Supporting the efficient transfer of unquoted securities through world class infrastructure anchored

on leading technology capabilities and resources

1 2

Unquoted Securities PlatformCatalyst For GrowthUnquoted Securities Platform Catalyst For Growth

WHAT IS THE UNQUOTED SECURITIES PLATFORM (USP)?

The Unquoted Securities Platform (USP) is an automated solution for the trading of securities of unquoted companies. The platform offers world class trading and information services as well as enables company’s access capital markets for long term funding through private placements.

HOW TO QUOTE SECURITIES ON THE USP

INTRODUCTIONIntroduction is the admission of USP securities that have been issued through private placement.

ADDITIONAL USP SECURITIESAny offer that involves admission of additional USP securities that are already admitted to the USP.

CO-OPERATIVE SHARESMeans admission of securities of a co-operative society registered in Kenya.

COMPANIES THAT CAN QUOTE SHARES ON THE USP

+ Commercial Banks + Insurance Companies + Co-operative Societies + Private Companies

Discover opportunity through the USP

WHAT BENEFITS DOES THE USP OFFER TO ISSUERS?

+ Access to a wider pool of domestic and international investors who did not have access to company’s securities in the manual OTC market.

+ Flexible listing and regulatory compliance. + Automated trading infrastructure for issuer’s securities reducing time and costs involved in facilitating trades.

+ Issuers can benefit from price discovery and exit mechanism in an automated market. + Enhanced liquidity of company shares through access to an integrated system that can match orders.

+ Access to a wider number of trading participating agents as opposed to a single broker per counter, leading to increased liquidity of trades.

HOW WILL INVESTORS BENEFIT FROM THE USP?

+ Convenient and cost effective transfer of securities. + Increased liquidity and execution speed for trading of securities of quoted companies. + Efficient access to market information. + Increased transparency for investors as daily reports with bid-offer prices will be generated. + Settlement delays and settlement failures are avoided since funds are held by a custodian who confirms availability of funds before settlements is done.

+ Automated transactions processing eliminates possibilities of human errors associated with manual processing.

+ The system allows surveillance by the exchange and the regulator. This makes reporting by market participants simpler and faster.

3 4

DIFFERENCES BETWEEN THE USP AUTOMATED SOLUTION AND THE CURRENT MANUAL OTC MECHANICS

UNQUOTED SECURITIES PLATFORM | 4

WHAT PARTIES WILL AN ISSUER ENGAGE BEFORE QUOTING ON THE USP?

TRANSACTION ADVISOR

CUSTODIAN

REGISTRAR

TRADING PARTICIPATING AGENTS

SETTLEMENT CUSTODIAN

The issuer will appoint a transaction advisor. The Transaction Advisor will be involved in the preparation of the Admission/Offer Memorandum and advise the Issuer on all of the Issuer’s responsibilities as per the USP Operational Guidelines in a competent and professional manner.

Upon admission, every Issuer shall be required to appoint a custodian. All the issued USP securities available for trading shall be registered in a Special Nominee account and the certificates of title shall be lodged with the custodian for safekeeping.

The issuer shall appoint a registrar. The registrar shall set up and manage a register of beneficiary holders of the USP securities which at all times shall add up to the certificates held by the custodian. The registrar will receive requisite reports on the Issuer’s securities periodically.

In many cases the Transaction advisor will also play the role of the Trading participating agent/broker.Trading participating agents will be responsible for placing buy and sell orders on the system and also ensure funding is available for trades.

The settlement custodian for the USP will be a bank that will settle all incoming and outgoing funds and will notify the USP on final settlement to ensure transfer of securities from the seller to the buyer. It is important to note that there will only be one dedicated Settlement custodian on the platform and will not be issuer nominated.

CURRENT OTC MECHANICS PROPOSED USP FRAMEWORK

Issuer appoints registrar for register management and stockbroker for trading.

Issuer will appoint a registrar and a custodian. The platform will then be open to all interested brokers for trading.

Other issuers currently handle the registrar work in-house.

Issuers will not need to involve themselves in trading transactions.

Selling investors approach issuer if they wish to sell, the issuer in turn refers them to the appointed broker to look for a potential buyer.

Investors will approach any of the participating brokers if they wish to sell and broker in turn will have electronic access to the trading platform.

Some issuers, especially cooperatives avail notice boards where offers to sell are advertised and wait for a potential buyer who may happen to visit the issuer’s offices.

Issuers will simply refer investors to USP or any or all of the participating brokers.

Trading price is normally determined by the parties negotiating or the broker advising both the buyer and seller of a recommended price. The price can vary widely from trade to trade

Investors will be given information of pricing of preceding transactions and will inform their broker of their preferred price to be posted onto the platform awaiting counter party.

Once deal is agreed the buyer either pays upfront before documents are sent to registrar to complete the transfer or after.

All payments by buyers will be lodged, and held in trust by the custodian pending completion of the transaction at which point seller is paid.

Transactions take between several weeks and months to conclude due to lack of liquidity and the manual nature of the processes.

The process will become faster and more efficient with guarantee of settlement.

No central information available to the market and regulator.

Enhanced information sharing by market participants

Unquoted Securities PlatformCatalyst For GrowthUnquoted Securities Platform Catalyst For Growth

5 6

Unquoted Securities PlatformCatalyst For GrowthUnquoted Securities Platform Catalyst For Growth

WHAT ARE THE FEES RELATING TO THE UNQUOTED SECURITIES PLATFORM?

ISSUER APPLICATION FEE

INITIAL ADMISSION FEE

REGISTRAR/CUSTODIAN FEES

FINANCIER ADMISSION FEE

SETTLEMENT CUSTODIAN

FUND RAISING FEES (PRIVATE

PLACEMENT/RESTRICTED

OFFERS)

ANNUAL SERVICE FEE

USP SECONDARY TRANSFER/PER

TRANSACTION

Kshs. 5,000

Admission fee of 0.03% of the outstanding amount subject to a maximum cap of Kshs. 500,000 and a minimum of Kshs. 150,000 will be payable to the NSE.

To be agreed between the issuer and the respective service providers.

Initial access fee of Kshs. 100,000.00

0.5% of amounts funded.

0.5% in of the amounts transacted on both buy and sell side.

Other bank charges (APIs, RTGS) will be dependent on the amounts and as per the bank rules.

0.50% of amount raised.

1.5% of the transaction value on both buy and sell side to the trading participating agents.

1% of the transaction value to the Platform administrators.

0.015% of the outstanding amount for the subsequent years after admission on the USP subject to a maximum of Kshs. 250,000 and a minimum of KShs. 100,000.

This fee will cater for the USP Services including executions, settlement, clearing, and reporting. Corporate actions such as dividends are excluded from this provision.

All trades on USP shall be settled on a maximum of T+5 cycle.

WHAT IS THE TRADING AND SETTLEMENT CYCLE?

On receipt of sell order USP shall validate availability of USP securities in the sellers account (on the sell side). USP shall further validate the funding of the buyers position with the participating custodian. Order matching shall take place on T+0.

On T+1 USP shall send trade confirmation to the custodian, registrar and USP securities dealer.

On T+2 the registrar shall initiate payment of stamp duty for the transaction.

On T+3 the registrar shall submit evidence of stamp duty payment to USP.

On T+5 the registrar shall update the register and confirm to USP and the custodian.

On T+4 USP shall instruct the custodian to release payment to the seller as well as payment of all commissions and levies applicable. On T+4 USP shall instruct the registrar to transfer USP securities from the seller to the buyer.

T+0

T+1

T+2

T+3

T+5

T+4

For more information, send an email tobusinessdevelopment@nse.co.ke

usp@nse.co.ke

Nairobi Securities Exchange PLC55 Westlands Road

P.O. Box 43633 - 00100 Nairobi

+254 020 283 1000+254 020 222 4200

To access the Operational Guidelines and the ApplicationForms for the Unquoted Securities Platforms visit:

https://www.nse.co.ke/usp/