NSE-Web-Prospectus-2014
NSE-Web-Prospectus-2014 NSE-Web-Prospectus-2014
11.2.5 Trading Intermediaries The NSE relies on trading intermediaries to provide services to investors and conduct business at the NSE. Various intermediaries have had challenges in the past that have adversely impacted the NSE, reputation and financial. The NSE has since worked with the CMA where necessary, to boost standards of corporate governance in the intermediaries via numerous regulations. This includes regular in-depth inspections, regular reporting and publishing of financial performance and use of risk-based supervision approach. However, there can be no assurance that present or future intermediaries will have no adverse impact on NSE. 11.2.6 Strategy Strategic risk is the risk of adverse impact on current and prospective earnings or capital arising from incorrect or inappropriate business decisions, improper implementation of decisions or lack of responsiveness to industry change. The NSE is managing strategic risk through the regular monitoring and updating of its 5 year strategic plan based on new market dynamics. 11.2.7 Compliance Compliance risk is the risk of non-compliance with regulatory guidelines. Regulatory risk is the current and prospective risk to earnings or capital arising from violations of, or non-conformance with laws, rules, regulations, prescribed practice, or ethical standards issued by the regulator from time to time. NSE has in place a compliance function which is responsible for continuous review and monitoring to ensure compliance at all times. The NSE is exposed to tax risk which is risk associated with changes in taxation rates or law, or misinterpretation of the tax laws and regulations which could have an adverse impact on the NSE. Taxes introduced by GOK on listed securities may have an impact on the NSE. 11.3 Financial Risk The main business risks faced by the company in respect of its principal non-derivative financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. There are policies for managing these risks. Refer to Annexure A2 – Reporting Accountants’ Report for more details. 11.3.1 Interest Rate Interest rate risk arises primarily from investments in fixed interest securities and bank borrowings. The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates at the reporting date. The NSE monitors the sensitivity of reported interest rate movements on a monthly basis by assessing the expected changes in the different portfolios due to a parallel movement of plus 5 percentage points in all yield curves of financial assets. 11.3.2 Foreign Exchange & Price The NSE undertakes certain transactions denominated in foreign currencies. Therefore, exposures to exchange rate fluctuations arise however these are minimal. 11.3.3 Credit Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the NSE. Credit risk arises from deposits with banks, as well as trade receivables. The NSE assesses the credit quality of each customer, taking into account its financial position, past experience and other factors. Bank balances, treasury bills and term deposits are fully performing. Trade receivables under the fully performing category are expected to be recovered in full as the debtors are paying their debts as they continue trading. 11.3.4 Liquidity Prudent liquidity risk management includes maintaining sufficient cash to meet company obligations. NSE manages this risk by maintaining adequate cash balances in the bank, banking facilities and by continuously monitoring forecast and actual cash flows. 11.3.5 Capital Management The NSE manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. 11.4 Investment Risk 11.4.1 Capital Markets Development There are various initiatives ongoing in the capital markets, some under the full control of the NSE and some not. Due to the complex nature of these initiatives some maybe implemented some may not. Some may be implemented within a calendar year while some may take many years. 11.4.2 Offer Price This can be affectd by GDP, equity and bond market capitalization to GDP ratio, equity and bond turnover ratio, level of interest rates and various other factors. There can be significant variation between projected and actual indicators which can change the investment environment. No adverse extra-ordinary or exceptional events were included in the assumptions however these are possible. This was concluded a number of weeks before the date of the Prospectus and volatility can affect the price of the Offer Shares. The share price of the NSE should be considered volatile due to the unpredictable nature of investor behavior towards the annual earnings potential of the NSE. 11.4.4 Liquidity The NSE is listing on the Main Investment Market Segment of The Exchange which has the maximum number of interested investors including local and foreign sophisticated /institutional investors. This can enhance liquidity. The actual level of free float may be lower than projected which can affect liquidity. As a result, shareholders and investors are cautioned that the NSE Shares may experience moderate illiquidity. 11.4.5 Currency Trading and payment of dividends is denominated in Kenya Shilling and as a result those investors whose principal currency is not the Kenya Shilling, are exposed to foreign currency rate risk. 44
Section 12 Legal Opinion 45
- Page 3 and 4: NAIROBI SECURITIES EXCHANGE LIMITED
- Page 5 and 6: Our Vision “To be a leading secur
- Page 7 and 8: Table of Contents Section Page Impo
- Page 9 and 10: MIMS NSE Shares Offer Offer Period
- Page 11 and 12: SBG Securities Limited CfC Stanbic
- Page 13 and 14: Chairman’s Statement (USD 2.89 bi
- Page 15 and 16: Section 1 Corporate Directory 1.1 C
- Page 17 and 18: 1.15 Subsidiaries of the NSE Name &
- Page 19 and 20: Section 2 Timetable The timetable f
- Page 21 and 22: The dividend history is as follows:
- Page 23 and 24: 3.3 Basis of Offer Price The Offer
- Page 25 and 26: less than 1,000 applicants (excludi
- Page 27 and 28: 4.13.5 All EFT and RTGS transfers m
- Page 29 and 30: Regulation 3 (1) of the Foreign Inv
- Page 31 and 32: Section 6 Development Of Capital Ma
- Page 33 and 34: days after the sale of their shares
- Page 35 and 36: 7.1.5 NSE 20 Share Index Performanc
- Page 37 and 38: 8.2 Equities Profile The listed sha
- Page 39 and 40: Bachelor’s degree in Mathematics
- Page 41 and 42: IT departments. Jane has also worke
- Page 43 and 44: youthful investors in the use of th
- Page 45: Section 11 Material Risks The futur
- Page 52 and 53: 2. THAT following the increase in a
- Page 54 and 55: (b) the approval of chief executive
- Page 56 and 57: the members from among or to repres
- Page 58 and 59: share register of the Company or by
- Page 60 and 61: 13.14 Material Indebtedness The Com
- Page 62 and 63: 13.27 Expenses of the Offer Table 1
- Page 64 and 65: Annexures Annexure A Nairobi Securi
- Page 69: Annexure A2 Nairobi Securities Exch
Section 12<br />
Legal Opinion<br />
45
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