The Central Depository Settlement Corporation Ltd AMEDA CONFERENCE

The Central Depository & Settlement Corporation Ltd. AMEDA CONFERENCE SUN CITY, SOUTH AFRICA 24 TH OCTOBER 2008 ROSE MAMBO Chief Executive Central Depository & Settlement Corp. Limited

THE KENYAN CAPITAL MARKETS MARKET PARTICIPANTS l l l The Capital Markets Authority The Nairobi Stock Exchange Stock Brokerage Firms (CDA) Private and Corporate Investors Custodian Banks (CDA) Issuers Fund managers Investment advisors Unit Trusts Registrars Settlement Bank

THE KENYAN CAPITAL MARKET THE CAPITAL MARKETS AUTHORITY l l l l The market regulator Established under the Capital Markets Act in 1991 Makes the Capital Markets Regulations Licenses market participants including CDSC Approves the listing of the securities of Issuers on the Exchange Approves the CDS Rules and Procedures Enforces the Rules and Regulations

ESTABLISHMENT OF CDSC l Central Depositories Act 2000 – Must be approved in writing by CMA – A stock exchange must be a shareholder – CDS Rules shall be approved by the regulator – License is subject to annual renewal

GOVERNANCE STRUCTURE l CAPITAL – AUTHORISED AND FULLY PAID UP – 100, 000/= (US$ 1. 4 M) DIVIDED INTO 1, 000 SHARES OF 100/= EACH – ISSUED – ALL THE AUTHORISED CAPITAL – FULLY PAID UP

GOVERNANCE STRUCTURE SHAREHOLDING NSE - 20% AKS NOMINEES - 18% CAPITAL MARKET CHALLENGE FUND – 50% INVESTOR COMPENSATION FUND - 7% DSE - 2. 5% USE - 2. 5%

GOVERNANCE STRUCTURE BOARD OF DIRECTORS 11 DIRECTORS ONE OF THEM TO BE CHAIRMAN DIRECTORS APPOINTED BY MEMBERS AS FOLLOWS: NSE -2 THE FUND -4 AKS - 1 DSE - 1 USE - 1 PUBLIC INTEREST – 2 – NOT STOCKBROKERS DIRECTORS REMOVED BY APPOINTING PARTY

CDS CONSTITUENTS • The CDS Organization • The Capital Markets Authority • The Nairobi Stock Exchange • Stock Brokerage Firms (CDAs) • Custodian Banks (CDAs) • Retail and Institutional Investors • Issuers and Registrars • Settlement Bank

APPOINTMENT OF CENTRAL DEPOSITORY AGENTS l Members of the Stock Exchange l Non-Bank subsidiary of a bank or financial institutional l Any institutional investor l Any body corporate as prescribed by CMA l Currently only stockbrokers and custodian banks are CDAs

CENTRAL DEPOSITORY AGENTS l Stockbrokers are trading participant l Custodian banks are settlement participants only l Stockbrokers can allocate trades to any custodian account l Custodians have the right of negative affirmation by T+2

SETTLEMENT OF TRANSACTIONS l T+4 Settlement Cycle l T+1 Board l Settlement Bank – Stanbic Bank, Kenya l All CDAs have a settlement account with the settlement Bank l Settlement takes place at 4. 00 p. m. l Not Real DVP – Banks moves cash and then CDSC moves securities

GUARANTEE FUND l Used to Settle Transactions When CDA fails to fund settlement account l Comprises: – A guarantee fund levy – 0. 01% – Contribution of 1, 500, 000/= per CDA (US$ 22, 000) – Amount currently in the NSE Investor Compensation Fund – penalties

GUARANTEE FUND l No Settlement Caps – In the process of introducing the Caps l Trading limit will be determined based on contribution to the Guarantee Fund l Fund has been used, most notable for three stockbrokers – 2 placed under statutory management by CMA, 1 to restructure

PROGRESS TO DATE • CDSC started operations on 10 th November 2004 • Depository Statistics as at 30 th September 2008 -Number of Accounts -Number of Shares immobilized - 1, 447, 609 16. 726 bn (31%) -Value of shares in depository - 34. 5% of market cap - Market capitalization = Kshs. 970, 853, 255, 000 (US$ 1. 3 bn)

MARKET PERFORMANCE 2008

MARKET PERFROMANCE

GOING FORWARD… l Regional Integration – East African Markets (Kenya, Uganda, Tanzania, Rwanda, Burundi) l Value added services – Handling of IPOs – Registrar Services – SMS Alerts – E-Statements

THE END.