2. Michael C. Phiri Legal Officer Securities & Exchange Commission

3. Discussion Topics 1. Who is the SEC? 2. The Role of the SEC 3. What are Financial markets and Capital markets? 4. Who is the LuSE? 5. What is the LuSE Alternative Market? 6. Requirements to list on the LuSE Alt-M 7. How can Farmers access funds on the LuSE ALT-M? 8. The Role of the SEC and the LuSE Alt-M

4. Who is the SEC? The Securities and Exchange Commission is the regulator of the capital market. Founded in 1994 under the Securities Act Cap. 354 of Volume 20 of the Laws of Zambia. The SEC acts more or less like the “police” of the capital market ensuring that the interests of both local and international investors are protected through the execution of the highest standards of good corporate governance by the market players, ie. Brokers, LuSE

5. Role of the SEC (a) Regulation of Capital Markets Custodian of the Securities Act-framework for Securities business in Zambia-Ensuring markets are fair, transparent, efficient (b) Licensing of Capital Markets Players Ensuring only fit and proper persons are participating on the market- aimed at protecting investors (c) Registration of Securities Shares(equity) Debt instruments(bonds, notes)

6. Financial and Capital Markets Financial markets are a platform where people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand Financial markets consists of: 1. Capital markets - both the primary and secondary markets (long term securities) 2. Money markets - borrowing and lending in the short term (bank deposits, overdrafts, personal loans etc

7. Capital markets Capital markets consists of Stock, both equity and bonds e.g Company conducts an IPO or GRZ issues a bond Companies and governments sell securities in the primary market. Investors trade these securities on exchanges and over the counter, it's called the secondary market.

8. Capital markets cont’d

9. Who is the LuSE? The Lusaka Stock Exchange is a modern, young exchange that acts as a platform for securities or financial instruments to be traded on the secondary market. Founded in 1992 with the collaborative efforts of the International Financial Corporation and the World Bank. Opened doors in February, 1994. The year 2014 marks the LuSE’s 20 th Anniversary year

10. What is the LuSE ALT-M? The LuSE Alternative Market definition: “ LuSE Alt-M is a market for small to medium companies that are in a growth phase and applicants that meet the criteria for listing on the Main Board will not ordinarily be granted a listing on LuSE Alt-M and the LuSE reserves the right to request such applicants to route their applications to the Main Board”

11. Definition of an SME SMEs/Emerging corporates/Small-cap/Growth companies: Small <50 employees Annual turnover K200,000 – 1,000,000 Medium Annual turnover K1,000,000 – 20,000,000 >50 employees

12. Requirements to List on The LuSE ALt-M Minimum of up to twenty (20) and a maximum of hundred and fifty (150) employees, a minimum trading turnover of K250, 000 and a maximum trading turnover of K20 million. Must have a contracted Financial Advisor known as a Designated Advisor or DA Minimum of 5 board directors Majority being non-family members Chairman and Chief Executive shall be separated after 5yrs following the issuer’s listing

13. Requirements cont’d Show operation at least 5yrs and/or Increased revenues and market share for 3 successive years and/or Submit audited financials of the Preceding financial year end and/or Produce a profit forecast for remainder of fin. Yr and 1yr after and/or Submit a business plan for the next 5 yrs of its operations

14. Requirements cont’d LuSE Alt-M features reduced listing fees and requirements in comparison to the main board: Not less than 500,000 equity shares in issue. The public must hold a minimum of 10% of each class of equity securities and the number of public shareholders shall be at least 30 Excludes DA held shares

15. Farmers Accessing the Capital Markets  Shares and Bonds Farmers can buy shares and bonds(corporate and government) and earn dividends (interim and/or final) For bonds the rate of interest is known( usually long term) Sell their shares as share prices increase in order to realize a profit

16. Farmers Accessing the LuSE Alt-M  LuSE Alt-M Market Financing Farmers can incorporate a co. & offer shares to the public- issuance of prospectus on the LuSE Alternative Market By listing on the LuSE Alt-M, farmers will attract investor appeal and funding, both retail and institutional Can issue Rights Offers/ Claw back rights offers to raise further funds, eg. CEC raised approximately USD$70million between February and March 2014 through a rights issue.

17. The Role of the SEC & the LuSE Alt-M Potential listing companies require to pay an initial, non-refundable document scrutiny fee of K22,000 in order to have their documentation considered for approval by the SEC. The Securities and Exchange Commission plays an integral role in ensuring the success of the LuSE Alt-M by ensuring that the listing companies on the LuSE Alt-M adhere to the highest practice of good corporate governance and hence increasing investor appeal and ultimately, funding

18. Thank you