1. Global Registered Shares
| Jeff Bijas | Thomas Kutzman | Gaurav Malhotra | Mei Lin Zhang |

2. Agenda American Depository Receipts Global Registered Shares
Comparison of Methods
DaimlerChrysler’s Initiative
DCX Results
Deutsche Bank’s GRS Issue
GRS Future Outlook

3. American Depository Receipt (ADR)
A certificate that represents ownership in a non US company’s publicly traded securities that may be traded on a listed or unlisted exchange in the US
Ordinary share deposited in trust with a local custodian bank
Primary method for the majority of US investors to invest abroad
US dollar denominated

4. ADR - Example Ex. Sony in Japan ¥30,000 per share $1 = ¥100
10 shares = 1 ADR
Conversion fee = 5% per share per transaction
Mr. Jones wants to hold 100 ADRs
1. US investor
Mr. Jones
Invest: (¥30,000 1000)  ($1/¥100) = $300,000
Conversion fee: ($0.05)  (1000) = $50
Total cost: $300,000 + $50 = $300,050
2. US Custodian Bank
JP Morgan Chase
Receives $300,050
Keeps $50 conversion fee
Converts dollars to yen
3. JAP stock market
JP Morgan Chase buys shares of Sony
Deposits shares in custody account
Delivers 100 ADRs to Mr. Jones

5. Global Registered Share (GRS)
Alternative to ADR with greater flexibility
Similar to ordinary shares except that investors can trade it on stock exchanges worldwide – they are not domestic securities representing a foreign interest
Make shares easily accessible not only to US investors but also to investors in other countries
Local currency denominated

6. GRS – Example Ex. Sony in Japan 1. US investor ¥30,000 per share
$1 = ¥100
Transaction fee = $5
Mr. Jones wishes to hold 1000 shares
1. US investor
Mr. Jones
Invest: (¥30,000 1000)  ($1/¥100) = $300,000
Transaction fee: $5
Total cost: $300,000 + $5 = $300,005
Mr. Jones receives 1000 GRSs of Sony
2. Global Registrar
Clears and settles trade using two-way electronic link between the exchanges

7. Comparison of Methods ADRs GRSs
Conventional method of accessing international equity markets since1927
Bundling feature adds to liquidity
Depository bank maintains ADR ownership records, processes corporate actions
Conversion fees
GRSs
No additional intermediaries
Fully fungible
High initial costs
Flat transaction fees
All shareholders have equal status
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

8. Introduction of the GRS
DaimlerChrysler established in 1998 to create a global, diversified manufacturer and distributor.
German company Daimler Benz with market capitalization of $36 billion
US company Chrysler with market capitalization of $23 billion
Share-for-share exchange effected with new global registered share (GRS) facility
.6325 new DCX shares per Chrysler share
1.005 new DCX shares per Daimler Benz share
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

9. “Equity could follow the sun…”
Only one equity vehicle to be issued to all DCX stockholders
Dual-listing could keep the US and the German company on even terms
Global share would allow DaimlerChrysler to keep Chrysler’s spot in the S&P 500
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

10. GRS Structure
Single, bilingual, multi-jurisdictional certificate applicable in both US and Germany
Issued in registered rather than bearer form
Eliminates need for each share to be accompanied by dividend coupons
Share registration and transfer handled by the US and German-based agents/registrars
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

11. Dynamics of GRS Trading
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

12. GRS Outcomes Greater trading activity and enhanced liquidity
Significantly higher value of combined trading
Significantly lower intraday bid-ask spreads
Tremendous migration of order flow back to Frankfurt
NYSE retains only 5% of total global trading volume of stock
DCX dropped from S&P 500
Volatility of returns increased dramatically

13. Trading Activity
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

14. Bid-Ask Spread Comparison
Source: A. Karolyi, “Daimler Chrysler AG, the First Truly Global Share”

15. Deutsche Bank issues GRSs
In 2001, Deutsche Bank chose to list on the NYSE via GRSs, making it the fourth foreign company to ever issue such shares
Critics suggested that a GRS listing would lead to a lower trading volume on the NYSE

16. Deutsche Bank’s Goal -- Press Release, 2001
"Deutsche Bank, with a share traded globally, is increasing its flexibility and -- above all in the U.S.A. -- its ability to actively take advantage of business opportunities," including "the financing of future acquisitions.“
-- Press Release, 2001

17. Deutsche Bank (DB) Performance

18. Conclusion
Not enough companies are willing to endure the up-front costs of GRS’s to determine if they are a viable and worthwhile means to make international investing more efficient and accessible to investors.
Results from DaimlerChrysler, Deutsche Bank, etc provide inconsistent data with unclear results
Small number of sample cases makes testing general hypotheses on GRS’s very difficult
GRS’s are simpler for the average investor and cheaper for high volume institutional investors