Investor Presentation

Opportunities for Growing a Businessthrough the Stock Exchange&Wealth Creation: 

Opportunities for Growing a Business through the Stock Exchange & Wealth Creation BY BRIAN K. TEMBO MARKETING AND PR MANAGER

Background: 

Background Incorporated as a private non-profit making limited liability company owned by Stock Brokers Established in 1993 Started formal operations on 21 Feb. 1994 Regulated by Securities and Exchange Commission (SEC)

Objectives for Setting up LuSE?: 

Objectives for Setting up LuSE? Empowering Zambians through ownership of shares Source of cheaper, long term finance Encourage local and foreign investment Facilitate the change of ownership of Government’s interest in parastatals Provide an efficient, fair, orderly and transparent market for secondary trading in shares

Structure of Company: 

Structure of Company

LuSE Market Structure: 

LuSE Market Structure LuSE has a unified market with a central securities depository (CSD) and does not handle physical certificates (dematerialised); Equity (shares) Market Part ownership of a company is exchanged Deals with sale and purchase (secondary trading) of shares Bond (Debt) Market Currently deals with primary issuance of corporate bonds Secondary trading of corporate bonds and GRZ bonds Plans are very advanced to issue and trade municipal bonds

Market Sectoral Analysis: 

Market Sectoral Analysis

ROLE OF THE STOCK EXCHANGE: At the Enterprise/Business Level: 

Three main roles: Facilitate Capital raising via two key products - debt & equity instruments Liquidity/Valuation and performance assessment Statement of good corporate governance ROLE OF THE STOCK EXCHANGE: At the Enterprise/Business Level

RAISING CAPITAL: 

RAISING CAPITAL interest investors Expansion Rehabilitation New Projects New Business Banks & Financial Institutions Savers Borrowers Money Depositors Traditional Model – Money Markets

Money Market Interest Profile: 

Money Market Interest Profile

RAISING FUNDS cont’d…: 

RAISING FUNDS cont’d… Capital Market Model Securities Shares Bonds etc Funds Savers Rehabilitation Expansion New Projects New Business Issuers Funds Investors

Benchmark Yeilds Trend: 

Benchmark Yeilds Trend Source: Bank of Zambia Monthly Financial Markets Review – May 2006

Listing Your Company – Equity/Shares: 

Listing Your Company – Equity/Shares Company X Ltd Company X Plc Listed Quoted Step 1 Step 4 Step 3 Step 2 - Securities registration application Satisfy LuSE listing requirements Satisfies LuSE listing requirements? conversion Raise capital through share offer Raise capital through share offer YES NO

Requirements forListing Equity: 

Requirements for Listing Equity Rule 4.25 Minimum Capital Number of shares in issue Minimum public float Minimum number of public shareholders Profit history

What is the cost – Listed Equity?: 

What is the cost – Listed Equity?

Quoted Tier: 

Quoted Tier Meant to be a nursery for listings Smaller to medium sized growth companies Automatic quotation after shares reg. with SEC Only annual fee currently

What is the Cost – Quoted Equity?: 

*Note that these fees are based on all quoted securities held in the LuSE Central Securities Depository What is the Cost – Quoted Equity?

Restructured Quoted Tier: 

Restructured Quoted Tier Operational in 1st half 2007 Reduced share reg. fees with SEC Relaxed reporting requirements Encourage growth of small to medium sized local companies

Capital Raising - Bonds: 

Capital Raising - Bonds Debt securities must be registered with SEC Offered to public (public offer) To select parties as a private placement Interest payments are semi annual Issuer determines tenor & coupon

What is the cost - Bonds?: 

What is the cost - Bonds?

Funds Raised - GRZ: 

Funds Raised - GRZ

Funds Raised on Capital Market: 

Funds Raised on Capital Market

Farmers House Plc cont’d…: 

Farmers House Plc cont’d… Issued 2,000 corporate bonds @ $500 each to commence Phase II Underwritten by NAPSA Rights Issue of 1,979,904 @ $1 each to fund Phase III Underwritten by Intermarket Discount House (IDH) Raised $2.6 million from Stanbic Bank to develop the Exchange building in Phase VI of development programme

Boabab College: 

Boabab College Need to improve on educational facilities and infrastructure after relocating to 50 acres land Accommodate anticipated student growth Requirement of $2,000,000 ($500,000 from own resources) Raised through 150 Debentures @ $10,000 each Investrust Merchant Bank, Arranger and Advisor

Arcades Development Plc: 

Arcades Development Plc Construction of entertainment and shopping centre 25 Convertible Debentures @ $60,000 each Utilised sweat equity concept (cost of works in exchange for equity) Intentions to list on LuSE after 3 years of operation to provide liquidity for investors

BBZ Plc Capital Note Issue: 

BBZ Plc Capital Note Issue Authorised 500 notes Issued 300 notes Face value of K100mil Floating Coupon rate Benchmarked to 91TB + margin of 1.25% Interest calculation dates 9 May & Nov. Raised K30billion to meet demand for long term lending

Investment Appetite?: 

Investment Appetite? Where is the money coming from? Individuals Institutional Investors (e.g ZSIC) Foreign investors

ZPTF Block Share Offer – 2005 Oversubscription: 

ZPTF Block Share Offer – 2005 Oversubscription

AELZ IPO Oversubscription: 

AELZ IPO Oversubscription

FARM Rights Issue: 

FARM Rights Issue

Which Instrument to Use?: 

Which Instrument to Use? Depends on your financial strategy and where your company falls

BUSINESS STRATEGY / BUSINESS MODEL : 

BUSINESS STRATEGY / BUSINESS MODEL MARKET SHARE STRATEGY MARKET GROWTH STRATEGY Market Share Strategy Market growth strategy

BUSINESS STRATEGY - DETERMINING FIT : 

BUSINESS STRATEGY - DETERMINING FIT Market Growth Market Share Where does your company Fit ?

BUSINESS STRATEGY : 

BUSINESS STRATEGY CASE 1: LOW MARKET LOW GROWTH LOW Market share LOW Growth

BUSINESS STRATEGY: 

BUSINESS STRATEGY CASE 2 : LOW MARKET – HIGH GROWTH HIGH LOW Market share Growth

BUSINESS STRATEGY: 

BUSINESS STRATEGY CASE 3: HIGH MARKET – HIGH GROWTH HIGH HIGH

BUSINESS STRATEGY: 

BUSINESS STRATEGY CASE 4: HIGH MARKET – LOW GROWTH HIGH LOW

BUSINESS STRATEGY - FINANCING: 

BUSINESS STRATEGY - FINANCING Business Cycle Type of Finance Characteristics Sources Start up Equity/ - Permanent/ long-term personal savings Debt - Short-term venture capital Growth Phase Debt Medium term bond borrowing/ bond issuance Maturity Equity - Permanent stock market Debt - Long term Bond issuance

CAPITAL RAISING OPTIONS : 

CAPITAL RAISING OPTIONS SHORT TERM : issue Commercial paper MEDIUM TERM : issue Corporate bond LONG TERM : issue Shares

What are Financiers looking for?: 

What are Financiers looking for? Security Return Liquidity Tenor Inflation cover Economic impact of project

ZSIC Experience: 

ZSIC Experience ZAMBIA STATE INSURANCE CORPORATION LTD HAS OVER THE YEARS SUPPORTED INDUSTRY THROUHG BOTH CHANNELLS OF DEBT & EQUITY: BARCLAYS BANK PLC CORPORATE BOND ISSUE - BBZ001 (K2 BILLION) COPPERBELT FORESTRY CORPORATE BOND ISSUE - 4YEARS (K1 BILLION) PG BISONITE COMMERCIAL PAPERS (K3 BIL) SEEDCO COMMERCIAL PAPERS (K4 BIL) FRESHPIKT CORPORATE DEBT ISSUE ($1 MIL) ZAMEFA – EQUITY INVESTMENT BEFORE ITS INTIAL LISTING (VALUED AT K6.4 BILLION TODAY)

Liquidity & Company Valuation Example: 

Liquidity & Company Valuation Example

Market Valuation Examples: 

Market Valuation Examples

Licensed Dealers: 

Licensed Dealers Stockbrokers Zambia Ltd Pangaea/EMI Securities Ltd Intermarket Securities Ltd Lloyds Financials Ltd Enfin Solutions Ltd Equity Capital Resources Plc More check: www.sec.gov.zm

The Role of the Intermediary: 

The Role of the Intermediary Must be a licensed dealer by SEC (www.sec.gov.zm) The Intermediary is an absolute necessity under the Law Vital link between borrower and lender Conversant with standardised documentation to be submitted Carry out due-diligence

Standard & Poors 2005 Ranking: 

Standard & Poors 2005 Ranking

Summary: 

Summary Primary Market Secondary Market ISSUING MARKET RETAILING MARKET ISSUERS Securities Shares INVESTORS (Corporates) Bonds - Individuals Money - Institutions - Funds Benefits: Benefits: Market Valuation  Pricing Liquidity  Liquidity Permanent Capital  Income - Corporate governance  Growth (capital gain)

Market 2007 Outlook - Listings: 

Market 2007 Outlook - Listings Restructured Quoted Tier At least 3 initial companies Main Board Blue Financial Services Equinox Minerals dual-listing Celtel Zambia ZANACO Copperbelt Energy Corporation