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Financing alternatives for Nigerian companies through listing and trading GDRs on the London Stock Exchange September 2007

Deciding between an offering in Nigeria or international markets: 

Deciding between an offering in Nigeria or international markets Financing priorities Offering route Distribution to FII’s or Nigierian investors only Convenience as top priority Focus on Nigeria business only Strategic issues as top priority Broaden investor base beyond FII’s Follow-on offering over c. $100 million, or primary offering of overseas business Commitment to liquidity in the DR Enhance profile in international markets Domestic or regional follow-on offering Secondary or primary listing overseas Overseas issuers will now focus on strategic financings

Overseas offerings: routes to global markets via London: 

Overseas offerings: routes to global markets via London Main Market Professional Securities Market (PSM) AIM Principal market of London Stock Exchange Primary listing of UK- or international-based company holding subsidiaries in Nigeria Secondary listing of depositary receipts using IFRS or US GAAP disclosure Specialised market for issuers not conforming to full EU disclosure standards (IFRS) Created to enable non-EU issuers e.g. Nigerian companies to use local GAAP (must have an EEA auditor) Emerging growth market not likely to be suitable for Nigerian issuers

Principal features of London Stock Exchange markets: 

Principal features of London Stock Exchange markets Compliance with the rules of UKLA – EU regulated market Normally a three-year trading record required Minimum of 25% shares in public hands Prior shareholder approval for certain transactions Pre-vetting of admission documents by the UKLA Sponsors needed for certain transactions Regulation by the Exchange No trading record required No minimum free float In most cases, no prior shareholder approval required for transactions Admission documents not pre-vetted by Exchange or UKLA but by nominated adviser Nominated adviser required at all times Main Market Compliance with the rules of UKLA An exchange regulated market enabling greater flexibility Normally a three year trading record required Ongoing disclosure obligations within the Listing Rules Sponsor not required IFRS not required – national GAAP sufficient Professional Securities Market

Routes to market for Nigerian overseas issuers: 

Routes to market for Nigerian overseas issuers IFRS or US GAAP accounts give access to retail investors across Europe if required(A) Nigerian GAAP accounts: access to institutional (professional) investors (B) Nigerian issuers can list outside UK and be admitted to IOB (C) Listing authority Routes for Indian issuers Market Trading platform Listing via UKLA Main Market PSM IOB International Order Book IOBU Other listing

Why depositary receipt offerings for Nigerian companies? (i) : 

Why depositary receipt offerings for Nigerian companies? (i) Profile and international visibility Addressing the perception of risk Raising standards of domestic corporate governance Increased visibility amongst international institutional investors Attain rank against global peers Strategic motivation Strategic financing requirements of Nigerian companies are expanding Development of markets outside Nigeria Diversification of investor base beyond regional investors Equity story better received abroad Currency for merger and acquisition activity abroad

Why depositary receipt offerings for Nigerian companies? (ii) : 

Why depositary receipt offerings for Nigerian companies? (ii) Liquidity Enhance liquidity in the domestic market Reduce volatility in the domestic market Trading on International Order Book in London


Strategic motivations for Nigerian companies seeking an international listing Strategic financings on Main Market / PSM DRs will be offered only where the international capital markets deliver significantly more transaction size, investor base and profile the Nigerian market or African regional market Size of transactions likely to be >$200 million Motivations may include: financing large acquisitions, profile in new markets, exceptionally large financings in short time frame Primary listings on Main Market, Nigerian MNCs outgrow domestic market

Global leadership in finance: 

Global leadership in finance 75% worldwide Eurobond trading 654 international companies listed in UK 31% global forex turnover 50% private equity in Europe 76% European hedge funds assets 20% international bank loans 43% OTC derivatives trading 307 largest number of foreign banks

Most advanced regulation and governance: 

Most advanced regulation and governance Source: Governance Metrics International, March 2005 Principles-based regulation: high standard, pragmatic application

leadership in international equity offerings: 

leadership in international equity offerings US market share of IPOs: 48% 1990s, 8% 2006 Source: London Stock Exchange and individual exchange websites

Optimal location for strategic financing: 

Optimal location for strategic financing US retail investors US QIBs Global institutional and retail investor base ADR offerings GDR offerings FIIs Europe, Japan retail Share offerings

London markets suited to strategic DR transactions: 

London markets suited to strategic DR transactions Unmatched reputation of London markets and regulators Other GDR locations: effectively outsourcing regulatory approval from the Nigerian market Timing Profile Trading London combines high profile, liquidity and relatively simple execution Disclosure Liquid and transparent trading platform for larger DRs No other exchanges offer effective GDR trading Relatively quick turnaround of documents Certainty on timing Nigerian GAAP accounts (only if audited by EEA auditor) Disclosure similar to other international jurisdictions

Profile: recent major DR offerings : 

Profile: recent major DR offerings London now dominant in major emerging markets issues

Profile: recent major DR offerings : 

Profile: recent major DR offerings London now dominant in major emerging markets issues


Trading International Order Book (IOB): dedicated GDR trading platform Orders and pricing for each GDR distributed to over 100,000 terminals around the world In 2006, $290 billion of GDR trades on IOB $12.4bn traded in African GDRs in 2006 Investors prefer transparency and liquidity of London DRs

Trading: IOB African turnover: 

Trading: IOB African turnover Accessing data on African GDR trading: go to Prices & News then, access Statistics and Other Market Statistics finally, Trading Statistics then, International Order Book trading volume Monthly summary of trading volumes for active African GDRs on Exchange website *Note: list includes only those companies whose GDRs traded in month shown.

Worldwide trading of GDRs: 

Worldwide trading of GDRs GDR platforms

GDR trading: London compared with DIFX: 

GDR trading: London compared with DIFX Source: Bloomberg * Kingdom Hotels has a primary listing in Dubai, DIFX volumes show common stock ** Investcom was acquired by MTN in June 2006 Kingdom Hotels Investcom **


Timing First-round comments: 10 Business days Second-round comments: Max 5 Business days Final clearance of document: 48 hours UK Listing Authority (UKLA) works to published deadlines Issuers can target clearance of offer document in 4 weeks UKLA generally comments in detail, consistent with high regulatory standards Iterative discussion possible with UKLA officials, avoids bureaucratic rulings Timely and predictable processing of documents


Disclosure Disclosure requirements Accounting standards Corporate governance Continuing obligations UKLA requires information broadly similar to Luxembourg Euro-MTF list, but more detailed and prescriptive Disclosure is more detailed than domestic Nigerian offerings PSM allows local GAAP No requirement to move to IFRS in future Certify compliance with Nigerian regulations only After listing, announcements same as Nigerian domestic market London disclosure matches international practice for institutional offerings

African companies on the London Stock Exchange: 

African companies on the London Stock Exchange 24 African companies with shares or GDRs listed in UK and admitted to the London Stock Exchange Main Market / PSM

Recent African floats on AIM: 

Recent African floats on AIM

Recent African floats on AIM: 

Recent African floats on AIM

Issues in choosing between London and New York: 

Issues in choosing between London and New York GDR Quick and cost effective access to worldwide institutional investor base Suitable for exceptionally large institutional offering Liquid trading of larger issues (only on London Stock Exchange) Simpler disclosure, avoids costs of mitigating potential additional liabilities from US offering Worth undertaking only where the issuer’s equity story has powerful appeal to US retail investors, and where US profile important Significant additional exposure to liability for management and board of directors Previous incentive for ADR issuance to capture premium now eroded by growing efficiency of market for emerging market equity ADR Decision driven by institutional or retail nature of investor base Main Market / PSM

Analysis of the ADR premium: 

Analysis of the ADR premium Technology stock with strong US retail appeal Wipro premium, reflecting excess demand by US retail over supply available in the ADR programme, has narrowed as ADR premium generally has declined Wipro retains some premium as a result of limited supply Industrial stock with primarily institutional appeal Moved from Luxembourg listing / London trading to NYSE in 2004 Tata Motors was already owned by institutions that wanted to invest Lack of US retail demand means ADR always traded without premium Wipro – ADR versus domestic share price Tata Motors – ADR versus domestic share price Investor base needs to match the equity story Main Market / PSM

Analysis of the ADR premium: 

Analysis of the ADR premium Growing integration of international with domestic markets removes the premium Main Market / PSM ADR premium is narrowing as a result of greater supply into ADR programmes Monetisation of the ADR premium via secondary offerings into the US investor base removes the supply/demand imbalance that underlies the premium ICICI Bank – ADR versus domestic share price

Emergence of GDR premium: 

Emergence of GDR premium GDR pricing generally contains no premium Via FIIs, the domestic and GDR markets are effectively integrated Premium can only emerge where FII demand is constrained by limits on foreign shareholding State Bank of India’s GDR had a c. 25%+ premium in 2005-2006 Ownership restrictions (max 20%) create shortage Premium can be expected to decline if/when foreign ownership ceiling raised In absence of supply/demand distortions, GDRs trade flat to the underlying share Main Market / PSM