Karin Stiles Chris Lo

Establishing a DR Program Issuer Develops team of advisors Investment Bank Lawyer Depositary Bank Accountant

Investment Bank Advise on type of DR’s and the market on which to launch them. Advise on the ratio of DR’s to ordinary shares. Prepare research reports on the issuer. Promote DR’s to investors via meetings and roadshows.

Lawyer Prepare contracts between the issuer and other intermediaries. File the required registration statements with the host market regulatory authorities. Manage compliance with the host market laws and regulations.

Accountant Prepare issuers financial statements according to the standards required in the host market.

Depositary Bank Issues DR’s on the basis of issuer’s shares held in custody by a custodian bank in the home market of the issuer. Arranges relationships with market makers and brokers who sell DR’s to investors in the host market. Also plays a key role in day-to-day management of a DR program by maintaining a register of DR holders, processing dividend payments for them, and keeping them informed about corporate actions of the issuer.

Depositary Bank/Sponsors  Key intermediaries for foreign transactions.  Table 4 uses data from capital raising events between 1990 and May 2009 by incorporated companies in BRIC.  359 accounts used DR’s  35% of total number of such events in the world. 40% of the total value.

**Honk Kong only had 3 capital raising events, data aggregated into China on table 4.

Merrill Lynch (ML) Credit Suisse (CS) Citibank (CITI) Morgan Stanley (MS) Goldman Sachs (GS) 46% of issues Very strong presence in China, but weak to no presence in India, Russia or Brazil. Activities have since tripled Presence in all markets. Activities have tripled since 1990 Equal presence in all markets. Since end of 2000, have 13X more issues than they did from Since the end of 2000, have 7X more issues than they did from Big market share in China, but weak or no presence in Russia. Activities have since tripled

Host Markets LSE – London Stock Exchange LUX – Luxembourg Stock Exchange NASDAQ - National Association of Securities Dealers Automated Quotations NYSE – New York Stock Exchange OTC – Over The Counter

Summary of Intermediaries in Foreign Listings  The services of depositary banking and lead management are key to foreign listings  It is dominated by only a handful of institutions  All leading intermediaries are international, although exhibit a degree of specialization in regards to size, country and service  Relationships

Destinations of foreign listings

New York(NYSE and NASDAQ) and London(LSE) are the main centers of foreign listings Main LUX Markets Technology Industrials Consumer goods Main LSE Markets Oil & Gas Basic materials Utilities Main NASDAQ Markets: Technology Consumer services Main NYSE Markets: Telecommunications Health care

Factors of distribution  Direct and indirect costs NYS and LSE are most expensive  Requirements in Reporting and Corporate Governance SEC Filing & US GAAP  Industrial specialization  Proximity(nearness in place)

Conclusion  Foreign listing will remain an important factor in influencing the map of the world economy  Author’s argument: a combination of the world city network and geography finance approaches

Test Question: What are some of the reasons why a company would choose not to list on the NYSE, NASDAQ or LSE(London Stock Exchange)?

Test Question Test Question: Explain one of the reasons why a company would choose not to list on the NYSE, NASDAQ or LSE(London Stock Exchange)? Answer(Choose 1!): 1.Cost: It is expensive to list stocks on the NYSE, NASDAQ, and LSE 2.Requirements and Corporate Governance: If you intend to have your stock listed on the NYSE you need to have SEC Filing and abide by US GAAP. 3.Industrial Specialization: Some stock exchanges have specialization in a certain industry and it may be beneficial to have your company’s stock in the same stock exchange for name exposure purposes.