level II (RegS)GDRInternationally Listed
Level III ADRU.S. Listed
Level III (144A/RegS)GDRInternationally Listed
Issuer
Selling New SharesCapital Raising Transactions
Existing Shares OnlyNon-Capital Raising Transactions
Existing shares or new shares can be used
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Requirements Determine Program TypeP
rog
ram
Vis
ibilit
y/
Liq
uid
ity
Disclosure Requirements
Level I GDR (RegS)
Level I ADR
Level II GDR and Level III GDR (RegS/144A)
Low
Medium
High
Low Medium High
Level II ADR
Level III ADR
Generally, Increased Disclosure Results in Increased Visibility
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GDR/ADR ListingsKASE and LSE
GDR LSE
Ordinary SharesLSE only
GDRKASE and OTC
GDR/ADR
Inc.
Stru
ctur
e/R
equi
rem
ents
KazakhstanOffshore UKKazakhstan
Non-offering of GDRs/ADRs
Minimal preparation to launch
Diversify Shareholder base
Reporting requirements no different to home market
Access US/Int’l investors
Short timetable
Trades on US OTC Market or European OTC
Not exchange listed
Offering in GDRs only
non-UK incorporated companies
Listing in GDR form on LSE
No domestic listing
GDR listing requirements more flexible
3 year audited IFRS required
Offering on LSE Main market (SETS)
“A UK plc”
No domestic listing
Highest listing standards
UK combined code applies to corporate governance
3 year audited IFRS required / Long Form Accounts
Potential FTSE index inclusion
Offering in ordinary shares and GDRs
Satisfies domestic demand
Kazakh capital market growth
International demand in London listed GDR
GDR listing requirements more flexible
3 year audited IFRS required
KazmunaigasKazkommertsbankHalyk Bank
KazakhmysKazakhgold
Shalkiya Zinc
KazakhtelecomATF BankBank TuranalemTemir BankIs
suer
s
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Comparative Timetables
SEC Registered Offering
Organizational Meeting
Initial SEC Filing
2-4 weeks4 weeks8-12 weeks
Due diligence, drafting
Closing
Roadshow / marketing activities
Effective Date –
Print Final Prospectus
3 daysUp to 6 months
Corporate housekeeping and IPO preparations
Corporate housekeeping and IPO preparations
Up to 3 months
Organizational Meeting
Print Red Herring;
Roadshow
Print Final Offering Circular
“Book-building”marketing activities
3-4 days1-3 weeks
ClosingRule 144A/Reg-S Offering
8-12 weeks
Due diligence, drafting
Distribute offering circular
File Revised Registration Statement;Print Red Herring
1 week
Receive SEC
Comments
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Holders of DRs issued by The Bank of New York are able:
To vote on a cumulative basis.
To request a shareholder’s meeting upon proper documentation proving the appropriate ownership level.
To nominate candidates for the Board of Directors.
Recent Offering Prospectus of Large Russian Issuer:
Not all depositary banks are the same…
The Bank of New York will work with your investors to provide many of the rights and benefits that your ordinary shareholders enjoy. There will be no need for your holders to cancel their GDRs
Cross Border Issues - The Rights of DR Holders
Holders of GDRs will not be able to instruct the Depositary to (i) vote the Shares represented by their GDRs on a cumulative basis, (ii) introduce proposals for the agenda of shareholders’ meetings or request that a shareholders meeting be called or (iii) nominate candidates for our Board of Directors or our review commission. If you wish to take such actions, you must timely request that your GDRs be cancelled and take delivery of the Shares and thus become the owner of the Shares on our share register.
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Transactional Experience – Infrastructure Knowledge
CIS Issuers are the source of complex transaction
KKB – Rights offerings extended to GDR holders
Kazakh Issuers – AGM/EGM voting
Lukoil – convertible bonds backed by GDRs
Norilsk Nickel – exchange offer/corporate restructuring using DRs
Norilsk Nickel – share buyback (extended to DR holders)
Norilsk Nickel/UES – spin-off of assets into new DR program
Gazprom – arranged for Ruhrgas stake to be held in GDR form
Sibneft – merger and demerger with Yukos
Bank of Georgia – holding structure approvals from National Bank of Georgia
The Bank of New York has an in-house Global Corporate Actions Team of 20 individuals focused solely on transactions and innovative solutions.
With over 15 years of transactional experience in the CIS, our staff is able to process the most complex corporate actions with confidence.
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Working with Foreign Regulators and IntermediariesThe Bank of New York maintains working relationships with many key international regulators and financial services intermediaries including the following:
UK:Financial Services Authority/the UK Listing Authority
USA:the Securities and Exchange Commission
US/Europe:Institutional Shareholder Services – the largest provider of proxy voting and corporate governance services
US/Europe:All Major Stock Exchanges
US/Europe:Corporate Governance Officers of Major Institutional Shareholders
US/Europe:Proxy Solicitation Agents
US/Europe:Corporate Governance Advisors
We keep clients informed of the latest market and regulatory developments.
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Funds Name% of Equity Portfolio in
DR Form
$ Value of Portfolio in
DR Form
% Portfolio invested in
Russia
% of Investment in DR form
Merril Lynch MLIIF Emerging Europe A Acc EUR 38.64 283,134,405 30.7 87.82Credit Suisse European Frontiers Class R 45.04 11,530,126 31.17 100.00JP Morgan Fleming Emerging Markets A Acc 40.83 225,409,407 4.95 64.04Schroder Intl Selection Emerging Europe Dis A 43.03 58,922,521 31.61 100.00Russel Emerging Markets Equity A Acc 16.17 89,007,644 3.2 81.56Lazard Emerging Markets Growth Retail Income 35.06 8,823,254 1.23 100.00SEI Global Master Emerging Markets Eq Inv Cl 19.5 23,515,938 2.94 89.46JP Morgan Fleming Emerging Markets Sel Equity A-USD 30.41 51,684,637 5.79 100.00
Average 33.59 94,003,492 13.95 90.36Total 752,027,932
Investors Often Access Equities through DRs
Most of the top Emerging Market Funds use DRsMost of the top Emerging Market Funds use DRs
Many issuers obtain greater access to capital through the use of a DR
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Largest Depositary Receipt Investors
Capital Research & Management
31,653 27,601 14.7% 828,941 3.7%
Wellington Management 23,455 19,439 20.7% 345,983 6.8%Dodge & Cox 23,871 19,629 21.6% 139,937 17.1%
Barclays Global Investors 10,049 8,081 24.4% 831,940 1.2%
Investor YE’06 DRValue ($mm)
YE ‘05 DRValue ($mm)
DR Value % Change
Total Equity Assets ($mm)
DR Value % of Total Equity
44,826
23,35320,04414,07911,411
34,234
10,360
23,900
6.1%748,648
82,17258,425
375,28436,335
9,274
160,480
28.4%34.0%3.7%
31.1%6.4%
9,4509.664
11,825
Fidelity Management & Research
30.9%
Brandes Investment Partners -2.3%NWQ Investment Management 116.1%AllianceBernstein Capital Mgmt. 49.0%Lazard Asset Management 18.1%Capital Guardian Trust -12.4%
Source: FactSet, December 2006
Investors Often Access Equities through DRs
Foreign Equities Held by U.S. Investors
0
1
2
3
4
'97 '98 '99 '00 '01 '02 '03 '04 '05 3Q060
5
10
15
20
Value of Foreign Holdings ($tn) % Foreign Portfolio
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Promotional Capabilities and Market AccessTargeted Promotional and Liquidity Services
Actively Highlight the DR Program
Buy-Side Sell-Side RetailGeneralOngoing
Promotional
DR Management Report Package • DR Alert • Daily E-Mail
Service • ADR Research Publications •Shareholder Analysis •
Market Maker Solicitation •
Annual/Interim Reports• U.S. Regional Broker
Network • G-Trade Service • Internet
Access • Negotiated Issuance Fees • Free
Issuance List
Retail Broker Marketing Support • WI Link •
Money Show • NAIC Investment Clubs • Wall
Street Squawk Box Calls
Investor Communication Services • Consultant
and Investment Manager Marketing Group •Investor Networks •Investor Presentation Package • BNY ADR Index • BLDRS and
HOLDRs • DR Converter • ADR Insight
Investor Identification and Targeting • Global BuyDIRECT • BNY
Call Center • FriedlandCapital Seminars •
Ordinary Share to DR Conversion Campaign
Depositary Receipt Quarterly / Annual Reviews • Investor Relations Support •
Company Presentations and Seminars • Road Show Support • New
York Society of Securities Analysts
Presentations •Bloomberg Forum
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The BNY CIS TeamLondon
Michael Cole-Fontayn
Managing Director
Global New Business Development
Tel : +44 207 964 6318
Gregory Roath
New Business Development/
Relationship Management
Tel : +44 207 964 6355
James Green
Managing Director
Broker and Institutional Marketing
Tel. +44 207 964 6080
Joseph Oakenfold
Broker and Institutional Marketing
Tel: +44 207 964 6419
www.adrbny.com
New York
Andrew ZelterManaging Director - EEMEARelationship [email protected] : +1 212 815 8128
Ludmila LeliavskaiaRelationship Management(Russian Speaker)[email protected] : +1 212 815 4493
Tatyana VesselovskayaRelationship Management(Russian Speaker)[email protected]: +1 212 815 5133
Maria MozhinaRelationship Management(Russian Speaker)[email protected] : +1 212 815 4295
Moscow
Irina Vakhraneva
Relationship Management/
New Business Development
(Russian Speaker)
Tel : +7501 967 3110
The Most Experienced Depositary Bank
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Overview
The Bank of New York is:
The world’s leading depositary bank with 1,164 sponsored clients, representing 63% of all sponsored DR programs from 65 countries
Ranked Number One in every meaningful market share category including U.S. listings, successorships, trading value, trading volume,capital raisings and privatizations
The most proactive depositary bank in advising and assisting companies with promoting and managing their DR programs
The only depositary bank in the stock transfer and registrar businesses
The only depositary without significant investment banking and research conflicts of interest
Most Experienced & Consistent
Personnel
The Bank of New York is the Right Choice
Best Secondary
Market Support
Proven Track Record and
Business Commitment
Leading Stock
Transfer Agent
Leading Global
Custodian
Numerous Value-added
Support Services
Personalized and
Customized Service
Advanced Analytical
and Reporting
Technology