FINANCIAL MARKETS: Nairobi Stock Exchange (NSE)

MARKET FACT FILE
CONTENTS
􀂃 NSE’s Vision, Mission and Core Values
􀂃 Fact Sheet
􀂃 The Role of the Stock Exchange in the Economy
􀂃 NSE Brief History
􀂃 Listing requirement
􀂃 A Chronology of Fiscal and Policy Incentives for the Capital Markets
􀂃 Capital Raising activities in the market: IPOs and Rights Issue
􀂃 Contact list of Member Firms
© NSE, BDD
Updated: Tuesday, November 11, 2008
THE NAIROBI STOCK EXCHANGE
Our vision
“To be a leading securities exchange in the world”
Our mission
“To provide a world class trading facility for wealth creation”
Our Core values
We believe in: -
i. People
ii. Integrity
iii. Professional Ethics
iv. Innovation
v. Confidentiality
vi. Fairness
vii. Excellence
© NSE, BDD
Updated: Tuesday, November 11, 2008
FACT SHEET
1. CONTACT ADDRESS Nation Centre, 1st Floor, Kimathi Street
P. O. Box 43633 - 00100, Nairobi, Kenya
Tel. +254 (020), 2831000
Fax. +254 (020) 2224200
E-Mail: info@nse.co.ke
Website; www.nse.co.ke
2. ESTABLISHED 1954
3. TRADING DAY/HOURS Monday to Friday 9.00 a.m. to 3.00 p.m.
4. NUMBER OF LISTED COMPANIES 59 (55 equities, 7 corporate bonds-3 of which have listed equities).
There are over 60
Government of Kenya treasury bonds listed on the fixed income
segment o f the securities exchange.
5. MARKET REGULATOR Capital Markets Authority of Kenya CMA (K). The Authority is
a government body mooted in 1989, under the Ministry of
Finance and through the Capital Markets
Authority Act Cap 485A (the CMA Act). The Authority was
established to regulate and oversee the orderly development
of Kenya’s capital markets
Rules and regulations available on the CMA Website:
www.cma.or.ke
6. INSTRUMENTS TRADED Equities, Preference shares, Treasury
Bonds & Corporate Bonds
7. INDEX NSE All Share Index (NASI) and NSE 20-Share Index
BASIS OF INDEX CALCULATION NASI is market capitalization weighted while NSE 20 Share
Index is geometric Mean of 20 Companies share prices.
8. DELIVERY & SETTLEMENT Done through Central Depository and Settlement Corporation
(CDSC)
9. BROKERAGE RATES
Costs to Investors - Transaction Levy Breakdown (% of the value of an Equity transaction)
0.12%
0.01%
0.12%
0.01%
NSE Transaction Levy
NSE Investor Compensation Fund
0.12%
0.01%
0.12%
0.01%
CMA Transaction Levy
CMA Investor Compensation Fund
0.06% 0.06% CDSC Transaction Levy
1.68% 1.78% Stockbroker Commission
2.00% 2.10%
Note: Although commissions are fully negotiable, industry practice is that the highest commission chargeable is 1.78%, applicable
to amounts upto Kshs. 100,000.00; above Kshs. 100,000.00, commissions are fully negotiable, subject to a maximum of 1.5%.
Stockbrokerage commission shall be limited to Kshs. 100 for odd lot transactions upto Kshs 3000 excluding statutory fees. Odd lot
transactions in excess of Kshs. 3000 shall be charged a commission at the prescribed rate of 1.8% excluding statutory fees.
Costs to Investors - Transaction Levy Breakdown (% of the value of Corporate and Treasury Bond transactions)
The only commission levied on Bonds is the Stockbrokerage commission: Minimum is Kshs. 500.00.
A 0.0625% commission of the value of the transaction is chargeable on amounts upto Kshs. 50.0 million. Commissions for amounts
above Kshs. 50.0 million are fully negotiable.
10. TAXES Withholding tax on dividend income is 5% for
Locals and 10% for non-residents
© NSE, BDD
Updated: Tuesday, November 11, 2008
Capital Gains Tax - Suspended since 1985
Withholding tax on interest income from listed corporate bonds and
Government of Kenya treasury bonds is 15%
12. FOREIGN INVESTMENT HOLDINGS 25.0% of the issued share capital of a listed company is reserved for
resident investors while the balance becomes a free float for all classes
of investors.
13. DETAILS OF REGISTRATION To be able to trade, equity securities should be deposited
with Central Depository and Settlement Corporation (CDSC); since
November 2004.
14. FOREIGN EXCHANGE CONTROLS All controls have been abolished.
15. RULES & REGULATIONS Available on the NSE website: www.nse.co.ke
THE BOARD OF DIRECTORS OF THE NSE
James Wangunyu - Chairman
Bob Karina
Edward Njoroge
David Njoroge
Esther Koimett
Edward Odundo
Lutaf Kassam
Stanley Ngaine
George A. Maina
Andre Desimone
Christopher Michael Mwebesa - Chief Executive
Lillian Mbindyo – Company Secretary
© NSE, BDD
Updated: Tuesday, November 11, 2008
The Role of the Stock Exchange in the Economy
The Stock Exchange is a market that deals in the
exchange of securities issued by publicly quoted
companies and the Government
The major role that the stock exchange has played, and
continues to play in many economies is that it promotes
a culture of thrift, or saving. The very fact that
institutions exist where savers can safely invest their
money and in addition earn a return, is an incentive to
people to consume less and save more.
Secondly, the stock exchange assists in the transfer of
savings to investment in productive enterprises as an
alternative to keeping the savings idle. It should be
appreciated that in as much as an economy can have
savings, the lack of established mechanisms for
channeling those savings into activities that create
wealth would lead to mis-allocation or waste of those
savings. Therefore, even if a culture of saving were to
be encouraged, the lack of developed financial markets
may lead to economic stagnation.
Thirdly, a robust stock market assists in the rational and
efficient allocation of capital, which is a scarce resource.
The fact that capital is scarce means systems have to
be developed where capital goes to the most deserving
user. An efficient stock market sector will have the
expertise, the institutions and the means to prioritise
access to capital by competing users so that an
economy manages to realise maximum output at least
cost. This is what economists refer to as the optimum
production level. If an economy does not have efficient
financial markets, there is always the risk that scarce
capital could be channeled to non-productive
investments as opposed to productive ones, leading to
wastage of resources and economic decline.
Fourthly, stock markets promote higher standards of
accounting, resource management and transparency in
the management of business. This is because financial
markets encourage the separation of owners of capital,
on the one hand, from managers of capital, on the
other. This separation is important because we
recognise that people who have the money may not
necessarily have the best business ideas, and people
with the best ideas may not have the money. And
because the two need each other, the stock exchange
becomes the all-important link. To give a practical
example, if an entrepreneur has a bright business idea
and lacks the money, he can approach the Nairobi
Stock Exchange, float shares and raise the capital he
needs to turn his idea into a business. The shareholders
will then appoint directors and management to run the
company on their behalf. This arrangement benefits
both parties because the manager of capital, who is the
entrepreneur, gets access to capital to turn his idea into
a reality, while the owners of capital, who are the
shareholders, get a return on their investment without
having to report for work at that company.
Fifthly, the stock exchange improves the access to
finance of different types of users by providing the
flexibility for customisation. This is made possible as the
financial sector allows the different users of capital to
raise capital in ways that are suited to meeting their
specific needs. For example, established companies can
raise short term finance through commercial paper;
small companies can raise long term capital by selling
shares; the Government and even municipal councils
can raise funds by floating various types of bonds as an
alternative to foreign borrowing.
Sixthly, and very important, is that the stock exchange
provides investors with an efficient mechanism to
liquidate their investments in securities. The very fact
that investors are certain of the possibility of selling out
what they hold, as and when they want, is a major
incentive for investment as it guarantees mobility of
capital in the purchase of assets.
There are many others less general benefits
which stock exchanges afford individuals,
corporations and even the Government.
1. The mobilization of savings for investment in
productive enterprises as an alternative to putting
savings in bank deposits, purchase of real estate
and outright consumption.
2. The growth of related financial services sector e.g.
insurance, pension and provident fund schemes
which nurture the spirit of savings.
3. The check against flight of capital which takes
place because of local inflation and currency
depreciation.
4. Encouragement of the divorcement of the owners
of capital from the managers of capital; a very
important process because owners may not
necessarily have the expertise to manage capital
investment efficiently.
5. Encouragement of higher standards of accounting,
resource management and public disclosure which
in turn affords greater efficiency in the process of
capital growth.
6. Facilitation of equity financing as opposed to debt
financing. Debt financing has been the undoing of
many enterprises in both developed and
developing countries especially in recessionary
periods.
7. Improvement of access to finance for new and
smaller companies. This is now possible on the
Alternative Investments Market Segment (AIMS).
This can also be realised through Venture Capital
institutions which are fast becoming key players in
financing small businesses.
8. Encouragement of public floatation of private
companies which in turn allows greater growth
and increase of the supply of assets available for
long-term investment.
The establishment of an efficient stock market is,
therefore, indispensable for any economy that is keen
on using scarce capital resources to achieve economic
growth.
For more information, please contact NSE Business Development Department – Tel: +254-20-2831000/2831256, Fax: +254-20-
224200
6
CHRONOLOGY OF EVENTS- NSE BRIEF HISTORY:
1920: In Kenya, dealing in shares and stocks started in
the 1920's when the country was still a British colony.
There was however no formal market, no rules and no
regulations to govern stock broking activities. Trading
took place on a gentleman's agreement in which
standard commissions were charged with clients being
obligated to honour their contractual commitments of
making good delivery, and settling relevant costs. At
that time, stock broking was a sideline business
conducted by accountants, auctioneers, estate agents
and lawyers who met to exchange prices over a cup of
coffee. Because these firms were engaged in other
areas of specialisation, the need for association did not
arise.
1951: An Estate Agent by the name of Francis
Drummond established the first professional stock
broking firm. He also approached the then Finance
Minister of Kenya, Sir Ernest Vasey and impressed upon
him the idea of setting up a stock exchange in East
Africa.
1953: The two approached London Stock Exchange
officials in July of 1953 and the London officials
accepted to recognize the setting up of the Nairobi
Stock Exchange as an overseas stock exchange.
1954: The Nairobi Stock Exchange was constituted as
a voluntary association of stockbrokers registered under
the Societies Act. Since Africans and Asians were not
permitted to trade in securities until after the
attainment of independence in 1963, the business of
dealing in shares was then confined to the resident
European community. At the dawn of independence,
stock market activity slumped due to uncertainty about
the future of independent Kenya.
1963: The first three years of independence, were
marked by steady economic growth, rekindling
confidence in the market. The exchange also handled a
number of highly oversubscribed public issues.
1972: Growth was however halted when the oil crisis
introduced inflationary pressures in the economy that
depressed share prices.
1975: A 35% Capital Gains Tax was introduced in
1975 (suspended since 1985), inflicting further losses to
the exchange which at the same time lost it's regional
character following nationalizations, exchange controls
and other inter-territorial restrictions introduced in
neighboring Tanzania and Uganda. For instance in
1976 Uganda compulsorily acquired a number of
companies, which were either quoted or subsidiaries of
companies quoted, on the Nairobi Stock Exchange.
1980: The Kenyan Government realized the need to
design and implement policy reforms to foster
sustainable economic development, and supported by
an efficient and stable financial system. In particular, it
set out to enhance the role of the private sector in the
economy, reduce the demands of public enterprises on
the exchequer, rationalize the operations of the public
enterprise sector, broaden the base of local ownership
and at the same time enhance capital markets
development.
1984: IFC/CBK study, "Development of Money and
Capital Markets in Kenya" became a blueprint for
structural reforms in the financial markets which
culminated in the formation of a regulatory body, 'The
Capital Markets Authority (CMA), in 1989. The overall
objective of the CMA is to assist in the creation of an
environment conducive for the growth and development
of the country's capital markets.
1988: The first privatization through the NSE is
the successful sale of a 20% government stake in
Kenya Commercial Bank. The sale leaves the
Government of Kenya and affiliated institutions
retaining 80% ownership of the bank.
1991: The NSE is registered under the Companies Act
and phases out the "Call Over" trading system in favour
of the floor based Open Outcry System.
1994: The NSE 20-Share Index recorded an all-record
high of 5030 points on Feb. 18, 1994. The NSE is rated
by the International Finance Corporation (IFC) as the
best performing market in the world with a return of
179% in dollar terms. An extensive modernization
exercise is undertaken, including a move to more
spacious premises at the Nation Centre in July 1994,
setting up a computerized delivery and settlement
system (DASS) and a modern Information Centre. For
the first time since the formation of the Nairobi Stock
Exchange, the number of stockbrokers increased with
the licensing of 8 new brokers.
1995: The Kenyan Government relaxed restrictions on
foreign ownership in locally controlled companies
subject to an aggregate limit of 20% with any single
holding not exceeding 2.5%. To help encourage foreign
portfolio investments these were doubled to 40% and
5% respectively in the June 1995 budget. The entire
Exchange Control Act was repealed in December 1995.
Seven more stockbrokers are licensed, bringing the
number to twenty from the original six (one of which
still survives) at the inception of the exchange in 1954.
Commission rates were reduced considerably from
2.5% to between 2% and 1 % on a sliding scale for
equities and 0.0625% for all fixed interest securities.
1996: The largest share issue in the history of NSE, the
privatization of Kenya Airways, comes to the market.
Having sold a 26% stake to KLM, the Government of
Kenya proceeded to offer 235,423,896 shares (51% of
the fully paid and issued shares of Kshs. 5.00 each) to
the public at Kshs. 11.25 per share. More than 110,000
shareholders acquired a stake in the airline and the
Government of Kenya reduced its stake from 74% to
23%. The Kenya Airways Privatization team was
awarded the World Bank Award for Excellence for 1996
for being a model success story in the divestiture of
state-owned enterprises.
For more information, please contact NSE Business Development Department – Tel: +254-20-2831000/2831256, Fax: +254-20-
224200
7
1998: The government expands the scope for foreign
investment by introducing incentives for capital markets
growth including the setting up of tax-free Venture
Capital Funds, removal of Capital Gains Tax on
insurance companies' investments, allowance of
beneficial ownership by foreigners in local stockbrokers
and fund managers and the envisaged licensing of
Dealing Firms to improve market liquidity.
1999: Kenya adopts the International Accounting
Standards (IAS) as the local Accounting Standards with
effect from January I, 1999.
2000
March 2000:
The African Lakes Corporation plc, a company
incorporated in Scotland and listed on the London Stock
Exchange, listed its shares on the Nairobi Stock
Exchange and raised £ 3.2 million gross of expenses.
African Lakes Corporation plc, is the majority
shareholder in African Online, then Africa’s largest
internet service provider.
1st August 2000: The NSE implements a new Trading
cycle, (T+5). The Central Depository System (CDS) Act
and the amended CMA Act (which covers Collective
Investment Schemes (CIS)) are passed by Parliament
and receive presidential assent, paving the way for the
full implementation of the CDS and for the introduction
of collective investment schemes in the Kenyan market.
5th September 2000: Following the signing of a
Partnership Agreement with the Association of National
Numbering Agencies (ANNA), the NSE was appointed as
the National Numbering Agency (NNA) for Kenya. The
NNA is responsible for issuing the ISIN for financial
securities issued under Kenyan jurisdiction in
accordance with the ISO 6166 guidelines issued by
ANNA.
October 2000: NSE becomes a member of the
Association of National Numbering Agencies (ANNA),
the global securities numbering agency.
November 2000: The Company for Habitat and
Housing in Africa, “Shelter-Afrique” issued the first
tranche of a medium term floating rate note worth
Kshs. 350.00 million. The net proceeds would be used
to fund the issuer’s investment in housing development
projects in Kenya. The issue would have a minimum
maturity of 18 months and a maximum maturity of 36
months. The coupon was linked to the 91-day Treasury
bill rate plus a 0.75% premium.
December 2000: Through its wholly owned
subsidiary, CFC Financial Services Ltd., CFC Bank
became the first licensed Securities Dealer on the
Nairobi Stock Exchange and was also licensed as an
investment advisor.
2001
March 2001:
African Lakes Corporation plc: On March 2, 2001,
African Lakes Corporation plc went to the market to
raise up to £8.4 million (net of expenses). Qualifying
shareholders were invited to subscribe for up to
34,903,956 new ordinary shares (29 pence per share)
or 4 new ordinary shares for every 11 existing ordinary
shares.
East African Breweries Ltd.: On March 27, 2001,
East African Breweries Ltd became the first company on
the Nairobi Stock Exchange to cross list on the Uganda
Securities Exchange (USE).
June 2001: Safaricom Ltd., Kenya’s first cellular phone
operator, offers medium term floating rate secured
notes with a 5 year maturity and worth Kshs. 4.0 billion.
The issue has a credit enhancement, provided by
Citibank, N.A., New York to cover upto 75% of the
amount of any unpaid scheduled payments of principal
and interest on the Notes. The coupon is linked to the
Government of Kenya 91-day Treasury bill rate plus a
1.00% premium.
July 2001: On July 11, 2001, the East African
Development Bank listed a Kshs. 2.0 billion, floating
rate, medium term note. The paper has a maturity of 5
years and a coupon rate linked to Government of Kenya
91-day Treasury bill rate plus a 0.75% premium.
November 14 2001:
Mumias Sugar Company
Following its privatization through a sale of government
shares to the public, Mumias Sugar Company lists on
the Nairobi Stock Exchange’s official list.
December 20 2001: 8 million additional shares of
ICDC Investment Company are admitted to the official
list of the NSE. ICDC Investment Company is Kenya’s
only listed Investment Company.
2002:
March 28, 2002
On March 28 2002, Kenya Airways became the second
company listed on the Nairobi Stock Exchange to cross
list its shares on the Uganda Securities Exchange (USE).
17 April 2002
The CMA announced the approval of the new NSE
trading and settlement rules. In summary, the amount
for block trades was revised upwards from Kshs. 3.0
million to between Kshs. 50.0 – 200.0 million. The block
trade rules now apply to trade values of above Kshs.
50.0 million but less than Kshs. 200.0 million. Lastly,
the brokerage commissions’ regime was liberalized.
1 May 2002
CFC Financial Services Limited is licensed as the first
non deposit taking Investment Bank. This was based on
its successful purchase of the entire share capital of an
existing licensed broker - Equity Stockbrokers Ltd., and
after its satisfactory performance as a dealer and its
compliance with the CMA requirements for licensing of
Investment Banks.
15 July 2002
As part of measures aimed at mobilizing domestic
savings through investment in financial assets, the CMA
gave approval to African Alliance Ltd. and Old Mutual
Ltd. to promote collective investment schemes (CIS) in
the form of unit trusts.
For more information, please contact NSE Business Development Department – Tel: +254-20-2831000/2831256, Fax: +254-20-
224200
8
15 July 2002
African Alliance Kenya was licensed as a non-deposit
taking Investment Bank on acquisition of a majority of
100% of an existing licensed broker – Kenya Wide
Securities Ltd.
26 July 2002
New Foreign Investor Regulations:
The foreign investor regulations are amended,
providing for a 25% minimum reserve of the issued
share capital for Kenyan citizens, while the balance of
the 75% becomes a free float for all classes of
investors. Within this 75% share holding available to all
classes of investor, there is no restriction on the amount
to be held by a single foreign investor. Additionally, the
following categories of investor have been defined:
Foreign institutional, Foreign individual, East African
institutional, East African individual, Local institutional,
Local individual (where East African is defined as a body
corporate registered in either Uganda or Tanzania or a
citizen of Uganda or Tanzania).
5 August 2002
The signing of the shareholders’ agreement for the
Central Depository and Settlement Corporation (CDSC).
The shareholders consisted of the Nairobi Stock
Exchange (20%), the Association of Kenya Stockbrokers
(18%), the CMA Investor Compensation Fund (7%),
and 9 institutional investors through the Capital Markets
Challenge Fund (50%); who collectively have invested
in the Central Depository and Settlement Corporation
(CDSC). The CDSC being the legal entity that owns and
runs the clearing, settlement, depository and registry
system for securities traded in Kenya’s capital markets.
23 October 2002
Mabati Rolling Mills Ltd. successfully completed the
launch of its first Kshs. 1.0 billion floating rate bond;
with a tenor of 5 years. The coupon was linked to the
Government of Kenya 91-day Treasury bill rate plus a
1.25% premium. The bond issue was part of the
ongoing financial restructuring of the firm.
31 October 2002
Mr. Goa Xiqing, Vice Chairman of the China Security
Regulatory Commission (CSRC) led a delegation from
the CRSC on the first such official visit by
representatives from the Chinese Capital Markets to the
NSE. Senior NSE officials including the then Chairman,
Ambassador Bethuel Kiplagat, Vice Chairman Mr.
William Murungu, and NSE Chief Executive Mr. Kibuga
Kariithi graced the occasion. In 2002, the Chinese
economy, for the first time supplanted the United
States, as the destination for the highest value of global
FDI flows.
22 November 2002
As of 22 November 2002, the NSE became the sole
NNA in Kenya, responsible for allocating the unique
code for quoted and unquoted securities domiciled in
Kenya.
2003
4 February 2003
The Directors of African Lakes Corporation plc (ALC)
resolved to cancel the company’s entire issued ordinary
share capital from the official list of the London Stock
Exchange and the Nairobi Stock Exchange. Thereafter
the shares would cease trading on the NSE’s main
investment market segment.
East African Packaging Ltd.
On February 14, 2003, Canadian Overseas Packaging
Industries Limited (COPIL) declared their intention to
takeover all the shares not held by themselves in East
African Packaging. At the time of the declaration, COPIL
owned 75% of all the issued shares in East African
Packaging Ltd.
After the takeover, EAPI applied for voluntary delisting
as provided in both the CMA Public Offers and Listing
Requirements and in the NSE Listing Manual.
24 March 2003
The Central Depository and Settlement Corporation in
collaboration with the NSE commenced the CDS
Education Campaign in preparation for the market
automation. The first CDS Education Workshop, with
the theme “The CDS Legal & Regulatory
Framework” kicked off. The objective of the workshop
was to update stakeholders on the CDS project and
clarify outstanding issues with key stakeholders.
27 March 2003
The NSE, together with professional speakers drawn
from the stock broking community, leading banks and
Investment Advisors, facilitated the seminar entitled
“Let Money Work for you”. The target audience for
the seminar was for leaders in the savings and credit
co-operative societies (SACCOS) sector with the
objective of illustrating the greater investment and
fundraising opportunities available through the NSE for
the growth and development of the sector. Kenya’s
sector is the most vibrant in Africa, with figures for
2003 as follows - USD. 1 billion, approximately 8% of
GDP, comprising over 3000 registered SACCOs, with a
membership estimated at close to 5 million.
December
For the year ending 31 December 2003, the exchange
recorded an equity turnover exceeding Kshs. 15.25
billion, more than the combined equity turnover
recorded in the previous 5 years; the number of shares
traded was 381.2 million. The bond market recorded a
turnover of Kshs 42 billion, a 24.85 % increase over the
previous year’s turnover of Kshs. 33.629 billion
2004
July
Kenya Commercial Bank (KCB) Rights Issue
On July 7 2004, the additional shares resulting from the
Kenya Commercial Bank (KCB) rights issue began to
trading on the Nairobi Stock Exchange. Kenya
Commercial Bank Rights issue (50 million shares –
through the issuance of 1 right for every 3 existing
shares) at a price of Kshs 49.00, were oversubscribed
by 12.25%. The bank raised Kshs 2.75 billion,
compared to Kshs 2.45 billion it intended to raise.
The Government of Kenya renounced its rights, diluting
its ownership from 35% to 25% (52,360,000 ordinary
shares) and at the same time enabling the Kenyan
taxpayer to own a piece of KCB using the capital
markets.
For more information, please contact NSE Business Development Department – Tel: +254-20-2831000/2831256, Fax: +254-20-
224200
9
Kenya Oil Company (KENOL) Rights Issue
KENOL shareholders approved the recommendation of
their Directors to split the 15,000,000 ordinary shares
of Kshs. 5 each in the proportion of Ten (10) shares for
every one held. Consequently, the number of shares
authorized became 150,000,000 ordinary shares of
Kshs. 0.50 each and the number of shares issued and
listed became 100, 796,120 ordinary shares of
Kshs.0.50 each in the capital of the company.
August
East African Development Bank
On August 9, 2004, the East Africa Development Bank
listed a Kshs. 800.0 million bond with a fixed interest
rate of 7.5% and a tenor of 7 years. Besides being the
only non Government of Kenya bond with a fixed
coupon, at the time of its listing, it had the longest
maturity of a non Government of Kenya bond listed on
the Exchange.
8 October 2004
Kenya Airways
Kenya Airways, with a primary listing on the Nairobi
Stock Exchange and a secondary listing on the Uganda
Securities Exchange, became the first company to have
a listing on all the three East African stock exchanges,
after listing its shares on the Dar-es-Salaam Stock
Exchange.
November
East African Breweries
29 November 2004 was the date of commencement in
trading of the new East African Breweries shares. This
was after the shareholders approved the increase in
authorised share capital, the bonus share issue (The
issued share capital of 109,829,772 ordinary shares of
Kshs. 10.00 each, increased by an additional
21,965,954 ordinary shares of Kshs. 10.00 each.) and
the share split at their annual general meeting held on
21 October 2004. The approvals resulted in the
increase of the share capital of the Company to Kshs.
2.0 billion and each ordinary share of Kshs. 10.00 being
subdivided into 5 ordinary shares of Kshs. 2.00 each.
Nairobi Stock Exchange Golden Jubilee
The NSE celebrated its 50-years of existence, and also
had the privilege of hosting the 8th ASEA conference. In
this celebration, the first NSE magazine dubbed “The
Exchange” and, The Central Depository & Settlement
Corporation (CDSC), which manages Central Depository
Systems, were both launched.
December
For the year ending 31 December 2004, the exchange
recorded an equity turnover exceeding Kshs. 22.32
billion; an increase of 46.37% over the corresponding
period for 2003. The number of shares traded was
625.3 million. The bond market recorded a turnover of
Kshs 34.1 billion, a 18.75 % decrease compared to the
previous year’s turnover. This was caused by a sharp
rise in short term interest rates in the third quarter of
2003 causing huge capital losses in the bond portfolios
of institutional investors.
2005
31 March 2005
On 31 March 2005 TPS Holdings Ltd. (TPSH),
announced that it had applied to the Capital Markets
Authority for approval of the proposed acquisition by
way of share exchange offer of up to 9,025,100
ordinary shares of Kshs. 5.00 each in Tourism
Promotion Services Limited (TPSL) not already owned
by TPS Holdings Ltd., (comprising 23.3% of the issued
shares of TPSL).
TPSH which already owned 76.7% of the issued shares
of TPSL, was in the process of consolidating its
ownership of TPS companies in Kenya, Tanzania and
Zanzibar, which implemented in full, would lead the
creation of an integrated hotels and tourism business
spanning the East African region.
If the share exchange were concluded and subject to
obtaining all the necessary statutory and regulatory
approvals, TPSH would acquire the remaining 23.3%
held by the public in TPSL. Subsequently, TPSH would
delist TPSL and list TPSH on the Nairobi Stock
Exchange.
April 2005
Faulu Kenya a microfinance institution, issues a Kshs.
500.0 million, 5 year floating rate note, with a margin of
0.5% above the most recent published average interest
rate for the Kenya Government 91 day Treasury bill.
Credit enhancement was provided by Agence Française
de Développement (AFD) for the tenor of the Issue, in
the form of a standby letter of credit covering 75% of
the aggregate of any unpaid principal and interest
(except default interest) due and payable under the
Notes (but subject to a limit of the Kenya Shilling
equivalent of 6.0 million euros. It is the first time that a
micro finance institution has come to the capital
markets to raise capital.
June 2005
On 29 June 2005, East African Breweries Ltd, with a
primary listing on the Nairobi Stock Exchange and a
secondary listing on the Uganda Securities Exchange,
became the second company to be cross listed on all
the three East African securities exchanges after listing
on the Dar-es-Salaam Stock Exchange.
July 2005
The Eastern and Southern African Trade and
Development (PTA) Bank, offered and listed medium
term floating rate notes with a 7 year maturity and
worth Kshs. 800.0 million.. The coupon was linked to
the Kenya Government 91-day Treasury bill rate plus a
1.00% premium.
Uchumi Supermarkets Rights Issue
The Uchumi Supermarkets rights issue which offered 2
new shares for every share owned on the record date
of 22 August 2005, was oversubscribed by 5.8%. The
minimum amount sort was Kshs. 850.0 million; with the
intended amount being set at Kshs. 1.2 billion. The
actual amount raised by the rights issue was Kshs.
1.269 billion.
The key shareholders of Uchumi – ICDCI, ICDC and
KWAL Holdings traded a majority of their rights through
For more information, please contact NSE Business Development Department – Tel: +254-20-2831000/2831256, Fax: +254-20-
224200
10
the Stock Exchange. Their joint holding in Uchumi was
diluted from 51.5% to 23.6%, resulting in a more
distributed shareholding, and enabled Uchumi to shed
its parastatal status.
The above process can also be considered a partial
privatisation by the Government through the Nairobi
Stock Exchange and can be applied to other institutions
in which the Government has a significant shareholding
such as National Bank of Kenya (NBK), Kenya Power
and Lighting Company (KPLC), East African Portland
Cement (EAPC) and Housing Finance (HF).
Through a transparent and accountable process, the
Government accomplished two policy objectives -
facilitating the development of Kenya’s private sector
and concurrently raising revenues to fund its budget
deficit.
September 2005
The Kshs. 800.0 million Athi River Mining Company
(ARM) medium term note which would pay interest with
a margin of 1.75% above the most recent published
average interest rate for the 91 day Kenya Government
Treasury bills was listed on the Stock Exchange. It was
both the first credit rated and first unsecured corporate
bond in the Kenyan market. While it is not an
endorsement by the NSE to invest in the ARM bond, it
is an acknowledgment of the growing sophistication of
the Kenyan investor in terms of analyzing risk and
return. ARM was given an investment grade credit
rating of an A (long-term) and A1 (short-term) from the
Global Credit Ratings Company of South Africa.
December
BOC Kenya Ltd.
On December 1, 2005, BOC Kenya served a Notice of
Intention on the Directors of Carbacid Investment
Company, and other requisite parties in accordance
with Regulations 4 (1) and 4 (2) of the Capital Markets
(Takeovers & Mergers) Regulations 2002, informing
them of BOC Kenya’s intention to acquire effective
control of Carbacid. Both companies are incorporated in
Kenya and listed on the Nairobi Stock Exchange. BOC
Kenya made a conditional offer to all the shareholders
of Carbacid Investments Ltd., to acquire the entire
issued share capital of Carbacid (excluding 660,000
ordinary shares of Carbacid held by Kivuli Ltd., a wholly
owned subsidiary of BOC Kenya) comprising 10,666,755
ordinary shares of Kshs. 5.00 each.
Shelter Afrique
On December 2 2005, the Capital Markets Authority and
the Nairobi Stock Exchange approved the issue and
listing of the Kshs. 500.0 million unsecured
floating/fixed rate notes issued by The Company for
Habitat and Housing in Africa, “Shelter-Afrique”. The
notes have a maturity of 3 years. The first tranche (the
floating rate component, priced at a premium above the
most recent published average interest rate of the 91-
Day Government of Kenya treasury bill rate) of Kshs.
200.00 million is expected to be issued in January 2006,
whilst the second tranche of Kshs. 300.00 million,
expected in April 2006 will be issued at a fixed rate yet
to be determined.
Celtel Kenya Ltd.
On 14 December 2005, Celtel Ltd., Kenya’s second cell
phone operator, listed a Kshs. 4.5 billion, 4- year,
floating rate, medium term note.
The medium term noted, which will pay an interest
premium of 1.25% above the prevailing 91-day
treasury bill rate is 75% guaranteed by FMO, a
specialised financial institution, 51% owned by the
Dutch Government, and whose objective is to
contribute to the advancement of productive enterprise
in developing countries. The Guarantee which covers all
credit risks during the lifetime of the issue, including
political risks, is irrevocable and unconditional, and will
cover investors irrespective of the cause of the payment
default.
The medium term note will be used to fund capital
investment in the Celtel network; and general working
capital needs. It will result in the improvement of the
telecommunications network for Celtel Kenya’s over 1.6
million subscribers and overall, enhance the quality of
life of Kenyan citizens by facilitating their ability to
communicate with each other.
CFC Bank Ltd.
On 23 December 2005, CFC Bank officially listed 12.0
million new shares, arising out of its just successfully
completed rights issue. The rights issue increased the
authorised share capital of CFC Bank Ltd., to 156.0
million ordinary shares of Kshs. 5.00, all of which are
listed on the Stock Exchange. The rights issue was
necessitated by the fact that as financial services
become increasingly competitive and banks convert into
integrated financial services providers, Central Banks
across the world are urging banks under their
jurisdiction to comply with the impending Basel II
regime on capital allocation for risk weighed assets.
End Year Performance
For the year ending 31 December 2005, the exchange
recorded an equity turnover exceeding Kshs. 36.52
billion (a 63.61% increase over the previous year’s
performance of Kshs. 22.32 billion), the number of
shares traded was 874.199 million (a 39.80% increase
over the previous year’s performance of 625.33 million
shares. Bond market performance was disappointing;
recording a decline of 60.16% in the value of
transactions from Kshs. 34.11 billion recorded in 2004
to Kshs. 13.59 billion recorded for 2005.
March 2006
Introduction of the Shares of TPS Eastern
Africa
March 20 2006 marked the official introduction of the
89,865,587 ordinary shares of one shilling each of
TPS Eastern Africa (formerly TPS holdings Ltd.) and
familiarly known as Serena; the only publicly listed
holding company in East Africa’s tourism industry.
The introduction was necessitated by recent
developments such as the integration of the
Tanzanian hotels and lodges with the existing
operations of Tourism Promotion Services Ltd. in
Kenya. TPS Eastern Africa (Serena) has indicated that
the future development of the business includes the
integration of the other Serena Group properties in
Uganda and Mozambique and the cross listing of the
shares of TPS Eastern Africa on the Dar-es-Salaam
Stock Exchange and the Uganda Securities Exchange.
May 2006
KenGen Initial Public Offering
On May 17, 2006, the shares of Kenya Electricity
Generating Company (KenGen) began to trade on the
Exchange. The privatization of the generator of 80
per cent of Kenya’s electricity was 337 per cent
oversubscribed. The Government of Kenya therefore
easily met its target of raising Kshs. 7.8 billion (USD.
102.9 million) from the market for the 30 per cent of
the shares of KenGen that it offered to the public.
The above process can also be considered a partial
privatisation by the Government through the Nairobi
Stock Exchange and can be applied to other
institutions in which the Government has a significant
shareholding such as National Bank of Kenya (NBK),
Kenya Power and Lighting Company (KPLC), East
African Portland Cement (EAPC) and Housing Finance
(HF).
Through a transparent and accountable process, the
Government accomplished two policy objectives -
facilitating the development of Kenya’s private sector
and concurrently raising revenues to fund its budget
deficit.
June 2006
Suspension of the Listing and Trading of the
Shares of Uchumi Supermarkets
On 1 June 2006, following the receipt of a resolution
of the Board of Directors of Uchumi Supermarkets
dated 31 May 2006 indicating that the company was
insolvent, the Capital Markets Authority, in pursuant
to powers granted by section 11 (3) (L) of the Capital
Markets Act (as amended by the Capital Markets
Authority Act 2000), and pursuant to the
requirements of section 22 of the Capital Markets
Securities (Public Offers, Listing and Disclosures)
Regulations 2002, suspended the listing and trading
of the shares of Uchumi Supermarkets at the Stock
Exchange.
August 2006
Introduction of the Shares of Equity Bank
August 7 2006 marked the occasion of the official
introduction of the shares of Equity Bank on the
official list of the main investment segment of the
NSE. At the time of listing, Equity Bank, whose main
business is the provision of retail banking and
microfinance services was already a public company
83.55 per cent owned by over 2,416 indigenous
shareholders, 10.93 per cent by Britak Investment
Company Limited and 5.52 per cent by Africap
Microfinance Fund Ltd., (a consortium of international
development investors principally the International
Finance Corporation (IFC) and the European
Investment Bank).
The listing highlights one of the main functions of a
securities exchange, which is to provide a trading
platform to facilitate the efficient and transparent
transfer of financial securities, thereby reducing the
risk to the investor of holding the asset and at the
same time, through the principle of supply and
demand, providing an indicative value of the security.
August 29 2006
The Official Listing of the Entire Issued Share
Capital of Scangroup
The official listing of the entire issued share capital of
Scangroup comprising 159.0 million issued and fully
paid ordinary shares ocurred. Scangroup, which is a
holding company for Media Initiative East Africa,
Lowe Scanad (Kenya, Uganda and Tanzania),
Thompson Kenya, McCann Kenya, Grey East Africa,
Draft Worldwide East Africa, Scanad PR and Universal
McCann East Africa, made history by being the first
media and advertising firm to list in East Africa.
This followed the successful offer to the public to
subscribe to 9.0 million new shares and the sale of
60.0 million existing shares by the vendor – Mr.
Bharat Thakrar; also to the public at Kshs. 10.45 per
share. The allocation results of the offer of 69.0
million ordinary shares of Scangroup released on
August 23, 2006, indicated that the public offer
attracted 96,459 valid applications for a total number
of 428,386,000 ordinary shares; Kshs. 4.48 billion
was received; an oversubscription of Kshs. 3.8 billion
equivalent to 6.21 times the Initial Public Offer (IPO)
amount of Kshs. 721.0 million. Post IPO, the key
employees of the company held 11.5% of the
company and Mr. Thakrar remained the largest
shareholder retaining 28.5% of the issued shares in
the listed company.
On the first day of trading, the share traded at a low
of Kshs. 12.00, reached a high of Kshs. 20.00 and
closed the trading session at an average trading price
of Kshs. 15.00.
September 2006
Commencement of Automated Trading
Monday 11 September 2006 saw the implementation
of live trading on the automated trading systems of
the Nairobi Stock Exchange.
The ATS is sourced from Millennium Information
Technologies (MIT) of Colombo, Sri Lanka, who are
also the suppliers of the Central Depository System
(CDS). MIT have also supplied similar solutions to the
Colombo Stock Exchange and the Stock Exchange of
Mauritius.
To ensure that there were no significant departures
from the overall trading principles in our market the
NSE ATS solution was customised to uphold the spirit
of the Open Outcry Trading Rules in an automated
environment.
Trading hours also increased from two (10:00 am –
12:00 pm) to three hours (10:00 am – 1:00 pm).
Other innovations included the removal of the block
trades board and introduction of the functionality for
the trading of rights in the same manner as equities.
Besides trading equities, the ATS is also fully capable
of trading immobilised corporate bonds and treasury
bonds.
The anticipated benefits of the new system include
greater transparency in the placement of bids and
offers. The system will also improve market
surveillance and transmit almost in real time, trading
information relating to index movements and price
and volume movements of traded securities. More
current information will become readily available to a
wider constituency of our stakeholders, facilitating
the decision making process and lowering the risk of
participating in our markets. As such the Exchange
views a situation where it will soon have an
opportunity to enhance its revenue streams through
information vending to our stakeholders.
November 27 2006: Singning of MoU between
the Nairobi Stock Exchange and Uganda
Securities Exchange on mass cross listing
The MoU will allow listed companies in both
exchanges to dualist. This will facilitate growth and
development of the regional securities markets.
Some of NSE’s listed companies that have dual- listed
include: Kenya Airways, East Africa Breweries and
Jubilee Holdings. Benefits that accrue to cross listed
companies include:
• Access to a wider capital base across the
region;
• A regional presence, resulting in a wider
acceptance and recognition of the
company brand across the region by
company stakeholder- shareholders,
employees, customers and regulators
• The prestige of a regional listing.
December 18th 2006: Listing of Eveready East
Africa (IPO)
Eveready, regional battery maker offered 63 million
shares to the public at an IPO price of Kshs 9.50 per
share. This issue raised Kshs 556.8 million.
December 24th 2006: CSR- NSE Christmas Tree
Fund
As part of NSE’s Corporate Social Responsility, NSE
launched a Christmas Tree Fund on December 24th
2006 to raise funds to help the most unfortunate in
our society. Contributors to this kitty include
members of NSE, listed company and friends to NSE
January 29th 2007: Additional listing of 92 m
Mumias shares
Offer for sale of 91,999,220 shares in mumias for the
Government of Kenya commenced trading on this
date. Following this offer, the government of Kenya
shareholding reduced by 18% to 20% (from 34%) in
Mumias sugar company. Through this issue, the
government raised Kshs 4.5 billion.
February 16 2007: Re-launch of NSE Website
NSE upgraded its website to enhance easy and faster
access of accurate, factual and timely trading
information. Also the upgraded website will be used
to boost data vending business. The Minister of
Finance, Hon. Amos Kimunya officiated the
ceremony.
June 4 2007: Listing of Access Kenya Group
199,885,578 shares of Access Kenya Group Ltd were
listed. A total of Kshs 800 million was raised from this
IPO.
July 20, 2007: NSE reviews Index
NSE revewed THE Index and announced the folwing
companies that constitute the NSE Share Index.
1. ICDC Investment Company
2. Kenya Electricity Generating Company
3. Mumias Sugar Company
4. Rea Vipingo Plantations Ltd.
5. CMC Holdings
6. Express Ltd.
7. Nation Media Group
8. Sasini Ltd.
9. Kenya Airways
10. TPS Eastern Africa
11. Barclays Bank (K) Ltd.
12. Diamond Trust Bank (K) Ltd.
13. Kenya Commercial Bank
14. Standard Chartered Bank (K) Ltd..
15. Bamburi Cement Ltd.
16. British American Tobacco Ltd
17. East African Breweries Ltd.
18. Sameer Africa
19. Kenya Power & Lighting Company
20. Total (K) Ltd.
The review of the NSE 20-share index is aimed at
ensuring it is a true barometer of the market. The
20-share index was last reviewed on 19 May 2003
when NIC replaced East African Packaging
27th August 2007: listing of Kenya Re’
600 million shares of Kenya Re’ were officially listed.
The offer was oversubscribed by 405%.
18th October 2007: RENAISSANCE CAPITAL
Joins NSE as a member. It took over the seat of
Francis Thuo (which was under receivership).
December 14th 2007, NSE ceased Centralized floor
based trading.
December 17th 2007, NSE officially implements
Wide Area Network (WAN) - remote trading plat
form. In this system, brokers and investment banks
trade through terminals in their offices linked to NSE
trading engine. The implementation of WAN is
envisaged to boost NSE’s efficiency and engance
volumes, as trading hours were extended from 9.00
a.m to 3.00 pm, in every trading day.
June 26 2008,
CHANGES TO THE NSE 20 SHARE INDEX AND ALL
SHARES INDEX (NASI)
NASI (All Share Index)
1. Safaricom Limited has been included
Though the regulations governing the NSE 20 Share Index
require a company to have been trading for a minimum of
one year prior to inclusion in the index, the Board of
Directors of the Nairobi Stock Exchange (NSE) have made
an exception for Safaricom Limited. This is in light of the
significant impact it has occasioned on market capitalisation
and trading activity at the bourse. Mr. Mbaru says,
“Safaricom Limited’s inclusion will enhance the technical and
market reflection accuracy of the NSE 20 Share Index.”
All the above changes have been endorsed by the NSE
Board after due regard was paid to factors of market
capitalisation, turnover, shares traded and the liquidity of
the respective counters. Further, the changes pay heed to
ensuring a fair sectoral representation.
February 25th 2006, NSE introduces NSE ALL Share
Index (NASI). The NASI is a comprehensive and
complementary index designed to represent
investors’ expectations of the future performance of
all listed companies. NASI’s calculation is based on
market capitalization, implying that the index level
will reflect the total market value of the constituent
stocks. The base year for NASI 01ST January
2008=100.
April 16 2008, NSE launched NSE Smart Youth
Investment Challenge to promote stock market
investments among Kenyan Youths. NSE partnered
with Smart Youth Investment Ltd. (SYI) and it was a
key sponsor, contributing Kshs 1.0 million.
The objective of the challenge is (i) Edutainment –
education and entertainment”, to occupy the minds
of the youth positively and draw them away from the
negative energy created by the current political,
economic and social situation in the country; (ii)
encourage the culture of thrift and saving funds
amongst the university students; (iii) encourage the
youth to invest their savings in the capital markets.
June 9 2008 – official listing of Safaricom Ltd,
A total of 50 billion shares were listed. The
Government of Kenya sold to the public 25 %( 10
billion shares) of it shareholding to the public at a
price of Kshs 5.00 each. Through this IPO, the
government realized Kshs 50 billion. The IPO was
oversubscribed by 532% attracting Sh286 billion
from local and foreign investors.
June 26 2008,
CHANGES TO THE NSE 20 SHARE INDEX AND
ALL SHARES INDEX (NASI)
The Chairman of the Nairobi Stock Exchange (NSE),
Jimnah Mbaru, together with the Board of Directors,
in line with international best practice and the
quarterly review of the Exchange’s indices (NSE 20
share and NASI), is implementing the following
changes, effective 1st July 2008.
NSE 20 SHARE INDEX
1. Equity Bank replaces Diamond Trust
Bank in the Finance and Investment Sector
2. East African Cables replaces Sameer
Limited and Athi River Mining replaces
Total Kenya in the Industrial and Allied
Sector
3. Safaricom Limited has replaced TPS
Serena in the Commercial and Services
Sector
ANNEXE 1: NSE MARKET SEGMENTS
NSE has the following Three market Segments
1. Main Investments Market Segment (MIMS)
2. Alternative Investments Market Segment (AIMS)
3. Fixed Income Securities Market Segment (FISMS)
Listing Requirements:
1. MAIN INVESTMENTS MARKET SEGMENT (MIMS)
The Minimum Eligibility Conditions and Listing Requirements for the Main Investment Market Segment
(MIMS) are:
1. Company to be listed must be a company limited by shares and registered under the Companies Act (Cap 486) as a
public limited company.
2. Company must have a minimum authorized, issued and fully paid up share capital of Kshs 50 million and net assets of
Kshs 100 million before the public offering of shares.
3. Shares to be listed must be freely transferable and not subject to any restrictions on marketability or pre-emptive
rights.
4. Company must have published audited and financial statements (complying with international accounting standards) for
an accounting period ending on a date not more than 3 months prior to the proposed date of the offer.
5. If more than 3 months will have elapsed since the end of the company's last accounting period for which audited
financial statements have been prepared and the proposed offer date, then the company must prepare a set of unaudited
interim financial statements for the period following the end of the financial period.
6. The un-audited interim financial statements should not however exceed 6 months, unless the issuer is already listed in
any market segment. In this regard unlisted issuers who have published accounts exceeding a period of 6 months will
have to carry out an interim audit for the period, or plan the date of offer to immediately follow the completion of the
next annual audit.
7. Company must have prepared financial statements for the latest accounting period on a going concern basis and
audited report must not contain any emphasis of matter or qualification in this regard.
8. At the date of application, the company must not be in breach of any of its loan covenants particularly in regard to the
maximum debt capacity.
9. As at the date of the application and for a period of at least 2 years prior to the date of the application, Directors of the
issuer must not have:
􀂃 any petition under bankruptcy laws filed against him/her (for individuals), or any winding-up petition pending or
threatened against it (for body corporate);
􀂃 any criminal proceedings in which he/she was convicted of fraud or any criminal offence, nor be named subject of
pending criminal proceeding against him/her (for individuals), or any offence or action either within or outside Kenya
(for body corporate);
􀂃 been the subject of any ruling of a court of competent jurisdiction or any governmental body, that permanently or
temporarily prohibits him or her from acting as an investment adviser or as a director or employee or a broker or
dealer, director or employee of any financial institution or engaging in any type of business practice or activity.
10. Company to be listed must have declared positive profits after tax attributable to shareholders in at least three of the
last. five completed accounting periods to the date of the offer.
11. Companies wishing to be listed should be solvent and the auditors report must be unqualified.
15
2. ALTERNATIVE INVESTMENTS MARKET SEGMENT (AIMS)
The Minimum Eligibility Conditions and Listing Requirements for the Alternative Investment Market
Segment (AIMS) are:
1. Company seeking listing must be incorporated or registered as a public limited company under the Companies Act
(Cap 486).
2. Company to be listed must also be a company limited by shares.
3. Company must have a minimum authorized, issued and fully paid up shares of Kshs 20 million and net assets of Kshs
20 million before seeking listing.
4. The shares to be listed must be freely transferable and not subject to any restriction on their marketability or preemptive
rights.
5. At the date of application, the company must not be in breach of any of its loan covenants particularly in regard to
the maximum debt capacity.
6. As at the date of the application and for a period of at least 2 years prior to the date of the application, Directors of
the issuer must not have:
􀂃 any petition under bankruptcy laws filed against him/her (for individuals), or any winding-up petition pending or
threatened against it (for body corporate);
􀂃 any criminal proceedings in which he/she was convicted of fraud or any criminal offence, nor be named subject of
pending criminal proceeding against him/her (for individuals), or any offence or action either within or outside Kenya
(for body corporate);
􀂃 been the subject of any ruling of a court of competent jurisdiction or any governmental body, that permanently or
temporarily prohibits him or her from acting as an investment adviser or as a director or employee or a broker or
dealer, director or employee of any financial institution or engaging in any type of business practice or activity.
7. Company shall not be eligible to list unless:
(i) It has a minimum of 25 investors;
(ii) At least 20% of the paid up capital after listing, excluding any holding by the employees or family
members, is held by not less than the prescribed minimum number of investors; and
(iii) No investor shall hold more than 3% of the shares in (ii) above.
8. Company must have been in existence in the same line of business for a minimum of 2 years with good growth
potential in order to provide a comparative and reliable track record.
9. A subsidiary whose parent company has a five year track record may list, provided that the subsidiary has an
operating track record of at least one year.
10. The accounts of the company must not be older than 4 months before the listing and must be audited.
11. Company must be solvent and the auditors report must be unqualified.
12. Company must have suitably qualified senior management with relevant experience, for at least one year prior to the
application for listing, none of whom shall have committed any serious offence that may be considered inappropriate
for the management of a listed company.
13. Company may not use the proceeds of a public issue to redeem any loans by the directors or the shareholders prior
to the listing.
14. Company must ensure that the existing shareholders, related persons or such other group of controlling shareholders
who have influence over management, undertake not to sell their shareholding, before the expiry of a period of 24
months following listing.
15. Company must have at least two non-executive and independent directors on its board of directors.
16. Company must disclose a clear policy on dividends.
17. Company listed on AIMS may only change from this segment after a minimum of one year and on satisfying, the
requirements for Main Investments Market Segment.
18. All companies seeking listing in MIMS shall have their information memoranda or prospectuses approved by the
Capital Markets Authority.
16
3. FIXED INCOME SECURITIES MARKET SEGMENT (FISMS)
Eligibility conditions and listing requirements for Fixed Income Securities Market Segment (FISMS)
Companies intending to list their commercial papers or corporate bonds in the Fixed Income Securities Market Segment
must satisfy the following eligibility requirements:
1. Company to be listed must be a company limited by shares and registered under the Companies Act
(Cap 486).
2. The company must have a minimum authorized, issued and fully paid up share capital of Kshs 50 million and net
assets of Kshs 100 million before the public offering of the securities. In the event that the issuer does not have net
assets of Kshs 100 million, the issuer must obtain from a bank or any other approved institution a financial
Guarantee to support the issue.
3. The securities to be listed must be freely transferable and not subject to any restrictions on marketability or preemption
rights.
4. The company must have published audited financial statements complying with International Accounting Standards
for an accounting period ending on a date not more than 3 months prior to the proposed date of the offer.
5. If more than 3 months will have elapsed since the end of the company's last accounting period for which audited
financial statements have been prepared and the proposed offer date, then the company must prepare a set of
unaudited interim financial statements for the period following the end of the financial period
6. The unaudited interim financial statements should not however exceed 6 months, unless the issuer is already listed
in any market segment. In this regard, unlisted issuers with published accounts exceeding a period of 6 months will
have to carry out an interim audit for the period, or plan the date of offer to immediately follow completion of the
next annual audit.
7. The company must have prepared financial statements for the latest accounting period on a going concern basis and
audit report must not contain any emphasis of matter or qualification in this regard
8. At the date of the application, the company must not be in breach of any of its loan covenants particularly in regard
to the maximum debt capacity
9. The company should have made profits in at least two of the last three years preceding the issue of the commercial
paper or the corporate bond.
10. Companies wishing to issue or list debt securities should not be insolvent.
11. Total indebtedness of the issuer, including the new issue of the commercial paper or the corporate bond shall not
exceed 400% of the company's net worth (or a gearing ratio of 4: 1) as at the date of the latest balance sheet.
12. The ratio of funds generated from operations to total debt for the three trading periods preceding the issue shall be
maintained at a weighted average of 40% or more. These requirements of solvency and adequacy of working
capital will apply both to the issuer on its own and to the group.
13. The conditions as provided in paragraphs 12 and 13 must be maintained as long as the commercial paper or
corporate bond remains outstanding.
14. The directors and senior management of an applicant must have collectively appropriate expertise and experience
for the management of the groups business. Details of such expertise must be disclosed in the issue information
memorandum.
15. The applicant must ensure that each director is free of any conflict of interest between the duties he/she owes to the
company and his/her private interest
16. If the issuer is a banking or an insurance company, the company must obtain a clean certificate from the relevant
regulatory authority.
17. Where there is a guarantor and in the event that the guarantor is a bank or an insurance company licensed to
operate in Kenya, the consent [except where the guarantor is an offshore bank or insurance company not subject to
regulation of the CBK or Commissioner of Insurance] of the CBK or the Commissioner of Insurance as the case may
be, will be required.
18. Where there is a guarantor, he will provide the Capital Markets Authority with a financial capability statement dully
certified by its auditors.
19. Where there is a guarantor, he will provide the CMA with a financial capability statement dully certified by its
auditors.
20. Companies seeking listing in MIMS shall have their information memoranda or prospectuses approved by the Capital
Markets Authority.
17
POLICY AND TAX INCENTIVES FOR THE CAPITAL MARKETS
• The legal costs and other incidental costs
relating to the introduction of shares (when
a company lists its share without raising
capital) is corporate tax deductible. (2006)
• Interest income generated from the cash
flows passed to the investors who buy listed
bonds as asset backed securities for the
purposes of developing the infrastructure,
has been exempted from both withholding
and income tax (2006)
• Interest income accruing to all listed bonds
used to raise funds for infrastructure and
social services, which have a maturity of at
least three years, is exempt from withholding
and income tax (2006)
• As an incentive to encourage more investors
at the Nairobi Stock Exchange, the Minister
proposed that newly listed companies pay
corporation tax at a lower rate of 20%, for a
period of 5 years, provided these companies
offer at least 40% of their shares to the
Kenyan public (2005)
• Securitization based on bankable assets and
ability to generate cash has become a viable
alternative in most emerging markets,
particularly for institutions providing
infrastructural services to raise long term
capital. In this regard, the Minister proposed
to exempt investment income of Special
Purpose Vehicles (SPVs) from income tax.
This is to encourage institutions providing
infrastructural services to set up SPVs for
purposes of issuing asset backed securities.
(2005)
• Foreign investors can now acquire shares
freely in the stock market subject to a
minimum reserved ratio of 25% for domestic
investors in each listed company. (2002)
• Investment ceiling by retirement benefits
schemes in fixed income securities (e.g.
bonds and commercial papers) has been
raised from 15% to 30%. (2002)
• To encourage savings, collective investment
schemes set up by employers on behalf of
employees to invest in listed shares, will be
exempted from income tax. (2002)
• Effective 1 January 2003, newly listed
companies are to pay a lower corporation
tax of 25% (i.e. 5 percentage points lower
than the standard corporation tax of 30%)
for a period of 5 years following their listing.
The new legislation applies to companies
with who float at least 30% of their issued
share capital to the public. (2002)
• New and expanded share capital by listed
companies or those seeking listing exempt
from stamp duty (2000/2001)
• Transfers of assets involved in the issuance
of asset-backed securities will to be exempt
from stamp duty (2000/2001)
• Newly listed companies to be taxed at a
lower rate of 27% as compared to the
standard rate of 30% for a period of three
years following the date of listing. This is
also dependent on such companies offering
at least 20% of the share capital to the
public (2001)
• Companies that apply and are listed shall get
a tax amnesty on their past omitted income,
provided they make a full disclosure of their
assets and liabilities and undertake to pay all
their future due taxes (2001)
• Income accruing to registered collective
investment schemes tax-free (1999)
• Licensed dealers to enjoy tax benefits, as
long as they turn their portfolios within 24
months and according to laid down
guidelines (1999)
• To encourage the transfer of technology and
skills, foreign investors allowed to acquire up
to 49% of local brokerage firms; and up to
70% of local fund management companies
(1999)
• Investments by Insurance companies on
listed securities exempted from tax arising
out of capital gains on sale of shares
(1996/97)
• Expenses incurred by companies in having
their financial instruments rated by an
independent rating agency are tax
deductible. (1997/98)
• Registered venture capital funds have been
accorded major tax incentives including tax
holidays of up to ten years on the funds
income (1997/98)
• Policy decision to facilitate the participation
of foreign investors in listed securities
subject to a maximum of 40% of the share
capital in aggregate and 5% for individual
investors, or such higher amount held by
foreign investors at the time of promulgation
of the regulation (1995/96)
• Reduction of withholding tax applicable to
dividend income arising from investment on
listed securities for both local and foreign
investors. Foreign 10%; Local 10% to7.5%
to 5%. (1995/96/97)
• Exemption of stamp duty and value added
tax on the transfer of listed securities
(1995)
• Costs of IPOs were made tax deductible
(1995)
• 35% Capital Gains Tax was introduced in
1975 (suspended since 1985)
18
Capital Raising in the Capital Markets
Table 1: Initial Public Offers, 1990 to date
Year Company Subscription rate (%) Amount raised (Kshs.)
1990 KCB 147 297,000,000
1991 KFC 110 40,800,000
1992 UCHUMI 103.20 232,000,000
1992 CROWN BERGER 104 138,000,000
1992 HFCK 400 126,000,000
1993 E A OXYGEN 100 42,400,000
1993 CMC 100 20,000,000
1994 FIRESTONE 101 1,420,000,000
1994 NBK 300 400,000,000
1994 NIC 77 718,000,000
1995 REA VIPINGO* 100 102,000,000
1996 REA VIPINGO 216 84,000,000
1996 KQ 194.60 2,664,000,000
1996 NBK 275 600,000,000
1996 KCB 150 560,000,000
1997 TPS 400 167,609,000
1997 ARM 250 281,750,000
1998 KCB 1,823,250,000
1999 HFCK < 100
2000 AFRICAN LAKES 150 378,000,000
2001 MUMIAS 60 1,125,000,000
2001 ICDCI 64 331,208,164
2006 KenGen 333 7,800,000,000
Scan Group 721,000,000
Equity Bank 0
Eveready East Africa 556,800,000
2007 Kenya Re’ 405 2,280,000,000
AccessKenya Group 800,000,000
Mumias ( offer for sale) 4,500,000,00
2008 Safaricom Ltd 532 50,000,000,000
Total amount raised 78,208,817,164
19
Table: Rights Issues 1989 – 2008
Year Company Rate Amount Raised (Kshs)
1989 Barclays 88,000,000
1990 ICDCI 70,966,196
1993 Marshalls 21,475,475
1994 KFC 1:3 44,875,000
1996 E A Portland 4:1 1,008,000,000
1997 EABL 1,488,275,775
1998 ICDCI 1:3 282,584,280
2000 UNGA 02:11 103,627,070
2000 Pan Africa Insurance 516,000,000
2001 Kenya Orchards 37:2 36,000,000
2001 Standard Newspapers 6:1 306,080,775
2001 Total Company 2:3 1,275,086,508
2003 Express Kenya 1:8 178,004,216
2004 KCB 1:3 2,748,026,872
2005 Uchumi Supermarkets 2:1 1,269,469,056
2005 CFC Bank 700,000,000
2006 Diamond Trust Bank 776,550,000
2007 Olympia Capital 3:1 420,000,000
NIC Bank 1:5 1,000,000,000
Diamond Trust Bank 1:6 4,500,000,000
2008 Housing Finance 1:1 To be announced
KCB 1:9 To be announced
TOTAL RAISED 16,833,021,22
20
LIST OF MEMBER FIRMS OF THE NAIROBI STOCK EXCHANGE
Drummond Investment Bank Limited
Hughes Building, 2nd floor,
P.O. Box 45465 00100
Nairobi.
Tel: 318690/318689
Fax.2223061
E-mail: info@drummond.co.ke
Web: www.drummond.co.ke
Dyer & Blair Investment Bank Ltd
Loita House, 10th floor,
P.O. Box 45396 00100
Nairobi
Tel. 3240000/2227803/4/5
Fax.2218633
E-mail: shares@dyerandblair.com
Web: www.dyerandblair.com
Ngenye Kariuki & Co. Ltd.
Corner House, 8th floor,
P. O. Box 12185-00400
Nairobi
Tel.224333/2220052/2220141
Fax.2217199/241825
E-mail: ngenyekari@wananchi.com
Web: www.ngenyestockbrokers.co.ke
Suntra Investment Bank Ltd
Nation Centre,10th Floor,
P.O. Box 74016-00200
Nairobi
Tel. 2870000/247530/2223330/2211846
0724- 257024, 0733-222216
Fax.2224327
E-mail: info@suntra.co.ke
Web: www.suntra.co.ke
Reliable Securities Ltd.
IPS Building, 6th Floor
P. O. Box 50338- 00200
Nairobi
Tel.241350/4/79
Fax.241392
E-mail: info@reliablesecurities.co.ke
CFC Financial Services
CFC Centre, Chiromo Rd
P.O. Box 47198 – 00100
Nairobi
Tel:3638900
Fax.3752950
E-mail: cfcfs@cfcgroup.co.ke.
Web: www.cfcbank.co.ke
Bob Mathews Stockbrokers Ltd
Nginyo Towers,3rd floor
P.O. Box 73253 – 00200
Tel 311898/313492/310540
Fax:2210279 Telefax: 341867
Cell: 0724-957345/0733-371629
E-Mail: bobmathews@bobmathewstocks.com
Website: www.bobmathewstocks.com
Afrika Investment Bank Ltd
Finance House, 9th Floor
P.O. Box 11019-00100
Nairobi
Tel: 2210178/2212989
Fax: 2210500
E-mail: info@afrikainvestmentbank.com
Website: www.afrikainvestmentbank.com
ABC Capital Ltd
IPS Building, 5th floor
P.O. Box 34137-00100
Nairobi
Tel: 246036/245971
Fax: 245971
E-mail: crossfield@wananchi.com
Sterling Investment Bank Ltd
Finance House, 11th Floor
P.O. Box 45080- 00100
Nairobi
Tel.2213914/244077/
0723153219/0734219146
Fax.2218261
E-mail: info@sterlingstocks.com
Web: www.sterlingstocks.com
ApexAfrica Investment Bank Ltd
Rehani House, 4th Floor
P.O. Box 43676- 00100
Nairobi
Tel: 242170/2220517
Fax: 2215554
E-mail: invest@apexafrica.com
Web: www.apexafrica.com
Faida Investment Bank Ltd.
Windsor House, 1st floor,
P. O. Box 45236-00100
Nairobi
Tel.243811/2/3
Fax.243814
E-mail: info@faidastocks.com
Web:www.faidastocks.com
NIC Capital Securities Ltd.
Kimathi House, 1st Floor
P.O. Box 63046-00200
Nairobi
Tel.2016482/3 244272/9
Mobile: 0724-951703
Fax.244280
E-mail: invest@nic-capital.com
Standard Investment Bank Ltd
ICEA Building, 16th floor,
P. O. Box 13714- 00800
Nairobi
Tel.2228963/2228967/2228969
Fax.240297
E-mail: info@standardstocks.com
Kestrel Capital (EA) Limited
ICEA Building, 5th floor,
P.O. Box 40005-00100
Nairobi
Tel2.251758/2251893,2251815,2250082
Fax.243264
E-mail:info@kestrelcapital.com
Web: www.kestrelcapital.com
Discount Securities Ltd.
International House, 4th floor,
P O Box 42489-00100
Nairobi
Tel. 2219552/38, 2773000
Fax. 2230987
E-mail: discount@dsl.co.ke
Web: www.dsl.co.ke
African Alliance Kenya Securities.
Ground Floor, Kenya Re Towers, Upper Hill
P.O. Box 27639 - 00506
Nairobi
Tel. 2735013/2735154/2735138/2710978
Fax. 2710247
E-mail: info@africanalliance.co.ke
Web: www.africanalliance.com
Renaissance Capital (Kenya) Ltd
Purshottam Place ,6th Floor
Westland , Chiromo Road
P.O BOX 40560-00100
Nairobi
Tel 3682000/3754422
Fax: 3632339
www.rencap.com
Genghis Capital Ltd.
Prudential Building, 5th Floor
P.O Box 1670-00100
Nairobi
Tel: 2337535/36
Fax: 246334
Email: info@gencap.co.ke
21
BUSINES DEVELOPMENT DEPARTMENT
THE NAIROBI STOCK EXCHANGE
NATION CENTRE 1ST FLOOR
Tel: +254 (020), 2831000
Fax +254 (020) 224200

For more info: www.nse.co.ke