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Capital Markets Act Cap 485A - as Plain Text by MWakili

LAWS OF KENYA CAPITAL MARKETS ACT CHAPTER 485A Revised Edition 2012 [2010] Published by the National Council for Law Reporting with the Authority of the Attorney-General www.kenyalaw.org [Rev.

2012] CAP.

485A Capital Markets CHAPTER 485A CAPITAL MARKETS ACT ARRANGEMENT OF SECTIONS PART I PRELIMINARY Section 1.

Short title.

Interpretation.

Meaning of the term associated person.

Definition of interest in securities.

PART II THE CAPITAL MARKETS AUTHORITY 5.

Establishment and membership of the Authority.

Meetings and procedures of the Authority.

Seal and execution of documents.

Appointment of chief executive of the Authority.

Appointment and remuneration of staff.

10.

Protection from legal action.

11.

Objectives of the Authority.

12.

Power of Authority to issue rules, regulations and guidelines.

13.

Furnishing of information to the Authority.

13A.

Power of entry and search.

14.

Committees.

15.

General fund.

16.

Financial year of Authority.

17.

Accounts.

18.

Establishment of the Investor Compensation Fund.

18A.

The Investor Compensation Fund.

PART III PROVISIONS RELATING TO SECURITIES EXCHANGES 19.

Approval of securities exchange required.

20.

Application for securities exchange approval.

21.

Changes in securities exchange rules.

22.

Disciplinary action by securities exchange.

PART IV SECURITIES INDUSTRY LICENCES 23.

Licences required.

24.

Application for licence.

25.

Renewal of licence.

25A.

Imposition of additional sanctions and penalties.

26.

Revocation of licence.

27.

28.

Obligation to report changes.

29.

Licensing requirements.

3 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets Section 30.

Procedure for collective investment schemes.

30A.

Publication of information memorandum.

PART V SECURITIES TRANSACTIONS AND REGISTERS 31.

Transactions in securities.

32.

PART VI INSIDER TRADING 32A.

Prohibition against use of unpublished insider information.

33.

Insider trading prohibited.

PART VII MISCELLANEOUS PROVISIONS 33A.

Powers of the Authority to intervene in management of a licence.

33B.

Prohibited conduct to be reported.

33C.

Asset backed securities.

34.

Other offences.

34A.

Financial penalties.

35.

Appeals from action of Authority.

35A.

Establishment of the Capital Markets Tribunal.

36.

Regulations.

37.

Supercession.

38.

Prosecution of offences.

39.

Exemption from Cap.

446.

[Issue 1] 4 [Rev.

2012] CAP.

485A Capital Markets CHAPTER 485A CAPITAL MARKETS ACT [Date of assent: 13th December, 1989.] [Date of commencement: 15th December, 1989.] An Act of Parliament to establish a Capital Markets Authority for the purpose of promoting, regulating and facilitating the development of an orderly, fair and efficient capital market in Kenya and for connected purposes [Act No.

17 of 1989, Act No.

14 of 1991, Act No.

10 of 1994, Act No.

3 of 2000, Act No.

2 of 2002, Act No.

15 of 2003, Act No.

4 of 2004, Act No.

10 of 2006, Act No.

9 of 2007, Act No.

8 of 2008, Act No.

8 of 2009, Act No.

10 of 2010, Act No.

37 of 2011, Act No.

4 of 2012.] PART I PRELIMINARY 1.

Short title This Act may be cited as the Capital Markets Act.

Interpretation In this Act, unless the context otherwise requires agent means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee; authorised securities dealer means a person authorized to deal in securities and operate in a specific market segment as may be prescribed by the Authority; Authority means the Capital Markets Authority established by section 5; beneficial owner means a natural person who, whether alone or with associates, is the ultimate owner or controller of a legal person or arrangement, or, if there is no legal person or arrangement, the person on whose behalf a transaction is being conducted; Board means the Board of the Authority constituted under section 5; capital market instrument means any long term financial instrument whether in the form of debt or equity developed or traded on a securities exchange or directly between two or more parties for the purpose of raising funds for investment; collective investment scheme includes an investment company, a unit trust, a mutual fund or other scheme which is incorporated or organized under the laws of Kenya which (a) collects and pools funds from the public or a section of the public for the purpose of investment; (b) is managed by or on behalf of the scheme by the promoter of the scheme; 5 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets and includes an umbrella scheme whose shares as herein defined are split into a number of different class schemes or sub-schemes, each of which is managed by or on behalf of a common promoter, but does not include (i) a body corporate incorporated under any law in Kenya relating to building societies, co-operative societies, retirement benefit schemes, credit unions or friendly societies; (ii) an arrangement where each of the holders of the shares is a body corporate in the same group as the promoter; (iii) an arrangement where each of the holders of the share is a bona fide employee, former employee, wife, husband, widow, widower, child, stepchild of the employee or former employee of the directors or shareholders of a body corporate in the same group as the promoter; (iv) arrangements where the receipt of contributions from the holders of shares in the collective investment scheme constitutes the acceptance of deposits in the course of a business which is a deposit-taking business for the purpose of the Banking Act (Cap.

488); (v) contracts of insurance; (vi) occupational pension schemes; company means a company formed and registered under the Companies Act (Cap.

486); Compensation Fund means the Investor Compensation Fund established by section 18; credit rating agency means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities; dealer means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business; dealers representative deleted by Act No.

3 of 2000, s.

4.) dealing in securities means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into (a) any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or (b) any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities; derivatives dealer means a person who carries on the business of buying, selling, dealing, trading, underwriting, or retailing securities derivatives as an agent for investors or on his own account, with the intention of selling them to the public; director has the meaning assigned to it in the Companies Act (Cap.

486); [Issue 1] 6 [Rev.

2012] CAP.

485A Capital Markets financial instrument includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof; fund manager means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time; futures contract means a contract for the acquisition or disposal of securities or other instruments, such as a commodity or a financial instrument, under which delivery is to be made at a future date and at a price agreed upon when the contract is made and shall include a reference to a date and a price determined in accordance with the terms of the contract; incorporation documents means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be; information memorandum means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public; insider means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information; investment adviser means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration (1) carries on the business of advising others concerning securities; or (2) as part of a regular business, issues or promulgates analyses or reports concerning securities; or (3) pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or (4) deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or (5) such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include (a) a bank as defined in section 2 of the Banking Act (Cap.

488); (b) a company or association registered under Part III of the Insurance Act (Cap.

487); 7 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (c) an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession; (d) a trust corporation within the meaning of the Trustee Act (Cap.

167); (e) a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or (f) a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap.

111), where (i) insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value; (ii) the advice is given or the analyses or reports are issued or promulgated only through that newspaper; (iii) that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports; (iv) the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that persons business as a newspaper proprietor; investment bank means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer; investment company means a collective investment scheme organised as a limited liability company under the Companies Act (Cap.

486) in which the rights of the participants are represented by shares of the company; key personnel means a person who manages or controls the activities of a licensed or a regulated person and includes (a) the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor, or any manager; and (b) any person who holds a position or discharges responsibilities of any person referred to in paragraph (a); licence deleted by Act No.

3 of 2000, s.

4; licensed person means a person or body corporate who has been issued with a licence or approved by the Authority; member deleted by Act No.

10 of 2010, s.

45; [Issue 1] 8 [Rev.

2012] CAP.

485A Capital Markets mutual fund means a collective investment scheme set up as a body corporate under section 30(5) whereby (a) the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate; (b) the investments of the participants are represented by shares of that body corporate; (c) the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap.

486);.

options contract means a contract that gives its holder the right and not the obligation to buy or sell a fixed number of securities or any other instrument at a fixed price on or before a given date; over the counter means the trading of securities otherwise than at an approved securities exchange; promoter means a person acting alone or in conjunction with others directly or indirectly who takes the initiative in forming or organising the business of a collective investment scheme but does not include an underwriter commission without taking any part in the founding or organising of the collective investment scheme business; quotation, in relation to securities and in relation to a securities exchange, includes the displaying or providing, on a securities exchange, of information concerning (a) in a case where offers to sell, purchase or exchange the securities at particular prices, or for particular consideration, are made or accepted on that securities market, those prices or that consideration; (b) in a case where offers or invitations are made on that securities market, being offers or invitations that are intended, or may reasonably be expected, to result, whether directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange the securities at particular prices or for particular consideration, those prices or that consideration; or (c) in any other case, the price at which, or the consideration for which particular persons, or particular classes of persons, propose, or may reasonably be expected, to sell, purchase or exchange the securities; Real estate investment trust mean an arrangement in respect of real estate or interest in real estate of any description, structured in accordance with the rules prescribed by the Authority to enable a person taking part in the arrangement, whether by becoming an owner of the property or any part of it or otherwise, to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the real estate or interest in the real estate or sums paid out of such profits of income; registered venture capital company means a company approved by the Authority and incorporated for purposes of providing risk capital to small 9 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets and medium sized businesses in Kenya with high growth potential, whereby not less than seventy-five per cent of the funds so invested consist of equity or quasi-equity investment in eligible enterprises; regulated person means an operator of an approved person, a licensed person, a listed company or a person approved to offer securities to the public; representative means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical role in that company, and includes a trader, director, general manager, analyst, or any other person employed by the licensee who plays a critical role; securities means (a) debentures or bonds issued or proposed to be issued by a government; (b) debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate; (c) derivatives including futures contracts and options contracts on (i) securities; (ii) indices; (iii) interest or other rates; (iv) currency; (v) futures; or (vi) commodities; (d) any unit, interest or share offered under a collective investment scheme or other similar vehicles, whether established in Kenya or not; or (e) any instruments commonly known as securities, but does not include (i) bills of exchange; (ii) promissory notes; or (iii) certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap.

488); securities exchange means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith; self-regulatory organization means an organization whose object is to regulate the operations of its members or of the users of its services and includes the organizations that may be recognized as such, by the Authority; share means a share in the share capital of a body corporate, a unit in a unit trust or an interest in any collective investment scheme; stockbroker means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission; [Issue 1] 10 [Rev.

2012] CAP.

485A Capital Markets stockbroking agent means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker; stock exchange means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith; stock market means a market, or other place at which, or a facility by means of which (a) offers to sell, purchase or exchange securities are regularly made or accepted; (b) offers or invitations are regularly made, being offers or invitations that are intended or may reasonably be expected to result, whether directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange securities; or (c) information is regularly provided concerning the prices at which, or the consideration for which, particular persons, or particular classes of persons, propose, or may reasonably be expected, to sell, purchase or exchange securities; substantial shareholder means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate; trading participant means a licensee of the Authority with rights to trade at an approved securities exchange; underwriting means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them; unit trust means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.

[Act No.

3 of 2000, s.

4, Act No.

2 of 2002, Sch., Act No.

8 of 2008, s.

47, Act No.

10 of 2010, s.

45, Act No.

37 of 2011, s.

2, Act No.

4 of 2012, s.

32.] 3.

Meaning of the term associated person (1) For the purpose of this Act, a reference to a person associated with another person shall be construed as a reference to (a) where the other person is a body corporate (i) a director or secretary of the body corporate; (ii) a body corporate that is related to the other person; or (iii) a director or secretary of such related body corporate; (b) where the matter to which the reference relates in the extent of a power to exercise, or to control the exercise of, the voting power 11 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets attached to voting shares in a body corporate, a person with whom the other person has, or proposes to enter into, an understanding or undertaking, whether express or implied (i) by reason of which either of those persons may exercise, directly or indirectly control the exercise of, or substantially influence the exercise of, any voting power attached to a share in the body corporate; (ii) with a view to controlling or influencing the composition of the board of directors, or the conduct of affairs, of the body corporate; or (iii) under which either of those persons may acquire from the other of them shares in the body corporate or may be required to dispose of such shares in accordance with the directions of the other of them; (c) a person in concert with whom the other person is acting or proposes to act, in relation to the matter to which the reference relates; (d) where the matter to which the reference relates is a matter, other than the extent of a power to exercise or control the exercise of, the voting power attached to voting shares in a body corporate (i) subject to subsection (2), a person who is a director of a body corporate that carries on a business of dealing in securities and of which the other person is also a director; (ii) subject to subsection (2), a person who is a director of a body corporate of which the other person is director, not being a body corporate that carries on a business of dealing in securities; or (iii) a trustee of a trust in relation to which the other person benefits or is capable of benefiting otherwise than by reason of transactions entered into in the ordinary course of business in connection with the lending of money; (e) a person with whom the other person is, by virtue of any law, to be regarded as associated in respect of the matter to which the reference relates; (f) a person with whom the other person is, or proposes to become, associated, whether formally or informally, in any other way in respect of the matter to which the reference relates; or (g) where the other person has entered into, or proposes to enter into, a transaction, or has done, or proposes to do, any other act or thing, with a view to becoming associated with the person mentioned in paragraph (a), (b), (c), (d), (e), or (f), that last mentioned person.

(2) Where it is alleged that a person referred to in subsection (1)(d)(i) and (ii) was associated with another person at a particular time, that person shall be deemed not to have been so associated in relation to the subject matter unless the person alleging the association proves that the first mentioned person at that time knew or ought reasonably to have known the material particulars of that matter.

[Issue 1] 12 [Rev.

2012] CAP.

485A Capital Markets (3) A person shall not be deemed to be associated with another person by virtue of subsection (1)(b), (c), (e) or (f) solely by reason of the fact that one of those persons furnishes advice to, or acts on behalf of, the other person in the proper performance of the functions attaching to his professional capacity or to his business relationship with the other person.

Definition of interest in securities (1) Where any property held in trust consists of or includes securities in which a person knows, or has reasonable grounds for believing, that he has an interest, he shall be deemed to have an interest in those securities.

(2) A person shall be deemed to have an interest in a security where a body corporate has an interest in a security and (a) the body corporate is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with directions, instructions or wishes of that person in relation to that security; (b) that person has a controlling interest in the body corporate; or (c) that person is, or the associates of that person or that person and his associates are, entitled to exercise or control the exercise of not less than fifteen per cent of the votes attached to the voting shares in the body corporate.

(3) A person shall be deemed to have an interest in a security in any one or more of the following circumstances (a) where he has entered into a contract to purchase a security; (b) where he has a right, otherwise than by reason of having an interest under a trust, to have a security transferred to himself or to his order, whether the right is exercisable presently or in the future and whether on the fulfillment of a condition or not; (c) where he has the right to acquire a security, or an interest in a security, under an option, whether on the fulfillment of a condition or not; or (d) where he is entitled, otherwise than by reason of his having been appointed a proxy or representative to vote at a meeting of members of a body corporate or of a class of its members, to exercise or control the exercise of a right attached to a security, not being a security of which he is the registered holder.

(4) A person shall be deemed to have an interest in a security if that security is held jointly with another person.

(5) For the purpose of determining whether a person has an interest in a security, it is immaterial that the interest cannot be related to a particular security.

(6) There shall be disregarded (a) an interest in a security if the interest is that of a person who holds the security as bare trustee; (b) an interest in a security of a person whose ordinary business includes the lending of money if he holds the interest only by way of 13 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets security for the purposes of a transaction entered into in the ordinary course of business in connection with the lending of money; (c) an interest of a person in a security being an interest held by him by reason of his holding a prescribed office; and (d) a prescribed interest in a security being an interest of such person, or of the persons included in such class of persons as is prescribed.

(7) An interest in a security shall not be disregarded by reason only of (a) its remoteness; (b) the manner in which it arose; or (c) the fact that the exercise of a right conferred by the interest is, or is capable of being made, subject to restraint or restriction.

PART II THE CAPITAL MARKETS AUTHORITY 5.

Establishment and membership of the Authority (1) There is hereby established an authority to be known as the Capital Markets Authority.

(2) The Authority shall be a body corporate with perpetual succession and a common seal and shall be capable in its corporate name of (a) suing and being sued; (b) taking, purchasing or otherwise acquiring, holding, charging and disposing of both movable and immovable property; (c) borrowing and lending money; (d) entering into contracts; and (e) doing or performing all such other things or acts necessary for the proper performance of its functions under this Act which may lawfully be done by a body corporate.

(3) The Authority shall consist of (a) a chairman to be appointed by the President on the recommendation of the Minister; (b) six other members appointed by the Minister; (c) the Permanent Secretary to the Treasury or a person deputed by him in writing for the purposes of this Act; (d) the Governor of the Central Bank of Kenya or a person deputed by him in writing for the purposes of this Act; (e) the Attorney-General or a person deputed by him in writing for the purposes of this Act; (f) the chief executive of the Authority.

(4) The chairman and every member appointed under paragraph (b) of subsection (3) shall be appointed from amongst persons who have experience and expertise in legal, financial, banking, accounting, economics or insurance matters.

[Issue 1] 14 [Rev.

2012] CAP.

485A Capital Markets (4A) The chairman and every member appointed under paragraph (b) of subsection (3) shall hold office for a period of three years and shall be eligible for re-appointment for a further term of three years.

(4B) The members of the Authority shall be appointed at different times so that the respective expiry dates of their terms of office shall fall at different times.

(5) Any member appointed under subsection (3)(b) shall cease to hold office if (a) he delivers to the Minister a written resignation of his appointment; (b) on the advice of the Authority, the Minister removes him from office on the grounds that he is incapacitated by mental or physical illness or is other wise unable or unfit to discharge the functions of a member or is unable to continue as a member; (c) he has been absent from three consecutive meetings of the Authority without leave or good cause; (d) he is adjudged bankrupt or enters into a composition scheme or arrangement with his creditors; (e) he is sentenced by a court to imprisonment for a term of six months or more; or (f) he is convicted of an offence involving dishonesty, fraud or moral turpitude.

(6) In the event of vacation of office by any member appointed under of subsection (3)(b) the Minister may appoint another person to hold office for the unexpired period of the term of office of the member in whose place he is appointed.

(7) If any member of the Authority appointed under paragraph (b) of subsection (3) is temporarily unable to perform his duties, the Minister may appoint another person to act in his place during the period of his absence.

(8) The members of the Authority shall be paid such remuneration and allowances out of the general fund of the Authority as may be determined by the Minister.

[Act No.

3 of 2000, s.

5.] 6.

Meetings and procedures of the Authority (1) The Board shall meet not less than six times in every financial year and not more than two months shall elapse between the date of one meeting and the date of the next meeting.

(2) The quorum for the conduct of the business of the Board shall be six members including the chief executive.

(3) The chairman shall preside at every meeting of the Board at which he is present but in his absence, the members present shall elect one of their number who shall, with respect to that meeting and the business transacted thereat, have all the powers of the chairman.

(4) All questions for decisions at any meeting of the Authority shall be decided by the vote of the majority of the members present and in case of an equality of votes the chairman shall have a casting vote.

15 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (5) If the chairman of the Authority, by reason of extended illness or absence is temporarily unable to perform the duties of his office, the President, on the recommendation of the Minister, shall appoint another member of the Authority to act in his place during the period of absence.

(6) The chairman may at any time resign by a letter addressed to the President and the resignation shall take effect upon being accepted by the President.

(7) Any member who has a direct or indirect interest in any decision that is to be taken on any specific non-rule making matter by the Authority, shall disclose the nature of such interest at the meeting of the Authority where such decision is being taken and the disclosure shall be recorded in the minutes of the meeting, and if either the member or majority of the members of the Authority believe that such members interest in the matter is such as to influence his judgment, he shall not participate in the deliberation or the decision of the Authority on such matter: Provided, that if a majority of the members in attendance at a meeting where such matter is considered determine that the experience or expertise of the interested member is necessary for the deliberation on the matter, they may permit such member to participate as they deem appropriate.

[Act No.

3 of 2000, s.

6.] 7.

Seal and execution of documents (1) The common seal of the Authority shall be kept in the custody of the Authority and shall not be affixed to any instrument or document except as authorized by the Authority.

(2) The common seal of the Authority shall be authenticated by the signature of the chief executive and the chairman or of one other member authorised by the Board in that behalf.

(3) All documents, other than those required by law to be under seal, made by, and all decisions of, the Authority may be signified under the hand of the chairman, or, in the case of a decision taken at a meeting at which the chairman is not present, under the hand of the person presiding at such meeting.

[Act No.

3 of 2000, s.

7.] 8.

Appointment of chief executive of the Authority (1) There shall be a chief executive of the Authority who shall be appointed by the President on the recommendation of the Minister and who shall, subject to this section, hold office on such terms and conditions of service as may be specified in the instrument of appointment, or otherwise from time to time.

(2) No person shall be qualified for appointment under this section unless such person (a) has at least ten years experience at a senior management level in matters relating to law, finance, accounting, economics, banking or insurance; and (b) has expertise in matters relating to money or capital markets or finance.

[Issue 1] 16 [Rev.

2012] CAP.

485A Capital Markets (3) The Minister, in consultation with the Board, shall recommend to the President a person qualified in terms of this section for appointment as the chief executive.

(4) The chief executive shall hold office for a period of four years but shall be eligible for reappointment for a further term of four years: Provided that no person shall serve as the chief executive for more than two terms.

(5) The chief executive shall, subject to the general direction and control of the Authority, be charged with the direction of the affairs and transactions of the Authority, the exercise, discharge and performance of its objectives, functions and duties, and the administration and control of the servants of the Authority.

[Act No.

3 of 2000, s.

8, Act No.

2 of 2002, Sch.] 9.

Appointment and remuneration of staff (1) The Authority may appoint such other officers and servants as it considers necessary for the efficient discharge of its responsibilities and functions.

(2) The officers and servants appointed under subsection (1) shall be remunerated in such manner and at such rates, and shall be subject to such conditions of service, as may be determined by the Authority.

(3) Every officer or servant appointed under subsection (1) shall, subject to this Act, exercise such powers and functions and perform the duties assigned to him from time to time by the chief executive.

10.

Protection from legal action (1) Neither the Authority, any of its members, officers nor servants shall be personally liable for any act which is done in good faith or purported to be done by such person, on the direction of the Authority or in the performance or intended performance of any duty or in the exercise of any power under this Act or the regulations made thereunder.

(2) Any expenses incurred by any person referred to in subsection (1) in any suit or prosecution brought against him before any court in respect of any act which is done or purported to be done by him under the Act or on the direction of the Authority shall, if the Court holds that such act was done in good faith, be paid out of the general fund of the Authority, unless such expenses are recovered by him in such suit or prosecution.

11.

Objectives of the Authority (1) The principal objectives of the Authority shall be (a) the development of all aspects of the capital markets with particular emphasis on the removal of impediments to, and the creation of incentives for longer term investments in, productive enterprises; (b) to facilitate the existence of a nationwide system of securities market and brokerage services so as to enable wider participation of the general public in the securities market; (c) the creation, maintenance and regulation of a market in which securities can be issued and traded in an orderly, fair and efficient 17 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets manner, through the implementation of a system in which the market participants are self-regulatory to the maximum practicable extent; (d) the protection of investor interests; (e) the facilitation of a compensation fund to protect investors from financial loss arising from the failure of a licensed broker or dealer to meet his contractual obligations; and (f) the development of a framework to facilitate the use of electronic commerce for the development of capital markets in Kenya.

(2) A reference to electronic commerce shall be construed as a reference to the use of information technology to effect linkages among functions provided by licensed persons or other market participants and describes technology platforms that allow (a) the transfer and dissemination of market information to a wider number of users within and between networks; (b) the offer, distribution or delivery in electronic form of securities or services ordinarily provided by licensed persons; and (c) the execution of securities transactions without the need for parties to the transaction to be physically present at the same location.

(3) For the purpose of carrying out its objectives, the Authority may exercise, perform or discharge all or any of the following powers, duties and functions (a) advise the Minister on all aspects of the development and operation of capital markets; (b) implement policies and programmes of the Government with respect to the capital markets; (c) employ such officers and servants as may be necessary for the proper discharge of the functions of the Authority; (cc) impose sanctions for breach of the provisions of this Act or the regulations made thereunder, or for non-compliance with the Authoritys requirements or directions, and such sanctions may include (i) levying of financial penalties, proportional to the gravity or severity of the breach, as may be prescribed; (ii) ordering a person to remedy or mitigate the effect of the breach, make restitution or pay compensation to any person aggrieved by the breach; (iii) publishing findings of malfeasance by any person; (iv) suspending or cancelling the listing of any securities, or the trading of any securities, for the protection of investors; (d) to frame rules and guidelines on all matters within the jurisdiction of the Authority under this Act and such rules and guidelines may prescribe (i) the financial penalties or sanctions for breach of the Authoritys rules or non-compliance with the authoritys requirements; [Issue 1] 18 [Rev.

2012] CAP.

485A Capital Markets (ii) the fees payable annually by a securities exchange or a central depository or for securities transactions, licences and approvals required by this Act to be issued or granted on an application to the Authority; (iii) the disclosure requirements and other terms and conditions on which securities may be listed on or de-listed from a securities exchange or offered for sale to the public or a section thereof; (iv) the criteria for determining whether a person is fit and proper to be licensed or approved under this Act; (e) to grant a licence to any person to operate as a stockbroker, dealer or investment adviser, fund manager, investment bank, central depository or authorised securities dealer, and ensure the proper conduct of that business; (f) to grant approval to any person to operate as a securities exchange, credit rating agency, registered venture capital company or to operate in any other capacity which directly contributes to the attainment of the objectives of this Act and to ensure the proper conduct of that business; (g) register, approve and regulate collective investment schemes; (h) inquire, either on its own motion or at the request of any other person, into the affairs of any person which the Authority has approved or to which it has granted a licence and any public company the securities of which are publicly offered or traded on an approved securities exchange or on an over the counter market; (i) give directions to any person which the Authority has approved or to which it has granted a licence and any public company the securities of which are publicly offered or traded on an approved securities exchange or on an over the counter market; (j) conduct inspection of the activities, books and records of any persons approved or licensed by the Authority; (k)-(l) deleted by Act No.

9 of 2007, s.

46(b); (m) appoint an auditor to carry out a specific audit of the financial operations of any collective investment scheme or public company the securities of which are publicly offered or traded on an approved securities exchange or on an over the counter market, if such action is deemed to be in the interest of the investors, at the expense of such collective investment scheme or company; (n) grant compensation to any investor who suffers pecuniary loss resulting from the failure of a licensed broker or dealer to meet his contractual obligations; (o) have recourse against any person whose act or omission has resulted in a payment from the Compensation Fund; (p) act as an appellate body in respect of appeals against any self regulatory organization securities exchange or central depository in actions by parties aggrieved thereby; 19 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (q) co-operate or enter into agreements for mutual co-operation with other regulatory authorities for the development and regulation of cross-border activities in capital markets; (r) regulate and oversee the issue and subsequent trading, both in primary and secondary markets, of capital market instruments; (s) regulate the use of electronic commerce for dealing in securities or offer services ordinarily carried out by a licensed person; (t) trace any assets, including bank accounts, of any person who, upon investigation by the Authority, is found to have engaged in any fraudulent dealings in securities or insider trading; (u) in writing, order caveats to be placed against the title to such assets or prohibit any such person from operating any such bank accounts as may be directed by the Authority, pending determination of any charges instituted against that person; (v) prescribe rules or guidelines on corporate governance of a company whose securities have been issued to the public or a section of the public; (w) do all such other acts as may be incidental or conducive to the attainment of the objectives of the Authority or the exercise of its powers under this Act.

[Act No.

10 of 1994, s.

2, Act No.

3 of 2000, s.

9, Act No.

9 of 2007, s.

46, Act No.

8 of 2008, s.

48, Act No.

37 of 2011, s.

3.] 11A.

Delegation of functions (1) The Authority may delegate any of its functions under this Act to (a) a committee of the Board; (b) a recognized self regulatory organization; or (c) an authorized person.

(2) The Authority may, at any time revoke a delegation made under this section.

(3) A delegation made under this section shall not prevent the Authority from performing the delegated function.

[Act No.

37 of 2011, s.

4.] 12.

Power of Authority to issue rules, regulations and guidelines (1) Without prejudice to the generality of the powers conferred by section 11, the Authority, in consultation with the Minister, shall formulate such rules, regulations and guidelines as may be required for the purpose of carrying out its objectives, to regulate (a) listing and de-listing of securities on a securities exchange; (b) disclosures about securities transactions by (i) stockbrokers and dealers; (ii) persons who acquire or dispose of securities; and (iii) a securities exchange; [Issue 1] 20 [Rev.

2012] CAP.

485A Capital Markets (c) the keeping and proper maintenance of books, records, accounts and audits by all persons approved or licensed by the Authority and regular reporting by such persons to the Authority of their affairs; (d) the operations of any other bodies corporate or persons dealing with capital market instruments; (e) the procedure for the participation of foreign investors in the securities market; (f) collective investment schemes; (g) registered venture capital companies; (h) credit rating agencies; (i) the issue, transfer, clearing and settlement of securities; (j) securities clearing and settlement or depository organisations; (k) fund managers; (l) investment banks; (m) authorized securities dealers; (n) self regulatory organizations; and (nn) the use of money raised from the issue of securities, in cases in which the securities are issued to raise money for a specified purpose.

(2) All rules, regulations and guidelines formulated by the Authority shall (a) take into account and be consistent with the objective of promoting and maintaining an effective and efficient securities market; (b) be exposed for comment by stakeholders and the general public for a period of thirty days through notification in at least two daily newspapers of national circulation and the electronic media; and (c) be signed by the chairman and chief executive and published in the Gazette.

(3) For the purposes of this Act, stakeholders shall include listed companies and all persons licensed or approved by the Authority or financial or other institutions whose operations have, in the opinion of the Authority, a bearing on the development and regulation of capital markets in Kenya.

[Act No.

10 of 1994, s.

3, Act No.

3 of 2000, s.

10, Act No.

15 of 2003, s.

46, Act No.

4 of 2004, s.

74, Act No.

8 of 2008, s.

49, Act No.

37 of 2011, s.

5.] 13.

Furnishing of information to the Authority (1) The Authority or any person officially authorized in that behalf by the Authority may, by notice in writing, require any person to furnish to the Authority or to the authorized person, within such period as is specified in the notice, all such returns or information as specified in such notice.

(2) The Authority or any member thereof, or any officer or servant of the Authority, shall not disclose to any person or use any return or information acquired under subsection (1) except for the purpose of achieving the objectives of the Authority unless required to do so by a court of law.

21 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (3) Notwithstanding subsection (2), the Authority may share information with other regulatory authorities.

[Act No.

10 of 2010, s.

46.] 13A.

Power of entry and search (1) The chief executive officer may authorise an officer of the rank of Senior Officer or above to inquire into the affairs of a person under this Act.

(2) An officer authorised under subsection (1) may, where he is satisfied that a person has committed or is reasonably suspected of committing an offence under this Act in Kenya or elsewhere, apply to a magistrate for a warrant to search the premises of that person.

(3) The magistrate may issue a warrant authorizing the officer to exercise all or any of the following powers (a) to enter any premises between sunrise and sunset to search for money, documents or other assets relevant to the inquiry; (b) to seize money, documents or assets which may be necessary for the inquiry or for which the purpose of civil or criminal proceedings and to retain them for as long as they are so required; and (c) to direct any person who has control over such assets to take any action with respect to such assets as the Authority may reasonably require with a view to protecting the assets until the court determines the appropriate course of action.

(4) In the interest of bank confidentiality, the powers of the officer in respect of any documents held by a banker shall be limited to making copies or extracts therefrom.

[Act No.

8 of 2008, s.

50.] 14.

Committees (1) The Authority may appoint committees, whether of its own members or otherwise, to carry out such general or special functions as may be specified by the Authority, and may delegate to any such committee such of its powers as the Authority may deem appropriate.

(2) Without prejudice to the generality of subsection (1), the Authority shall establish (a) a committee to hear and determine complaints of shareholders of any public company listed on an authorized securities exchange, relating to the professional conduct or activities of such securities exchange or such public company, or any other person under the jurisdiction of the Authority and recommend actions to be taken, in accordance with rules established by the Authority for that purpose; and (b) a committee to make recommendations with respect to assessing and awarding compensation in respect of any application made in accordance with rules established by the Authority for that purpose.

[Act No.

3 of 2000, s.

11.] [Issue 1] 22 [Rev.

2012] CAP.

485A Capital Markets 15.

General fund (1) The Authority shall have its own general fund.

(2) There shall be paid into the general fund (a) all such sums of money as may be paid as fees under this Act; and (b) all such sums of money as may be received by the Authority for its operations from any other source approved by the Minister.

(3) There shall be paid out of the fund all such sums of money required to defray the expenditure incurred by the Authority in the exercise, discharge and performance of its objectives, functions and duties.

16.

Financial year of Authority The financial year of the Authority shall be the period of twelve months commencing on the first day of July in each year.

17.

Accounts The Authority shall cause proper books of accounts to be kept of its income and expenditures, assets and liabilities and all other transactions of the Authority.

18.

Establishment of the Investor Compensation Fund (1) There shall be established a Fund to be known as the Investor Compensation Fund for the purposes of granting compensation to investors who suffer pecuniary loss resulting from the failure of a licensed stockbroker or dealer to meet his contractual obligations and paying beneficiaries from collected unclaimed dividends when they resurface.

(2) The Compensation Fund shall consist of (a) such moneys as are required to be paid into the Compensation Fund by licensed persons; (b) such sums of money as are paid under this Act as fines or penalties or under section 34 as ill-gotten gains where those harmed are not specifically identifiable; (c) such sums of money as accrue from interest and profits from investing Compensation Fund moneys; (d) such sums of money recovered by or on behalf of the Authority from entities whose failure to meet their obligations to investors result in payments from the Compensation Fund; (e) interest deemed to accrue on the proceeds of a public issue or offer for sale of shares of a company listed or to be listed on an approved securities exchange, between the closing date and the date of dispatch of refund cheques, or, where there is no refund, the date of dispatch of share certificates or crediting of securities accounts, to be determined at the rate prescribed by the Authority; (ee) unclaimed dividends outstanding in listed companies at the expiry of the applicable statutory limitation period; 23 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (f) such sums of money as are received for purposes of the Compensation Fund from any other source approved by the Minister.

(3) Moneys which have accumulated in the Compensation Fund may be invested by the Authority in such manner as may be determined by the Authority.

[Act No.

3 of 2000, s.

12, Act No.

10 of 2006, s.

39, Act No.

9 of 2007, s.

47, Act No.

8 of 2008, s.

51.] 18A.

The Investor Compensation Fund Board (1) There is hereby established a Board to be known as the Investor Compensation Fund Board.

(2) The Board shall be a body corporate with perpetual succession and a common seal, and capable, in its corporate name of (a) suing and being sued; (b) taking, acquiring, holding and disposing of movable and immovable property; (c) borrowing and lending money; and (d) doing or performing such other things as may lawfully be done by a body corporate.

(3) The Board shall consist of (a) a chairman appointed by the President on the recommendation of the Minister; (b) the Permanent Secretary to the Treasury or a person deputed by him in writing; (c) the Attorney-General or a person deputed by him in writing; (d) the Public Trustee; (e) the chief executive of the Capital Market Authority or a person deputed by him in writing; (f) the chief executive of the Board; and (g) five other members appointed by the Minister by virtue of their knowledge and experience in legal, financial, business or administrative matters.

(4) The function of the Board shall be to administer the Fund established under section 18.

[Act No.

9 of 2007, s.

48, Act No.

8 of 2008, s.

52.] PART IIA RECOGNITION OF SELF REGULATORY ORGANIZATIONS 18B.

Recognition of self regulatory organization (1) An organization which intends to operate as a self regulatory organization shall apply to the Authority, in the prescribed form, for recognition as such.

(2) An application made under subsection (1) shall specify the functions and powers that the organization is seeking to exercise upon recognition.

[Issue 1] 24 [Rev.

2012] CAP.

485A Capital Markets (3) The Authority may, in respect of an application made under subsection (1), subject to such terms and conditions as it considers necessary, by notice in the Gazette, declare an organization to be a recognized self-regulatory organization where it is satisfied that the organization (a) has a constitution and internal rules and policies which are consistent with this Act or related legislation; (b) has the capacity and financial and administrative resources necessary or desirable to carry out its functions as a self regulatory organization, including dealing with a breach of the law or of any other applicable standards or guidelines; (c) is a fit and proper person; (d) has competent personnel for the carrying out of its functions; and (e) satisfies such other criteria as may be specified by the Authority.

(4) A person who operates or purports to operate as a self regulatory organization without being recognized as such by the Authority commits an offence.

(5) The Authority may, in writing, delegate any of its powers or functions to a self regulatory organization.

(6) A delegation made under subsection (5) shall specify (a) the function or power delegated to the self regulatory organization; (b) the extent of disciplinary powers delegated and the scope of sanctions which may be imposed; (c) the terms and conditions upon which the power or function has been delegated and may be exercised; (d) the persons authorized to exercise the delegated powers or functions on behalf of the self regulatory organization; (e) the manner in which a self regulatory organization shall submit periodical reports to the Authority in respect of the exercise of a delegated power or function; and (f) any other matter which the Authority may prescribe.

[Act No.

37 of 2011, s.

6.] 18C.

Rules of self regulatory organizations (1) A self regulatory organization shall make rules relating to the matters for which it has regulatory or supervisory functions, including any sanction and disciplinary powers to be exercised in connection with the functions delegated to it.

(2) The rules made under subsection (1) shall make provisions relating to (a) management structures and shareholding rights of the self regulatory organization taking into consideration the interests, rights and liabilities of its members, consumers, investors and users of their services; (b) rules of membership and conditions for approval and admission of members; 25 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (c) the procedure for dispute resolution between members, users, investors and their clients and the right of appeal to the Authority or other relevant primary regulator; and (d) the rules and procedures of the self regulatory organization relating to reporting and accountability to any primary regulator other than the Authority.

(3) The rules made under subsection (1) shall not be implemented unless they have been approved by the Authority.

(4) A self regulatory organization shall submit any amendments to its constitution to the Authority for approval before the amendments come into operation.

[Act No.

37 of 2011, s.

6.] 18D.

Restriction on decision by a self regulatory organization A self regulatory organization shall not make a decision, under its rules, which is likely to adversely affect the rights of a person unless the self regulatory organization (a) has given that person an opportunity to make representations about the matter; or (b) considers, on a reasonable ground, that a delay in making the decision will prejudice a class of consumers.

[Act No.

37 of 2011, s.

6.] 18E.

Disciplinary action by a self regulatory organization (1) A self regulatory organization may take disciplinary action against any of its members in accordance with its rules, if the member contravenes any provision of the rules.

(2) A self regulatory organization shall, where it has taken disciplinary action under subsection (1), immediately inform the Authority, in writing, of the name of the member, the action taken and the reason therefor, including the amount of any fine and the period of suspension, if any.

(3) The Authority may, on its own motion or on application by an aggrieved person, review any disciplinary action taken under subsection (1) and may affirm, modify or set aside the decision after giving the aggrieved person and the self regulatory organization an opportunity to be heard.

(4) Nothing in this section shall preclude the Authority, in any case where a self regulatory organization fails to act against its member, from suspending, expelling or otherwise disciplining a member of the self regulatory organization.

(5) The Authority shall, before taking any action under subsection (4), give the licensed person and the self regulatory organization an opportunity to be heard.

(6) Any action taken by a self regulatory organization under subsection (1) shall not prejudice the power of the Authority to take any further action that it considers necessary with regard to the licensed person.

[Act No.

37 of 2011, s.

6.] [Issue 1] 26 [Rev.

2012] CAP.

485A Capital Markets 18F.

Protection from personal liability No civil liability, whether arising in contract, tort, defamation, equity or otherwise shall be incurred by (a) a self regulatory organization; or (b) any person acting on behalf of a self regulatory organization including (i) any member of the Board of directors, employee or agent of the self regulatory organization; or (ii) any member of any committee established by the self regulatory organization, in respect of anything done or omitted in good faith in the discharge of the duties delegated to the self regulatory organization under this Part or in the performance of its functions under its rules.

[Act No.

37 of 2011, s.

6.] 18G.

Appointment of key personnel by a self regulatory organization A self regulatory organization shall not change its key personnel except with prior written notification to the Authority of the intention to change and receipt from the Authority of a confirmation that it has no objection to the proposed change.

[Act No.

37 of 2011, s.

6.] 18H.

Directions to a self regulatory organization (1) The Authority may, after giving a self regulatory organization a reasonable opportunity to be heard in respect of any matter, give a direction, in writing, to the self regulatory organization in terms of this section.

(2) A direction given under subsection (1) may (a) suspend any provision of the constitution or rules of a self regulatory organization for a period specified in the direction; (b) require a self regulatory organization, subject to the Companies Act (Cap.

486) or any other law, to amend its constitution in the manner specified in the direction so as to bring it in conformity with this Act, or any other law; (c) require a self regulatory organization to amend its rules; or (d) require a self regulatory organization to implement or enforce its constitution or its rules.

[Act No.

37 of 2011, s.

6.] 18I.

Removal of an officer of the self regulatory organization The Authority may, if it reasonably believes that (a) an officer of a self regulatory organization is not a fit and proper person to be an officer of the organization; or (b) an appointment of a person or the continuing in office as an officer of a self regulatory organization is likely to be detrimental to the self 27 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets regulatory organization, or may prejudice the interest of investors and consumers of financial services or members of the relevant sector or industry, after giving the officer and the self regulatory organization an opportunity to be heard, direct the self regulatory organization not to appoint the officer, or to remove the officer from office.

[Act No.

37 of 2011, s.

6.] 18J.

Annual report (1) A self regulatory organization shall, within ninety days after the end of every financial year, submit to the Authority, its financial statement and an annual report which shall include (a) a report on the corporate governance policy of the self regulatory organization; (b) financial statements prepared and audited in accordance with the accounts and audit requirements for regulated persons; and (c) such other requirements as may be specified by the Authority.

(2) An auditor who, in the course of his audit, has reason to believe that (a) there is or has been an adverse change in the risks inherent in the business of a self regulatory organization with the potential to jeopardize the ability of the self regulatory organization to continue as a going concern; (b) the self regulatory organization may be in contravention of any provisions of this Act, or directions issued by the Authority; (c) a financial crime has been or is likely to be committed; or (d) serious irregularities have occurred, shall report the matter, in writing, to the Authority.

(3) A report made under subsection (2) shall not constitute a breach of the duties of the auditor.

[Act No.

37 of 2011, s.

6.] PART III PROVISIONS RELATING TO SECURITIES EXCHANGES 19.

Approval of securities exchange required Subject to this Act, no person shall carry on a business as a securities exchange or hold himself out as providing or maintaining a securities market unless he has been approved as a securities exchange by the Authority in such manner as the Authority may prescribe.

[Act No.

3 of 2000, s.

13, Act No.

37 of 2011, s.

7.] 19A.

Restriction on use of the words stock exchange, securities exchange etc.

A person shall not use the words stock exchange, securities exchange, derivatives exchange or futures exchange in connection with a business except in accordance with a securities exchange licence granted by the Authority.

[Act No.

37 of 2011, s.

8.] [Issue 1] 28 [Rev.

2012] CAP.

485A Capital Markets 20.

Application for securities exchange approval (1) An application for securities exchange approval shall be made to the Authority in the form and manner prescribed by the Authority and shall be accompanied by the prescribed fee.

(2) The Authority may, by notice in writing, approve a person as a securities exchange if it is satisfied (a) that the applicant is a limited liability company whose liability is limited by shares, or as may be prescribed by the Authority; (b) that the applicants board of directors is constituted in a manner prescribed by the Authority.

(3) Deleted by of Act No.

10 of 2010, s.

47.

(4) The directors of a securities exchange other than the chief executive shall elect a chairman from amongst themselves.

(5) The function of the board of directors of a securities exchange shall be the overall administration of the securities exchange.

(6) All fees to be charged by a securities exchange shall be subject to prior approval by the Authority notwithstanding the constitution of such securities exchange.

(7) An approved securities exchange shall comply with all requirements of the Authority and pay an annual fee to the Authority at such rate as the Authority may prescribe.

(8) The Authority may require an applicant for a licence as a securities exchange to lodge an application to be recognized as a self regulatory organization as a condition for obtaining and maintaining its licence.

[Act No.

10 of 1994, s.

4, Act No.

3 of 2000, s.

14, Act No.

10 of 2010, s.

47, Act No.

37 of 2011, s.

9.] 21.

Changes in securities exchange rules (1) The rules of an approved securities exchange, in so far as they have been approved by the Authority, shall not be amended, varied or rescinded without the prior approval of the Authority.

(2) Where the board of directors of an approved securities exchange wishes to amend its rules, it shall forward the amendments to the Authority for approval.

(3) The Authority shall, after hearing from the securities exchange, and within thirty days of receipt of a notice under subsection (2) give written notice to the securities exchange stating whether such amendments to the rules are allowed or disallowed and in the event of the rules being disallowed, the Authority shall give reasons for such disallowance.

(4) Notwithstanding the provisions of paragraph (2), a proposed rule change may take effect upon filing with the Authority if designated by the exchanges as (a) a stated policy, practice or interpretation with respect to the meaning, administration or enforcement of an existing rule; (b) a proposal establishing or changing a fee or other charge; or 29 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (c) a proposal dealing solely with the administration of the exchange or other matters which the Authority may specify.

(5) In addition to the provisions of subsection (4), the Authority may add other items which it determines to be appropriate in fulfilling its objective under this Act: Provided that the Authority may summarily abrogate such exchange rules within thirty days of their implementation and require that the rules undergo the procedure prescribed in subsection (3) except that the summary abrogation shall not effect the validity of the rules while in force nor shall it be subject to appeal.

(6) Where an approved securities exchange proposes to alter any particulars already furnished or undergoes or intends to undergo a change from its state specified in the application for approval it shall inform the Authority and obtain its prior consent before such alteration or change is effected.

22.

Disciplinary action by securities exchange (1) Where a securities exchange reprimands, fines, suspends or expels, or otherwise takes disciplinary action against a trading participant or a listed company, it shall within seven days give notice to the Authority in writing, giving particulars including the name of the person, the reason for and nature of the action taken.

(2) The Authority may review any disciplinary action taken by a securities exchange under subsection (1) and, on its own motion, or in response to the appeal of an aggrieved person, may affirm or set aside a securities exchange decision after giving the trading participant or the company and the securities exchange an opportunity to be heard.

(3) Nothing in this section shall preclude the Authority, in any case where a securities exchange fails to act against a trading participant or a listed company, from itself, suspending, expelling or otherwise disciplining the subject person, but before doing so the Authority shall give such persons and the exchange an opportunity to be heard.

[Act No.

10 of 2010, s.

48.] PART IV SECURITIES INDUSTRY LICENCES 23.

Licences required (1) No person shall carry on business as a stockbroker, dealer, investment adviser, fund manager, investment bank, derivatives dealer, central depository, authorised securities dealer, authorized depository, or hold himself out as carrying on such a business unless he holds a valid licence issued under this Act or under the authority of this Act.

(2) No person shall carry on or hold himself out as carrying on business as a securities exchange, registered venture capital company, collective investment scheme or credit rating agency unless he is approved as such by the Authority.

(3) A person approved by the Authority to carry out any business required by this Act to be approved shall comply with all requirements of the Authority and pay an annual fee to the Authority at such rate as the Authority may prescribe.

(4) Nothing in this section shall be construed as limiting the powers of the Authority to approve or license any other person operating in any other capacity which has a direct impact on the attainment of the objectives of this Act.

[Act No.

3 of 2000, s.

15, Act No.

2 of 2002, Sch., Act No.

8 of 2008, s.

53, Act No.

37 of 2011, s.

10.] [Issue 1] 30 [Rev.

2012] CAP.

485A Capital Markets 24.

Application for licence (1) An application for a licence or for the renewal of a licence shall be made to the Authority in the prescribed form and shall be accompanied by the prescribed fee and in the case of an application for the renewal of a licence, may be made within three months but not later than one month prior to the expiry of the licence.

(2) The Authority may require an applicant to supply such further information as it considers necessary in relation to the application.

(3) A licence shall only be granted if the applicant meets and continues to meet such minimum financial and other requirements as may be prescribed by the Authority.

(4) The Authority may grant a licence subject to such conditions or restrictions as it thinks fit and the Authority may, at any time by written notice to a licence holder, vary any condition or restriction or impose further conditions or restrictions.

(5) The Authority shall not refuse to grant or renew a licence without first giving the applicant or holder of a licence an opportunity of being heard.

(6) Subject to subsection (7), a licence granted under this subsection shall expire on the thirty-first day of December in each year: Provided that where an application for renewal of a licence is made under this section, the licence shall be deemed to continue in force until the application for renewal is determined.

(7) A licence that has been renewed in accordance with the provisions of this section shall continue in force for a period of one year next succeeding the date upon which but for its renewal, it would have expired.

(8) Any person licensed by the Authority shall not change its shareholders, directors, chief executives or key personnel except with the prior confirmation in writing, by the Authority that it has no objection to the proposed change and subject to compliance with any conditions imposed by the Authority.

[Act No.

3 of 2000, s.

16, Act No.

9 of 2007, s.

49, Act No.

8 of 2008, s.

54.] 25.

Renewal of licence (1) In granting a renewal of a licence, the Authority shall satisfy itself that the licensed person is in compliance with the provisions of this Act and the rules and regulations made thereunder.

(2) In considering an application for a licence renewal, the Authority may extend an existing licence for a period of three months in order to permit an applicant to take such action as the Authority deems necessary to come into compliance with the Act and rules and regulations made thereunder.

(3) In granting an extension to any person under subsection (2), the Authority may impose any conditions or restrictions it deems appropriate on the activities of such person.

31 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (4) Where the Authority is satisfied that a licensed person has (a) acted in contravention of any provision of this Act, or any rules or regulations made thereunder; or (b) has since the grant of a licence, ceased to qualify for such a licence; or (c) is guilty of malpractice or irregularity in the management of his affairs, the Authority may (i) direct the person to take whatever action the Authority deems necessary (A) to correct the conditions resulting from any contravention of any provisions of this Act or any rules or regulations made thereunder; and (B) to come into compliance with the provisions of this Act or any rules or regulations made thereunder; or (ii) suspend or impose, restrictions or limitations on the licence granted to the person.

[Act No.

3 of 2000, s.

17.] 25A.

Imposition of additional sanctions and penalties (1) Without prejudice to any other provision of this Act, the Authority may impose the following sanctions or levy financial penalties in accordance with this Act, for the breach of any provisions of this Act, the regulations made thereunder, or the rules of procedure of a securities exchange, by a licensed or approved person, listed company, employee or a director of a licensed or approved person or director of a listed company as provided under section 11(3)(cc) (a) with respect to a licensed person, listed company, securities exchange or other approved person (i) a public reprimand; (ii) suspension in the trading of a listed companys securities for a specified period; (iii) suspension of a licensed person from trading for a specified period; (iv) restriction on the use of a licence; (v) recovery from such person of an amount equivalent to two times the amount of the benefit accruing to such person by virtue of the breach; (vi) the levying of financial penalties in such amounts as may be prescribed; (vii) revocation of the licence of such person; (b) with respect to an employee of a licensed or approved person, including a securities exchange (i) require the licensed or approved person to take disciplinary action against the employee; [Issue 1] 32 [Rev.

2012] CAP.

485A Capital Markets (ii) disqualification of such employee from employment in any capacity by any licensed or approved person or listed company for a specified period; (iii) recovery from the employee of a licensed or approved person an amount double the benefit accruing to such person be reason of the breach; (iv) the levying of financial penalties as such amounts as may be prescribed; (c) with respect to a director of a listed company or a licensed or approved person, including a securities exchange (i) disqualification of such person from appointment as a director of a listed company or licensed or approved person including, a securities exchange; (ii) the recovery from such person of an amount equivalent to two times the amount of the benefit accruing to the person by reason of the breach; (iii) the levying of financial penalties in such amounts as may be prescribed.

(2) In addition to any other sanction or penalty that may be imposed under this section, the Authority may make orders for restitution, subject to the provisions of subsection (3).

(3) The Authority shall make orders under subsection (2) where the breach of the provisions of this Act or the regulations made under the Act results in a loss to one or more aggrieved persons, but subject to the following conditions (a) that the amount of the loss is quantified and proved to the Authority by the person making the claim; and (b) that notice is served by the Authority on the person expected to make the restitution, containing details of the amount claimed and informing them of their right to be heard.

(4) The Authority shall, in its annual report, publish the names of persons against whom actions has been taken by the Authority under this Part.

[Act No.

9 of 2007, s.

50, Act No.

8 of 2008, s.

55.] 26.

Revocation of licence (1) The Authority may revoke a licence or approval if it is satisfied that the licensed or approved person (a) has contravened or failed to comply with any provisions of this Act or any rules or regulations made thereunder; or (b) has ceased to be in good financial standing; or (c) has since the grant of the licence, ceased to qualify for such a licence; or (d) is guilty of malpractice or irregularity in the management of his business; or 33 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (e) is adjudged bankrupt: Provided that the Authority shall not revoke a licence or approval, other than an approval to operate as a credit rating agency, without first exercising its powers under section 33A.

(2) In all cases where action under sections 25 and 26 is taken, the Authority shall give the person affected by such action an opportunity to be heard.

(3) Deleted by Act No.

3 of 2000, s.

18.

[Act No.

3 of 2000, s.

18, Act No.

2 of 2002, Sch.] 27.

Register of licence holders (1) The Authority shall (a) before the thirtieth day of April in each year, cause the names and addresses of all persons licensed or approved during the current year to be published in the Gazette; and (b) within thirty days of revocation of a licence, cause the names of any persons whose licence is revoked to be published in the Gazette.

(2) The Authority shall keep in such form as it deems appropriate a register of the holders of current licences specifying, in relation to each holder of a licence (a) his name; (b) the address of the principal place at which he carries on the licensed business; and (c) the name or style under which the business is carried on if different from the name of the holder of the licence.

[Act No.

3 of 2000, s.

19, Act No.

2 of 2002, Sch.] 28.

Obligation to report changes Where (a) the holder of a licence ceases to carry on the business to which the licence relates; or (b) a change occurs in any particulars which are required by section 27 to be entered in a register of licence holders with respect to the holder of a licence, the holder of the licence shall within fourteen days of the occurrence of the event concerned, give to the Authority, particulars of such event.

[Act No.

3 of 2000, s.

20.] 29.

Licensing requirements (1) Before granting any licence or approval, the Authority in respect of a business that requires to be licensed or approved shall satisfy itself (a) that the applicant is a company incorporated under the Companies Act (Cap.

486), with such minimum share capital as the Authority may prescribe or is duly constituted as a collective investment scheme; (b) that none of the directors of the applicant company (i) has been declared bankrupt; [Issue 1] 34 [Rev.

2012] CAP.

485A Capital Markets (ii) has been a director of a company that has been denied any licence or approval under this Act or equivalent legislation in any other jurisdiction; (iii) has been a director of a company providing banking, insurance, financial or investment advisory services whose licence has been revoked by the appropriate authority; (c) that at least one director and at least one employee who is the chief executive of the applicant company, have satisfied such minimum qualification requirements as may be prescribed; (d) in the case of a stockbroker, dealer or other person prescribed by the Authority that the applicant company has lodged security in such sum as may be determined by the Authority or an equivalent bank guarantee or bond with the securities exchange in which it is a trading participant or with the Authority or other person approved by the Authority as the case may be; (e) that the applicant company has the necessary administrative capacity to carry on business for which the licence is required; (f) in the case of an application for a stockbrokers licence, that the applicant shall carry on business solely on behalf of clients; (g) in the case of an application for a dealers licence, that the applicant shall carry on business solely on the applicants own behalf; (gg) in the case of an application for a derivatives dealers licence, that the applicant may carry on business either on behalf of clients or on the applicants own behalf, or both; (h) that none of the persons engaged or to be engaged in the position of executive director or other senior capacity (i) has previously been involved in the management or administration of an institution offering financial services whose licence has been revoked owing to any failure on the part of the management; or (ii) has taken part in or been associated with any such business practices as would, or have, cast doubt on his competence or soundness of judgment.

(2) A licensed stockbroker or dealer may, on fulfilment of all requirements imposed by the Authority or the relevant securities exchange and any self regulatory organization and payment of the admission fee approved by the Authority, be admitted as a trading participant in a securities exchange.

(3) A securities broker, a derivatives dealer or a dealer whose license is revoked under section 26, shall cease to be a trading participant of the securities exchange.

(4) No person who, in relation to a company (a) controls or is beneficially entitled directly or indirectly to more that twenty-five per cent of the listed share capital or voting right; (b) is entitled to appoint more than twenty-five per cent of the board of directors; or 35 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (c) is entitled to receive more than twenty-five per cent of the aggregate dividends and interest on shareholders loans to be paid in any given financial year, shall be appointed as an executive director of that company or to any senior position in the management of the company: Provided that any person who, before the commencement of this section, is appointed to any position in a company in contravention of this subsection, relinquish such position by the 31st December, 2009.

(5) No individual or corporate person shall, in relation to a company (a) control or be beneficially entitled directly or indirectly, to more that twenty-five per cent of the issued share capital or voting rights of a company; (b) be entitled to appoint more than twenty-five per cent of the board of directors; or (c) be entitled to receive more that twenty-five per cent of the aggregate dividends and interest on shareholders loans to be paid in any given financial year: Provided that the provisions of this subsection shall not apply (i) to a corporate entity that is licensed by a banking, insurance, pensions or securities regulator in Kenya or elsewhere; (ii) where the ownership structure of that corporate shareholder is sufficiently diverse and no single person holds or controls more than twenty-five per cent of its shares, votes, directorship appointments or dividend or interest on shareholder loans.

(6) Any person who, at the commencement of this section, does not meet any of the requirements of subsection (5), shall comply with such requirements by the 31st December, 2009.

(7) For the purposes of subsection (4), (5) and (6), company means (a) a stockbrokerage; (b) an investment bank; or (c) a fund manager.

[Act No.

10 of 1994, s.5, Act No.

14 of 1991, Act No.

3 of 2000, s.

21, Act No.

2 of 2002, Sch., Act No.

9 of 2007, s.

51, Act No.

8 of 2008, s.

56, Act No.

10 of 2010, s.

49, Act No.

37 of 2011, s.

11.] 30.

Procedure for collective investment schemes (1) No person shall carry on any business or engage in any activity as a collective investment scheme, in or from within Kenya, unless such person is registered under this Act.

(2) The promoters of a collective investment scheme that is proposed to be formed, may apply to the Authority for consent to register a collective investment scheme upon complying with the requirements prescribed under this Act.

[Issue 1] 36 [Rev.

2012] CAP.

485A Capital Markets (3) Where the Authority grants its consent under subsection (2), the promoters of the proposed collective investment scheme shall, within three months from the date of granting such consent, deliver to the Authority (a) in the case of a unit trust or investment company, satisfactory proof that the proposed collective investment scheme is lawfully constituted in Kenya; (b) in the case of a mutual fund, proposed incorporation documents and such other information or documents as may be stipulated by the Authority; and (c) an application in the prescribed form for registration as a collective investment scheme accompanied by the prescribed fee.

(4) If the Authority is satisfied that the applicant has complied with all the requirements, it shall register the collective investment scheme and issue to the applicant a certificate of registration in the prescribed form.

(5) In the case of a collective investment scheme to be set up as a mutual fund, upon the issue of a certificate of registration under subsection (4), a body corporate shall be deemed to have been incorporated as a collective investment scheme with variable capital, notwithstanding the provisions of the Companies Act (Cap.

486) (6) Notwithstanding the requirements of subsection (1), any person whom immediately before the commencement of this Act was carrying on business as an investment company within the meaning of this Act shall be entitled to carry on such business without registration for a period of six months from such commencement: Provided that such person shall apply for and obtain registration under this Act prior to the expiration of such period.

(7) During the period referred to in subsection (6), the investment company shall be subject to all the provisions of this Act except the requirement as to registration.

(8) No registered collective investment scheme shall, in or outside Kenya, offer its shares to the public unless prior to such offer, it publishes in writing an information memorandum signed by or on behalf of its officers and files a copy thereof with the Authority.

(9) Every information memorandum under subsection (8) shall comply with such requirements as may be prescribed by the Authority.

(10) Subject to the provisions of this Act, any regulations issued thereunder, or anything contained in the articles of association or information memorandum, a mutual fund shall be a body corporate with perpetual succession and a common seal and shall be capable, in its corporate name, of doing and performing all things and acts which may lawfully be done by a body corporate.

[Act No.

3 of 2000, s.

22.] 30A.

Publication of information memorandum (1) No person shall, in Kenya, offer its securities for subscription or sale to the public or a section of the public unless prior to such offer, it publishes an information memorandum signed by or on behalf of its officers and files a copy thereof with the Authority.

37 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (2) Every information memorandum shall comply with such requirements as may be prescribed by the Authority: Provided that nothing in this section shall be construed to apply to an information memorandum issued by a co-operative society incorporated under the Co-operative Societies Act (Cap.

490) for the purpose of raising capital from its members.

[Act No.

3 of 2000, s.

23, Act No.

2 of 2002, Sch.] PART V SECURITIES TRANSACTIONS AND REGISTERS 31.

Transactions in securities (1) No licensed person, broker or dealer shall transfer listed securities outside the securities exchange in which he is a trading participant except as provided for by the Authority in rules or as authorised by the Authority on a case by case basis, and on payment of a prescribed fee.

(1A) The Authority may authorise the transfer of a listed security outside the securities exchange if the Authority is satisfied that (i) the transaction is a private transaction as prescribed by the Authority; (ii) the security trades over the counter and such trade is reported in accordance with the rules prescribed by the Authority; or (iii) it would be in the interest of the holders of ordinary shares of the company having regard to the prevailing conditions and all factors which are relevant in the circumstances to so authorise.

(2) No licensed person, broker or dealer shall trade in listed securities in contravention of such rules as the Authority shall prescribe with respect to the clearance, settlement, payment, transfer or delivery of securities.

(3) No licensed person, broker or dealer shall effect any transaction in a margin account in a manner contrary to requirements adopted by the Authority.

(4) No licensed person, broker or dealer shall lend or arrange for the lending of any securities carried for the account of any customer without the customers written consent, or borrow, or arrange to borrow, using the securities, carried for the account of any customer, as collateral, without the customers written consent.

(5) No licensed person, broker or dealer shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any listed security by means of any manipulative deception, or other fraudulent device or contrivance.

(6) No person holding shares in a public company listed on an approved securities exchange, shall sell or transfer such shares except in compliance with the trading procedures adopted by such securities exchange.

(7) No person shall, directly or indirectly, in connection with the purchase or sale of any security (a) employ any device, scheme or artifice to defraud; (b) engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person; [Issue 1] 38 [Rev.

2012] CAP.

485A Capital Markets (c) make any untrue statement of a material fact; or (d) omit to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made, not misleading.

[Act No.

10 of 1994, s.

6, Act No.

3 of 2000, s.

24, Act No.

8 of 2009 s.

45, Act No.

10 of 2010, s.

50, Act No.

37 of 2011, s.

12.] 32.

Register of interest in securities (1) This section applies to (a) any person who is licensed under this Act; and (b) a financial journalist.

(2) For the purposes of this section, financial journalist means a person who contributes advice concerning securities or prepares analyses or reports concerning securities for publication in a newspaper or periodical.

(3) For the purposes of this section, a reference to securities is a reference to securities which are quoted on a securities exchange.

(4) A person to whom section (1) applies shall maintain a register of the securities in which he has an interest and such interest or any changes in such interest shall be entered in the register within seven days of the acquisition or change in the interest.

(5) The Authority or any person authorized by it in that behalf may require any person to whom section (1) applies to produce for inspection the register required under subsection (4) and the Authority or any person so authorized may make extracts from the register.

PART VI INSIDER TRADING 32A.

Prohibition against use of unpublished insider information (1) No insider shall (a) either on his own behalf or on behalf of any other person, deal in securities of a company listed on any stock exchange or otherwise publicly offered on the basis of any unpublished price sensitive information; or (b) communicate any unpublished price sensitive information to any person, with or without his request for such information, except as required in the ordinary course of business or under any law; or (c) counsel or procure any other person to deal in securities of any company on the basis of unpublished price sensitive information.

[Act No.

3 of 2000, s.

25.] (2) Any insider, who deals in securities or communicates any information or consults any person dealing in securities in contravention of the provisions of subsection (1) shall be guilty of insider trading.

[Act No.

3 of 2000, s.

26, Act No.

37 of 2011, s.

13.] 39 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets 33.

Insider trading prohibited (1) A person who is, or at any time in the preceding six months has been, connected with a body corporate shall not deal in any securities of that body corporate if by reason of his being, or having been, connected with that body corporate he is in possession of information that is not generally available but, if it were, would be likely materially to affect the price of those securities.

(2) A person who is, or at any time in the preceding six months has been, connected with a body corporate shall not deal in any securities of any body corporate if by reason of his so being or having been connected with that first- mentioned body corporate he is in possession of information that (a) is not generally available but, if it were, would be likely materially to affect the price of those securities; and (b) relate to any transaction (actual or expected) involving both bodies corporate or involving one of them and securities of the other.

(3) Where a person is in possession of any such information referred to in subsection (2) which if made generally available, would be likely to materially affect the price of securities but is not precluded by that subsection from dealing in those securities, he shall not deal in such securities if (a) he has obtained the information, directly or indirectly, from another person and is aware, or ought reasonably to be aware, of facts or circumstances by virtue of which that other person is himself precluded by subsection (1) from dealing in those securities; and (b) when the information was so obtained, he was associated with that other person or had with him an arrangement for the communication of information of a kind to which that subsection apply with a view to dealing in securities by himself and that other person or either of them.

(4) A person shall not, at any time when he is precluded by subsection (1), (2) or (3) from dealing in any securities, cause or procure any other person to deal in those securities.

(5) A person shall not, at any time when he is precluded by subsection (1), (2) or (3) from dealing in any securities by reason of his being in possession of any information, communicate that information to any other person if (a) trading in those securities is permitted on any securities exchange; and (b) he knows, or has reason to believe, that the other person will make use of the information for the purpose of dealing or causing or procuring another person to deal in those securities.

(6) Without prejudice to subsection (3) but subject to subsections (7) and (8), a body corporate shall not deal in any securities at a time when any officer of that body corporate is precluded by subsection (1), (2), or (3) from dealing in those securities.

(7) A body corporate is not precluded by subsection (6) from entering into a transaction at any time by reason only of information in the possession of an officer of that body corporate if (a) the decision to enter into the transaction was taken on its behalf by a person other than the officer; [Issue 1] 40 [Rev.

2012] CAP.

485A Capital Markets (b) it had in operation at that time arrangements to ensure that the information was not communicated to that person and that no advice with respect to the transaction was given to him by a person in possession of the information; and (c) the information was not so communicated and such advice was not so given.

(8) A body corporate is not precluded by subsection (6) from dealing in securities of another body corporate at any time by reason only of information in the possession of an officer of that first-mentioned body corporate, being information that was obtained by the officer in the course of the performance of his duties as an officer of that first-mentioned body corporate and that relates to proposed dealings by that first-mentioned body corporate in securities of that other body corporate.

(9) For the purpose of this section, a person is connected with a body corporate if, being a natural person (a) he is an officer of that body corporate or of a related body corporate; (b) he is a substantial shareholder in that body corporate or in a related body corporate; or (c) he occupies a position that may reasonably be expected to give him access to information of a kind to which subsections (1) and (2) apply by virtue of (i) any professional or business relationship existing between himself (or his employer or a body corporate of which he is an officer) and that body corporate or a related body corporate; or (ii) his being an officer of a substantial shareholder in that body corporate or in a related body corporate.

(10) This section does not preclude the holder of a stockbrokers or dealers licence from dealing in securities, or rights or interests in securities, of a body corporate, being securities or rights or interests that are permitted by a securities exchange to be traded on the stock market of that securities exchange, if (a) the holder of the licence enters into the transaction concerned as agent for another person pursuant to a specific instruction by that other person to effect that transaction; (b) the holder of the licence has not given any advice to the other person in relation to dealing in securities, or rights or interests in securities, of that body corporate that are included in the same class as the first-mentioned securities; and (c) the other person is not associated with the holder of the licence.

(11) For the purpose of subsection (8), officer, in relation to a body corporate, includes (a) a director, secretary, executive officer or employee of the body corporate; (b) a receiver, or receiver and manager, of property of the body corporate; (c) an official manager or a deputy official manager of the body corporate; 41 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (d) a liquidator of the body corporate; and (e) a trustee or other person administering a compromise or arrangement made between the body corporate and another person or other persons.

(12) A person who contravenes this section shall be guilty of an offence and shall be liable (a) on a first offence (i) in the case of a body corporate, to a fine not exceeding five million shillings; (ii) in the case of any other person, including a director or officer of a body corporate, to a fine not exceeding two million five hundred thousand shillings or to imprisonment for a term not exceeding five years or to both; (b) on any subsequent conviction (i) in the case of a body corporate, to a fine not exceeding ten million shillings; or (ii) in the case of any other person, including a director or officer of a body corporate, to a fine not exceeding five million shillings or to imprisonment for a term not exceeding seven years or to both.

(13) An action under this section for the recovery of a loss shall not be commenced after the expiration of six years after the date of completion of the transaction in which the loss occurred.

(14) Nothing in subsection (12) affects any liability that a person may incur under any other section of this Act or any other law.

(15) This section shall apply without prejudice to the generality of section 32A.

[Act No.

3 of 2000, s.

27.] PART VII MISCELLANEOUS PROVISIONS 33A.

Powers of the Authority to intervene in management of a licence (1) This section shall apply and the powers conferred by subsection (2) may be exercised in the following circumstances (a) if a persons licence or approval is suspended under section 25(4)(c)(ii); (b) if a petition is filed, or a resolution proposed, for the winding up of a licensed person or if any receiver or receiver manager or similar officer is appointed in respect of the licensed person or in respect of all or any part of its assets; (c) if the Authority discovers (whether on an inspection or otherwise) or becomes aware of any fact or circumstance which, in the opinion of the Authority, warrants the exercise of the relevant power in the interests of investors: Provided that the Authority shall give the licensed person an opportunity to be heard prior to the exercise of this power.

[Act No.

3 of 2000, s.

28.] [Issue 1] 42 [Rev.

2012] CAP.

485A Capital Markets (2) Notwithstanding the provisions of any other written law, in any case to which this section applies, the Authority may (a) appoint any competent person or persons (in this Act referred to as a statutory manager) to assume the management, control and conduct of the affairs and business of a licensed person to exercise all the powers of a licensed person to the exclusion of its board of directors, including the use of its corporate seal; (b) remove any officer or employee of the licensed person who, in the opinion of the Authority, has caused or contributed to any contravention of any provision of this Act or any regulations made thereunder or to any deterioration in the financial stability of the licensed person or has been guilty of conduct detrimental to the interests of investors; (c) appoint a competent person familiar with the business of the licensed person to its board of directors to hold office as a director who shall not be capable of being removed from office without the approval of the Authority other than by order of the High Court; (d) by notice in the Gazette, revoke or cancel any existing power of attorney, mandate, appointment or other authority by the licensed person in favour of any officer or employee or any other person.

(3) The appointment of a statutory manager shall be for such period, not exceeding six months, as the Authority shall specify in the instrument of appointment and may be extended by the High Court upon the application of the Authority if such extension appears to the Court to be justified, and any such extension shall be notified to all interested parties.

(4) A statutory manager shall, upon assuming the management, control and conduct of the affairs and business of a licensed person, discharge his duties with diligence and in accordance with sound investment and financial principles and in particular, with due regard to the interests of the licensed persons customers or investors.

(5) The responsibilities of the statutory manager shall include (i) tracing and preserving all the property and assets of the licensed person or of its customers; (ii) recovering all debts and other sums of money due to and owing to the licensed person; (iii) evaluating the capital structure and management of the licensed person and recommending to the Authority any restructuring or reorganisation which he considers necessary and which, subject to the provisions of any other written law, may be implemented by him on behalf of the licensed person; (iv) entering into contracts in the ordinary course of the business of the licensed person; and (v) obtaining from any officers or employees of the licensed person, any documents, records, accounts, statements or information relating to its business.

43 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (5A) For the purposes of discharging his responsibilities, a statutory manager shall have to declare a moratorium on payment by the licensed person of its customers and other person creditors and the declaration of a moratorium shall (a) be applied equally and without discrimination to all classes of creditors: Provided that the statutory manager may offset the liabilities owed by the licensed person to any creditor against any debts owed by that creditor to the licensed person; (b) suspend the running of time for the purposes of any law of limitation of actions in respect of any claim by a creditor of the licensed person; or (5B) A moratorium shall cease to apply upon the termination of the statutory managers appointment, whereupon the rights and obligations of the licensed person and creditors shall, save to the extent provided in subsection (5A)(b), be the same as if there had been no declaration under the provisions of that subsection: Provided that a moratorium declared by the statutory manager for payment shall not exceed six months.

(6) The statutory manager shall, once every month, furnish the Authority and all interested parties with a report of his activities during the preceding month, in such form as may be prescribed by the Authority.

(7) If any officer or employee of the licensed person removed under the provisions of subsection (2)(b) is aggrieved by the decision, he may appeal to the Capital Markets Tribunal, and the Tribunal may confirm, reverse or modify the decision and make any other order in the circumstances as it thinks just; and pending the determination of the appeal, the order of removal shall remain in effect.

(8) Neither the Authority nor any officer or employee thereof nor any manager nor any other person appointed, designated or approved by the Authority under this Act shall be liable in respect of any act or omission done in good faith by such officer, employee, manager or other person in the execution of the duties undertaken by him.

(9) Where it appears to the statutory manager that it is just and equitable to do so in the interest of all interested parties, the statutory manager may after consultation with the Authority, petition the High Court for the winding-up of the licensed person.

(10) All costs and expenses properly incurred by the statutory manager shall be payable out of the assets of the licensed person in priority to all other claims.

[Act No.

3 of 2000, s.

29, Act No.

9 of 2007, s.

52, Act No.

8 of 2008, s.

57.] 33B.

Prohibited conduct to be reported (1) Any person who, in the course of providing services to a licensed person or company whose securities are listed at a securities exchange, comes into possession of information indicating that such licensed person or company is engaged in any conduct prohibited by this Act, shall report the matter to the Authority.

[Issue 1] 44 [Rev.

2012] CAP.

485A Capital Markets (2) A person who contravenes subsection (1) commits an offence.

[Act No.

3 of 2000, s.

29.] 33C.

Asset backed securities (1) This section applies with respect to asset backed securities which, for the purposes of this section, are securities (a) that are issued as part of a securitization transaction in which assets are transferred to a third party that issues the securities; and (b) that are primarily serviced, with respect to both return of investment and return on investment, by the cash flow from the assets described in paragraph (a).

(2) No person shall issue or list, or cause to be issued or listed, asset backed securities without the prior written approval of the Authority.

(3) The authority shall consult with the Minister before giving any approval under subsection (2).

(4) The Authority shall, under section 12, regulate asset backed securities, including their issue and listing, subject to subsection (5).

(5) In addition to any other requirements, the rules, regulations and guidelines of the Authority under section 12 shall require (a) that the issuer of the asset backed securities shall be a company or a trust that has no purpose other than the implementation and operation of the securitization transaction in respect of which securities are issued; (b) that the issuer shall have the professional and technical capacity to implement and operate the securitization transaction; (c) that the issuer shall have the capability to meet its obligations to the holders of the asset backed securities; and (d) that the issuer shall adequately protect the rights of the holders of the asset backed securities.

(6) For the purposes of this section, securities of an investment company are not asset backed securities.

[Act No.

4 of 2004, s.

75.] 34.

Other offences (1) Any person who (a) contravenes any provision of this Act or any requirement imposed under the provision of this Act or any rule or regulation made thereunder; (b) furnishes or publishes for the purpose of this Act or in connection with an issuer whose securities are listed or quoted to be listed on a securities exchange, or issued or to be issued to the public or a 45 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets collective investment scheme, any information or any returns the contents of which are to his knowledge untrue or incorrect or misleading because of material omissions; or (c) wilfully obstructs any member of the Authority or an officer or servant of the Authority in the performance of his duties under the provisions of that Act, shall be guilty of an offence.

(2) Any person who is guilty of an offence under this Act for which no penalty is expressly provided shall be liable to imprisonment for a term not exceeding five years or to a fine not exceeding fifteen million shillings or to both.

(3) Any person convicted of an offence under this Act may be ordered by the court to pay compensation to any person who suffers loss by reason of the offence and the compensation may be either in addition to or in substitution for any other penalty.

(4) The amount of restitution or compensation for which a person is liable under subsection (3), is (a) the loss sustained or adverse impact of the breach on the person or persons claiming compensation restitution; or (b) the profits that have accrued to the person in breach; (c) where harm has been done to the market as a whole, the illegal gains received or loss averted as a result of the illegal action as may be determined by the court.

(5) To the extent that a person found guilty of an offence under subsection (1) profited by that offence but those harmed cannot reasonably and practicably be determined, the payment under subsection (3) shall be made to the Compensation Fund established under this Act.

[Act No.

3 of 2000, s.

30, Act No.

9 of 2007, s.

53, Act No.

8 of 2008, s.

58.] 34A.

Financial penalties (1) The Minister may, in regulations, prescribe penalties to be paid for the breach of or failure to comply with any of the provisions of this Act, which shall not exceed ten million shillings in the case of an institution, or five million shillings in the case of a natural person: Provided that the financial penalties with respect to (a) a breach of trading rules of a securities exchange by a licensed person, the penalty shall be double the brokerage commission payable to the licensed person on the relevant trade, or double the annual licence fees, whichever is higher; (b) failure to comply with a reporting requirement by a listed company or licensed person, the penalty shall be double the applicable prescribed annual listing fee or licence fee, whichever is higher, for every calendar quarter during which the reporting requirement remains outstanding; or (c) failure on the part of the securities exchange to enforce and ensure compliance with this Act and the rules of the securities exchange as approved by the Authority, the penalty shall be equal to the annual licence fee of the securities exchange.

[Issue 1] 46 [Rev.

2012] CAP.

485A Capital Markets (2) The discretion conferred on the Authority to levy financial penalties or to impose any other sanctions under this Act may be exercised separately or cumulatively, and in no circumstances shall the exercise of such penalties or sanctions prejudice, in any way, any right to any other legal proceedings that may be vested in the Authority.

(3) All financial penalties levied under this Act shall be paid into the Investor Compensation Fund.

[Act No.

9 of 2007, s.

54.] 35.

Appeals from action by Authority (1) Any person aggrieved by any direction given by the Authority to such person or by a decision of the Authority or by the Investor Compensation Fund Board (a) refusing to grant a licence; (b) imposing limitations or restrictions on a licence; (c) suspending or revoking a licence; (cc) refusing to approve a public offer of securities; (d) refusing to admit a security to the official list of a securities exchange; (e) suspending trading of a security on a securities exchange; or (f) requiring the removal of a security from the official list of a securities exchange; (g) refusing to grant compensation to an investor who has suffered pecuniary loss resulting from failure of a licensed stockbroker or dealer, to meet his contractual obligations or pay unclaimed dividends to a beneficiary who resurfaces, may appeal to the Capital Markets Tribunal against such directions, refusal, limitations or restrictions, cancellations, suspension or removal, as the case may be, within fifteen days from the date on which the decision was communicated to such person.

(2) The Capital Markets Tribunal may require the Authority or the Investor Compensation Fund Board to show cause for its action or decision, and may affirm or, after affording the Authority or the Board an opportunity to be heard, set aside such action or decision.

[Act No.

3 of 2000, s.

31, Act No.

8 of 2008, s.

59, Act No.

37 of 2011, s.

14.] 35A.

Establishment of the Capital Markets Tribunal (1) There is established a tribunal to be known as the Capital Markets Tribunal which shall consist of the following members and the secretary appointed by the Minister (a) a chairman who at the time of his appointment shall be an advocate of not less than seven years standing; (b) one lawyer having at least seven years experience in the commercial and corporate sector; (c) one accountant who shall have been in practice for a period of not less than seven years; and 47 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (d) two persons who have demonstrated competence in the field of securities; (e) the secretary shall be an advocate with at least five years experience commercial law.

(2) All appointments to the Tribunal under subsection (1) shall be by notice in the Gazette issued by the Minister and shall be for a period of three years.

(3) The office of a member of the Tribunal shall become vacant (a) at the expiration of three years from the date of his appointment; (b) if he accepts any office the holding of which, if he were not a member of the Tribunal, would make him ineligible for appointment to the office of a member of the Tribunal; (c) if he is removed from membership of the Tribunal by the Minister for failure to attend three consecutive meetings of the Tribunal or is unable to discharge the functions of his office (whether arising from infirmity of body or mind or from any other cause) or for misbehaviour; or (d) if he resigns from the office of a member of the Tribunal.

(4) The Tribunal shall, upon an appeal made to it in writing by any party or a reference made to it by the Authority or by any committee or officer of the Authority, on any matter relating to this Act, inquire into the matter and make an award thereon, and every award made shall be notified by the Tribunal to the parties concerned, the Authority or any committee or officer thereof, as the case may be.

(5) For the purposes of hearing an appeal, the Tribunal shall have all the powers of the High Court to summon witnesses, to take evidence upon oath or affirmation and to call for the production of books and other documents.

(6) Where the Tribunal considers it desirable for the purposes of avoiding expenses or delay or any other special reasons so to do, it may receive evidence by affidavit and administer interrogatories within the time specified by the Tribunal.

(7) In its determination of any matter the Tribunal may take into consideration any evidence which it considers relevant to the subject of an appeal before it, notwithstanding that such evidence would not otherwise be admissible under the law relating to evidence.

(8) The Tribunal shall have power to award the costs of any proceedings before it and to direct that costs shall be taxed in accordance with any scale prescribed.

(9) All summonses, notices or other documents issued under the hand of the chairman of the Tribunal shall be deemed to be issued by the Tribunal.

(10) Any interested party may be represented before the Tribunal by an advocate or by any other person whom the Tribunal may admit to be heard on behalf of such party.

(11) The Tribunal shall sit at such times and in such places as it may appoint.

(12) The proceedings of the Tribunal shall be open to the public save where the Tribunal, for good cause, otherwise directs.

[Issue 1] 48 [Rev.

2012] CAP.

485A Capital Markets (13) Except as expressly provided in this Act or any rules made thereunder, the Tribunal shall regulate its own procedure.

(14) For the purposes of hearing and determining any cause or matter under this Act, the chairman and two members of the Tribunal shall form a quorum.

(15) A member of the Tribunal who has an interest in any matter which is the subject of the proceedings of the Tribunal shall not take part in those proceedings.

(16) Upon any appeal, the Tribunal may (a) confirm, set aside or vary the order or decision in question; (b) exercise any of the powers which could have been exercised by the Authority or any of its committees in the proceedings in connection with which the appeal is brought; or (c) make such other order, including an order, for costs, as it may deem just.

(17) Upon any appeal to the Tribunal under this section the status quo of any matter or activity, which is the subject of the appeal, shall be maintained until the appeal is determined.

(18) The Tribunal shall have power to award the costs of any proceedings before it and to direct that costs shall be paid in accordance with any scale prescribed for suits in the High Court or to award a specific sum as costs.

(19) Where the Tribunal awards costs in an appeal, it shall, on application by the person to whom the costs are awarded, issue to him a certificate stating the amount of the costs.

(20) Every certificate issued under subsection (19) may be filed in the High Court by the person in whose favour the costs have been awarded and upon being so filed, shall be deemed to be a decree of the High Court and may be executed as such.

(21) The Chief Justice may make rules governing the making of appeals and providing for the fees to be paid, the scale of costs of any such appeal, the procedure to be followed therein, and the manner of notifying the parties thereto; and until such rules are made, and subject thereto; the provisions of the Civil Procedure Act (Cap.

21) shall apply as if the matter appealed against were a decree of a subordinate court exercising original jurisdiction.

(22) Any party to proceedings before the Tribunal who is dissatisfied by a decision or order of the Tribunal on a point of law may, within thirty days of the decision or order, appeal against such decision or order to the High Court.

(23) No decision or order of the Tribunal shall be enforced until the time for lodging an appeal has expired or where the appeal has been commenced until the appeal has been determined.

(24) Upon the hearing of an appeal under this section, the High Court may (a) confirm, set aside or vary the decision or order in question; (b) remit the proceedings to the Tribunal with such instructions for further consideration, report, proceedings or evidence as the court may deem fit to give; 49 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets (c) exercise any of the powers which could have been exercised by the Tribunal in the proceedings in connection with which the appeal is brought; or (d) make such other order as it may deem just, including an order as to costs of the appeal of earlier proceedings in the matter before the Tribunal.

(25) There shall be paid to the chairman, secretary and the members of the Tribunal, such remuneration and allowances as the Minister shall, from time to time, determine.

(26) All expenses of the Capital Markets Tribunal shall be charged to the general fund of the Authority.

[Act No.

3 of 2000, s.

32.] 36.

Regulations (1) The Minister may, in consultation with the Authority, make regulations in respect of the following matters (a) sources of funding or fees payable to the Authority; and (b) participation of foreign investors in the stock market.

(2) The Minister may, from time to time, direct the Authority to furnish in such form as he may require, returns, accounts and any other information with respect to the work of the Authority and the Authority shall comply with such direction.

(3) The Authority shall, within six months after the close of each financial year, submit to the Minister a report of its operations and activities throughout the year together with audited accounts in such form and detail as the Minister shall, from time to time, determine.

(4) The Minister shall table the report submitted under subsection (3) before above to Parliament within three months of its submission.

[Act No.

3 of 2000, s.

33.] 37.

Supercession Where there is a conflict between the provisions of this Act and the provisions of any other written law with regard to the powers or functions of the Authority under this Act, the provisions of this Act shall prevail.

[Act No.

3 of 2000, s.

34.] 38.

Prosecution of offences The Attorney-General may, on the request of the Authority, appoint any officer of the Authority or advocate of the High Court to be a public prosecutor for the purposes of offences under the provisions of this Act.

[Act No.

3 of 2000, s.

34.] 39.

Exemption from Cap.

446 The provisions of the State Corporations Act (Cap.

446) shall not apply to the Authority.

[Act No.

3 of 2000, s.

35.] [Issue 1] 50 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] CHAPTER 485A CAPITAL MARKETS ACT SUBSIDIARY LEGISLATION List of Subsidiary Legislation Page 1.

Capital Markets Authority Rules, 1992.

53 2.

Capital Markets Authority Collective Investment Schemes Regulations, 2001 59 3.

Guidelines on the Approval and Registration of Credit Rating Agencies.

125 4.

Guidelines on Corporate Governance Practices by Public Listed Companies In Kenya.

129 5.

Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002.

141 6.

Capital Markets (Licensing Requirements) (General) Regulations, 2002.

265 7.

Capital Markets (Take-Overs and Mergers) Regulations, 2002.

315 8.

Capital Markets (Foreign Investors) Regulations, 2002.

337 9.

The Capital Markets Tribunal Rules, 2002.

343 10.

Capital Markets (Registered Venture Capital Companies) Regulations.

349 11.

Capital Markets (Asset Backed Securities) Regulations, 2077.

365 12.

Capital Markets (Corporate Governance) (Market Intermediaries) Regulations, 2011.

387 13.

Capital Markets (Conduct of Business) (Market Intermediaries) Regulations, 2011.

403 14.

Capital Markets (Demutualization of the Nairobi Securities Exchange Limited) Regulations, 2012.

421 51 [Issue 1] [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] CAPITAL MARKETS RULES, 1992 ARRANGEMENTS OF RULES PART I PRELIMINARY Rule 1.

Citation.

PART II TO PART X (Repealed by L.N.

125/2002, s.

81.) PARTS XI AND XII (Repealed by L.N.

60/2002, s.

24.) PART XIII (Repealed by L.N.

125/2002, s.

81.) PART XIV (Repealed by L.N.

87/2002, s.

2.) SCHEDULE TAKE-OVER OFFERS 53 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] CAPITAL MARKETS AUTHORITY RULES, 1992 [L.N.

429/1992, L.N.

286/1996, L.N.

87/2002.] PART I PRELIMINARY 1.

Citation These Rules may be cited as the Capital Markets Authority Rules, 1992.

PART II to PART X (Repealed by L.N.

125/2002, s.

81.) PARTS XI and XII (Repealed by L.N.

60/2002, s.

24.) PART XIII (Repealed by L.N.

125/2002, s.

81.) SCHEDULE [Rule 42] TAKE-OVER OFFERS PART A REQUIREMENTS WITH WHICH TAKE-OVER OFFERS TO COMPLY 1.

(1) The offer shall be dated and shall be despatched to the offeree within three days of its date and shall state that, except in so far as it and all other take-over offers made under the take-over scheme may be totally withdrawn and every person released from any obligation incurred thereunder, it will remain open for acceptance by the offeree for at least twenty-one days from the date of despatch.

(2) The offer shall not be conditional upon the offeree approving or consenting to any payment or other benefit being made or given to any director of the offeree company or any company which is deemed by virtue of paragraph 42(4) to be related to that company as compensation for loss of office or as consideration for, or in connection with, his retirement from office.

(3) The offer shall state (a) whether or not the offer is conditional upon acceptance of offers made under the take-over scheme being received in respect of a minimum percentage of share and, if so, that percentage; (b) if the shares are to be acquired in whole or in part for cash, the period within which payment will be made and the method of payment; and (c) if the shares are to be acquired for a consideration other than cash, the period within which the offeree will receive that consideration.

(4) Where the offer is conditional upon acceptances in respect of a minimum percentage of shares being received, the offer shall specify (a) a date not being a date later than sixty days after the date of the despatch of the offer or such later date as the registrar may in a competitive situation or [Issue 1] 54 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] in special circumstances allow as the latest date on which the offeror company can declare the offer to have become free from that condition; and (b) a further period of not less than fourteen days from the date on which the offer would otherwise have expired during which the offer will remain open for acceptance after it has been declared unconditional.

Where the offer becomes or is declared unconditional as to acceptances on or by an expiry date and the offeror company has given at least fourteen days notice in writing to the shareholders of the offeree company that the offer will not be open for acceptance beyond that date, the offer need not remain open for acceptance for the further period specified in sub-paragraph (b).

No such notice may be given between the time when a competing offer has been announced and the resultant competitive situation has ended.

(5) Every offer document shall contain the following words which are to be displayed prominently in that document: If you are in any doubt about this offer you should consult your stockbroker, bank manager, lawyer or other professional adviser.

PART B REQUIREMENTS WITH WHICH STATEMENT GIVEN BY OFFEROR COMPANY TO COMPLY 2.

(1) The statement shall (a) specify the names, descriptions addresses of all the directors of the offeror company; (b) contain a summary of the principal activities of the offeror company; (c) specify the number and description and amount of marketable securities in the offeree company held by or on behalf of the offeror company, or if none are so held contain a statement to that effect; (d) if the shares are to be acquired for a consideration which consists of shares or debentures in the offeror company or in a company which is by virtue of paragraph 42(4) deemed to be related to the offeror company (i) set out the reports which, if the statement were a prospectus issued on the date on which notice of the take-over scheme is given to the offeree company, would be required to be set out in it under paragraph 19 in Part II of the Third Schedule of the Companies Act (Cap.486) and Part XII of these Rules; (ii) specify details of any alterations in the capital structure of the offeror company or of any subsidiary of the offeror company during the period of five years immediately preceding the date on which notice of the take-over scheme is given to the offeree company and particulars of the source of any increase in capital; (e) if the shares are to be acquired for a consideration other than wholly in cash or other than for a consideration such as is referred to in SUB-paragraph (d) contain such information and details as to the consideration as the Registrar requires.

(2) The statement shall contain particulars of any restriction on the right to transfer the shares to which the take-over scheme relates contained in the memorandum or articles or other instrument constituting or defining the constitution of the offeree company which has the effect of requiring the holders of the shares, before transferring them, to offer them for purchase to members of the offeree company or to any other person and, if there is any such restriction, the arrangements, if any, being made to enable the shares to be transferred in pursuance of the take-over scheme.

(3) If the consideration for the acquisition of shares under the take-over scheme is to be satisfied in whole or in part by the payment of cash, the statement shall contain details 55 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] of the arrangements that have been, or will be, made to secure payment of the cash consideration and, if no such arrangements have been or will be made, shall contain a statement to that effect.

(4) The statement shall set out (a) whether or not it is proposed in connection with the take-over scheme that any payment or other benefit shall be made or given to any director of the offeree company or of any company which is by paragraph 42(4) deemed to be related to the offeree company as compensation for loss of office or as consideration for, or in connection with, his retirement from office and if so, particulars of the proposed payment or benefit in respect of each such director; (b) whether or not there is any other agreement or arrangement made between the offeror company and any of the directors of the offeree company in connection with or conditional upon the outcome of the scheme, and, if so, particulars of any such agreement or arrangement; (c) whether or not there has been within the knowledge of the offeror company any material change in the financial position or prospects of the offeree company since the date of the last balance sheet laid before the offeree company in general meeting, and, if so, particulars of any such change; and (d) whether or not there is any agreement or arrangement whereby any shares acquired by the offeror company in pursuance of the scheme will or may be transferred to any other person, and, if so (i) the names of the persons who are a party to the agreement or arrangement and the number, description and amount of the shares which will or may be so transferred; and (ii) the number, if any, and description and amount of shares of the offeree company held by or on behalf of each of these persons, or if no such shares are so held, a statement to that effect.

(5) Paragraphs (6) to (8) apply only where the consideration to be offered in exchange for share of the offeree company consists in whole or in part of marketable securities issued or to be issued by the offeror company or by any other company.

(6) Where the marketable securities are quoted or dealt in on a securities exchange, the statement shall state this fact and specify the securities exchanges concerned and specify (a) the latest available market sale price prior to the date on which notice of the take-over scheme is given to the offeree company; (b) the highest and lowest market sale price during the three months immediately preceding that date and the respective dates of the relevant sales; and (c) where the take-over scheme has been the subject of a public announcement in a newspaper or by any other means, the latest market sale price immediately prior to the public announcement.

(7) Where the securities are quoted or dealt in on more than one securities exchange, it is sufficient compliance with paragraph 6(a) if information with respect to the securities is given in relation to the securities exchange at which there have been the greatest number of recorder dealings in the securities in the three months immediately preceding the date on which notice of the take-over scheme is given to the offeree company.

(8) Where the take-over scheme relates to securities which are not quoted or dealt in on a securities exchange, the statement shall contain all the information which the offeror company may have as to the number, amount and price at which the securities have been [Issue 1] 56 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] sold in three months immediately preceding the date on which notice of the scheme is given to the offeree company and, if the offeror company has no such information, a statement to that effect.

PART C REQUIREMENTS WITH WHICH STATEMENT GIVEN BY OFFEREE COMPANY TO COMPLY 3.

(1) The statement shall indicate whether or not the board of directors of the offeree company recommends to shareholders the acceptance of take-over offers made, or to be made, by the offeror company under the take-over scheme.

(2) The statement shall set out (a) the number, description and amount of marketable securities in the offeree company held by or on behalf of each director of the offeree company or, in the case of a director where none are so held, that fact; (b) in respect of each such director of the offeree company by whom, or on whose behalf, shares to which the take-over scheme relates are held (i) whether or not the present intention of the director is to accept any take-over offer that may be made in pursuance of the take-over scheme in respect of those shares; or (ii) that the director has not decided whether he will accept such a take- over offer; (c) whether or not any marketable securities of the offeror company are held by, or on behalf of, any director of the offeree company and, if so, the number, description and amount of the marketable securities so held; (d) whether or not it is proposed in connection with the take-over scheme that any payment or other benefit shall be made or given to any director of the offeree company or of any other company which is by virtue of paragraph 42(4) deemed to be related to that company as consideration for, or in connection with, his retirement from office and, if so, particulars of the proposed payment or benefit; (e) whether or not there is any other agreement or arrangement made between any director of the offeree company and any other person in connection with or conditional upon the outcome of the take-over scheme and, if so, particulars of any such agreement or arrangement; (f) whether or not any director of the offeree company has any direct or indirect interest in any contract entered into by the offeror company and, if so, particulars of the nature and extent of such interest; (g) if the shares to which the scheme relates are not quoted or dealt in on a stock exchange all the information which the offeree company may have as to the number, amount and price at which any such shares have been sold in the six months preceding the date on which notice of the take-over scheme was given to the offeree company; and (h) whether or not there has been any material change in the financial position of the offeree company since the date of the last balance sheet laid before the company in general meeting and, if so, particulars of such change.

57 [Issue 1] [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] CAPITAL MARKETS AUTHORITY COLLECTIVE INVESTMENT SCHEMES REGULATIONS, 2001 ARRANGEMENT OF REGULATIONS PART I PRELIMINARY Regulation 1.

Citation.

Interpretation.

PART II CONSENT, REGISTRATION AND APPROVAL OF COLLECTIVE INVESTMENT SCHEMES 3.

Application for consent.

Documents to accompany application.

Application for registration of a collective investment scheme.

Notification of registration.

Form of certificate.

PART III INCORPORATION DOCUMENTS OF A COLLECTIVE INVESTMENT SCHEME 8.

Requirements of incorporation documents.

Alteration of incorporation documents.

10.

Alterations subject to approval of the Authority.

11.

Inspection of incorporation documents.

PART IV COLLECTIVE INVESTMENT SCHEME INFORMATION MEMORANDUM 12.

Collective Investment scheme to issue information memorandum.

13.

Requirements of information memorandum.

14.

Revision of information memorandum.

PART V MANAGEMENT OF COLLECTIVE INVESTMENT SCHEME Fund Manager 15.

Obligation to appoint a fund manager.

16.

Management of a collective investment scheme.

17.

Duties of a fund manager.

18.

Records to be maintained by a fund manager.

19.

Fund managers reports.

20.

Liability of a fund manager.

21.

Remuneration of a fund manager.

22.

Removal of a fund manager.

23.

Resignation of a fund manager.

24.

Service of notice and handing over.

Trustee 25.

Obligation to appoint a trustee.

26.

Eligibility for appointment of a trustee.

27.

Duties and obligations of a trustee.

59 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] Regulation 28.

No delegation of duties of a trustee.

29.

Resignation of a trustee.

30.

Removal of a trustee.

31.

Matters to be provided for in the trust deed.

32.

Remuneration of trustee.

Custodian 33.

Obligation to appoint a custodian.

34.

Eligibility for appointment of a custodian.

35.

Duties of a custodian.

36.

Records to be maintained by a custodian.

37.

Reports by a custodian.

38.

Resignation of a custodian.

39.

Removal of a custodian.

Umbrella Schemes and Investment Companies 40.

Meaning of umbrella scheme.

41.

Minimum requirements for umbrella schemes.

42.

Allocation of costs for umbrella schemes.

43.

Reports.

44.

Special provisions relating to investment companies.

PART VI PRICING, VALUATION AND DEALING OF SHARES Initial Offer 45.

Application.

46.

Compliance with incorporation documents.

47.

Period of initial offer.

48.

Creation of shares during initial offer.

49.

Initial price.

50.

Determination of selling and repurchase price.

51.

Pricing of additional shares.

52.

Valuation point for selling price.

53.

Valuation point for repurchase price.

54.

Allowance for service charge.

55.

Determination of repurchase price.

56.

Calculation of net asset value per share.

Redemption and Cancellation of Shares 57.

Cancellation of shares.

58.

Repurchase price.

59.

Timing of instructions to create or cancel units.

Operational Requirements (Dealing) 60.

Dealing.

61.

Fund managers obligation to issue or redeem shares.

62.

Restrictions on issued shares in an investment company.

[Issue 1] 60 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] Regulation 63.

Issue price parameters.

64.

Redemption price parameters.

65.

Charges on Issue.

66.

Charges on redemption or cancellation.

67.

Dilution Levy.

68.

Payment on Redemption.

69.

Notification of price to trustee or custodian.

70.

Publication of price.

Valuation 71.

General.

Income 72.

Annual income allocation date.

73.

Annual allocation of income.

74.

Annual allocation to accumulation shares.

75.

Annual distribution to holders of income shares.

76.

Interim allocation of income.

77.

Income equalisation.

PART VII INVESTMENT, BORROWING, LENDING 78.

Broad investment guidelines.

79.

Restriction on borrowing and lending.

80.

Investment and borrowing powers for umbrella schemes.

Advertisements and Public Announcements 81.

Advertising only for approved schemes.

82.

General contents.

Meetings 83.

General meeting and extra-ordinary meetings.

84.

Notice of meetings.

85.

Quorum.

86.

Resolutions.

87.

Voting rights.

88.

Proxies 89.

Holders to be notified.

90.

Special resolutions required for amendments to incorporation documents.

91.

Service of notices and other documents.

Accounts and Audit 92.

Obligation to appoint an auditor.

93.

Qualifications of an auditor.

94.

Independence.

95.

Accounting period.

96.

Audit of annual report.

61 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] PART VIII AMALGAMATION AND RECONSTRUCTION Regulation 97.

General.

98.

Amalgamation and reconstruction.

Suspension and Resumption of Dealings in Shares 99.

Suspension and resumption of dealings in shares.

Winding-up of Collective Investment Schemes 100.

When a collective investment scheme may be wound up.

101.

Consequences of commencement of winding up.

102.

Manner of winding up.

103.

Final account.

104.

Duty to ascertain liabilities.

105.

Accounts and reports.

106.

Liability of a fund manager.

107.

Additional provisions applicable to umbrella schemes.

108.

Capital Markets Tribunal.

PART IX EMPLOYEE SHARE OWNERSHIP PLANS (ESOPS) 109.

Approval of and registration with the Authority.

110.

ESOP Unit Trust.

111.

Requirements for ESOPS.

112.

Investment parameters.

113.

Minimum number of trustees.

114.

Creation of units.

115.

Certificate of entitlement to holders.

116.

Rights on the certificate of entitlement.

117.

Price of units.

118.

Surrender of certificates by employee.

119.

Redemption or transfer.

120.

Exchange of units not permitted.

121.

Audit.

122.

Winding up.

123.

Disclosures.

Special Interest Collective Investment Schemes 124.

Definition.

125.

Approval and registration with the Authority.

126.

Special interest unit trust.

127.

Requirements for special interest unit trust.

128.

Investment parameters.

129.

Minimum number of trustees.

130.

Creation of units.

131.

Certificate of entitlement to holders.

132.

Rights on the certificate of entitlement.

133.

Price of units.

[Issue 1] 62 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] Regulation 134.

Redemption or transfer.

135.

Exchange of units not permitted.

136.

Audit.

137.

Winding up.

138.

Disclosures.

SCHEDULES FIRST SCHEDULE SECOND SCHEDULE THE INCORPORATION DOCUMENTS THIRD SCHEDULE TRUST DEED FOURTH SCHEDULE PARTICULARS OF INFORMATION MEMORANDUM FIFTH SCHEDULE INTERIM AND ANNUAL REPORTS 63 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] CAPITAL MARKETS (COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 2001 [L.N.

181/2001, L.N.

165/2002, L.N.

100/2009.] PART I PRELIMINARY 1.

Citation These Regulations may be cited as the Capital Markets (Collective Investment Schemes) Regulations, 2001.

Interpretation In these Regulations, unless the context otherwise requires Act means the Capital Markets Act; certificate of entitlement means a document of title, statement of account or any other document evidencing ownership of the holder thereof to one or more shares acquired by the holder in a collective investment scheme; collective investment scheme portfolio means all cash and other collective investment scheme portfolio for the time being held or deemed to be held upon trust pursuant to a trust deed establishing a collective investment scheme or other incorporation or offering document of a collective investment scheme, other than the amount for the time being standing to the credit of the distribution account; custodian means a company approved by the Authority to hold in custody funds, securities, financial instruments or documents of title to assets of a collective investment scheme; dealing means an act of buying, selling or agreeing to buy or sell or trade shares by a fund manager; dilution means that a collective investment scheme may suffer reduction in the value of its collective investment scheme portfolio as a result of costs incurred in dealing in its underlying investments and of any spread between the buying and the selling prices of such investments; holder means any person (other than a fund manager) who is the lawful holder of a certificate evidencing that he has an interest in the collective investment scheme and includes a purchaser of or a subscriber for such an interest who is entitled to have a certificate issued to him; initial charge means that portion of the selling price of a share which represents the fund managers charge in respect of expenditure incurred and work performed by it in connection with the creation and issue of such share but does not include any compulsory charge; portfolio means a group of securities in which members of the public are invited to acquire shares pursuant to the collective investment scheme and includes any amount in cash forming part of the assets pertaining to such portfolio; shillings means shillings in the currency of the Republic of Kenya; trust means a trust within the meaning of the Trustee Act (Cap.

167); trust deed in relation to a collective investment scheme, means the trust deed that sets out the trusts governing the unit trust or mutual fund and includes even instrument that varies those trusts, or effects the powers, duties, or functions of the trustee or manager of the unit trust or mutual fund; [Issue 1] 64 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] trustee in relation to a unit trust, means a trustee in which are invested the money, investments or other collective investment scheme portfolio that are for the time being subject to the trusts governing the unit trust; unit means an undivided share in the collective investment scheme portfolio of a unit trust scheme; working day excludes Saturday, Sunday and public holidays.

PART II CONSENT, REGISTRATION AND APPROVAL OF COLLECTIVE INVESTMENT SCHEMES 3.

Application for consent An application for consent to register a collective investment scheme shall be submitted to the Authority by the promoter of a proposed collective investment scheme, and shall be accompanied by (a) the prescribed application fee; (b) the documents specified in Regulation 4; and (c) such other documents that may be required by the Authority.

Documents to accompany application (1) The application in Regulation 3 shall be accompanied by the following documents (a) draft incorporation documents of the collective investment scheme; (b) memorandum and articles of association of the promoter; (c) memorandum and articles of association of the proposed fund manager; (d) business plan; (e) one bank reference; and (f) two professional or business references.

(2) Consent granted for the registration of collective investment scheme shall lapse after three months.

Application for registration of a collective investment scheme An application for registration of a collective investment scheme shall be made to the Authority by a promoter of the collective investment scheme, in triplicate in Form 1 set out in the First Schedule, within three months after the grant of consent, accompanied by the following (a) the incorporation documents; (b) the information memorandum; (c) audited reports for the preceding 3 years of the proposed fund manager, where applicable; (d) audited reports for the preceding 3 years of the proposed trustee; (e) audited reports for the preceding 3 years of the proposed custodian; (f) a letter of consent to act as a fund manager; (g) a letter of consent to act as a trustee; (h) a letter of consent to act as a custodian; and (i) the prescribed registration fee.

65 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 6.

Notification of registration The Authority shall advise the promoter within thirty days of receipt of the application for registration of a collective investment scheme whether registration has been granted.

Form of certificate The certificate of registration of a collective investment scheme shall be in Form 2 set out in the First Schedule.

PART III INCORPORATION DOCUMENTS OF A COLLECTIVE INVESTMENT SCHEME 8.

Requirements of incorporation documents (1) The incorporation documents of a collective investment scheme shall contain the documents specified in the Second Schedule.

(2) Nothing in the incorporation documents may provide that a trustee, custodian, fund manager or board of directors of a collective investment scheme shall be exempt from liability to a holder for breach of trust, fraud or negligence, or be indemnified against such liability by holders or at the holders expense.

Alteration of incorporation documents (1) All proposed alterations or additions to the incorporation documents shall be submitted to the Authority for prior approval.

(2) The Authority shall determine whether holders shall be notified of any alterations or additions to the incorporation documents and the period of notice if any to be applied before the changes are to take effect.

(3) The notice period referred to in sub-regulation (2) shall not exceed three months unless the Authority, having regard to the merits of the case, otherwise determines.

10.

Alterations subject to approval of the Authority (1) Subject to Regulation 9, the incorporation documents may be altered by the fund manager without consulting the holders, provided that the trustee or the board of directors, as the case may be, certify in writing that in their opinion the proposed alteration (a) is necessary to enable compliance with fiscal, statutory or other official requirements; or (b) does not materially prejudice holders interests, does not to any material extent release the trustee, custodian, fund manager or the board of directors, their agents or associates from any liability to holders and does not materially increase the costs payable from the collective investment scheme portfolio concerned; or (c) is necessary to correct a manifest error.

(2) All alterations under this Regulation shall be filed with the Authority within seven days of the relevant decision.

11.

Inspection of incorporation documents The fund manager shall make the incorporation documents available for inspection free of charge to any of the collective investment schemes holders at all times during ordinary office hours at the registered office of the fund manager.

[Issue 1] 66 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] PART IV COLLECTIVE INVESTMENT SCHEME INFORMATION MEMORANDUM 12.

Collective Investment scheme to issue information memorandum A collective investment scheme shall not offer its shares for sale to the public or a section of the public issued an information memorandum approved by the Authority which complies with the Fourth Schedule.

13.

Requirements of information memorandum (1) Every information memorandum of a collective investment scheme shall contain the information listed in the Fourth Schedule.

(2) Application forms supplied to persons who are not holders shall be accompanied by the information memorandum but advertisements or investment plans containing an application form and all the information listed in the Fourth Schedule may also be used.

(3) Where performance data or estimated yields are included in an information memorandum, advertisement or any other invitation to the public to invest in the collective investment scheme, the Authority may require justification of the calculations resulting in such performance data or estimated yields.

(4) Forecast of a collective investment schemes performance shall not be made in the information memorandum and the publication of a prospective yield shall not constitute a forecast of performance and a statement to the effect that the publication is that of a prospective yield and not a forecast of performance shall be made in the information memorandum, advertisement or any other invitation to the public.

14.

Revision of information memorandum (1) An information memorandum shall be (a) reviewed and revised at least once in every six months to take account of any change or new matter, other than a matter which reasonably appears to the fund manager to be insignificant; (b) revised immediately upon the occurrence of any material change in the matters stated therein or upon the occurrence of any new material information which ought to be disclosed therein.

(2) A revision of the information memorandum may take the form of a complete substitution of the previous information memorandum or a supplement to the information memorandum and the date of the revision shall be prominently displayed.

(3) Any amendments to the information memorandum shall require the prior approval of the Authority.

PART V MANAGEMENT OF A COLLECTIVE INVESTMENT SCHEME Fund Manager 15.

Obligation to appoint a fund manager Every collective investment scheme shall appoint in writing a fund manager approved by the Authority to manage the day to day operation of the collective investment scheme.

16.

Management of a collective investment scheme (1) No person shall be appointed as fund manager of a collective investment scheme unless such a person holds a licence to operate as a fund manager issued by the Authority.

67 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (2) A fund manager of a collective investment scheme may in relation to the custodian or trustee of such collective investment scheme, be a holding company or a subsidiary company within the meaning of the terms as defined in section 154 of the Companies Act (Cap.

486) or be deemed by the Authority to be otherwise under control of substantially the same persons or the consist substantially of the same shareholders, provided that the investment in a related company shall be limited to ten percent of the total funds managed by the fund manager.

(3) A fund manager shall at all times maintain a paid-up share capital and unimpaired reserves of not less than ten millions shillings for the operation of the collective investment scheme.

[L.N.

165/2002, s.

2.] 17.

Duties of a fund manager (1) A fund manager of a collective investment scheme shall carry out the administration of the fund including the management of the portfolio of investments in accordance with the direction and the authority of the trustee or the board of directors, as the case may be, as well as the provisions of the incorporation documents, the information memorandum, the rules of the collective investment scheme and these Regulations.

(2) The principal duties of a fund manager shall include but shall not be restricted to (a) advising the trustee or board of directors, as the case may be, on the asset classes which are available for investment; (b) formulating a prudent investment policy; (c) investing the schemes assets in accordance with the schemes investment policy; (d) reinvesting any income of the scheme fund which is not required for immediate payments; (e) instructing the custodian to transfer, exchange, deliver in the required form and manner the scheme assets held by such custodian; (f) ensuring that the shares or units in the collective investment scheme are priced in accordance with the information memorandum, the rules of the collective investment scheme and these Regulations; (g) not selling any shares otherwise than on the terms and at a price calculated in accordance with the provisions of the information memorandum, rules of the collective investment scheme or these Regulations; (h) rectifying any breach of matters arising under paragraph (f) or (g) provided that where the breach relates to incorrect pricing of shares or to the late payment in respect of the issue or redemption of shares, rectification shall, unless the trustee or board of directors, as the case may be, otherwise directs, extend to the reimbursement or payment or arranging the reimbursement or payment of money by the fund manager to the holders or former holders, by the fund manager to the scheme, or by the scheme to the fund manager; (i) purchasing at the request of a holder, any shares held by such holder on the terms and at a price calculated in accordance with the provisions hereof; (j) publishing daily the price of shares in at least two daily newspapers of national circulation, published in the English language: Provided that where a collective investment scheme is not dealing on a daily basis, there shall be at least one publication a month of the prices of shares in at least two daily newspapers of national circulation, at least three days before the dealing day, specifying therein the date of the dealing day; [Issue 1] 68 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (k) preparing and timeously dispatching all cheques, warrants, notices, accounts, summaries, declarations, offers and statements required under the provisions of the information memorandum, rules of the collective investment scheme or these Regulations, to be issued, served or sent and signing and executing all certificates and all transfers of securities; (l) making available for inspection to the trustee or board of directors or any approved auditor appointed by the trustee or directors, the records and the books of account of the fund manager giving to the trustee or board of directors or to any such auditor such oral or written information as it or he requires with respect to all matters relating to the fund manager, its properties and its affairs; (m) making available or ensuring that there is made available to the trustee or board of directors such details as the trustee or board of directors may require with respect to all matters relating to the collective investment scheme; and (n) being fair and equitable in the event of any conflict of interest that may arise in the course of its duties.

(3) A fund manager shall not engage or contract any advisory or management services on behalf of a collective investment scheme without prior written approval of the trustee or the board of directors: Provided that (a) the fund manager shall remain liable for any act or omission of the sub- contracted fund manager; (b) the fees and expenses of any such persons shall be payable by the fund manager and shall not be payable out of the collective investment scheme portfolio; (c) any expenses incurred by any such persons which, if incurred by the fund manager would have been payable out of the collective investment scheme portfolio, may be paid out of the collective investment scheme portfolio to the fund manager by way of reimbursement; and (d) any such appointment or termination of appointment shall be notified in writing to all holders.

(4) All monetary benefits or commissions arising out of managing scheme funds shall be credited to the scheme fund by the fund manager.

(5) The fund manager shall account to the trustee within thirty days after receipt by the fund manager any monies payable to the trustee.

(6) Every fund manager shall issue a receipt evidencing the purchase of shares of the collective investment scheme for each purchase.

(7) The fund manager shall issue a certificate of entitlement to the holders every thirty days, specifying any shares held by any holder and showing the transactions in the holders account during the preceding month and which shall be prima facie evidence of the title of the holder to the units or shares.

18.

Records to be maintained by a fund manager (1) A fund manager of a collective investment scheme shall (a) keep and maintain a record of all minutes, statements of accounts and resolutions in respect of the schemes investment portfolio; (b) keep or cause to be kept proper books of accounts and records in which shall be entered all transactions effected by the fund manager for the 69 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] account of the collective investment scheme and permit the trustee or board of directors from time to time on demand to examine and take copies of or extracts from any such books and records; (c) maintain a daily record of shares held by the fund manager, including the type of such shares acquired or disposed of, and of the balance of any acquisitions and disposals; and (d) keep and maintain a daily record of the shares of the scheme which are held, issued, redeemed, exchanged, and the valuation of the collective investment scheme portfolio including particulars given in Regulation 69, required upon completion of a valuation.

(2) The fund manager shall make the collective investment schemes records available for inspection by the trustee, board of directors or the Authority free of charge at all times during office hours and shall supply the trustee, board of directors or Authority with a copy of the records or any part of such records on request at no charge.

19.

Fund managers reports (1) The fund manager shall provide the trustee, board of directors, holders and the Authority quarterly from the date of the fund managers appointment with (a) a valuation of the scheme fund and of all the investments representing the same, including the details of the cost of such investments and their estimated yields; (b) a report reviewing the investment activity and performance of the investment portfolios comprising the scheme fund since the last report date and containing the fund managers proposals for the investment of the scheme fund during the period; and (c) a record of all investment transactions during the previous period.

(2) The fund manager of a collective investment scheme shall once every year provide every holder and the Authority with audited accounts and such other statements as may be necessary in relation to the operations of that scheme during the period which ended not more than three months before the date on which such accounts or statements are submitted, and in regard to its position as at the end of that period, including (a) the fund managers capital resources actually employed or immediately available for employment for the purposes of the scheme; (b) in respect of the collective investment scheme portfolio, the total market value of each of the several securities included in the collective investment scheme portfolio, and the value of each of those securities expressed (i) as a percentage of the total market value of the collective investment scheme portfolio; (ii) as a percentage of the total amount of securities of that class issued by the concern in which the investment is held; and (iii) indicating the percentage of such securities in relation to the investment guidelines specified in Regulation 78(2); (c) the amount of dividends and interest and any other income for distribution which have accrued to the underlying securities comprised in the collective investment scheme portfolio, indicating the classes of income and the amount derived from each class, and how the income has been or is intended to be allocated; (d) the amount of proceeds of capital gains, rights and bonus issues and any other accruals and receipts of a capital nature which have been or are to be [Issue 1] 70 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] invested in the scheme for the benefit of the holders, indicating the classes thereof and the amount derived from each class, but excluding amounts derived from the sale of shares; (e) the total amount derived from the sale of shares, indicating the total amount paid in respect of compulsory charges, and the total amount paid in respect of the repurchase of shares; (f) the fund managers income derived from all sources in the operation of the scheme, indicating the sources and the amount derived from each source, and its net profit or loss derived from such operation; (g) a review of the fluctuations in the selling and repurchase prices per share during the period in question including the highest and lowest selling prices and the highest and lowest repurchase price.

(3) Copies of the accounts and statements referred to in sub-regulation (2) shall be kept at the registered office of the fund manager and made available for inspection during ordinary office hours by any holder or other person bona fide interested in the purchase of shares of the scheme.

(4) A fund manager shall in addition, within a period of thirty days after receipt of a written request from the Authority, or within such further period thereafter as the Authority may allow, lodge with the Authority such further information and explanations in connection with any accounts or statement referred to in sub-regulation (2) as may be specified in the request.

(5) The fund manager of a mutual fund shall report to the board of directors within seven days of the creation and cancellation of shares.

20.

Liability of a fund manager (1) The fund manager of a collective investment scheme shall not be liable for any loss, damage or depreciation in the value of the scheme fund or of any investment comprised therein or the income therefrom which may arise by reason of depreciation of the market value of the shares and other assets in which scheme funds are invested unless such loss, damage or depreciation in the value of the scheme fund arises from negligence whether professional or otherwise, wilful default or fraud by the fund manager or any of its agents, employees or associates.

(2) In the absence of fraud or negligence by the fund manager, the fund manager shall not incur any liability by reason of any matter or thing done or suffered or omitted by it in good faith under the provisions of the, incorporation documents, information memorandum, rules of the collective investment scheme or these Regulations.

(3) The fund manager shall not be under any liability except such liability as may be expressly assumed by the fund manager under the incorporation documents, information memorandum, the rules of the collective investment scheme and these Regulations, nor shall the fund manager save as expressly provided herein be liable for any act or omission of the trustee.

21.

Remuneration of a fund manager (1) The fund manager shall be entitled by way of remuneration for its services and to cover expenses and fees in performing its obligations including obligations to pay the remuneration to the trustee and the trustees disbursements and the auditors fees and expenses but excluding expenses incurred by the fund manager or the trustee for the purpose of enabling the trust to conform to legislation passed after the date hereof the expenses whereof to be paid out of the collective investment scheme portfolio to receive the following amounts, namely (a) the initial charge referred to in Regulation 65(1); or (b) any charge disclosed in the information memorandum.

71 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (2) The fund manager may at any time at the fund managers discretion waive or rebate in full or any part of the amounts mentioned in sub-regulation (1): Provided that the fund manager shall report to the trustee or board of directors any such changes and give the reasons therefor.

22.

Removal of a fund manager (1) A fund manager shall be removed immediately on the happening of any of the following events (a) if a court of competent jurisdiction orders liquidation of the fund manager (except a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the trustee, board of directors, as the case may be, and the Authority); or (b) if a receiver is appointed for the undertaking of the fund managers assets or any part thereof; or (c) if for good and sufficient reason the trustee or board of directors, as the case may be, is of the opinion and so states in writing to the Authority that a change of fund manager is desirable in the interest of the holders.

(2) A fund manager shall be removed by three months notice in writing by the trustee or board of directors to the fund manager as the case may be (a) if an extra-ordinary resolution is passed by the holders removing the fund manager; or (b) if the holders of three quarters majority in value of the shares in existence (excluding shares held or deemed to be held by the fund manager or by any associate of the fund manager) request in writing to the trustee or board of directors as the case may be, that the fund manager be removed.

23.

Resignation of a fund manager A fund manager may resign by giving three months notice to the trustee or board of directors, as the case may be, of the collective investment scheme, and shall give reasons for the resignation.

24.

Service of notice and handing over (1) Notice shall be deemed to have been served seven days from the date of its dispatch and shall come into effect four days after it is served and such termination will be deemed to be effective ninety days after the notice comes into effect.

(2) During the last thirty days of the notice period given under Regulations 22 and 23 the fund manager shall (a) hand over, transfer and deliver to a fund manager, appointed in writing by the trustee or board of directors and licensed by the Authority to succeed the outgoing fund manager, all information within itself in relation to its contractual duties to the scheme including (i) statements pertaining to the entire scheme fund; (ii) investment portfolio including details of the cost of such investments and estimated yields; (iii) statements pertaining to all incomplete transactions; and (iv) any other information as may reasonably be required by the scheme; (b) hand over, transfer and deliver all records of accounts required to be maintained by a fund manager under Regulation 18, as may be reasonably required by the incoming fund manager: Provided that copies of the said information shall be submitted to the Authority within the same period.

[Issue 1] 72 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] Trustee 25.

Obligation to appoint a trustee Subject to these Regulations, a collective investment scheme shall in writing appoint as trustee a person approved by the Authority.

26.

Eligibility for appointment of a trustee (1) No person shall be appointed a trustee of a collective investment scheme unless such person is a bank or financial institution approved for that purpose by the Authority.

(2) A trustee of a collective investment scheme may in relation to the fund manager or custodian of such collective investment scheme, be a holding company or a subsidiary company within the meaning of the terms as defined in section 154 of the Companies Act (Cap.

486) or be deemed by the Authority to be otherwise under control of substantially the same persons or consist of substantially of the same shareholders, provided that the investment in a related company shall be limited to ten percent of the total funds managed by the fund manager.

(3) The Authority may revoke any approval already granted if at any time thereafter a trustee ceases to satisfy the requirements of these Regulations.

[L.N.

165/2002, s.

3.] 27.

Duties and obligations of a trustee (1) In the case of a unit trust, a trustee shall cause proper books of accounts to be kept by the fund manager, in respect of the unit trust and shall make available annually in such manner as may be prescribed by the Authority, audited statement of accounts in respect of the unit trust, together with a summary of any amendments of the trust deed that have been made since the date of the last statement.

(2) The trustee of a collective investment scheme, shall serve the scheme in compliance with the trust deed, and the trustees duties shall include the following, to (a) ensure that the custodian takes into custody all the collective investment scheme portfolio and holds it in trust for the holders in accordance with these Regulations; (b) take all steps and execute all documents which are necessary to secure acquisitions or disposals properly made by the fund manager in accordance with the trust deed, incorporation documents and these Regulations; (c) collect any income due to be paid to the scheme and/or claim any repayment of tax and direct any income received in trust for the holders to the custodian in accordance with these Regulations or the trust deed; (d) keep such records as are necessary (i) to enable it to comply with these Regulations; and (ii) to demonstrate that such compliance has been achieved; (e) execute all documents as are necessary and take all steps to ensure that instructions properly given to it by the fund manager as to the exercise of rights (including voting rights) attaching to the ownership of collective investment scheme portfolio are carried out; (f) exercise any right of voting conferred by any of the collective investment scheme portfolio which is in shares in other collective investment schemes managed or otherwise operated by the fund manager; (g) execute and deliver to the fund manager or its nominee upon the written request of the fund manager from time to time such powers of attorney or proxies as the fund manager may reasonably require, in such name or 73 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] names as the fund manager may request, authorising such attorneys and proxies to vote consent or otherwise act in respect of all or any part of the collective investment scheme portfolio; (h) forward to the fund manager and the custodian without delay all notices of meetings, reports, circulars, proxy solicitations and other documents of a like nature received by it as registered holder of any investment; (i) ensure that the collective investment scheme is managed by the fund manager in accordance with the agreement of service with the fund manager, these Regulations, the incorporation documents, the information memorandum and the rules of the collective investment scheme; (j) issue a report to be included in the annual report of the collective investment scheme on whether in the opinion of the trustee, the fund manager has in all material respects managed the scheme in accordance with the provisions of these Regulations, incorporation documents, the information memorandum and the rules of the collective investment scheme, and if the fund manager has not done so, the respect in which it has not done so and the steps which the trustee has taken in respect thereof; (k) ensure that decisions about the constituents of the collective investment scheme portfolio do not exceed the powers conferred on the fund manager; and (l) ensure that the fund manager maintains sufficient records and adopts such procedures and methods for calculation of prices at which shares are issued and redeemed to ensure that those prices are within the limits prescribed by these Regulations, the incorporation documents, the information memorandum and the rules of the collective investment scheme: Provided that if the trustee is not satisfied with any matter(s) specified in this regulation it must inform the Authority.

(3) In this regulation voting includes giving any consent or approval of any arrangement, scheme or resolution or any alternation in or abandonment of any rights attaching to any part of the collective investment scheme portfolio and right includes a requisition or joining in a requisition to convene any meeting or to give notice of any resolution or to circulate any statement or to consent to any short notice of any meeting.

28.

No delegation of duties of a trustee A trustee shall not delegate to the fund manager, his agent or associate (a) any function of oversight in respect of the fund manager; or (b) any function of custody or control of the collective investment scheme portfolio.

29.

Resignation of a trustee (1) A trustee shall not be entitled to resign except upon the appointment of a new trustee.

If a trustee wishes to resign it shall give three months notice in writing to that effect to the fund manager and the Authority and the fund manager shall appoint within two months after the date of such notice, some other qualified person as the new trustee upon and subject to such person entering into a trust deed supplemental to the trust deed comprised in the incorporation documents.

If the fund manager is unable to appoint a new trustee as aforesaid within such period of two months, the trustee shall be entitled to appoint a qualified company selected by it as the new trustee on the same basis as aforesaid.

(2) In this clause the expression qualified person means a company qualified to act as trustee in terms of these Regulations.

[Issue 1] 74 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] 30.

Removal of a trustee (1) A trustee shall be removed by the fund manager in writing immediately on the happening of any of the following events, that is if (a) a court of competent jurisdiction orders its liquidation (except a voluntary liquidation for the purpose of reconstruction or amalgamation under a scheme approved by the Authority); (b) a manager or a receiver is appointed over any of its assets; or (c) the trustee ceases to carry on business as a bank or financial institution.

(2) A trustee shall be removed by three months notice in writing given to the trustee by the fund manager with the approval of the Authority if (a) the trustee fails or neglects after reasonable notice from the fund manager to carry out or satisfy any duty imposed on the trustee in accordance with the trust deed, the incorporation documents, the information memorandum, the rules of the collective investment scheme or these Regulations; or (b) the holders, by extraordinary resolution resolve that such notice be given.

(3) The fund manager shall by deed supplemental to the trust deed appoint as trustee some other qualified person with the approval of the Authority to replace a trustee who has been removed.

31.

Matters to be provided for in the trust deed (1) A collective investment scheme trust deed shall make provisions on all the matters specified in the Third Schedule of these Regulations.

(2) Every trust deed shall prescribe the rules for the administration of the collective investment scheme complying with provisions of the Third Schedule and including the following (a) appointment of a custodian; (b) the issue of a receipt evidencing the purchase of the shares of the collective investment scheme; (c) the issue of a certificate of entitlement to the holders within thirty days specifying shares held by each holder and showing the transactions in the holders account during the preceding month, and that such certificate shall be prima facie evidence of the title of the holder to the units or shares; (d) authentication of every share certificate by the trustee, provided that before it is issued by the fund manager to the purchaser, the trustee shall not countersign any share certificate unless it has received from the fund manager a full account of the cash proceeds of the issue of that certificate or securities to the required value, together with all documents necessary to effect transfer thereof; (e) the funds of the collective investment scheme to be deposited in the trust account(s) with the custodian approved by the Authority and the securities of the collective investment scheme be kept with such custodian; (f) that (i) any funds for investment accruing from the issue of shares; (ii) dividends, interest or any other income accruing on underlying securities; (iii) the proceeds of capital gains, rights or bonus issues; and (iv) any funds received by the fund manager from the realization of underlying securities, 75 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] be accounted for in full to the trustee by the fund manager and the custodian and deposited in the trust account(s); (g) that the proceeds of capital gains, rights and bonus issues be vested in the collective investment scheme for the benefit of the holders; (h) all transactions of the collective investment scheme portfolio be individually reported to the trustee by the fund manager by the next working day following such transaction; (i) the obligation of the fund manager to repurchase, subject to such terms and conditions as may in terms of the trust deed apply, any number of shares offered to it, on such basis as may be prescribed in the trust deed; (j) that the specific method of calculation of the value of the collective investment scheme portfolio and of the share value at which holders shall transact their holdings with the collective investment scheme, should be acceptable to the Authority including the specific time of the day the week or date of the month and time for taking the valuation of securities, and the particulars relating to valuation given in Part VI of these Regulations; (k) the fee charged by the fund manager (which shall be the only monies payable to the fund manager annually) be disclosed in the financial reports of the collective investment scheme; (l) the accounts and financial records of a collective investment scheme be maintained in a system and manner acceptable to the Authority; (m) the fees payable to the trustee and the custodian of the collective investment scheme portfolio be disclosed in the financial reports of the collective investment scheme; and (n) amendment of the trust deed be in accordance with the provisions of the trust deed, these Regulations, the incorporation documents, the information memorandum and with the prior approval of the Authority.

(3) Every such trust deed shall further prescribe (a) the investment policy to be followed in respect of the scheme concerned; (b) the manner in which the selling price of shares is to be calculated; (c) the terms and conditions on which the fund manager will repurchase shares and the manner in which repurchase price is to be calculated; (d) the manner in which shares can be transferred from one holder to another; (e) if applicable, the manner in which additional shares are to be calculated; (f) the manner in which the yield from shares is to be calculated; and (g) the manner in which the initial charge and other charges are to be calculated.

(4) The Authority may authorize any (a) inclusion in the trust deed or the information memorandum as the case may be of any provision that in its opinion is deemed to be consistent with international market practices; or (b) omission from the trust deed or the information memorandum as the case may be of any information whose inclusion would otherwise be required under these Regulations if in the opinion of the Authority such information would be inconsistent with the international market practices or would be inappropriate to the nature of the collective investment scheme or would not be in the best interest of the holders.

[Issue 1] 76 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (5) The parties to a trust deed may by a supplemental deed alter or rescind any provisions of such trust deed or add further to the provisions thereto, but no alteration or rescission of, or addition to a trust deed shall be valid (a) unless the consent thereto of the holders and the Authority has been obtained in the manner prescribed in the trust deed; or (b) the Authority is satisfied that any such alteration, rescission or addition does not contain anything inconsistent with the provisions of the Act or with sound financial principles.

(6) A provision in any trust deed, whether entered into before or after the commencement of these Regulations purporting to relieve any party from liability to the holders on account of his own negligence, shall be void.

[L.N.

165/2002, s.

5.] 32.

Remuneration of trustee The agreement between the fund manager, the trustee and the board of directors, as the case may be, shall make provision on the computation of the fee in respect of the trustees services which will be disclosed to the holders in the annual report each year and the trustee shall in addition to such remuneration be entitled to be repaid by the fund manager on demand the amount of all its disbursements other than disbursements expressly required or authorised to be paid out of the collective investment scheme portfolio.

Custodian 33.

Obligation to appoint a custodian Every collective investment scheme shall appoint a custodian approved by the Authority.

34.

Eligibility for appointment of a custodian (1) No person shall be appointed a custodian of a collective investment scheme unless such person is a bank or financial institution approved for that purpose by the Authority.

(2) A custodian of a collective investment scheme may in relation to the fund manager or the trustee of such collective investment scheme, be a holding company or a subsidiary company within the meaning of the terms as defined in section 154 of the Companies Act (Cap.486) or be deemed by the Authority to be otherwise under control of substantially the same persons or consist substantially of the same shareholders, provided that the investment in a related company shall be limited to ten percent of the total funds managed by the fund manager.

(3) The Authority may revoke the approval of a custodian if at any time thereafter the custodian ceases to satisfy the requirements of these Regulations.

[L.N.

165/2002, s.

4.] 35.

Duties of a custodian (1) A custodian shall render custodial services to the collective investment scheme pursuant to a written agreement between the custodian and the board of directors, fund manager or trustee as the case may be, including the following (a) to maintain the custody of all the collective investment scheme portfolio and hold it to the order of the trustee or fund manager in accordance with the provisions of these Regulations, the incorporation documents, the information memorandum and the rules of the collective investment scheme; 77 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) to receive and keep in safe custody title documents, securities and cash amounts of the collective investment scheme; (c) to open an account in the name of the collective investment scheme for the exclusive benefit of such collective investment scheme; (d) to transfer exchange or deliver in the required form and manner securities held by the custodian upon receipt of proper instructions from the fund manager, trustee or board of directors, as the case may be; (e) to require from the fund manager, board of directors or trustee, such information as it deems necessary for the performance of its functions as a custodian of the collective investment scheme; (f) to promptly deliver to the trustee or fund manager or to such other persons as the fund manager or trustee may authorize, copies of all notices, proxies, proxy soliciting materials received by the custodian in relation to the securities held in the collective investment scheme portfolio, all public information, financial reports and stockholder communications the custodian may receive from the issuers of securities and all other information the custodian may receive, as may be agreed between the custodian trustee or fund manager, as the case may be from time to time; (g) to exercise subscription, purchase or other similar rights represented by the securities subject to receipt of proper instructions from the fund manager or the trustee as the case may be; (h) to exercise the same standard of care that it exercises over its own assets in holding, maintaining, servicing and disposing of the collective investment scheme portfolio and in fulfilling obligations in the agreement; (i) where title to investments are recorded electronically, to ensure that entitlements are separately identified from those of the fund manager or the trustee, as the case may be, of the collective investment scheme in the records of the person maintaining records of entitlement; (j) to attend general meetings of the holders and be heard at any general meeting on matters which concern it as custodian: Provided that the custodian shall in executing its duties exercise the degree of care expected of a prudent professional custodian for hire.

(2) A custodian discharging its contractual duties to the scheme shall not contract an agent to discharge those functions; except where a portion of the collective investment scheme portfolio is invested in offshore investments, in which case the custodian may engage the services of an overseas sub-custodian approved by the trustee or board of directors, with the notification of such appointment to the Authority.

(3) The agreement between the custodian and the trustee or board of directors or fund manager as the case may be, shall make provision on the computation of the fee in respect of custodial services which shall be disclosed to the holders in the annual report each year.

36.

Records to be maintained by a custodian The custodian must keep such books, records and statements as may be necessary to give a complete record of (a) the entire fund of the collective investment scheme portfolio held by the custodian; and (b) each and every transaction carried out by the custodian on behalf of the collective investment scheme, [Issue 1] 78 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] and shall permit the trustee, board of directors, the fund manager or a duly authorized agent of the Authority to inspect such books, records and statements within the premises of the custodian at any time during business hours.

37.

Reports by a custodian The custodian must provide to the fund manager, trustee or board of directors as the case may be and other Authority (a) a written statement at agreed reporting dates which lists all assets of the scheme in the scheme account(s) together with a full account of all receipts and payments made and other actions taken by the custodian; (b) advice or notification of any transfers of collective investment scheme portfolio or securities to or from the scheme account(s) indicating the securities acquired for the account(s) and the identity of the party having physical possession of such securities; (c) a copy of the most recent audited financial statements of the custodian prepared together with such information regarding the policies and procedures of the custodian as the fund manager, trustee or board of directors may request in connection with the agreement or the duties of the custodian under that agreement; and (d) provide a report annually to the Authority demonstrating that compliance with these Regulations the incorporation documents, the information memorandum and the rules of the collective investment scheme, has been achieved.

38.

Resignation of a custodian (1) The custodian shall not be entitled to resign except upon the appointment of a new custodian and if the custodian wishes to resign it shall give three months notice in writing to that effect to the board of directors or the fund manager, as the case may be and the Authority and the custodian shall give reasons for the resignation.

(2) The fund manager shall appoint within two months after the date of a notice under sub-regulation (1) some other qualified person as the new custodian upon and subject to such person being approved by the Authority and entering into an agreement similar to the agreement comprised in the incorporation documents.

(3) If the fund manager is unable to appoint a new custodian as within the period of two months, the custodian shall be entitled to appoint a qualified company selected by it as the new custodian on the same basis as a custodian appointed under Regulation 34.

(4) On receipt of the notice by the trustee, board of directors or the fund manager as the case may be the agreement between the board of directors fund manager as the case may be and the custodian shall be deemed to have been terminated.

(5) In the event the custodian desiring to retire or ceasing to be registered as a custodian with the Authority, the fund manager may with the approval of the Authority appoint another eligible person to be a custodian in its place.

39.

Removal of a custodian (1) A custodian shall be removed in writing immediately on the happening of any of the following events that is if (a) a court of competent jurisdiction orders its liquidation except a voluntary liquidation for the purpose of reconstruction or amalgamation approved by the Authority; or 79 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) a statutory manager or a receiver is appointed over any of its assets; or (c) the custodian ceases to carry on business as a bank or financial institution.

(2) A custodian shall be removed by three months notice in writing given by the fund manager to the custodian if (a) the custodian fails or neglects after reasonable notice from the fund manager, trustee or board of directors as the case may be, to carry out or satisfy any duty imposed on the custodian in accordance with the agreement; or (b) the holders, by extra ordinary resolution resolve that such notice be given, and the fund manager appoint as custodian some other qualified institution with the approval of the Authority.

(3) In the event of a termination of the agreement provided for under Regulation 38(4), or from the date of a winding up order issued by a competent court against the custodian, the custodian shall immediately hand over, and deliver all assets, documents and funds including those from the bank account(s) of the collective investment scheme held by such custodian to the custodian appointed in writing by the board of directors, fund manager or trustee, as the case may be, and approved by the Authority within thirty days from the date of such termination.

(4) Within twenty days from the termination of the agreement, the custodian shall submit to the Authority an audit report indicating the assets, liabilities and an inventory of the scheme fund, securities and title documents of the scheme assets which have been handed over transferred and delivered to the appointed custodian.

(5) A copy of the notice given to the custodian for termination of services by the fund manager shall be given to the trustee and the board of directors.

(6) In the event of any disagreement between the fund manager, the trustee or the board of directors as the case may be and the custodian, notification shall be made to the Authority by the fund manager giving reasons for the termination of services of the custodian.

Umbrella Schemes and Investment Companies 40.

Meaning of umbrella scheme A promoter of a collective investment scheme may establish two or more sub-funds under the management of one fund manager (hereinafter called an umbrella scheme).

41.

Minimum requirements for umbrella schemes (1) An umbrella scheme does not qualify for approval from the Authority to operate unless each of its proposed sub-funds qualify for a separate approval to operate as a collective investment scheme, except as provided in Regulation 80.

(2) Subject to the provisions of sub-regulation (4), if for a period of twenty-four consecutive months commencing at any time after the first issue of any shares of an umbrella scheme, shares in respect of less than two sub-funds are in issue the trustee or board of directors of the scheme shall take such action as is necessary to change the category of the scheme or to cause shares in respect of more than one sub-fund to be in issue.

(3) If sub-regulation (2) becomes, or should reasonably be expected by the trustee or board of directors to become applicable, the fund manager shall, prior to or forthwith upon the expiry of the twenty-four month period notify the holders and the Authority of any action proposed in order to comply with sub-regulation (2).

[Issue 1] 80 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (4) Sub-regulation (2) shall not apply if, on or prior to the expiry of the twenty-four month period, winding-up of the umbrella scheme has commenced.

42.

Allocation of costs for umbrella schemes In so far as any of the collective investment scheme portfolio of an umbrella scheme, or any assets to be received as part of the collective investment scheme portfolio or any costs, charges or expenses to be paid out of the collective investment scheme portfolio, are not attributable to one sub-fund only, the umbrella scheme shall allocate such assets, costs, charges or expenses between and among the sub-funds in a manner which is fair to the holders of the umbrella scheme generally.

43.

Reports Regulation 19 (fund managers reports) shall be applied as if each sub-fund were a separate collective investment scheme.

44.

Special provisions relating to investment companies (1) Every collective investment scheme incorporated as an investment company shall list on an approved securities exchange within six months of a period of expiry of two years after the date of registration of the collective investment scheme.

(2) The minimum amount to be raised for a collective investment scheme set up as an investment company shall be twenty five million shillings.

(3) The investment company with the express approval of the Authority shall offer its securities for sale.

(4) The investment company will be registered as a collective investment scheme upon providing proof that it has raised the minimum amount of twenty-five million shillings.

(5) In the event that the minimum amount of twenty-five million shillings is not raised then the investment company shall refund the monies received as subscriptions to the subscribers.

PART VI PRICING, VALUATION AND DEALING OF SHARES Initial Offer 45.

Application This sub part applies to the setting up of a new scheme by way of an initial offer and during the period of such offer.

46.

Compliance with incorporation documents A fund manager shall not issue or sell shares of a collective investment scheme otherwise than at a price calculated in accordance with these Regulations, the incorporation documents, the latest information memorandum and the rules of the collective investment scheme.

47.

Period of initial offer A period of initial offer shall not exceed thirty days from the date of launch, to be so specified in the initial information memorandum and subject to the provisions of regulation 46, an initial offer shall remain open for the prescribed period.

48.

Creation of shares during initial offer (1) The fund manager shall create or in the case of a unit trust, instruct the trustee to create shares in the scheme at the beginning of the first day of business in the initial offer period and during the period.

81 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (2) At or before the beginning of the day referred to in sub-regulation (1) the fund manager must irrevocably choose, in respect of that initial offer to proceed either under paragraph (3)(a) (up and running) or under paragraph (3)(b) (pay over and wait) and in the case of a unit trust, notify its choice to the trustee.

(3) Where on any business day during the period of initial offer the fund manager assumes any obligation to issue shares it must, depending on its choice under paragraph (2) either (a) create shares or instruct the trustee (in the case of a unit trust), at the beginning of the next business day, to create shares in the scheme in such number at least as will enable the fund manager immediately to fulfil that obligation, whether from the shares so created or from other shares; or (b) proceed as follows (i) pay to the custodian or trustee (in any case where the purchaser has sent a remittance) on the day of receipt of the remittance or on the next business day, the total amount (or the total amount less the total of the fund managers preliminary charge, if any, in respect of those shares); and (ii) as soon as the period of the initial offer has come to an end, create shares or in the case of a unit trust, instruct the trustee to create shares in the scheme in such number at least as will enable the fund manager to fulfil his obligation to issue shares whether from the units so created or from other shares.

(4) The instructions given by the fund manager to the trustee shall state, in relation to each type of share to be created, the number to be created, expressed either as a number of shares or as an amount in value or as a combination of the two.

(5) The trustee must create shares on receipt of instructions by the fund manager given under this rule, and must not during an initial offer create shares otherwise.

49.

Initial price (1) The initial issue price and offer period, which shall not exceed thirty days from the date of the launching, shall be prescribed in the incorporation documents and the latest information memorandum and the proceeds of the issue shall be remitted by the fund manager to the custodian of the collective investment scheme with advice to the trustee.

(2) The initial issue of shares of a new fund shall not be less than the issue price paid by investors during the launching and offer period less the fund managers fee and service charges prescribed in the incorporation documents and the latest information memorandum.

50.

Determination of selling and repurchase price (1) The selling price and repurchase price quoted by the fund manager shall be based on the net asset value of the fund in this respect, the value of an investment in securities listed and quoted on the securities exchange shall be the value based on the last done market price which is the last transacted price of the securities.

(2) In the event of a suspension in the quotation of securities for a period exceeding fourteen days, or such shorter period as determined by the trustee, the value of such securities shall be based on other methods such as the net tangible assets of the issuer of the securities and the nominal value of the securities.

(3) With respect to unlisted securities, the valuation shall be based on methods that are fair and reasonable and that are acceptable to the fund manager and approved by the trustee.

[Issue 1] 82 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] 51.

Pricing of additional shares The price of additional shares created and payable by the fund manager to the trustee, after the offer period of the initial offer of new fund shall be based on the net asset value of the fund.

The same basis in the computation of the price shall also be applicable to the price payable by the trustee on redemption by way of cancellation of shares.

52.

Valuation point for selling price The value of the fund to be used in determining the selling price quoted by the fund manager and the price payable by the fund manager to the trustee on creation of additional shares shall be the net asset value at the end of the business day immediately preceding the business day on which the written request to buy and create shares is received by the fund manager and the trustee respectively.

53.

Valuation point for repurchase price The value of the fund to be used in determining the repurchase price quoted by the fund manager and the price payable by a trustee of a collective investment scheme on the redemption of units shall be the net asset value at the end of the business day on which the written request to repurchase and redeem is received by the fund manager and the trustee respectively.

54.

Allowance for service charge In addition to the selling price which is derived from the net asset value; the fund manager may charge a service fee as disclosed in the information memorandum and such charge shall be disclosed separately in the application form.

55.

Determination of repurchase price The repurchase price quoted by the fund manager shall be the net asset value of the fund.

However, if the determination of the repurchase price is computed on a different basis, the repurchase price so computed and quoted by the fund manager shall not be less than the net asset value of the fund and no deductions, other than deductions for incidental expenses such as stamp duty shall be made from the computed repurchase price.

56.

Calculation of net asset value per share (1) The formula to be adopted to determine the value of the fund per share is to divide the value of the assets of the fund less its liabilities (including such provisions and allowances for contingencies as the fund manager may think appropriate) by the number of shares issued and fully paid.

(2) The net asset value of the fund and the net asset value per share shall be calculated by the fund manager as at the end of each business day.

(3) Liabilities shall include the amount of any accrued fees and expenses at the relevant valuation date of the fund.

(4) The number of units in issue shall be those units that are issued and fully paid.

Redemption and Cancellation of Shares 57.

Cancellation of shares (1) Where the fund manager wishes that shares be cancelled, it shall cancel such shares and in the case of a unit trust, instruct the trustee to cancel such shares; and any 83 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] instruction given by the fund manager shall state, in relation to each type of shares to be cancelled, the number to be cancelled, expressed either as a number of shares or as an amount in value or as a combination of the two: Provided that at any moment of such instruction the fund manager shall not have any outstanding obligation to issue shares, which by cancellation of shares, would prevent the fund manager from fulfilling any such instruction.

(2) The trustee shall cancel the units on receipt of instructions given by the fund manager.

(3) On cancellation of shares and on delivery to the custodian or the trustee as the case may be of such evidence of the title to those shares, as the custodian or trustee may reasonably require, the custodian or the trustee shall, within two business days of the instructions given by the fund manager pay the repurchase price of the shares (a) to the person who was the holder of those shares; or (b) in accordance with the relevant provisions of the information memorandum, trust deed and incorporation documents.

58.

Repurchase price The repurchase price payable for each share by the custodian or the trustee shall be based on the net asset value of the fund.

59.

Timing of instructions to create or cancel units (1) A fund manager may at any time give instructions to the trustee to create or to cancel units.

(2) Where instructions are given at a time which is less than twelve hours after the last valuation point and before the next valuation point the instructions must be given by reference to the price calculated or being calculated for the last valuation point.

(3) Where instructions are given at a time which is more than twelve hours after the last valuation point (a) instructions must be given by reference to the price next to be calculated; and (b) the trustee shall create or cancel the units only after the next valuation point has been reached.

Operational Requirements (Dealing) 60.

Dealing (1) Every collective investment scheme shall stipulate in the information memorandum the days when dealings in its shares shall be computed.

(2) In the event of a scheme not dealing on a daily basis, there shall be at least one regular dealing day every two weeks.

(3) Suspension in dealings may be provided for only in exceptional circumstances having regard to the interest of all the holders.

(4) The fund manager shall immediately notify the Authority if dealing has been cancelled or suspended and the fact of the cancellation shall be published immediately following such decision and at least once every week during the period of suspension, in the newspaper in which the schemes prices are normally published.

[Issue 1] 84 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] 61.

Fund managers obligation to issue or redeem shares (1) Subject to the provisions of sub-regulation (2), the fund manager shall at all times during the dealing day issue or redeem shares of the scheme at a price arrived at under these Regulations.

(2) Sub-regulation (1) shall not apply if the (a) number or value of the shares sought to be issued or redeemed is less than any number or value stated in the information memorandum as the minimum number or value to be purchased or held or redeemed; (b) fund manager believes on reasonable grounds that the number or value of shares sought to be issued would lead to the holding by any one person or by any one person and any other person appearing to the fund manager to be acting in concert with that person of more shares than any number stated in the information memorandum as the maximum number to be purchased or held; or (c) fund manager has reasonable grounds, having regard to the interests of all the holders relating to the circumstances of the person concerned, for refusing to issue units to or redeeming shares from such person.

(3) This regulation shall also apply during an initial offer in so far as it relates to the issuing of shares.

62.

Restrictions on issued shares in an investment company No person shall after expiry of six months from the closing date of the initial offer period have beneficial interest in shares of collective investment scheme set up as an investment company representing more than twenty five per cent of the collective investment schemes issued shares.

63.

Issue price parameters (1) The fund managers price for issue of shares shall not exceed the maximum issue price, that is, a price fixed by the fund manager and notified to the custodian or the trustee: and that maximum issue price itself must not exceed the total of (a) the relevant creation price; and (b) the current initial charge.

(2) In the case of an initial offer, the fund managers price for issue of shares shall not exceed the initial price.

64.

Redemption price parameters (1) A fund managers price for redemption of shares shall not be less than the relevant minimum repurchase price already notified to the trustee.

(2) The minimum repurchase price shall not be less than the relevant repurchase price.

(3) In case of an umbrella fund, the maximum price at which shares in one constituent part may be exchanged for shares in another such part shall not exceed the relevant maximum issue price (less any preliminary charge) of the new shares; and the minimum price at which the old shares may be taken in exchange shall not be less than the equivalent minimum repurchase price.

65.

Charges on Issue (1) If the trust deed or the information memorandum so permits, the issue price may include an initial charge which may be expressed either as a fixed amount or calculated as 85 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] a percentage of the creation price and such initial charge shall not exceed the amount stated in the information memorandum as the current initial charge.

(2) A fund manager wishing to increase the current initial charge, shall give a ninety day notice in writing after obtaining approval from the trustee or board of directors, as the case may be, of that increase and the date of its commencement to the trustee and all persons who ought reasonably to be known to the fund manager to have made an arrangement for the purchase of shares at regular intervals and the information memorandum shall be revised in accordance with these Regulations to reflect the new initial charge and the date of its commencement.

66.

Charges on redemption or cancellation If the trust deed or the information memorandum so permits, the amount payable as proceeds of redemption may be arrived at after deduction of a charge for the benefit of the fund manager, and that charge may be expressed either as a fixed amount, or calculated as a percentage of the proceeds of redemption which would otherwise have been payable: Provided that (a) the amount or percentage may be expressed as diminishing over the time during which the holder has held the shares, but may not be expressed as liable to vary in any other respects; (b) where the fund manager is permitted to make a deduction, the amount shall not exceed the amount that would be derived by applying the rate or method prescribed in the information memorandum at the date on which the relevant shares were issued; (c) where the trust deed or information memorandum of a scheme, whenever executed, is modified so as to include the provision on fund managers charge on redemption the modification shall be expressed so as to apply only to shares issued after the date on which the modification takes effect; and (d) the fund manager shall not rely on the introduction of the charge on redemption or increase in the rate or method of the charge, unless (i) the fund manager has obtained approval to the introduction or increase of the charge from the trustee or board of directors, as the case may be and thereafter has given a notice in writing of introduction or increase of the charge on redemption and of the date of its commencement to all persons who ought reasonably to be known to the fund manager to have made an arrangement for the purchase of shares at regular intervals; (ii) the fund manager has revised the information memorandum in accordance with these Regulations and incorporation documents and to reflect the new charge, rate or method and the date of its commencement; and (iii) ninety days have elapsed since the revised information memorandum became available.

67.

Dilution Levy (1) The fund manager shall have the power to require either or both of (a) the payment of a dilution levy in respect of the issue or sale of shares or any class of shares; and (b) the deduction of a dilution levy in respect of the redemption or the cancellation of shares or any class of shares.

[Issue 1] 86 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (2) Any payment or deduction provided for under sub-regulation (1) shall become due the same time as payment becomes due in respect of the relevant issue, sale, redemption or cancellation.

(3) A dilution levy may be imposed only in a manner that is, so far as practicable, fair to all holders and potential holders and the maximum rate must be disclosed in the current information memorandum.

68.

Payment on Redemption (1) On agreeing to redeem shares, the fund manager shall, within the period specified in sub-regulation (2), pay the appropriate proceeds of redemption to the holder.

(2) The period provided for under sub-regulation (1) expires at the close of business on the sixth (6) business day next after the valuation point immediately following receipt by the fund manager of the request to redeem.

(3) Nothing in this Regulation shall require the fund manager to part with money in respect of a cancellation or redemption of shares where it has not yet received money due on the earlier issue or sale of those shares from the holder.

(4) The amount to be paid by the fund manager as the proceeds of redemption of a share shall not be less than the price of a share of the relevant class notified or to be notified to the custodian in respect of the last valuation point or, for a redemption at a forward price to be notified in respect of the next valuation point less (a) any redemption charge permitted under Regulation 66; (b) any withholding taxes or other taxes to be deducted; and (c) any dilution levy permitted under Regulation 67.

69.

Notification of price to trustee or custodian (1) Forthwith upon completion of a valuation the fund manager shall notify the custodian or the trustee, as the case may be, of (a) the creation price; (b) the repurchase price; (c) the maximum issue price; (d) the minimum repurchase price; together, in the case of an umbrella fund; and (e) the maximum issue price for shares in any part on an exchange of shares.

(2) The prices to be notified under sub-regulation (1) are those relevant to deals based on prices determined at that valuation day.

(3) Any notification under sub-regulation (1) shall include a statement of the number of shares owned by the trustee or fund manager as the case may be, for the scheme at that valuation day, or notified point if there is one.

70.

Publication of price (1) The fund manager shall publish on the business day following any valuation, the repurchase price of those shares and the maximum selling price and if there is one, the current initial charge and redemption charge if any which shall be the relevant prices last notified to the trustee or custodian under Regulation 69.

(2) Publication required by sub-regulation (1) shall not be in less than two daily newspapers of national circulation published in the English language.

(3) During the period of the initial offer, the fund manager shall not agree to issue shares of the scheme at a price other than the initial price.

87 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] Valuation 71.

General (1) For the purposes of determining the price at which shares of any class in a unit trust or a mutual fund may be issued, cancelled, sold or redeemed, the fund manager shall carry out a valuation of the collective investment scheme portfolio at each valuation point for the unit trust or mutual fund, or a sub fund of an umbrella scheme, as the case may be, at each valuation point.

(2) An investment included in the collective investment scheme portfolio for which different prices are quoted according to whether it is being bought or sold shall be valued at its mid market price.

(3) For the purposes of the preceding paragraphs, there shall be excluded from the value of an investment or other part of the collective investment scheme portfolio any fiscal charges or commissions or other charges that were paid or would be payable on the acquisitions or disposals of the investment or other part of the collective investment scheme portfolio.

(4) There must be at least two valuation points in each calendar month and if there are only two valuation points in any calendar month they must be two weeks apart.

(5) The frequency of regular valuation points and the manner in which valuations will be carried out, must be specified in the information memorandum.

(6) Sub-regulations (1) to (5) shall not apply to a collective investment scheme set up as an investment company under the Companies Act (Cap.

486) and listed on a securities exchange.

Income 72.

Annual income allocation date (1) A collective investment scheme shall have an annual income allocation date which is the date in the calendar year stated in the most recently published information memorandum as the date on or before which, in respect of each annual accounting period, an allocation of income is to be made.

(2) The annual income allocation date shall be a date within three calendar months after the relevant accounting reference date.

73.

Annual allocation of income (1) At the end of each accounting period, the trustee, board of directors or the fund manager, as the case may be, shall arrange for the custodian to transfer the income of a collective investment scheme portfolio to an account to be known as the distribution account.

(2) The trustee, board of directors or the fund manager, as the case may be, are not obliged to comply with sub-regulation (1) if it appears to them that the average of the allocations of income from the distribution account to the holders would be less than such minimum amount as may be prescribed in the information memorandum.

(3) Any income that in accordance with sub-regulation (2) is not transferred to the distribution account must be carried forward to the next accounting period and be regarded as received at the start of the next period and the fund manager shall disclose the maximum number of periods in which any income in accordance with this sub- regulation can be carried forward.

[Issue 1] 88 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (4) The calculation of the available income shall be as follows (a) take the aggregate of the income of a collective investment scheme portfolio received or receivable for the account of the collective investment scheme in respect of the period; (b) deduct the charges and expenses of the collective investment scheme paid or payable out of the income of the collective investment scheme portfolio in respect of the period; (c) add the fund managers best estimate of any relief from tax on such charges and expenses; (d) make such other adjustments as the fund manager considers appropriate (in the case of subparagraph (i) and (ii), after consulting the auditors) in relation to (i) taxation; (ii) the proportion of the price received or paid for shares that is related to income (taking account of any provisions in the incorporation documents relating to equalisation); (iii) potential income which is unlikely to be received until twelve months after the income allocation date; (iv) income which should not be accounted for on an accrual basis because of lack of information about how it accrues; (v) any transfer between income and capital account; and (vi) any other adjustments that the fund manager considers appropriate after consulting the auditors; (e) on or before the annual income allocation date, the fund manager shall allocate the available income to the shares of each class in issue taking account of the provision of its incorporation documents relating to the proportion of available income attributable to each class in the case of an umbrella scheme.

74.

Annual allocation to accumulation shares (1) The amount of income allocated to accumulation shares shall with effect from the end of the annual accounting period, become part of the capital of the collective investment scheme portfolio and the interests of the holders in the amount shall be satisfied by an adjustment as at the end of the period, in the proportion of the value of the collective investment scheme portfolio to which the price of a share of the relevant class is related.

(2) The adjustments under sub-regulation (1) shall be such as will ensure that the price of an accumulation share of the relevant class remains unchanged notwithstanding the transfer of the income to the capital of the collective investment scheme portfolio.

75.

Annual distribution to holders of income shares (1) Subject to sub-regulation (2), where the shares in issues in a collective investment scheme are or include income shares, on or before each annual income allocation date, the fund manager shall give the custodian timely instructions sufficient to enable the custodian to distribute the income allocated to income shares amongst the holders in accordance with the number of such shares held or deemed to be held by them respectively at the end of the relevant annual accounting period and the custodian shall pay the distribution in accordance with the instructions.

89 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (2) In calculating the amount to be distributed under sub-regulation (1), the fund manager shall (a) deduct any amounts previously allocated by way of interim allocation of income in respect of that annual accounting period; and (b) deduct and carry forward in the income account such amount as shall be necessary to adjust that allocation of income to the nearest one hundredth of a cent (or the equivalent amount in the base currency) per income share or such lesser fraction as the trustee or board of directors, as the case may be, from time to time determine.

76.

Interim allocation of income (1) This Regulation applies if at any time the most recently published information memorandum (a) states that an allocation of income will be made before the annual income allocation date in any year in respect of a period (hereinafter referred to as an interim accounting period) within the annual accounting period; and (b) specifies a date as the interim income allocation date in relation to that interim accounting period.

(2) In a case such as that provided for under sub-regulation (1), Regulations 73, 74 and 75 shall apply so as to secure the making of an interim allocation of income as if (a) the interim accounting period in question and all previous interim accounting periods in the same annual accounting period taken together, were the annual accounting period; (b) the interim income allocation date were the annual income allocation date; and (c) the trustee or board of directors were to treat as the available amount of income for the interim allocation a sum which, in the opinion of the fund manager, would be available for allocation of income if the interim accounting period and all previous interim accounting periods in the same annual accounting period taken together were an annual accounting period.

77.

Income equalisation An information memorandum may provide that an allocation of income whether annual or interim to be made in respect of each share issued or sold during the accounting period in respect of which that income allocation is made shall include a capital sum to be referred to as income equalisation.

PART VII INVESTMENT, BORROWING, LENDING 78.

Broad investment guidelines (1) All investments of a collective investment scheme made by the fund manager shall (a) be consistent with the objectives of the scheme; (b) be transferable; (c) have a ready price or value; and (d) have adequate proof of title or ownership to allow proper custodial arrangements to be made.

(2) The book value of the investments of a collective investment scheme portfolio shall not exceed the following limits (a) securities listed on a securities exchange in Kenya 80%; [Issue 1] 90 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (b) securities issued by the Government of Kenya 80%; (c) immovable property 25%; (d) other collective investment schemes including umbrella schemes 25%; (e) any other security not listed on a securities exchange in Kenya 25%; (f) off-shore investments 10%: Provided that (a) no limits shall apply to investment of the collective investment scheme portfolio in an interest bearing account, product or financial instrument of or issued by a bank or financial institution as defined by the Banking Act (Cap.

488); or and insurance company as defined in the Insurance Act (Cap.

487); (b) the book value of an investment in an interest bearing account, financial product or instrument of or issued by any single bank or financial institution or insurance company or a combination of any such investment in a single bank, financial institution or insurance company shall not in aggregate exceed 25% of the collective investment scheme portfolio and net asset value; (c) the book value of a collective investment schemes holding of securities relating to any single issuer shall not exceed twenty-five per cent of the collective investment schemes properties net asset value; and (d) a collective investment scheme established for the investment of retirement benefits schemes shall comply with the investment guidelines prescribed under the Retirement Benefits Act (Cap.

3); (e) sub-regulation 78(2)(c) and (e) shall not apply to a collective investment scheme established as an investment company.

(3) A fund manager shall not apply any part of the collective investment scheme portfolio in the acquisition of any investments which are for the time being, partly paid or otherwise in the opinion of the trustee likely to involve the trustee in any liability contingent or otherwise.

(4) The limits and restrictions in this Part shall be complied with at all times based on the most up-to-date value of the collective investment scheme portfolio, but a five percent allowance in excess of any limit or restriction shall be permitted where the limit or restriction is breached through the appreciation in value of the collective investment scheme portfolio.

79.

Restriction on borrowing and lending No collective investment scheme shall (a) lend all or any part of the collective investment scheme portfolio; or (b) assume, guarantee, endorse or otherwise become directly or contingently liable for or in connection with any obligation or indebtedness of any person.

80.

Investment and borrowing powers for umbrella schemes Regulations 78 and 79 shall not apply to sub funds of an umbrella scheme.

Advertisements and Public Announcements 81.

Advertising only for approved schemes (1) No person shall advertise or make other invitations to the public or a section of the public in Kenya to invest in a collective investment scheme which has not obtained approval from the Authority.

91 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (2) Every advertisement or invitation to the public, or a section of the public shall be submitted to the Authority at least forty-eight hours before the date of publication, and may be used until such significant or material changes arise in the information contained in the advertisement, invitations, public announcement or other promotional materials, after which a new submission for approval may be made to the Authority.

82.

General contents (1) Any advertisement or invitation or other promotional material to the public or a section of the public, which includes information on the trustee, shall be accompanied by the trustees written consent.

(2) If a collective investment scheme is described as having been approved by the Authority it shall be stated that, in giving this approval, the Authority does not take responsibility for the financial soundness of the scheme or for the correctness of any statements made or opinions expressed in this regard.

(3) Advertisements shall include a warning statement that (a) the price of shares, and the income therefrom if the collective investment scheme pays dividends may go down as well as up; and (b) investors are reminded that in certain specified circumstances their right to redeem their shares may be suspended.

(4) Warning statements shall be written in such a manner as to be capable of being read with reasonable case by anyone reading the advertisement.

Meetings 83.

General and extra-ordinary meetings (1) The trustee, board of directors, fund manager or holders, as the case may be, shall convene a general meeting within three months after the relevant accounting reference date.

(2) The trustee, board of directors, fund manager or holders, as the case may be, may convene an extra-ordinary meeting of holders at any time but not later than six weeks after receipt of the requisition.

(3) A requisition shall (a) state the objects of the meeting; (b) be dated; (c) be signed by holders who, at that date, are registered as the holders of shares representing not less than one-tenth in value of all of the shares in the collective investment scheme then in issue; (d) be deposited at the head office of the collective investment scheme.

(4) A requisition may consist of several documents deposited with the fund manager at the same time, each being in like form and signed by one or more holders.

84.

Notice of meetings (1) Not less than twenty-one days written notice, inclusive of the date on which the notice is deemed to be served and the day of the meeting, shall be given to the holders of a general meeting.

(2) Sub-regulation (1) shall not apply to notice of an adjourned meeting.

(3) The non-receipt of notice by a holder shall not invalidate the proceedings at any meeting.

[Issue 1] 92 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] 85.

Quorum (1) The quorum at a meeting of holders shall be specified in the information memorandum or the trust deed.

(2) No business shall be transacted at any meeting unless the requisite quorum is present at the commencement of the meeting.

(3) If within half an hour from the time appointed for the meeting a quorum is not present the meeting, if convened on the requisition of holders, shall be dissolved and in any other case it shall stand adjourned to such day and time not being less than seven days thereafter and to such place as may be appointed by the chairman if any has been appointed pursuant to the incorporation documents or otherwise by the trustee, board of directors or fund manager, as the case may, be and if at such adjourned meeting a quorum is not present within fifteen minutes from the time appointed for the meeting, the holders present shall comprise the quorum.

(4) Notice of any adjourned meeting of holders shall be given and such notice shall state that the holders present at the adjourned meeting whatever their number and the number of shares held by such holder or holders shall form a quorum.

86.

Resolutions (1) Except where an extraordinary resolution is specifically required or permitted by these Regulations, any resolution required under the Companies Act (Cap.

486) or these Regulations shall be passed by a simple majority of the votes validly cast for and against the resolution at a general meeting of holders.

(2) In the case of an equality of votes cast, in respect of a resolution, put to a general meeting, any chairman appointed pursuant to the incorporation documents shall be entitled to a casting vote in addition to any other vote he may have.

(3) An extra-ordinary resolution shall mean a resolution passed at an extra-ordinary meeting as defined in Regulation 83(2).

87.

Voting rights (1) On a show of hands, every holder who, being an individual is present in person or, being a corporation, is present by its representative duly authorized in that regard, shall have one vote.

(2) Votes may be given either personally or by proxy or in any other manner permitted by the incorporation document and the voting rights attached to each shall be such proportion of the voting rights attached to all of the shares in issue as the price of the share bears to the aggregate price or prices of all the shares in issue at the date specified in Regulation 84 and a holder entitled to more than one vote need not, if he votes, use all his votes or cast all his votes in the same way.

(3) In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose, seniority shall be determined by the order in which the names stand in the register of holders.

(4) No director of a collective investment scheme shall be entitled to be counted in the quorum of, and no director or any associate of the director shall be entitled to vote at, any meeting of a collective investment scheme except in respect of any shares which the director or his associate holds on behalf of or jointly with a person who, if himself the registered holder would be entitled to vote and from whom the director or his associate, as the case may be, has received voting instructions, and accordingly, shares held by any director shall not, except as mentioned in this subregulation be regarded as being in issue.

93 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 88.

Proxies (1) A holder entitled to attend and vote at a meeting of a collective investment scheme is entitled to appoint another person to attend and vote in his place whether such other person is a holder or not.

(2) Except insofar as the incorporation documents otherwise provides a holder shall be entitled to appoint more than one proxy to attend on the same occasion but a proxy shall be entitled to vote only on a poll.

(3) Every notice calling a meeting of the holders in the collective investment scheme shall contain a reasonably prominent statement that a holder entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him.

(4) An instrument appointing a proxy, or any other document necessary to show the validity of, or otherwise relating to, the appointment of a proxy shall not be required to be received by the collective investment scheme or any other person more than forty-eight hours before the meeting or adjourned meeting in order that the appointment may be effective.

89.

Holders to be notified In this Part, holders shall mean only the persons who were holders seven days before the notice of the relevant meeting was deemed to have been served in accordance with Regulation 84(1), but excluding any persons who are known to the fund manager not to be holders at the time of the meeting.

90.

Special resolutions required for amendments to incorporation documents (1) The incorporation documents of a collective investment scheme may be amended by an extraordinary resolution subject to sub-regulation (2).

(2) An amendment to the incorporation documents may be made by resolution of the directors if (a) the instrument of incorporation provides for amendment to be made in such manner; and (b) the amendment is required solely (i) to implement any change in the law, including a change brought by an amendment of these Regulations; or (ii) as a direct consequence of any such change; or (iii) to change the name of the collective investment scheme; or (iv) to remove from the incorporation documents obsolete provisions; or (v) to make any other change to the instrument of incorporation which the board of directors consider does not involve any holder or potential holder in any material prejudice; and (c) it would not introduce or affect any provision relating to the descriptions of the transferable securities in which the collective investment scheme portfolio may be invested unless it is required solely to reflect the introduction of a new sub-fund.

91.

Service of notices and other documents (1) Any notice or document required to be served upon a holder shall be deemed to have been duly served if it is sent by post to or left at holders address appearing in the register.

[Issue 1] 94 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (2) Any notice required to be served or information to be supplied or given to any other person, including the Authority, shall be in writing or in such other form as enables the recipient to know or to record the time of receipt and to preserve a legible copy of the notice.

(3) Any notice or document served by post shall be deemed to have been served on the fourth day following that on which the letter containing the same is posted, and in providing such service it shall be sufficient to prove that such letter was properly addressed, stamped and posted; and any notice or document left at a registered address or delivered other than by post shall be deemed to have been served on the day it was so left or delivered.

Accounts and Audit 92.

Obligation to appoint an auditor The fund manager shall at the outset and upon any vacancy, appoint an auditor for the collective investment scheme.

93.

Qualifications of an auditor A person shall not be qualified for appointment as auditor unless he is a member of and holds a valid practicing certificate issued by the Institute of Certified Public Accountants of Kenya.

94.

Independence An auditor shall be independent of the trustee, board of directors, fund manager and the custodian, their agents or associates.

95.

Accounting period Every collective investment scheme shall have an annual accounting period ending the last day of December in each year; but the fund manager shall publish and submit to the Authority an un-audited interim report for the half-year period ending on the last day of June in each year within thirty days from the end of that month.

[L.N.

100/2009, s.

1.] 96.

Audit of annual report The fund manager shall cause the schemes annual report to be audited, and such report shall contain the information provided in the Fifth Schedule.

PART VIII AMALGAMATION AND RECONSTRUCTION 97.

General (1) In this part, amalgamation means a scheme of arrangements whereby the whole of the collective investment scheme portfolio becomes the collective investment scheme portfolio (but not the first collective investment scheme portfolio) of a regulated collective investment scheme and whereby holders in the collective investment scheme receive shares in the regulated collective investment scheme and reference to a collective investment scheme includes a sub-fund or equivalent separately pooled part of such a scheme.

(2) Reconstruction in relation to a collective investment scheme (which in this definition includes a sub-fund) is a scheme of arrangement whereby (a) part of the collective investment scheme portfolio becomes the collective investment scheme portfolio of a regulated collective investment scheme (which includes a sub-fund or equivalent separately pooled part, of a regulated collective investment scheme); or 95 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) the whole of that collective investment scheme portfolio becomes the collective investment scheme portfolio of two or more regulated collective investment schemes; or (c) the whole of that collective investment scheme portfolio becomes the first collective investment scheme portfolio of a regulated collective investment scheme.

98.

Amalgamation and reconstruction (1) Neither a collective investment scheme nor a sub-fund of an umbrella fund shall be subject to an amalgamation or reconstruction which would result in its holders becoming holders in any body other than a regulated collective investment scheme that complies with these Regulations.

(2) Where for the purpose of an amalgamation or reconstruction, it is proposed that the collective investment scheme portfolio or collective investment scheme portfolio attributable to a sub-fund of an umbrella scheme, should become the collective investment scheme portfolio of another regulated collective investment scheme or sub-fund (or equivalent separately pooled part) of a regulated collective investment scheme, the proposal shall not be implemented without the sanction of an extraordinary resolution of the holders of the collective investment scheme or as the case may be, of the class or classes of shares related to the sub-fund.

(3) Where it is proposed that a collective investment scheme or a sub-fund of an umbrella scheme should receive a collective investment scheme portfolio of another collective investment scheme as a result of amalgamation or reconstruction of some other collective investment scheme or sub-fund (or equivalent separately pooled part) of such a scheme or of a body corporate, then the proposal shall not be implemented without the sanction of an extraordinary resolution of the holders of the collective investment scheme or, as the case may be, of the class or classes of shares related to the sub-fund unless sub-regulation (4) applies.

(4) This sub-regulation applies if the trustee or board of directors of the collective investment scheme are reasonably satisfied that the inclusion of the collective investment scheme portfolio concerned (a) is not likely to result in any material prejudice to the interests of the holders of the collective investment scheme; and (b) is consistent with the objectives of the collective investment scheme or its sub-fund.

(5) The fund manager shall obtain the approval of the Authority in writing, of the proposed amalgamation or reconstruction and shall submit a copy of the extraordinary resolution by the holders approving the amalgamation or reconstruction within two days after holding of the extraordinary meeting.

Suspension and Resumption of Dealings in Shares 99.

Suspension and resumption of dealings in shares (1) The fund manager may, at any time, with prior agreement of the trustee or directors as the case may be, or shall without delay, if the trustee or board of directors, as the case may be, so require, suspend the issue, cancellation, sale and redemption of shares (referred to in this Regulation as dealings in shares) if the fund manager, or the trustee or board of directors as the case may be, are of the opinion that due to exceptional circumstances there is good and sufficient reason to do so having regard to the interests of holders.

[Issue 1] 96 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (2) At the time of suspension under paragraph (1) the fund manager shall (a) inform the Authority of the suspension, stating the reason for its action; and (b) forthwith give written confirmation of the suspension and the reasons for it to the Authority.

(3) During the period of suspension, none of the obligations in Part VI relating to the issue, cancellation, sale or redemption of shares or to the valuation of the collective investment scheme portfolio shall apply.

(4) The suspension of dealings in shares shall cease as soon as practicable after the trustee or board of directors as the case may be are no longer of the opinion referred to in sub-regulation (1) and in any event within twenty-eight days of the commencement of the suspension of dealings in shares.

(5) Before the suspension of dealings in shares ceases, the fund manager shall inform the Authority of the proposed resumption and forthwith after the resumption shall confirm the resumption by giving notice in writing to the Authority.

(6) This Regulation may be applied to one or more classes of shares without being applied to other classes of shares in an umbrella scheme and shall apply to a sub-fund as it applies to the collective investment scheme but by reference to the shares of the class or classes relating to the sub-fund and to the collective investment scheme portfolio attributable to the sub-fund, however, for the purpose of subregulation (1), the fund manager shall have regard to the interests of all the holders in the collective investment scheme or the umbrella scheme.

Winding-up of Collective Investment Schemes 100.

When a collective investment scheme may be wound up (1) A collective investment scheme shall not be wound up otherwise than by a court order except under the provisions of these Regulations (a) unless and until effect may be given in accordance with the provisions relating to winding up given in the Companies Act (Cap.

486), to a proposal to wind up the affairs of a company otherwise than by the court, and provided that the Authority shall have first exercised its powers to intervene in the management of the collective investment scheme before an application is made to court for winding up of the collective investment scheme; (b) unless a statement has been prepared and sent or delivered to the Authority in accordance with paragraphs (3)(a), (4) and (5) and received by the Authority prior to satisfaction of the condition in subregulation (1)(a).

(2) Subject to sub-regulation (1) and the subsequent provisions of this regulation, a collective investment scheme shall be wound up under these Regulations if an extraordinary resolution to that effect has been passed; or when the period (if any) fixed for duration of the collective investment scheme by its incorporation documents, expires or the event occurs, on the occurrence of which its instrument of incorporation provides that the collective investment scheme is to be wound up.

(3) On or before a notice is given to the Authority in the event of a proposal to wind up the affairs of the collective investment scheme otherwise than by the court, the trustee or board of directors shall commence to make a full enquiry into the collective investment schemes affairs so as to ascertain whether the scheme will be able to meet all its liabilities (which include contingent and prospective liabilities) and the fund manager shall prepare a statement, which shall reflect the results of such enquiry, and either (a) confirm that the collective investment scheme will be able to meet all its liabilities within twelve months of the date of the statement; or 97 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) state that such confirmation cannot be given.

(4) The statement referred to in sub-regulation (3) shall (a) relate to the collective investment schemes affairs at the date which must not be more than twenty-one days prior to the date on which notice is given to the Authority; and (b) be approved by the trustee or board of directors and be signed on their behalf by the fund manager, and if it is given under paragraph (a) of sub- regulation (3) of this regulation by at least one other director or alternatively be signed by the fund manager and contain a statement signed by the auditor to the effect that in his opinion the enquiry required by sub- regulation (3) has been properly made and is fairly reflected by the confirmation.

(5) Following compliance with sub-regulation (4), the statement referred to in sub- regulation (3) must be sent or delivered to the Authority and a copy sent to the custodian.

101.

Consequences of commencement of winding up (1) In this regulation the effective time means either the time at which both the condition referred to in sub-regulation (1) of Regulation 100 are satisfied or, if later, the time, determined in accordance with sub-regulation (2) of Regulation 100, at which the collective investment scheme shall be wound up.

(2) Immediately following the effective time (a) regulations pertaining to pricing, dealing investment and borrowing powers shall cease to apply to the collective investment scheme; (b) the collective investment scheme shall cease to issue and cancel shares; (c) the fund manager shall cease to sell or redeem shares or to arrange for the collective investment scheme to issue to cancel them; (d) no transfer of a share shall be registered and no other change to register of holders shall be made without the sanction of the trustee or board of directors, as the case may be; and (e) the collective investment scheme shall cease to carry on its business, except so far as may be required for its beneficial winding up; however the corporate state and corporate powers of the scheme and (subject to the preceding provisions of this Regulation) the powers of the trustee or board of directors shall continue until the collective investment scheme is dissolved.

(3) The fund manager shall as soon as practicable after the effective time (a) publish in not less than two daily newspapers of national circulation published in the English language managements decision to wind up the collective investment scheme and the date of commencement of the winding up; and (b) if the fund manager has not previously notified the holders of the proposal to wind up, give written notice of the commencement of the winding up to the holders.

102.

Manner of winding up (1) The fund manager shall, as soon as practicable after the effective time cause the collective investment scheme portfolio to be utilized and the liabilities of the collective investment scheme to be met out of the proceeds.

[Issue 1] 98 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (2) The fund manager shall give instructions to the custodian as to how such proceeds (until utilized to meet liabilities or make distributions to holders) shall be held and such instructions shall be with a view to the prudent protection of the creditors and holders against loss.

(3) Provided there are sufficient liquid funds available after making adequate provision for the expenses of the winding up and the discharge of the liabilities of the collective investment scheme remaining to be discharged, the fund manager may arrange to make one or more interim distributions out of such funds to the holders proportionately to the right to participate in collective investment scheme portfolio attached to their respective shares as at the effective time.

(4) When the fund manager has caused all the collective investment scheme portfolio to be realized and all of the liabilities of the collective investment scheme known to the fund manager to be met, the fund manager shall make a final distribution, on or prior to the date on which the final account is sent to the holders in accordance with Regulation 103, of the balance remaining (net of a provision for any further expenses of the collective investment scheme) to the holders in the same proportions as provided in sub-regulation (3).

(5) Sub-regulations (1) to (4) are subject to the terms of any scheme of amalgamation or reconstruction sanctioned by an extraordinary resolution of the collective investment scheme passed on or before the effective time.

103.

Final account (1) As soon as the collective investment schemes affairs are fully wound up including distribution or provision for distribution in accordance with Regulation 102(3), the fund manager shall prepare an account of the winding up showing how it has been conducted and how the collective investment scheme portfolio has been disposed of and the account shall, following its approval by the trustee or board of directors as the case may be, be signed on their behalf by the fund manager and the trustee or at least one other director as the case may be and the account once signed, shall be the final account for the purposes of these Regulations.

(2) The final account shall state the date on which the collective investment schemes affairs were fully wound up and the date stated shall be regarded as the final day of the accounting period of the scheme then running of the final accounting period.

(3) The collective investment schemes auditor shall make a report in respect of the final account, which shall state the auditors opinion as to whether the final account has been properly prepared for the purpose of sub-regulation (1).

(4) Within two months of the end of the final accounting period, the fund manager shall send a copy of the final account and the auditors report on it to the Authority, and to each person who was a holder (or the first named joint holders) immediately before the final accounting period.

104.

Duty to ascertain liabilities (1) The fund manager shall have a duty to use all reasonable endeavours to ensure that all the liabilities of the collective investment scheme are discharged prior to the completion of the winding up.

(2) The duty in sub-regulation (1) relates to all liabilities of the scheme of which (a) the fund manager is, or becomes, aware prior to the completion of the winding up; or (b) the fund manager would have become aware of prior to the completion of the winding-up had it used all reasonable endeavours to ascertain the liabilities of the collective investment scheme.

99 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (3) If the fund manager rejects any claim against the collective investment scheme in whole or part, the fund manager shall forthwith send to the claimant written notice of its reasons for doing so.

(4) If after the effective time the fund manager becomes of the opinion that the collective investment scheme will be unable to meet all its liabilities within twelve months of the date of the statement provided under sub-regulation (3)(a) of Regulation 100 (a) the fund manager shall notify the trustee or board of directors as the case may be immediately; and (b) the trustee or board of directors as the case may be shall forthwith present a petition or cause the collective investment scheme to present a petition for the winding up in accordance with the provisions in the Companies Act (Cap.

486).

105.

Accounts and reports (1) While a collective investment scheme is being wound up (a) the annual and half-yearly accounting periods shall continue to run; (b) the provisions about annual and interim allocation of income shall continue to apply; and (c) annual and half-yearly reports shall continue to be required.

(2) The fund manager need not send to each holder a copy of any report relating to an accounting period or half-yearly accounting period which began after the effective time, if the trustee or board of directors of the collective investment scheme as the case may be, after consulting the Authority, are satisfied that the interests of the holders are not such as to require the report to be sent to the holders, but a copy of the report shall be sent or supplied free of charge to any holder requesting the same.

106.

Liability of a fund manager (1) The fund manager shall be personally liable to meet any liability of a collective investment scheme wound up under these Regulations (whether or not the collective investment scheme has been dissolved) that was not discharged prior to the completion of the winding up, except to the extent that the fund manager can show that it has complied with Regulation 104.

(2) If the proceeds of the realization of the assets attributable, or allocated to a particular sub fund of an umbrella scheme are insufficient to meet the liabilities attributable or allocated to that sub-fund, the fund manager shall pay to the scheme for the account of that sub-fund the amount of the deficit, except and to the extent that the fund manager can show that the deficit did not arise as a result of any failure by the fund manager to comply with these Regulations.

(3) The obligations of the fund manager under this regulation shall not affect any other obligation of the fund manager under these Regulations or the general law.

107.

Additional provisions applicable to umbrella schemes (1) Liabilities of an umbrella scheme attributable, or allocated in accordance with Regulation 42 to a particular sub-fund shall be met out of the scheme collective investment scheme portfolio attributable or allocated to such sub-fund.

(2) In this Part (a) references to shares are references to shares of the class(es) related to the sub-fund to be terminated; (b) references to holders are references to holders of such shares; [Issue 1] 100 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (c) references to a resolution or extraordinary resolution are references to such resolution passed at a meeting of holders of shares of the class or classes referred to in paragraph (a); (d) references to collective investment scheme portfolio are references to collective investment scheme portfolio allocated or attributable to the sub- fund to be terminated; and (e) references to liabilities are references to liabilities of the company allocated or attributable to the sub-fund to be terminated.

108.

Capital Markets Tribunal Any dispute or difference which may arise between the holders, fund manager, trustee or the board of directors as the case may be, custodian and the other or others shall be referred to as the Capital Markets Tribunal established under section 35A of the Act.

PART IX EMPLOYEE SHARE OWNERSHIP PLANS (ESOPS) 109.

Approval of and registration with the Authority (1) A listed company may set up an employee share owner-ship plan (hereinafter referred to as ESOP) to enable its employees own shares of the listed company subject to approval of the Authority.

(2) Every ESOP shall be registered with the Authority.

110.

ESOP Unit Trust An Employee Share Ownership Plan shall be structured as a unit trust (the ESOP Unit Trust).

111.

Requirements for ESOPS An ESOP Unit Trust shall comply with the following requirements (a) application and registration for an ESOP Unit Trust shall be accompanied with the following information and documents (i) proposed trust deed and scheme rules; (ii) names of the proposed trustees; (iii) board of directors resolution approving the establishment of ESOP Unit Trust and the appointment of the proposed trustees; (iv) shareholders approval for the establishment of the ESOP Unit Trust and the terms of the trust deed (where already obtained); and (v) any other information that the Authority may require.

(b) every trust deed to an ESOP Unit Trust shall include the following particulars (i) parties to the trust deed; (ii) interpretation of terms used in the trust deed; (iii) declaration of trust; (iv) appointment and removal procedures for trustees; (v) procedure for creation and issuance of units; (vi) method of pricing and valuation of units; (vii) procedure for repurchase of units; (viii) procedure for income distribution; (ix) apportionment of unit holders entitlements in respect of dividends, rights and capitalization issues; 101 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (x) companys and trustees covenants; (xi) restrictions on the trustees; (xii) trustees fees and charges; (xiii) liability of the trustees; (xiv) register of unit holders and records of trust fund charges and commissions; (xv) audit and periodic reports; (xvi) procedures for winding up; (xvii) applicable law; (xviii) procedure for variation of trust deed; (xix) procedure for settlement of disputes.

(c) Every ESOP Unit Trust shall have scheme rules which shall include the following (i) eligibility for membership; (ii) procedure for saving and/or acquisition and repurchase of units; (iii) maximum individual holding; (iv) employee rights in respect to units; (v) pricing and valuation of units; (vi) in case of an options scheme there shall be a procedure for granting options, maximum limit, executive rights in respect to units and entitlement in the event of reconstruction or winding up.

112.

Investment parameters An ESOP Unit Trust shall acquire or purchase shares of the listed company from time to time as may required by the rules of the ESOP: Provided that an ESOP Unit Trust shall not acquire or purchase any securities other than the shares of the listed company for which it is established.

113.

Minimum number of trustees There shall be at least three trustees of ESOP Unit Trust save that a trust corporation may act as sole trustee of an ESOP Unit Trust.

114.

Creation of units The trustees of an ESOP Unit Trust shall hold the certificates representing the shares of the listed company in the trustees names and create corresponding units in the same denominations as the listed company shares purchased by the trustees to be allotted and issued the employee entitled thereto under the ESOP.

115.

Certificate of entitlement to holders The trustees shall issue to every employee entitled to the units under the ESOP a certificate of entitlement representing the number of units owned by the employee in the ESOP Unit Trust within thirty days of receiving the companys certificate of entitlement against which such units were issued and maintain a register of all unit holders.

116.

Rights on the certificate of entitlement The certificates representing the units owned by employees shall not be transferable nor traded at any securities exchange but the units represented therein may, at the option of the unit holder be pledged or repurchased by the trustees for cash.

[Issue 1] 102 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] 117.

Price of units The rules of the ESOP shall prescribe the price at which an ESOP Unit Trust shall allot the units to the employee, the price at which the trustees shall repurchase units and the liability for incidental expenses but such repurchase shall reflect the latest traded price of the companys shares at the securities exchange.

118.

Surrender of certificates by employee On termination of employment of an employee, the employee shall surrender all certificates representing the units held by such employee in an ESOP Unit Trust to the trustees at such time as prescribed by the ESOP rules.

119.

Redemption or transfer At the option of the employee, the trustees shall upon receipt of the surrendered certificates, either (a) transfer in a private transaction in accordance with the prescribed procedure for private transactions, to the name of the employee, the number of shares of the listed company corresponding in value to the units represented in the surrendered share certificate and cause the employees name to be registered as the owner of such shares in the register of the listed company; or (b) re-purchase the surrendered units.

120.

Exchange of units not permitted Save as provided in these Regulations, the trust deed of an ESOP Unit Trust shall not permit the exchange of units of an ESOP Unit Trust with shares of the listed company.

121.

Audit The trustees of an ESOP Unit Trust shall cause an audit of the ESOP to be carried out once every year by qualified persons and shall submit a copy of the auditors report to the unit holders and the Authority within sixty days of the completion of the audit.

122.

Winding up An ESOP Unit Trust may be varied or wound up in accordance with its rules but three months notice of intention to wind up an ESOP Unit Trust shall be given to the unit holders and the Authority.

123.

Disclosures Every listed company shall disclose any options granted to employees under the ESOP and disclose the total value of the ESOP (including the number of shares purchased from the exchange and the number of units created and issued under the ESOP) in its annual report.

Special Interest Collective Investment Schemes 124.

Definition For the purposes of these Regulations, a special interest collective investment scheme means a collective investment scheme established by a promoter for the purposes of facilitating investment by a special group of individuals with a common interest in a listed company and may include farmers, distributors, supplier, among others.

103 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 125.

Approval and registration with the Authority (1) A promoter may set up a special interest collective investment scheme for the purposes of investing in the securities of a specified listed company subject to the approval of the Authority.

(2) Every special interest collective investment scheme shall be registered with the Authority.

126.

Special interest unit trust A special interest collective investment scheme shall be structured as a unit trust and the promoter shall notify the listed company upon approval and registration with the Authority.

127.

Requirements for special interest unit trust A special interest collective investment scheme shall comply with the following requirements (a) application and registration for a special interest unit trust shall be accompanied with the following information and documents (i) proposed trust deed and scheme rules; (ii) names of the proposed trustees; (iii) board of directors or promoter resolution approving the establishment of a special interest collective investment scheme and the appointment of the proposed trustees; (iv) holders approval for the establishment of the special interest collective investment scheme and the terms of the trust deed (where already obtained); and (v) any other information that the Authority may require.

(b) every trust deed to a special interest collective investment scheme shall include the following particulars (i) parties to the trust deed; (ii) interpretation of terms used in the trust deed; (iii) declaration of trust; (iv) appointment and removal procedures for trustees; (v) procedure for creation and issuance of units; (vi) method of pricing and valuation of units; (vii) procedure for repurchase of units; (viii) procedure for income distribution; (ix) apportionment of unit holders entitlements in respect of dividends, rights and capitalisation issues; (x) trustees covenants; (xi) restrictions on trustees; (xii) trustees fees and charges; (xiii) liability of the trustees; (xiv) register of holders and records of trust fund charges and commissions; (xv) audit and periodic reports; (xvi) procedures for winding-up; (xvii) procedure for variation of trust deed; and (xviii) procedure for settlement of disputes.

[Issue 1] 104 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (c) every special interest collective investment scheme shall have scheme rules which shall include the following (i) eligibility of membership; (ii) procedure for saving and/or acquisition and repurchase of units; (iii) maximum individual holding; (iv) holders rights in respect of units; (v) pricing and valuation of units; and (vi) entitlement to holders in the event of reconstruction or winding up.

128.

Investment parameters A special interest collective investment scheme shall acquire or purchase shares of the listed company from time to time as may be required by the rules of the scheme: Provided that a special interest collective investment scheme shall not acquire or purchase any securities other than the shares of the listed company for which it is established.

129.

Minimum number of trustees There shall be at least three trustees of a special interest collective investment scheme.

130.

Creation of units The trustees of a special interest collective investment scheme shall hold the certificates representing the shares of the listed company in the trustees names and create corresponding units in the same denominations as the listed companys shares purchased by the trustees to be allotted and issued to the holder entitled thereto under the special interest collective investment scheme.

131.

Certificate of entitlement to holders The trustees shall issue to every holder entitled to the units under the special interest collective investment scheme a certificate of entitlement representing the number of units owned by the holder in the special interest collective investment scheme within thirty days of receiving the companys certificate of entitlement against which such units were issued and maintain a register of all unit holders.

132.

Rights on the certificate of entitlement The certificates representing the interest of a holder shall not be transferable nor traded at any securities exchange but the units represented therein may, at the option of the holder be pledged or repurchased by the trustees for cash.

133.

Price of units The rules of the special interest collective investment scheme shall prescribe the price at which that unit trust shall allot units to the holders or potential holders, the price at which the trustees shall re-purchase units and the liability for incidental expenses but such re-purchase shall reflect the latest or previous days traded price of the companys shares at the securities exchange.

134.

Redemption or transfer At the option of the holder, the holder shall surrender the certificates to the trustee who shall upon receipt of the surrendered certificates either (a) transfer in a private transaction in accordance with the prescribed procedure for private transactions to the name of the holder, the number of shares of 105 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] the listed company corresponding in value to the units represented in the surrendered share certificate and cause the holders name to be registered as the owner of such shares in the register of listed company; or (b) re-purchase the surrendered units.

135.

Exchange of units not permitted Save as provided in these Regulations, the trust deed of a special interest collective investment scheme shall not permit the exchange of units of the scheme with shares of the listed company.

136.

Audit The trustees of a special interest collective investment scheme shall cause an audit of the scheme to be carried out once every year by qualified persons and shall submit a copy of the auditors report to the holders and the Authority within sixty days of the completion the audit.

137.

Winding up A special interest collective investment scheme may be varied or wound up in accordance with its rules but three months notice of intention to wind up the scheme shall be given to the holders and the Authority.

138.

Disclosures Every listed company shall disclose any special interest collective investment scheme which has an acquired or is to acquire shares, the number of shares purchased from the exchange and the aggregate holding of the scheme in the listed company in its annual report.

FIRST SCHEDULE Form 1 (r.

5) CAPITAL MARKETS ACT [Cap.

485A.

APPLICATION TO REGISTER A COLLECTIVE INVESTMENT SCHEME (1) Promoter: State name and address of the fund.

(2) Constitution: (a) State the legal form of the collective investment scheme (i) mutual fund; (ii) unit trust; (iii) investment company.

(b) State the name of the country or jurisdiction where the collective investment scheme is constituted.

(d) State certificate of incorporation.

(3) Key Officers: (a) State name, address, place of birth and citizenship of: (i) directors; (ii) chief executive.

(4) References: Give two personal references and a bank reference of the key officers.

(5) Functionaries: State names, addresses and business activities of each of the collective investment scheme's (a) fund manager; [Issue 1] 106 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] FIRST SCHEDULE, Form 1continued (b) administrators; (c) investment advisers; (c) custodians; and (d) Trustees.

(6) Prior Registration: State if the collective investment scheme is now or has been registered, licensed, recognized or authorized under any law or regulations relating to mutual funds, collective investment schemes/fields or securities in any country or jurisdiction.

(7) Refusal or Disciplinary Has the collective investment scheme, any of its officers, Measures: managers, administrators, investment advisers or custodians been the subject of (a) refusal of an application for registration, licence, recognition or authorization; or (b) suspension, cancellation or revocation of registration, licence, recognition or authorization, by any authority in any country or jurisdiction? YES/NO.

If yes, provide details.

(8) Civil Proceedings: Has a judgment been rendered or any suit, action or proceedings pending against any officer of the collective investment scheme or of any of its functionaries listed in question (5) above, in civil proceedings in any court or tribunal in any country or jurisdiction which has been or is based in whole or in part on fraud, theft, deceit, misrepresentation or similar conduct? YES/NO If yes, provide details.

(9) Offences: Has any key officer of the collective investment scheme or any of its functionaries listed in question (5) above been or is being charged, indicted or convicted in any country or jurisdiction for any offence in any criminal or civil proceedings relating to fraud or theft arising out of dealing in mutual funds, collective investment schemes/funds or securities? If so, provide details.

(10) Bankruptcy: Has any key officer or the collective investment scheme or of any of its functionaries listed in question 5 above been (a) declared bankrupt or been party to bankruptcy or insolvency proceedings? (b) subject to proceedings (elating to winding up, dissolution or creditors' arrangements; or (c) subject to proceedings relating to receivership or creditors' compromise; in any country or jurisdiction? If so, provide details.

AFFIDAVIT I.

as a director of.

Limited, the promoter of the proposed collective investment scheme, do depose and say that I.

have read and understood the questions in this application form and hereby certify under oath that the foregoing answers and statements are true, correct and complete to the best of my knowledge, information and belief.

Sworn before me.

Name and Commissioner of Oaths Signature of Deponent at the city of.

this.

day.

20.

107 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] FIRST SCHEDULE, Form 1continued (b) State educational and professional qualifications of the key officers.

Form 2 (r.

7) CAPITAL MARKETS ACT [Cap.

485A.

CERTIFICATE OF REGISTRATION The CAPITAL MARKETS AUTHORITY herby certifies that.

has this day been registered as a unit trust/mutual fund/investment company* under the provisions of section 30(4) of the Capital Markets Act (Cap.

485A of the Laws of Kenya) Dated the .day of .20.

SEALED with the common seal of the Capital Markets Authority in the presence of:.

Chairman Chief Executive * Delete as necessary SECOND SCHEDULE [Regulation 8(1).] THE INCORPORATION DOCUMENTS 1.

Particulars of the Promoters; 2.

Information Memorandum; 3.

Trust Deed; 4.

Management Agreement; 5.

Custody Agreement; 6.

Rules of the Scheme; THIRD SCHEDULE [Regulation 31.] TRUST DEED PART I THE TRUST 1.

Interpretation definition of terms used in the Trust Deed 2.

The constitution of the collective investment scheme [Issue 1] 108 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] A statement of the name, address and registered office of the collective investment scheme.

If the collective investment scheme is to terminate after the expiration of a particular period, a statement to that effect.

Declaration of trust A declaration that, subject to the provisions of the deed and all rules of the collective investment scheme for the time being in force, the collective investment scheme portfolio (other than sums standing to the credit of the distribution account) is held by the trustee on trust for the holders of the shares pari passu according to the number of shares held by each holder, and the sums standing to the credit of the distribution account are held by the trustee on trust to distribute or apply them in accordance with these Regulations.

Objects of the trust 5.

Trust Deed to be binding and authoritative A statement that the deed is binding on each holder as if he had been a party to it and is bound by its provisions and authorizes and requires the trustee and the fund manager to do the things required or permitted of them by the terms of the deed.

The investment policy and authorized investments The categories in which the funds of the collective investment scheme may invest as well as the investment and borrowing restrictions.

Valuation of the collective investment scheme portfolio 8.

Restricted economic or geographical objectives If there are to be any restrictions on the geographic areas or economic sectors in which investment of capital of the collective investment scheme portfolio may be made, a statement of what they are.

Holders liability to pay A provision that a holder is not liable to make any further payment after he has paid the purchase price of his shares and that no further liability can be imposed on him in respect of the shares which he holds.

10.

Certificates A provision requiring the fund manager or the trustee to issue certificates representing shares to holders whose names are entered on the register.

A provision authorizing the trustee to charge a fee for issuing any document recording or for amending an entry on the register otherwise than on the issue or sale of shares.

PART II FUND MANAGER 11.

Appointment of a Fund Manager A declaration that the scheme will at all times be managed and administered by a fund manager licensed by the Capital Markets Authority.

12.

Fund Managers capital A provision that the fund manager shall at all times maintain a paid-up share capital as prescribed by the Authority.

13.

Duties of a Fund Manager A description of duties to be carried out by the fund manager.

109 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 14.

Fund Managers preliminary charge A statement authorizing the fund manager to make a preliminary charge to be included in the issue price of a share, specifying a maximum to that charge expressed either as a fixed amount in the base currency or as a percentage of the creation price of a share.

15.

Fund Managers periodic charge A statement authorizing the fund manager to make a periodic charge payable out of the income of the collective investment scheme portfolio and a statement that provides for the charge to be expressed as annual percentage (to be specified in the information memorandum) of the value of the collective investment scheme portfolio (and the statement may provide for the addition to the charge of value added tax, if any, payable thereon), specifying the accrual intervals and how the charge is to be paid, and the maximum charge expressed as an annual percentage of the value of the collective investment scheme portfolio.

16.

Fund Managers remuneration A provision that expressly details the fund managers entitlement by way of remuneration for its services and to cover its expenses in performing its obligations under this Deed.

17.

Reports by Fund Manager to Trustee A provision that expressly requires the fund manager to make periodic reports to the trustee, board of directors and the Authority.

18.

Fund Managers powers A provision detailing the powers and discretions of the Fund Manager.

19.

Documents to be prepared by the Fund Manager A provision detailing the documents to be prepared for signature and execution by the trustee.

20.

Retirement, Substitution, Suspension or Liquidation of Fund Manager Provisions on the circumstances under which the fund manager may retire, be replaced or suspended.

21.

Removal of the Fund Manager Provisions on the circumstances under which the fund manager may be suspended.

PART III TRUSTEE 22.

Appointment of Trustee A provision setting out the name, address and the terms and conditions of service for the trustees.

23.

Trustees share capital 24.

Role, powers, duties and obligations of trustee 25.

Registration and retention of securities by the trustee 26.

Legal proceedings by or against the trustee 27.

Trustees remuneration [Issue 1] 110 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] A statement authorizing any payments to the trustee by way of remuneration for his services to be paid (in whole or in part) out of the collective investment scheme portfolio and specifying the basis on which that remuneration is to be determined and how it should accrue and be paid.

28.

Retirement and appointment of new trustee Provisions on the circumstances under which the trustee may retire or be replaced.

29.

Removal of trustee Provisions on the circumstances under which the trustee may be removed.

PART IV CUSTODIAN 30.

Appointment of custodian by trustee 31.

Duties of a custodian 32.

Records to be maintained by a custodian 33.

Reports by a custodian 34.

Retirement of a custodian 35.

Removal of a custodian PART V UNIT PORTFOLIO 36.

Issue and purchase of units 37.

The creation of units 38.

The cancellation of units 39.

The redemption of units PART VI MUTUAL FUNDS 40.

Issue and purchase of shares 41.

Cancellation of shares 42.

Redemption of shares PART VII VALUATION 43.

Details on the method used for valuation of units or shares PART VIII MEETINGS 44.

Notice of meetings 45.

Quorum for a meeting 46.

Voting rights 47.

Proxies 111 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 48.

Resolutions 49.

Amendments to incorporation documents PART IX SUSPENSION AND TERMINATION 50.

Winding up of a unit trust or mutual fund 51.

Manner of winding up 52.

Manner in which collective investment scheme portfolio to be dealt with on liquidation of fund manager 53.

Termination of a sub-fund of an umbrella company PART X OTHER MATTERS TO BE PROVIDED FOR IN THE TRUST DEED 54.

Every trust deed of a unit trust shall prescribe the rules for the administration of the unit trust concerned and shall inter alia contain provisions to the following effect namely that (a) the trustee shall, subject to the terms of the trust, hold the underlying securities in trust for the unit holders; (b) certificates shall be issued to unit holders within seven days of any purchase; (c) the trustee shall countersign, graphically or otherwise, every certificate before it is delivered by the fund manager to a purchaser; (d) the trustee shall not so countersign any certificate unless it has received from the fund manager a full account of the cash proceeds of the issue of that certificate or securities to the required value, together with all documents necessary to effect transfer thereof; (e) the monies of the unit trust shall be kept in a trust account at a licensed bank; (f) (i) any monies for investments accruing from the issue of securities; (ii) dividends, interest or any other income accruing on underlying securities; (iii) the proceeds of capital gains, rights or bonus issues; and (iv) any money received by the unit trust fund manager from the realization of underlying securities, shall be accounted for in full to the trustee and deposited in a trust account or accounts; (g) the securities of the unit trust shall be kept with a custodian approved by the Authority; (h) the proceeds of capital gains, rights and bonus issues shall be invested in the unit trust scheme concerned for the benefit of the unit holders; (i) all transactions of the unit trust collective investment scheme portfolio shall be individually reported to the trustee by the fund manager within two weeks of such transaction; (j) the funds of the unit trust shall be invested on accordance with the investment limits prescribed by the Authority; (k) it shall be incumbent upon the fund manager to repurchase, subject to such terms and conditions as may in terms of the trust deed apply, any number of units offered to it; [Issue 1] 112 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (l) the specific method of calculations of the value of the unit trust and of the unit at which unit holders shall transact their holdings with the unit trust shall be acceptable to the Authority; (m) the specific date of the week or month and time for taking valuation of securities; (n) the valuation of securities be at the last stock exchange transaction prices at or prior to that time and date; (o) the unit value shall be the market valuation of all monies and properties of the funds of the unit trust divided by units outstanding at that time; and (p) the initial charge, which shall be the only deductible charge from unit values in transaction with unit holders be stated; (q) the fee charge by the fund manager which shall be the only monies payable to the fund manager shall be stated and shall be an annual fee; (r) the accounts and financial records of the unit trust shall be maintained in a system acceptable to the Authority; (s) the fees payable to the trustee and the custodian of the collective investment scheme portfolio shall be stated; and (t) the trust deed may be amended in the manner prescribed in the trust deed.

55.

Every such trust deed shall further prescribe (a) the investment policy to be followed in respect of the scheme concerned; (b) the manner in which the selling price of units is to be calculated; (c) the terms and conditions on which the fund manager will repurchase units and the manner in which the repurchase price is to be calculated; (d) if applicable, the manner in which additional units for sale to the public are to be created; (e) the manner in which the yield from units is to be calculated; (f) the manner in which the initial charge and the service charge are to be determined; (g) the manner in which units are to be cancelled.

PART X CERTAIN VOID PROVISIONS OF TRUST DEED, AND AMENDMENTS TO TRUST DEED 56.

Any provision in a trust deed relating to the unit trust which is inconsistent with any provision of the Capital Markets Act or these Regulations shall be void.

57.

The parties to a trust deed may be a supplemental deed alter or rescind any provisions of such trust deed or add further provisions thereto, but no alterations or rescission of or addition to any trust deed shall be valid (a) unless the consent thereto of unit holders has been obtained in the manner prescribed in the trust deed: Provided that if the trustee is satisfied that any such alienation, rescission or addition is required only to enable the provision of the trust deed to be given effect to more conveniently or economically or otherwise to benefit the unit holders, will not prejudice the interests of the unit holders and does not alter the fundamental provisions or objects of the trust deed or operate to release the trustee or the unit trust fund manager from any responsibility to the unit holders, such consent may be dispensed with; or 113 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) unless the Authority is satisfied that any such alteration, rescission or addition does not contain anything inconsistent with the provisions of the Capital Markets Act or with sound financial principles.

58.

A provision in any trust deed, whether entered into before or after the commencement of these Regulations purporting to relieve any party thereto from liability to the unit holders on account of his own negligence shall be void.

FOURTH SCHEDULE [Regulation 12.] PARTICULARS OF INFORMATION MEMORANDUM (NOTE: This list is not intended to be exhaustive.

The board of directors of the scheme or the fund manager or trustee, as the case may be are obliged to disclose any information which may be necessary for investors to make an informed judgment.) 1.

Prominent statement Prominent statement on the period for which the prospectus is valid.

Disclaimer The following statement shall be contained on the front cover of the prospectus Permission has been granted by the Capital Markets Authority to offer to the public the securities which are the subject of this issue.

As a matter of policy, the Authority assumes no responsibility for the correctness of any statements or opinions made or reports contained in this prospectus.

The Collective Investment Scheme State (a) the name of the collective investment scheme; (b) that the collective investment scheme is a unit trust or a mutual fund; or (c) where the duration of the collective investment scheme is not unlimited, when it may terminate; (d) that the holders are not liable for the debts of the collective investment scheme; (e) particulars of registration of the collective investment scheme; (f) the address of its head office and its branch office; (g) the address of the place in Kenya for service on the collective investment scheme of notices or other documents required or authorized to be served on it if different from (f); (h) the date of the licence granted by the Authority to operate as a collective investment scheme; (i) the base currency for the collective investment scheme; (j) the maximum and minimum sizes of the collective investment schemes capital; (k) the circumstances in which the collective investment scheme may be wound up under the rules of the collective investment scheme and a summary of the procedure for, and the rights of the holders under, such a winding up; and [Issue 1] 114 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (l) in the case of an investment company, the fact that the minimum subscription value of Kenya shillings 25 million must be attained during the offer period and what would occur if the expected amount is not received during the initial offer.

Investment Objectives and Policy (1) Give sufficient information to enable a shareholder to ascertain (a) the investment objectives (e.g.

capital growth or income) of the collective investment scheme or of each sub-fund of an umbrella scheme; (b) the collective investment schemes investment policy for achieving investment objectives referred to under (a) including the general nature of the portfolio and any intended specialization (e.g.

economic sector, geographical area or type of investment); (c) the extent (if any) to which the policy under (b) does not envisage remaining fully invested at all times; and (d) any restrictions in the range of transferable securities in which investment may be made, including restrictions in the extent to which the collective investment scheme may invest in any category of investment, indicating (where appropriate) where the restrictions are tighter than those imposed by the Regulations.

(2) Where all or part of the remuneration of the fund manager is to be treated as a capital charge, it must be made clear that the investment objectives of the collective investment scheme are to treat the generation of income as a higher priority than capital growth or as the case may be, to place equal emphasis on the generation of income and on capital growth and that (in either case) this may accordingly constrain capital growth.

(3) List any individual eligible securities markets through which the collective investment scheme may invest or deal.

(4) State the extent (as a percentage of the total) to which the collective investment scheme intends to invest its assets in any one security or sector and whether or not it has done so.

(5) State the policy in relation to the exercise of borrowing powers by the collective investment scheme.

(6) In the case of a collective investment scheme, which may invest in other collective investment schemes state the extent to which the collective investment scheme portfolio may be invested in the shares of collective investment schemes, which are managed by the fund manager or by an associate of the fund manager.

Distributions State (a) the date on which the collective investment schemes annual accounting period is to be in each year; (b) if there are interim accounting periods, what they are and the policy in relation to interim distributions (whether interim distribution will be made and if so, the policy on smoothing of income distributions within an annual accounting period); (c) the date or dates in each year on or before which payment or accumulation of income is to be made or take place; (d) if applicable, the policy on payment of income equalisation; (e) how distributable income is determined; and 115 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (f) if applicable, that unclaimed distributions may be forfeited and summarize the relevant provisions of the instrument of incorporation.

The characteristics of shares in the collective investment scheme State (a) where there is more than one class of shares in issue or available for issue, the names of such classes, the rights attached to each class in so far as they vary from the rights attached to other classes; (b) how holders may exercise their voting rights and what these are; and (c) what the method is for conversion between shares of different classes; and (d) in what circumstances, if any, a mandatory redemption, cancellation or conversion of shares from one class to another may be required.

The Fund Manager State the following particulars of the fund manager (a) name; (b) the nature of corporate form; (c) the date of incorporation; (d) the address of registered office; (e) the address of head office if different from (d); (f) if it is a subsidiary, the name and place of incorporation of ultimate holding company; (g) the amount of issued share capital and how much of it is paid up; (h) the date of licence with the Authority to operate as fund manager; (i) whether the fund manager is in any capacity in relation to any other regulated collective investment schemes and if so the names of the schemes and the nature of the capacity in relation to those schemes; and (j) a summary of the material provisions of the contract between the collective investment scheme and the fund manager which may be relevant to the holders including provisions relating to terminations, compensation on termination and indemnity.

Other directors of the collective investment scheme State (a) the names and positions of the directors in the collective investment scheme; (b) the main business activities of each of the directors (other than those connected with the business of the collective investment scheme); (c) the manner, amount and calculation of the remuneration of directors; (d) in summary form, the main terms of each contract of service between the collective investment scheme and a director; and (e) if the director is a body corporate in a group of which any other corporate director of the collective investment scheme is a member, a statement of that fact.

The Trustee State the following particulars of the trustee (a) name and address; [Issue 1] 116 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (b) date and place of its incorporation; (c) if it is a subsidiary, the name of its ultimate holding company and the date and place of its incorporation; (d) the address of its registered office (if different from (a)); (e) the address of its head office if that is different from (a) and (d); and (f) a description of its principal business activity.

10.

The Custodian State the following particulars of the custodian (a) name and address; (b) the date of incorporation; (c) if it is a subsidiary, the name of its ultimate holding company and its place of incorporation; (d) the address of its registered office (if different from (a)); (e) the address of its head office (if different from (a) and (d)); (f) a description of its principal business activity; and (g) a summary of the material provisions of the contract between the collective investment scheme and the custodian, which may be relevant to holders including provisions relating to the remuneration of the custodian.

11.

The Auditor State the name and address of the auditor of the collective investment scheme.

12.

The Register of Holders State the address in Kenya where the register of the holders is kept and can be inspected by the holders.

13.

Payments to the Fund Manager State the payments that may be made to the fund manager out of the collective investment scheme portfolio whether by way of remuneration for its services or reimbursement of expenses.

For each category of remuneration, specify (a) the current amounts of such remuneration; (b) how will it be calculated and accrue and when it will be paid; (c) if notice is to be given to holders of the fund managers intention to introduce a new category of remuneration for its services or to increase any amount currently charged, particulars of that increase and when it will take place; (d) whether all or part of the remuneration is to be treated as a capital charge (i) that fact; and (ii) the actual or maximum amount of the charge which may be so treated; and (iii) if notice has been given to holders of an intention to propose an increase in the maximum amount of that charge at a meeting of holders and particulars of that proposal.

14.

Other Payments out of the Collective Investment Scheme Portfolio Provide details of (a) any liability of the collective investment scheme to reimburse costs incurred by any of its directors, its custodian or any third party; 117 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) any remuneration payable by the collective investment scheme to any third party; and (c) the types of other charges and expenses that may be taken out of the collective investment scheme portfolio.

15.

Movable and immovable property Give an estimate of any expenses likely to be incurred by the collective investment scheme in respect of movable and immovable property in which the collective investment scheme has an interest.

16.

Sale and redemption of shares State (a) the dealing days and times in the dealing day on which the fund manager will be available to receive requests for the issue and redemption of shares; (b) the procedures for effecting the sale and redemption of shares and the settlement of transactions; (c) whether certificates will be issued in respect of registered shares; (d) the steps required to be taken by a holder in redeeming shares before he can receive the proceeds; (e) the circumstances in which the redemption of shares may be suspended; (f) the days and time on which recalculation of the price will commence; (g) the amounts of the following minima (if they apply) for each type of share in the collective investment scheme (i) the minimum number of shares which any one person may hold; (ii) the minimum value of shares which any one person may hold; (iii) the minimum number of shares which may be the subject of any one transaction of shares or redemption; (iv) the minimum value of shares which may be subject of any one transaction of sale or redemption; (h) the circumstances in which the fund manager may arrange for, and the procedure for, a cancellation of shares; (i) in which local newspaper the most recent price will be published and how often the prices will be published; (j) the time period for the custodian to pay the repurchase price of the shares to the holder.

17.

Valuation of the collective investment scheme portfolio State (a) how frequently and at what time of the day the collective investment scheme portfolio will be valued for the purpose of determining the price at which shares in the collective investment scheme may be purchased from or redeemed by the fund manager and a description of any circumstances in which the collective investment scheme portfolio may be specially valued; (b) the basis on which the collective investment scheme portfolio will be valued; and (c) how the price of the shares of each class will be determined.

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485A Capital Markets [Subsidiary] 18.

Dilution levy State (a) what is meant by dilution and by dilution levy; and (b) the fund managers policy on imposing a dilution levy.

19.

Forward and historic pricing (1) Disclose the fund managers normal basis of dealing.

(2) Disclose the basis of the management fee and the service charge.

20.

Initial charge If the fund manager makes a preliminary charge state (a) the current amount or rate of the initial charge; and (b) if notice has been given to holders of the fund managers intention to introduce a initial charge or to increase the rate or amount currently charged, particulars of that introduction or increase and when it will take effect.

21.

Redemption charge If the fund manager may make a redemption charge, state (a) the amount of that charge, or if it is a variable, the rate or method of arriving at it; (b) if the amount, rate or method has been changed, that the details of any previous amount, rate or method may be obtained from the fund manager on request; (c) if notice has been given to holders of the fund managers intention to introduce a redemption charge or to propose a change in the rate or amount or method which is adverse to the holders, particulars of that proposal; and (d) how the order in which shares acquired at different times by a holder shall be determined insofar as necessary for the purposes of the imposition of the redemption charge.

22.

General information State (a) when annual and half yearly reports will be published; (b) the address at which copies of instruments of incorporation, any amending instrument and most recent annual and half yearly reports may be inspected and from which, copies may be obtained.

23.

Umbrella collective investment scheme (a) State, in the case of an umbrella collective investment scheme (i) whether or not a shareholder is entitled to exchange shares in one sub-fund for shares in any other sub-fund; (ii) whether or not an exchange of shares in one sub fund for shares in any other sub-fund is treated as a redemption and a sale and will be subject to taxation on capital gains or withholding tax, as the case may be; (iii) subject to (i) and (ii), that in no circumstances will a holder who exchanges shares in one sub-fund for shares in any other sub-fund be given a right by law to withdraw from or cancel that transaction; 119 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (iv) what charges, if any, may be made on exchanging shares in one sub- fund for shares in another sub-fund; (v) the policy for allocating between sub-funds any assets of, or costs, charges and expenses payable out of the collective investment scheme portfolio, which are not attributable to any particular sub-fund; (vi) in respect of each sub fund, the currency in which the collective investment scheme portfolio allocated to it will be valued and the price of shares calculated and payments made, if this currency is not the base currency of the umbrella collective investment scheme; and (vii) if there are shares in respect of less than two sub funds in issue the effect of regulation 42.

(b) In the application of this Schedule to an umbrella scheme, information required (i) shall state in relation to each sub fund where the information for any sub fund differs from that for any other; (ii) shall state for the collective scheme as a whole but only where the information is relevant to the collective investment scheme as a whole; (iii) shall contain a statement to the effect that the sub funds of an umbrella scheme are not ring fenced and the event of an umbrella scheme being unable to meet liabilities attributable to any particular sub-fund out of the assets attributable to such sub-fund, the excess liabilities may have to be met out of the assets attributable to other sub-funds.

24.

Marketing outside Kenya (List other countries in which marketing and selling of collective investment shares will occur.) An information memorandum which is prepared for the purpose of marketing shares in States outside Kenya shall state the following (a) that all formalities and requirements of such country have been fulfilled; (b) what special arrangements have been made (i) for paying in that country amounts distributable to holders residing in that country; (ii) for redeeming in that country the shares of holders resident in that country; (iii) for inspecting and obtaining copies in that country of the instrument of incorporation and the amendments thereto, of the prospectus and of the annual and half yearly reports; and (iv) for making public the prices of shares of each class; (c) how the collective investment scheme will publish in that country the following information that (i) annual and half yearly reports are available for inspection; (ii) a distribution has been declared; (iii) amendments have been made to the incorporation documents; (iv) the information memorandum has been revised or that changes have been made to the arrangements under paragraph (a).

The information memorandum will state that the shares are to be marketed in that country.

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2012] CAP.

485A Capital Markets [Subsidiary] 25.

Additional information State any other material information which is within the knowledge of the fund manager or which the fund manager would have obtained by making of reasonable inquiries (a) which investors and their advisers would reasonably require and reasonably expect to find in an information memorandum to enable them to make an informed judgment about the merits of investing in the collective investment scheme and the extent and characteristics of the risks accepted by so participating; (b) including a statement of any risk factors in the collective investment scheme that may reasonably be regarded as presenting for reasonably prudent investors of moderate means; (c) in the case of an investment company, information on whether there is a minimum subscription value which must be raised during the limited offer period.

FIFTH SCHEDULE [Regulation 96.] INTERIM AND ANNUAL REPORTS Except as stated the following matters shall be set out in every annual and half-yearly report of a collective investment scheme.

PART I REPORT OF THE TRUSTEE OR BOARD OF DIRECTORS/FUND MANAGER (AS THE CASE MAY BE) 1.

The names and addresses of the following (a) the fund manager; (b) the Trustee; (c) the custodian; and (d) the Auditor.

The names of all the directors.

A statement that (a) the collective investment scheme is an approved collective investment scheme within the meaning of the Capital Markets Act; and (b) the holders are not liable for the debts of the collective investment scheme.

A statement on the nature of the funds in the collective investment scheme (i.e.

price index funds, securities funds, money market funds, etc.) or an umbrella scheme, as the case may be.

The investment objectives of the collective investment scheme.

The collective investment schemes policy for achieving that objective.

A review of the collective investment schemes investment activities during the period to which the report relates.

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485A [Rev.

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Particulars of any significant change in the information memorandum made since the date of the last report.

Particulars of any significant change in the incorporation documents since the date of the last report.

10.

A statement of any sub-division or consolidation of shares which has been effected during the period to which the report relates.

11.

Any other significant information which would enable shareholders to make an informed judgment on the development of the activities of the collective investment scheme during this period and the results of those activities as at the end of that period.

12.

In the case of a report relating to an umbrella scheme (a) information required under the above paragraphs shall be given in respect of each sub-fund if it would vary from that given in respect of the umbrella scheme as a whole and paragraph 4 shall apply as if it required a statement in respect of each sub-fund; and (b) the report shall contain statements to the effect that (i) there are and/or as the case may be, in the future there may be, other sub funds of that umbrella collective investment scheme; and (ii) a sub-fund is not a legal entity, if the assets attributable to any sub- fund were insufficient to meet the liabilities attributable to it, the shortfall might have to be met out of the assets attributable to one or more other sub-funds of the umbrella scheme.

PART II COMPARATIVE TABLE 1.

A performance record over the last 5 calendar years, or if the collective investment scheme has not been in existence during the whole of that period, over the whole period in which it has been in existence, showing (a) the highest and the lowest price of a share of each class in issue during each of those years; and (b) the net income distributed for a share of each class during each of those years, taking account of any sub-division or consolidation of shares that occurred during that period.

As at the end of each of the last three annual accounting periods (or all of the collective investment schemes accounting periods, if less than three) the total value of the collective investment scheme portfolio at the end of each of those years and the price for a share of each class and the number of shares of each class in issue at the end of each of those years.

If in the period covered by the table (a) the collective investment scheme has been subject of any event (such as an amalgamation or reconstruction but excluding any issue or cancellation of shares for cash) having a material effect of the size of the collective investment scheme; or (b) there have been changes in the investment objectives of the collective investment scheme, an indication, related in the body of the table to the relevant year in the table, of the date of the event or change in the investment objectives and a brief description of its nature.

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485A Capital Markets [Subsidiary] 4.

In the case of an umbrella scheme paragraphs 1 to 3 shall not apply and the information required under each of paragraphs 1 to 3 shall instead be given in respect of each sub-fund of the umbrella scheme.

PART III REPORT OF THE CUSTODIAN The report of the custodian to the holders for any annual accounting period shall contain statements (a) which may be in summary form, describing the duties of the custodian under regulation 35 and in respect of the safekeeping of the collective investment scheme portfolio; (b) to the effect of whether (i) the issue, sale, redemption and cancellation, and calculation of the price of the collective investment schemes shares and the application of the collective investment schemes income have been carried out in accordance with these Regulations; and (ii) the investment and borrowing powers and restrictions applicable to the collective investment scheme in accordance with these Regulations and the documents of incorporation have been exceeded.

PART IV REPORT OF THE AUDITOR [Regulation 96.] The report of the auditor to the shareholders in respect of the accounts of the collective investment scheme shall state (a) whether in the auditors opinion, the accounts have been properly prepared in accordance with these Regulations; (b) whether, in the auditors opinion, the accounts give a true and fair view of the net income and the net gains or losses on the collective investment scheme portfolio for the annual accounting period in question and the financial position of the collective investment scheme or the sub-fund as at the end of that period; (c) if the auditor is of the opinion that proper accounting records for the collective investment scheme have not been kept or that the accounts are not in agreement with those records, that fact; and (d) if the auditor has not been given all the information and explanation which, to the best of his knowledge and belief, are necessary for the purpose of his audit, that fact; and (f) if the auditor is of the opinion that the information given in the report of the directors for that period is inconsistent with the accounts, that fact.

123 [Issue 1] [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] GUIDELINES ON THE APPROVAL AND REGISTRATION OF CREDIT RATING AGENCIES [G.N.

8512/2001.] SCHEDULE 1.

Introduction The Capital Markets Authority is seeking to promote the establishment of credit rating agencies as part of measures aimed at building an active corporate securities debt market and impetus to deepening of the domestic capital markets.

These are guidelines on the requirements for approval and registration of credit rating agencies in Kenya.

1.1 Credit Rating: Credit rating is an objective and independent opinion on the general creditworthiness of an issuer of a debt instrument, and its ability to meet its obligations in a timely manner over the life of the financial instrument based on relevant risk factors including the ability of the issuer to generate cash in the future.

Ratings rank the debt issue within a consistent framework to compare risk among the different debt instruments in the market and assign a risk grade.

As it pertains to assessment of future likely positions on the basis of both quantitative and qualitative judgment and past performance, credit rating is necessarily subjective.

The goal of the rating process is to arrive at a reasoned judgment on credit risk not through a set formula but rather through a careful review and analysis of the critical issues surrounding a specific debt and the issuer.

This in particular includes the ability of the management to sustain in future, cash generation in the face of adverse changes in the business and economic environment.

A rating is therefore an informed opinion of future outcome based on known qualitative and quantitative factors.

A rating does not constitute a recommendation to purchase, sell or hold a particular security.

In addition, a rating does not comment on the suitability of an investment for a particular investor.

The objective of a credit rating is to provide independent, high quality, impartial, value-added quantitative and qualitative review as well as analytical information on the risk profile assessment of issuers of financial instruments.

It therefore serves to promote confidence in the capital markets and enhance transparency by facilitating investors awareness on underlying risks of an issuer or issued financial instrument through assignment of ratings.

Core Professional Capacity 2.1 The applicant must make evident its capacity to perform the role of a rating agency.

2.2 The applicant must have a background and experience as well as professional expertise to provide the service of a rating agency.

125 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 2.3 The applicant must either be in the process of appointing or have appointed professionals including economic, financial and research analysts, and other relevant quantitative and qualitative analysts who have the relevant background in the rating business.

Objectivity and Independence 3.1.

The applicant must demonstrate its independence and objectivity.

3.2.

The applicant must not be associated directly or indirectly with group(s) who have conflicting interests in the area of the rating business.

3.3.

The applicant must also demonstrate that it has a proven rating methodology.

3.4.

The rating process must have sufficient internal checks and balances to safeguard objectivity in particular where qualitative judgment also plays an important role in the rating process.

3.5.

The rating process must be based on quantitative and qualitative review of facts and must not rely in hearsay or rumours to downgrade or upgrade a particular issuer or issued financial instrument.

Ownership 4.1 In order to ensure independence and objectivity, the applicant must be a body corporate with a preponderance of an institutional shareholding of repute.

4.2 The shareholders, board of directors, management and professional analytical staff should be persons of impeccable character.

4.3 The applicant should partly be owned by an internationally recognized rating agency or have a contractual arrangement with an internationally recognized rating agency that provides technical and strategic support drawn from international experience.

4.4 For purposes of this guidelines, an internationally recognized agency shall be a rating agency which has been in the business of providing credit ratings for debt securities or any securities of interest to investors, which obligates the issuer to pay back the principal amount raised in more than two markets for at least five years.

4.5 The ownership structure or association and capital level shall not be the only basis or criteria of determining the independence and integrity of a rating agency.

Capital Requirements The applicant shall have a stable financial base with a minimum paid up capital of KSh.

12 million (or the equivalent in US dollars).

Disclosure of Information by Rating Agency The rating agency must disclose to the Authority, issuers and the general public the following (a) General fee structure or any change thereof; (b) downgrades of ratings; (c) disclosure of ratings of commercial paper or corporate bonds as applicable.

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485A Capital Markets [Subsidiary] 7.

Confidentiality The rating agency must have a system of maintaining on a confidential basis the information supplied strictly for the purpose of rating by issuers in order to safeguard and promote confidence in the rating process.

Documents to Accompany the Application for Approval and Registration of a Credit Agency in Kenya An application for approval and registration should be made to the Capital Markets Authority accompanied by the following (a) certificate of Incorporation, Memorandum and Articles of Association; (b) business plan (to include resumes of the top management staff, management structure, brief on the rating methodology, rating grades, fee structure); (c) a sample of a standard agreement between the rating agency and its clients; (d) draft sample letter of requests for rating accompanied by a draft of the information requirements for rating securities.

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485A Capital Markets [Subsidiary] GUIDELINES ON CORPORATE GOVERNANCE PRACTICES BY PUBLIC LISTED COMPANIES IN KENYA [G.N.

3362/2002.] SCHEDULE 1.

Introduction 1.1 The Capital Markets Authority (the Authority) has developed these guidelines for good corporate governance practices by public listed companies in Kenya in response to the growing importance of governance issues both in emerging and developing economies and for promoting growth in domestic and regional capital markets.

It is also in recognition of the role of good governance in corporate performance, capital formation and maximization of shareholders value as well as protection of investors rights.

1.2 Corporate governance, for the purpose of these guidelines is defined as the process and structure used to direct and manage business affairs of the company towards enhancing prosperity and corporate accounting with the ultimate objective of realising shareholders long-term value while taking into account the interest of other stakeholders.

1.3 These guidelines have been developed taking into account the work which has been undertaken extensively by several jurisdictions through many task forces and committees including but not limited to the United Kingdom, Malaysia, South Africa, Organization for Economic Cooperation and Development (OECD) and the Commonwealth Association for Corporate Governance.

The Authority has also supported development of a code of best practice for corporate governance in Kenya issued by the Private Sector Corporate Governance Trust, Kenya, whose efforts have also been useful in the development of these guidelines and are supplementary thereto.

1.4 The objective of these guidelines is to strengthen corporate governance practices by public listed companies in Kenya and to promote the standards of self-regulation so as to bring the level of governance in line with international trends.

1.5 The Authority, in developing these guidelines has adopted both a prescriptive and a non-prescriptive approach in order to provide for flexibility and innovative dynamism to corporate governance practices by public listed companies.

1.6 Good corporate governance practices must be nurtured and encouraged to evolve as a matter of best practice but certain aspects of operation in a body corporate must of necessity require minimum standards of good governance.

In this regard the Authority expects the directors of every public listed company to undertake or commit themselves to adopt good corporate governance practices as part of their continuing listing obligations.

1.7 It is important that the extent of compliance with these guidelines should form an essential part of disclosure obligations in the corporate annual reports.

It is equally important the extent of non-compliance be also disclosed.

129 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 1.8 Every public listed company shall disclose, on an annual basis, in its annual report, a statement of the directors as to whether the company is complying with these guidelines on corporate governance with effect from the financial year ending during 2002, as prescribed under the Capital Markets (Securities) (Public Offers, Listing and Disclosure) Regulations, 2002.

1.9 All issuers of fixed income securities or debt instruments through the capital markets such as bonds and commercial paper shall also comply with these guidelines.

The issuer of the fixed income securities or debt instrument shall disclose in the information memorandum the extent of compliance with these guidelines.

1.10 Where the company or Issuer is not fully compliant with these guidelines, the Issuer shall identify the reasons for non-compliance and indicate the steps being taken to become compliant.

1.11 Whilst these guidelines have been developed for public listed companies and issuers of fixed income securities and debt instruments in Kenyas capital market, companies in the private sector are also encouraged to practice good corporate governance.

Principles of Good Corporate Governance Practices There are a number of principles that are essential for good corporate governance practices of which the following have been identified as representing critical foundation and virtues of good corporate governance practices: 2.1 Directors Every public listed company should be headed by an effective board to offer strategic guidance, lead and control the company and be accountable to its shareholders.

2.1.1 The Board and Board committees (i) the Board should establish relevant committees and delegate specific mandates to such committees as may be necessary.

(ii) the Board shall specifically establish an audit and nominating committee.

2.1.2 Directors Remuneration (i) the directors remuneration should be sufficient to attract and retain directors to run the company effectively and should be approved by shareholders.

(ii) the executive directors remuneration should be competitively structured and linked to performance.

(iii) the non-executive directors remunerations should be competitive in line with remuneration for other directors in competing sectors.

Companies should establish a formal and transparent procedure for remuneration of directors, which should be approved by the shareholders.

2.1.3 Supply and Disclosure of Information (i) the board should be supplied with relevant, accurate and timely information to enable the board discharge its duties.

[Issue 1] 130 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (ii) every board should annually disclose in its annual report, its policies for remuneration including incentives for the board and senior management, particularly the following (a) quantum and component of remuneration for directors including non executive directors on a consolidated basis in the following categories (aa) executive directors fees; (bb) executive directors emoluments; (cc) non-executive directors fees; (dd) non-executive directors emoluments; (b) a list of ten major shareholders of the Company; (c) share options and other forms of executive compensation that have to be made or have been made during the course of the financial year; and (d) aggregate directors loans.

2.1.4 Board balance The Board should compose of a balance of executive directors and non-executive directors (including at least one third independent and non-executive directors) of diverse skills or expertise in order to ensure that no individual or small group of individuals can dominate the boards decision-making processes.

2.1.4.1 Independent Director means a director who (i) has not been employed by the Company in an executive capacity within the last five years; (ii) is not associated to an adviser or consultant to the Company or a member of the Companys senior management or a significant customer or supplier of the Company or with a not-for-profit entity that receives significant contributions from the Company; or within the last five years, has not had any business relationship with the Company (other than service as a director) for which the Company has been required to make disclosure; (iii) has no personal service contract(s) with the Company, or a member of the Companys senior management; (iv) is not employed by a public listed company at which an executive officer of the Company serves as a director; (v) is not a member of the immediate family of any person described above; or (vi) has not had any of the relationships described above with any affiliate of the Company.

2.1.4.2 Non-executive Director means a director who is not involved in the administrative or managerial operations of the Company.

2.1.5 Appointments to the Board There should be a formal and transparent procedure in the appointment of directors to the board and all persons offering 131 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] themselves for appointment, as directors should disclose any potential area of conflict that may undermine their position or service as director.

2.1.6 Multiple Directorships Every person save a corporate director who is a director of a listed company shall not hold such position in more than five public listed companies at any one time to ensure effective participation in the board and in the case where the corporate director has appointed an alternate director, the appointment of such alternate shall be restricted to three public listed companies, at any one time, subject to the requirements under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002.

2.1.7 Re-election of Directors (i) all directors except the managing director should be required to submit themselves for re-election at regular intervals or at least every three years.

(ii) executive directors should have a fixed service contract not exceeding five years with a provision to renew subject to (a) regular performance appraisal; and (b) shareholders approval.

(iii) disclosure should be made to the shareholders at the annual general meeting and in the annual reports of all directors approaching their seventieth (70th) birthday that respective year.

2.1.8 Resignation of Directors Resignation by a serving director should be disclosed in the annual report together with the details of the circumstances necessitating the resignation.

2.2 Role of Chairman and Chief Executive 2.2.1 There should be a clear separation of the role and responsibilities of the chairman and chief executive, which will ensure a balance of power of authority and provide for checks and balances such that no one individual has unfettered powers of decision making.

Where such roles are combined a rationale for the same should be disclosed to the shareholders in the annual report of the Company.

2.2.2 Every person who is a Chairperson of a public listed company shall not hold such position in more than two public listed companies at any one time, in order to ensure effective participation in the board, subject to the requirements under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002.

2.3 Shareholders 2.3.1 Approval of Major Decisions by Shareholders There should be shareholders participation in major decisions of the Company.

The Board should therefore provide the shareholders with information on matters that include but are not limited to major disposal of the Companys assets, restructuring, takeovers, mergers, acquisitions or reorganisation.

2.3.2 Annual General Meetings (i) the board should provide to all its shareholders sufficient and timely information concerning the date, location and agenda of the general meeting as well as full and timely information regarding issues to be decided during the general meeting; [Issue 1] 132 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (ii) the board should make shareholders expenses and convenience primary criteria when selecting venue and location of annual general meetings; and (iii) the directors should provide sufficient time for shareholders questions on matters pertaining to the Companys performance and seek to explain to the shareholders their concern.

2.4 Accountability and Audit 2.4.1 Annual reports and Accounts The board should present an objective and understandable assessment of the Companys operating position and prospects.

The board should ensure that accounts are presented in line with International Accounting Standards.

2.4.2 Internal Control The board should maintain a sound system of internal control to safeguard the shareholders investments and assets.

2.4.3 Independent Auditors The board should establish a formal and transparent arrangement for shareholders to effect the appointment of independent auditors at each annual general meeting.

2.4.4 Relationship with Auditors The board should establish a formal and transparent arrangement for maintaining a professional interaction with the Companys auditors.

2.5 General 2.5.1 Public Disclosure There shall be public disclosure in respect of any management or business agreements entered into between the Company and its related companies, which may result in a conflict of interest.

2.5.2 Chief Financial Officers of Public Listed Companies (i) The Chief Financial Officers and persons heading the accounting department of every issuer shall be members of the Institute of Certified Public Accountants established under the Accountants Act (Cap.

531).

(ii) where the persons referred to in paragraph (i) are members of other internationally recognized professional bodies and are yet to register as members of the Institute of Certified Public Accountants such persons shall register as members of the Institute within a period of twelve months from the date of appointment to such position, subject to requirements under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002.

2.5.3 Company Secretaries of Public Listed Companies The Company Secretary of every public listed company shall be a member of the Institute of Certified Public Secretaries of Kenya established under the Certified Public Secretaries of Kenya Act (Cap.

534).

2.5.4 Auditors of Public Listed Companies The auditor of a public listed company shall be a member of the Institute of Certified Public Accountants and shall comply with the International Auditing Standards.

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Recommended Best Practices in Corporate Governance by Public listed Companies The adoption of international standards in corporate governance best practices is essential for public companies in Kenya in order to maximize shareholders value through effective and efficient management of corporate resources.

As a matter of best practice, every public listed company should endeavour to achieve the following: 3.1 Best Practices Relating to the Board of Directors 3.1.1 The Role and Responsibilities of the Board of Directors The board of Directors should assume a primary responsibility of fostering the long-term business of the corporation consistent with their fiduciary responsibility to the shareholders.

The board of directors should accord sufficient time to their functions and act on a fully informed basis while treating all shareholders fairly, in the discharge of the following responsibilities, among others (i) define the companys mission, its strategy, goals, risk policy plans and objectives including approval of its annual budgets; (ii) oversee the corporate management and operations, management accounts, major capital expenditures and review corporate performance and strategies at least on a quarterly basis; (iii) identify the corporate business opportunities as well as principal risks in its operating environment including the implementation of appropriate measures to manage such risks or anticipated changes impacting on the corporate business; (iv) development of appropriate staffing and remuneration policy including the appointment of chief executive and the senior staff, particularly the finance director, operations director and the company secretary as may be applicable; (v) review on a regular basis the adequacy and integrity of the Companys internal control, acquisition and divestitures and management information systems including compliance with applicable laws, regulations, rules and guidelines; and (vi) establish and implement a system that provides necessary information to the shareholders including shareholder communication policy for the Company; (vii) monitor the effectiveness of the corporate governance practices under which the Company operates and propose revisions as may be required from time to time; (viii) take into consideration the interests of the Companys stakeholders in its decision making process.

3.1.2A balanced Board Constitutes an Effective Board (i) the board of directors of every listed company should reflect a balance between independent, non-executive directors and executive directors.

(ii) the independent and non-executive directors should form at least one-third of the membership of the board.

(iii) the structure of the board should also comprise a number of directors, which fairly reflects the Companys shareholding structure.

The Board composition should not be biased towards representation by a substantial shareholder but should reflect the Companys broad shareholding structure.

The composition of the [Issue 1] 134 [Rev.

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485A Capital Markets [Subsidiary] board should also provide a mechanism for representation of the minority shareholders without undermining the collective responsibility of the directors.

(iv) A substantial shareholder, for the purpose of these guidelines is a person who holds not less than fifteen per cent of the voting shares of a listed company and has the ability to exercise a majority voting for the election of the directors.

(v) In circumstances where there is no major shareholder but there is a substantial shareholder the board should exercise judgment determining the representation on the board of such shareholder and of the other shareholders that effectively reflects the shareholding structure of the Company.

(vi) The board should disclose in its annual report whether independent and non-executive directors constitute one third of the board and if it satisfies the representation of the minority shareholders.

(vii) The size of the board should not be too large to undermine an inter-active discussion during board meetings or too small such that the inclusion of a wider expertise and skills to improve the effectiveness of the board is compromised.

(viii) the board should monitor and manage potential conflict of interest at management, Board and shareholder levels.

3.1.3 Appointment and Qualifications of Directors (i) the board of every public listed company should appoint a nominating committee consisting mainly of independent and non- executive directors with the responsibility of proposing new nominees for the board and for assessing the performance and effectiveness of directors in the Company.

(ii) the nominating committee should consider only persons of calibre, credibility and who have the necessary skills and expertise to exercise independent judgment on issues that are necessary to promote the Companys objectives and performance in its area of business.

(iii) the nominating committee should also consider candidates for directorship proposed by the chief executive and shareholders.

(iv) the board, through the nominating committee, should on an annual basis review its required mix of skills and expertise that the executive directors as well as independent and non-executive directors bring to the Board and make disclosure of the same in the annual report.

(v) the Board should also implement a process of assessing the effectiveness of the board as a whole, the committees of the Board, as well as of each individual director and such task should be assigned to the nominating committee.

(vi) newly appointed directors should be provided with necessary orientation in the area of the Companys business in order to enhance their effectiveness in the Board.

(vii) the nominating committee should recommend to the board candidates for directorship to be filled by the shareholders as the responsibility of nominating rests on the full board, after considering the recommendations of the nominating committee.

135 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (viii) The process of the appointment of directors should be sensitive to gender representation, national outlook and should not be perceived to represent single or narrow community interest.

(ix) No person shall be a director in more than five public listed companies at any one time in order to ensure effective participation in the board.

3.1.4 Remuneration of the directors (i) The Board of Directors of every listed company should appoint a remuneration committee or assign a mandate to a nominating committee consisting mainly of independent and non-executive directors to recommend to the board the remuneration of the executive directors and the structure of their compensation package.

(ii) The determination of the remuneration for the non-executive and independent directors should be a matter for the whole board.

(iii) The remuneration of the executive director should include an element that is linked to corporate performance including a share option scheme so as to ensure the maximization of the shareholders value.

(iv) The consolidated total remuneration of the directors should be disclosed to the shareholders in the annual report specifying the following categories (a) total remuneration for executive directors; (b) total fees for non-executive and independent directors.

3.2 Best Practices Relating to the Position of Chairman and Chief Executive (i) Every public listed company should as a matter of best practice separate the role of the chairman and chief executive in order to ensure a balance of power and authority and provide for checks and balances.

(ii) Where the role of the chairman and the chief executive is combined, there should be a clear rationale and justification which must (a) be for a limited period; (b) be approved by the shareholders; (c) include measures that have been implemented to ensure that no one individual has unfettered powers of decision in the Company; and (d) include plan for separation of the role where such combined role is deemed necessary for a limited period during the restructuring or change process.

(iii) Chairmanship of a public listed company should be held by an independent and non-executive director.

(iv) No person shall be a chairman in more than two public listed companies at any one time in order to ensure effective participation in the board.

(v) Every public listed company should also have a clear succession plan for its chairman and chief executive in order to avoid unplanned and sudden departures, which could undermine the companys and shareholders interest.

(vi) The chief executive should be responsible for implementing the Board corporate decision and there should be a clear flow of information [Issue 1] 136 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] between management and the board in order to facilitate both quantitative and qualitative evaluation and appraisal of the companys performance.

(vii) The chairman of the board should undertake a primary responsibility for organizing information necessary for the board to deal with and for providing necessary information to the directors on a timely basis.

(viii) The chief executive is obliged to provide such necessary information to the board in the discharge of the boards business.

3.3 Best practices relating to the rights of the shareholders The essence of good corporate governance practices is to promote and protect shareholders rights (i) a board of a public listed company should ensure equitable terms of shareholders including the minority and foreign shareholders.

(ii) all shareholders should receive relevant information on the companys performance through distribution of regular annual reports and accounts, half-yearly results and quarterly results as a matter of best practice.

(iii) the shareholders should receive a secure method of transfer and registration of ownership as well as a certificate or statement evidencing such ownership in the case of a central depository environment.

(iv) every shareholder shall have a right to participate and vote at the general shareholders meeting including the election of directors.

(v) every shareholder shall be entitled to ask questions, seek clarification on the Companys performance as reflected in the annual reports and accounts or in any matter that may be relevant to the Companys performance or promotion of shareholders interests and to receive explanation by the directors and/or management.

(vi) every shareholder shall be entitled to distributed profit in form of dividend and other rights for bonus shares, script dividend or rights issue, as applicable and in the proportion of its shareholding in the Company.

(vii) the board should maintain an effective communication policy that enables both management and the board to communicate effectively with its shareholders, stakeholders and the public in general.

(viii) the annual report and accounts to the shareholders must include highlights of the operation of the Company and financial performance.

(ix) all shareholders should be encouraged, to participate in the annual general meetings and to exercise their votes.

(x) Institutional investors are particularly encouraged to make direct contact with the Companys senior management and board members to discuss performance and corporate governance matters as well as vote during the annual general meetings of the Company.

(xi) companies, as a matter of best practice, are encouraged to organize regular investor briefings and in particular when the half-yearly and annual results are declared or as may be necessary to explain their performance and promote interaction with investors.

(xii) every public listed company should encourage the establishment and use of the Companys website by shareholders to ease communication and interaction among shareholders and the Company.

(xiii) every public listed company should encourage and facilitate the establishment of a Shareholders Association to promote dialogue 137 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] between the Company and the shareholders.

The Association should play an important role in promoting good corporate governance and actively encourage all shareholders to participate in the annual general meeting of the Company or assign necessary voting proxy.

(xiv) Shareholders while exercising their right of participation and voting during annual general meetings of the Company should not act in a disrespective manner as such action may undermine the Companys interest.

3.4 Best Practices Relating to the Conduct at Annual General Meetings The Board of a public listed company should ensure that shareholders right of full participation at annual general meetings are protected by giving shareholders (i) sufficient information on voting rules or procedures; (ii) the opportunity to quiz management; (iii) the opportunity to place items on the agenda at annual general meetings; (iv) the opportunity to vote in absentia; (v) sufficient information to enable them to consider the costs and benefits of their votes.

3.5 Best Practices Relating to Accountability and the Role of Audit Committees As a matter of best practice, the constitution of audit committees represents an important step towards promoting good corporate governance.

The following shall represent the recommended best practice relating to the role and constitution of audit committees by public listed companies: 3.5.1 The Audit Committee The board shall establish an audit committee of at least three independent and non-executive directors who shall report to the board, with written terms of reference, which deal clearly with its authority and duties.

The chairman of the audit committee should be an independent and non-executive director.

The board should disclose in its annual report whether it has an audit committee and the mandate of such committee.

3.5.2 Attributes of Audit Committee Members Important attributes of committee members should include (i) broad business knowledge relevant to the Companys business; (ii) keen awareness of the interests of the investing public and familiarity with basic accounting principles; and (iii) objectivity in carrying out their mandate and no conflict of interest.

3.5.3 Duties of Audit Committees Audit Committees should have adequate resources and authority to discharge their responsibilities.

The members of the audit committee shall (i) be informed, vigilant and effective overseers of the financial reporting process and the Companys internal controls; (ii) review and make recommendations on management programs established to monitor compliance with the code of conduct; [Issue 1] 138 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (iii) consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal of the external auditor; (iv) discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audits firm is involved; (v) review managements evaluation of factors related to the independence of the Companys external auditor.

Both the audit committee and management should assist the external auditor in preserving its independence; (vi) review the quarterly, half-yearly and year-end financial statements of the Company, focusing particularly on (a) any changes in accounting policies and practices; (b) significant adjustments arising from the audit; (c) the going concern assumption; and (d) compliance with International Accounting Standards and other legal requirements; (vii) discuss problems and reservations arising from the interim and final audits, and any matter the external auditor may wish to discuss (in the absence of management where necessary); (viii) review any communication between external auditor(s) and management; (ix) consider any related party transactions that may arise within the company or group; (x) consider the major findings of internal investigations and managements response; (xi) have explicit authority to investigate any matter within its terms of reference, the resources that it needs to do so and full access to information; (xii) obtain external professional advice and to invite outsiders with relevant experience to attend, if necessary; and (xiii) consider other issues as defined by the Board including regular review of the capacity of the internal audit function.

3.5.4 Audit Committee and Internal Audit Functions The Board should establish an internal audit function.

The internal audit function should be independent of the activities they audit and should be performed with impartiality, proficiency and due care.

The Audit Committee should determine the remitting of the internal audit function and in particular (i) review of the adequacy, scope, functions and resources of the internal audit function, and ensure that it has the necessary authority to carry out its work; (ii) review the internal audit program and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal audit function; (iii) review any appraisal or assessment of the performance of members of the internal audit function; (iv) approve any appointment or termination of senior staff members of the internal audit function; 139 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (v) ensure that the internal audit function is independent of the activities of the company and is performed with impartiality, proficiency and due professional care; (vi) determine the effectiveness of the internal audit function; and (vii) be informed of resignations of internal audit staff members and provide the resigning staff members an opportunity to submit reasons for resigning.

3.5.5 Participation in the Meetings of Audit Committees (i) the finance director, the head of internal audit (where such a function exists) and a representative of the external auditors shall normally attend meetings of the audit committee while other board members may attend meetings upon the invitation by the audit committee.

(ii) at least once a year the committee shall meet with the external auditors without executive Board members present.

(iii) the audit committee should meet regularly, with adequate notice of the issues to be discussed and should record its conclusions.

(iv) the board should disclose in an informative way, details of the activities of audit committees, the number of audit committee meetings held in a year and details of attendance of each audit committee member at such meetings.

The Capital Markets Guidelines on Corporate Governance Practices by Public Listed Companies in Kenya are revoked.

[G.N.

369/2002.] [Issue 1] 140 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] CAPITAL MARKETS (SECURITIES) (PUBLIC OFFERS, LISTING AND DISCLOSURES) REGULATIONS, 2002 ARRANGEMENT OF REGULATIONS PART I PRELIMINARY Regulation 1.

Citation.

Interpretation.

PART II ELIGIBILITY, DISCLOSURE AND GENERAL REQUIREMENTS FOR PUBLIC OFFERINGS 3.

Application.

Meaning of offer of securities.

Meaning of offer to the public.

5A.

Appointment of transaction advisor.

Issuer to publish prospectus.

6A.

Issuing on growth Enterprise Market Segment.

Eligibility to issue securities.

Issuers not seeking listing.

Transfer to other market segment.

10.

Disclosure requirement for public issues.

10A.

Nominated Advisors.

11.

Disclosure requirements for additional issues.

12.

General duty of disclosure in prospectus.

13.

Supplementary prospectus.

13A.

Supplementary listing statement.

14.

Power of Authority to extend, re-open or cancel.

15.

Exceptions.

15A.

Listing statement exceptions.

16.

Advertisements, etc., in connection with offer of securities.

17.

Persons responsible for prospectus.

18.

Underwriting requirements.

PART III CONTINUING OBLIGATIONS AND MISCELLANEOUS PROVISIONS 19.

Continuing obligations.

20.

Exceptions.

21.

Meaning of private offers.

22.

Suspension and de-listing.

23.

Revocation of L.N.

13/2002.

24.

Amendment of L.N.

429/1992.

25.

Amendment of L.N.

428/1992.

SCHEDULES FIRST SCHEDULE ELIGIBILITY CRITERIA FOR PUBLIC OFFERING OF SHARES AND LISTING 141 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] SECOND SCHEDULE ELIGIBILITY CRITERIA FOR PUBLIC OFFERING OF FIXED INCOME SECURITIES AND LISTING ON THE FIXED INCOME SECURITIES MARKET SEGMENT THIRD SCHEDULE PART A - MAIN INVESTMENT MARKET SEGMENT DISCLOSURE REQUIREMENTS FOR PUBLIC OFFERINGS PART B - ALTERNATIVE INVESTMENT MARKET SEGMENT DISCLOSURE REQUIREMENTS FOR PUBLIC OFFERINGS PART C - FIXED INCOME SECURITIES MARKET SEGMENT DISCLOSURE REQUIREMENTS FOR PUBLIC ISSUES PART CC GROWTH ENTERPRISES MARKET SEGMENT DISCLOSURE REQUIREMENTS PART D - DISCLOSURE REQUIREMENTS FOR LISTING BY INTRODUCTION FOURTH SCHEDULE DISCLOSURE REQUIREMENTS FOR ADDITIONAL ISSUES (RIGHTS, SCRIP DIVIDEND AND CAPITALIZATION ISSUES AND OPEN OFFERS) FIFTH SCHEDULE CONTINUING OBLIGATIONS SIXTH SCHEDULE LISTING FEES SEVENTH SCHEDULE LISTING FEE [Issue 1] 142 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] CAPITAL MARKETS (SECURITIES) (PUBLIC OFFERS, LISTING AND DISCLOSURES) REGULATIONS, 2002 [L.N.

60/2002, L.N.

30/2008, L.N.

101/2009, L.N.

61/2012.] PART I PRELIMINARY 1.

Citation These Regulations may be cited as the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002.

Interpretation In these Regulations, unless the context otherwise requires Alternative Investment Market Segment means a market segment for which securities of issuers that satisfy the eligibility requirements prescribed under regulation 7(1)(b) are listed; days means calendar days excluding Saturdays, Sundays and public holidays; Directors Induction Program means a training programme, approved by the Securities Exchange in consultation with the Authority, covering issues relating to directors responsibility in listed entities including corporate governance, regulatory compliance and accountability; Fixed Income Securities Market Segment means a market segment for which fixed income securities of issuers that satisfy the eligibility requirements prescribed under regulation 7(1)(c) are listed, and include Government and corporate securities; Growth Enterprise Market Segment means a market segment where issues that satisfy the eligibility requirements prescribed under Regulation (7)(1)(c), are listed.

IAS means International Accounting Standards; introduction means the listing of securities that are listed on another securities exchange or that are publicly held other than as a result of an immediately preceding public offer; issuer in relation to any securities, means the person by whom securities have been issued or are to be issued and shall include a company or other legal entity that offers securities to the public or a section thereof in Kenya, whether or not such securities are subject of an application for admission or have been admitted to listing; listing means admission of a security to the official list of a securities exchange; and the terms list and listed shall be construed accordingly; listing statement means an information document prepared in connection with a listing on the Growth Enterprise Market Segment and does not constitute an information memorandum or prospectus unless specifically provided; Main Investment Market Segment means a market segment for which securities of issuers that satisfy the eligibility requirements prescribed under regulation 7(1)(a) are listed; material information means any information that may affect the price of an issuers securities or influence investment decisions and includes information on (a) a merger, acquisition or joint venture; (b) a block split or stock dividend; (c) earnings and dividends of an unusual nature; 143 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (d) the acquisition or loss of a significant contract; (e) a significant new product or discovery; (f) a change in control or significant change in management; (g) a call of securities for redemption; (h) the public or private sale of a significant amount of additional securities; (i) the purchase or sale of a significant asset; (j) a significant labour dispute; (k) a significant law suit against the issuer; (l) establishment of a programme to make purchases of the issuers own shares; (m) a tender offer for another issuers securities; (n) significant alteration of the memorandum and articles of association of the issuer; or (o) any other peculiar circumstances that may prevail with respect to the issuer or the relevant industry; market segment means a separate segment of the official list established by a securities exchange, with the approval of the Authority, with respect to listings of securities for which specific eligibility and disclosure requirements are prescribed; Nominated Advisor means a registered person appointed to undertake the responsibilities set out under regulation 10A; offer period means a period not exceeding ten working days, or such longer period as the Authority may approve, during which an offer for subscription or sale of securities to the public remains open; official list means a list specifying all securities which have been admitted to listing on any of the market segments of a securities exchange; Registrar has the meaning as assigned to it in section 2 of the Companies Act (Cap.

486); related company means a holding company, a subsidiary of another company or a subsidiary of the holding company of another company; supplementary prospectus means the prospectus referred to in regulation 13.

[L.N.

30/2008, s.

2, L.N.

61/2012, s.

2.] PART II ELIGIBILITY, DISCLOSURE AND GENERAL REQUIREMENTS FOR PUBLIC OFFERS 3.

Application (1) These Regulations shall apply to all offers of securities to the public in Kenya whether or not the issuer is seeking a listing on any securities exchange in Kenya.

(2) The Authority shall be the competent authority to grant approval for all public listing of securities on any securities exchange in Kenya.

(2A) A Securities Exchange may approve the listing of a security on a Growth Enterprise Market Segment if (i) that security is not offered to the public; and (ii) the listing is by way of introduction.

[Issue 1] 144 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (3) A securities exchange shall list all securities approved for listing by the Authority upon being satisfied that the issuer has (a) obtained a letter of approval from the Authority for the listing of securities confirming that the issuer has satisfied the eligibility requirements prescribed under regulation 7(1) and the disclosure requirements prescribed under regulation 10 (1) with respect to the market segment in which the securities are to be listed; and (b) attained the (i) total minimum subscription of shares as disclosed in the approved prospectus by the Authority in respect of public offering and listing of securities; (ii) minimum shareholders prescribed for the respective market segment under regulation 7(1)(a) and (b); and (c) with respect to additional issue and listing of securities of the same class as those already listed, obtained a letter of approval from the Authority confirming that the issuer satisfied the requirements for additional issues prescribed under regulation 11.

(4) Every issuer of securities approved for listing by the Authority at a securities exchange shall pay the listing fees prescribed under the Sixth Schedule, to the securities exchange at which its securities are listed.

(4A) An issuer of securities approved for listing by a securities exchange shall pay the listing fees as set out in the Seventh Schedule.

(5) Every person whose securities have been approved by the Authority for a public offer or listing shall state that fact on all announcements of the public offer or listing.

(6) A person whose securities have been approved by a Securities Exchange for listing shall state that fact on all announcements of the listing.

[L.N.

30/2008, s.

3, L.N.

61/2012, s.

3.] 4.

Meaning of offer of securities A person is to be regarded as offering securities if, as principal (a) he makes an offer which, if accepted, would give rise to a contract for the issue or sale of the securities by him or by another person with whom he has made arrangements for the issue or sale of the securities; or (b) he invites a person to make such an offer, but not otherwise and, except where the context otherwise requires, offer and offeror shall be construed accordingly.

Meaning of offer to the public (1) A person offers securities to the public in Kenya if, to the extent that the offer is made to persons in Kenya, it is made to the public and for this purpose, an offer which is made to any section of the public, whether selected as members or debenture holders of a body corporate, or as clients of the person making the offer, or in any other manner, is to be regarded as made to the public; and the terms public offer and public offering shall be construed accordingly.

(2) An issuer applying for a listing shall be bound by all the obligations arising in respect of a public offer of securities in so far as the obligations apply.

(3) An issuer applying for a listing on the Growth Enterprise Market Segment shall be bound by all the obligations arising in respect of listing in such market.

[L.N.

30/2008, s.

4, L.N.

61/2012, s.

4.] 145 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 5A.

Appointment of transaction advisor (1) Any company proposing to offer its securities to the public or a section of the public shall appoint a transaction advisor.

(2) A transaction advisor appointed under paragraph (1) shall be responsible for ensuring that the offer of securities is made in accordance with the provisions of the Act and regulations issued thereunder.

(3) A person shall not be eligible for appointment as a transaction advisor unless such person is licensed as an investment bank or is approved by the Authority to act as a transaction advisor for the particular offer of securities.

[L.N.

101/2009, s.

2.] 6.

Issuer to publish prospectus (1) When securities are to be offered to the public, or a section of the public in Kenya the issuer shall publish an Information Memorandum by making it available to the public or the section of the public, free of charge at an address in Kenya, during the offer period or for such period prior to Listing as prescribed by the Authority.

(2) The issuer shall, before the time of publication of the prospectus, obtain approval of the Authority that the information memorandum with these Regulations and shall deliver a copy thereof to the Registrar for registration.

(3) With respect to initial offers to the public, the prospectus shall include (a) an accountants report confirming compliance by the issuer of the financial disclosures prescribed under regulation 10(1); and (b) a legal opinion which shall include but not be limited to the following (i) whether all licences and consents required to perform the business or proposed business of the issuer have been duly obtained; (ii) the validity of evidence of ownership of land, plant and equipment and other important and relevant assets of the issuer; (iii) any agreements or contracts with respect to the proposed issue of securities, including, where applicable but not limited to, underwriting contracts, agreements or contracts with any securities exchange, registrar and trustees of bonds, debentures or other credit securities; (iv) any material litigation, prosecution or other civil or criminal legal action in which the issuer or any of its director is involved; (v) whether the existing capital of the issuer and any proposed changes thereto is in conformity with applicable laws and has received all necessary authorizations; and (vi) any other material items with regard to the legal status of the issuer and the proposed issue: Provided that where by reasons of exceptional circumstances acceptable to the Authority and disclosed in the prospectus, the issuer is not able to obtain a legal opinion, the directors of the issuer will be required individually and severally to declare and give an undertaking on the matters stated in regulation 6(3)(b)(i) to (vi), and such declaration and undertaking shall be included in the prospectus.

(4) The prospectus shall be published in the English language and shall be in black and white except for the issuers logo.

(5) No person shall offer any securities to the public through an electronic form, unless on the basis of a prospectus approved by the Authority.

(6) Any person offering securities through an electronic form which has been approved by the Authority shall state in the prospectus whether the application for [Issue 1] 146 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] subscription of such securities may be made in an electronic form and in that regard, the procedure and process of facilitating subscription and payment shall be disclosed in the prospectus.

(7) An issuer may distribute a prospectus to prospective investors through electronic form provided such prospectus shall be in the form and content as approved by the Authority.

(8) Where securities are offered through an electronic form the results of the subscription including the allocation process shall be posted on the issuers website which shall disclose the broad classification of the allottees into individuals, local institutional investors and foreign investors.

(9) Allotment of securities offered to the public shall be made on the basis of the allotment policy disclosed in the prospectus unless the results of the subscription make such policy impractical and in such a case an amendment of the allotment policy shall be made with the approval of the Authority: Provided where such amendment has been approved by the Authority the issuer shall announce the fact within twenty-four hours of the grant of approval.

(9A) When developing an allocation policy, an issuer or offeror shall ensure that the policy reserves at least forty per centum of the ordinary shares that are subject to an initial public offering and subsequent listing for investment by local investors.

(9B) Where the per centum reserved for local investors is not fully subscribed for by local investors, the issuer or offeror may, with the prior written approval of the Authority allocate the shares remaining to foreign investors.

(10) No person shall publish the results of the allotment of the public offer without notifying the Authority of the results at least twenty four hours prior to the date on which the allotment results are to be released to the public.

[L.N.

30/2008, s.

5.] 6A.

Issuing on growth Enterprise Market Segment (1) A person who intends to issue securities on a Growth Enterprise Market Segment shall publish a listing statement by making it available to the public or to a section of the public, free of charge at an address in Kenya, for such period prior to listing as prescribed by the Securities Exchange.

(2) The issuer shall, before the time of publication of the listing statement, obtain approval of the Securities Exchange that the listing statement complies with these Regulations.

(3) A Securities Exchange shall, at least seven days prior to granting any approval of a listing statement, submit to the Authority a copy of the listing statement it is considering for approval with a confirmation that the listing statement is in compliance with these Regulations.

[L.N.

61/2012, s.

5.] 7.

Eligibility to issue securities (1) No person shall be eligible to issue securities to the public or list at a securities exchange, unless (a) with respect to securities to be listed on the Main Investment Market Segment, the issuer complies with the eligibility requirements prescribed in Part A of the First Schedule; (b) with respect to securities to be listed on the Alternative Investment Market Segment, the issuer complies with the eligibility requirements prescribed in Part B of the First Schedule; 147 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (bb) with respect to securities to be listed on the Growth Enterprise Market Segment, the issuer complies with the eligibility requirements as set out in Part C of the First Schedule.

(c) with respect to securities to be listed on the Fixed Income Securities Market Segment, the issuer complies with the eligibility requirements prescribed in the Second Schedule.

(2) Any person who does not receive the minimum number of subscriptions in a public offering shall not be eligible to make another public offering before the expiry of one year from the date of approval of the previous public offering.

[L.N.

30/2008, s.

6, L.N.

61/2012, s.

6.] 8.

Issuers not seeking listing (1) An issuer who does not wish to list on any market segment of a securities exchange shall comply with the eligibility and disclosure requirements prescribed for the Alternative Investment Market Segment in the case of an offer of shares to the public or for the Fixed Income Securities Market Segment in the case of an offer of debt securities or other fixed income security to the public.

(2) An issuer who has made a public offer in accordance with subsection (1), may, after the expiry of not less than one year since the securities in question ceased to be the subject of an offer to the public list those securities by introduction.

[L.N.

30/2008, s.

7.] 9.

Transfer to other market segment (1) An issuer whose shares are listed on the any market segment of a Securities Exchange shall not be eligible to transfer such securities to the other market segment before the expiry of one year from the date of listing on the first mentioned market segment.

(2) A transfer of shares from or to the any market segment of a Securities Exchange shall be subject to the approval of the Authority and compliance with the eligibility and disclosure requirements prescribed under these Regulations.

[L.N.

61/2012, s.

7.] 10.

Disclosure requirement for public issues (1) The form and content of a prospectus or listing statement shall comply with (a) Part A of the Third Schedule where the issuer seeks to list in the Main Investment Market Segment; (b) Part B of the Third Schedule where the issuer seeks to list in the Alternative Investment Market Segment; (c) Part C of the Third Schedule where the issuer seeks to list in the Fixed Income Securities Market Segment; (cc) Part CC of the Third Schedule where the issuer seeks to list on the Growth Enterprises Market Segment; and (d) Part D of the Third Schedule where the issuer seeks to list on any segment of the market by way of introduction.

(2) Every prospectus or listing statement shall (a) contain the following statement on its front page As a matter of policy, the Capital Markets Authority assumes no responsibility for the correctness of any statements or opinions made or reports contained in this prospectus or listing statement, as the [Issue 1] 148 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] case may be.

Approval of the issue and/or listing is not to be taken as an indication of the merits of the issuer or of the securities; and (b) state the allotment procedure to be applied in case of an over subscription for the securities to be issued pursuant to the prospectus.

[L.N.

30/2008, s.

8, L.N.

61/2012, s.

8.] 10A.

Nominated Advisors (1) An issuer seeking to be listed on the Growth Enterprise Market Segment shall appoint a Nominated Adviser by a written contract and shall ensure that it has a Nominated Advisor at all times.

(2) The Securities Exchange shall suspend an issuer from trading if the issuer, at any time, ceases to have a duly appointed Nominated Advisor.

(3) A Nominated Advisor shall (a) advise and guide an issuer on the application of listing requirements of Growth Enterprise Market Segment; (b) manage the submission of the listing statement and all other documentation to the Securities Exchange and ensure its completeness and correctness before submission; (c) confirm to the Securities Exchange that (i) the issuer complies with all the conditions for listing as set out in the listing requirements for the Growth Enterprise Market Segment; (ii) the information contained in the listing statement is accurate and complete in all material aspects; (iii) there are no other matters, the omission of which would make any statement in the listing statement false or misleading; (iv) statements of fact and opinion expressed by the directors in the listing statement have been arrived at after due and careful consideration on the part of the directors founded on fair and reasonable bases and assumptions; and (v) the directors of the applicant have made sufficient enquiries to enable them give the confirmations set out in the responsibility statement contained in the listing statement; (d) satisfy itself on the credentials of the reporting accountants, auditors, competent persons, valuers, providers of opinions and any other party responsible for a listing statement as required under paragraph A.02 of Part CC of the Third Schedule; (e) satisfy itself, prior to submitting any documentation which requires approval by the Securities Exchange, that to the best of its knowledge and belief, having made due and careful enquiry of the issuer and its advisers (i) it is in compliance with the eligibility and disclosure requirements for listing on the Growth Enterprise Market Segment; and (ii) there are no material matters, other than those disclosed in writing to the Securities Exchange, which should be taken into account by the Securities Exchange in considering the application; (f) provide the Securities Exchange with any information or explanation known to it in such form and within such time as the Securities Exchange may reasonably require for the purposes of verifying whether the Nominated Advisor or the issuer have complied with the listing requirements; 149 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (g) advise the Securities Exchange immediately if it is aware or have reason to suspect that any of its clients have or may have breached the listing requirements; (h) submit all documents to the Securities Exchange and ensure that where such documents or any announcements are required, that they are in compliance with the continuous listing obligations; (i) take all reasonable steps to brief all new appointments to the board of directors of the issuer as to the nature of their responsibilities under the listing requirements, other applicable regulation and the general nature of their obligations in relation to shareholders and shall ensure that (i) at least one third of the directors of the issuer have completed the Directors Induction Programme (DIP) prior to listing and the remainder complete the same within six months after the listing; and (ii) all new appointments to the board of directors of the issuer complete the DIP within six months of appointment; (j) review with the issuer, prior to publication, all periodic financial information announcements, and any other documentation to ensure that the directors of the issuer, after due and careful consideration, understand the importance of accurately disclosing all material information to shareholders and the market; (k) ensure that at least one of its authorised representatives attends all board audit committee meetings of the issuer in an advisory capacity to ensure that the issuer conducts its meetings in compliance with the listing requirements and any applicable regulations; and (l) carry out any activities relating to company for which it is the Nominated Advisor as may be requested by the Securities Exchange, from time to time.

(4) A Nominated Adviser shall, in the discharge of its responsibilities under these Regulations, observe due care and skill and ensure, at all times, that its conduct or judgment does not impair the integrity and reputation of the Growth Enterprise Market Segment.

[L.N.

61/2012, s.

9.] 11.

Disclosure requirements for additional issues An issuer whose securities are listed at a securities exchange shall not issue, or authorize its registrar to issue or register, by way of capitalization, scrip dividend, right issue or additional shares of the class listed, to a greater amount than the number hitherto authorized for listing except in accordance with the disclosure requirements for additional listing prescribed in the Fourth Schedule.

12.

General duty of disclosure in prospectus (1) In addition to the information required to be disclosed by virtue of these Regulations, a prospectus or information memorandum or a listing statement shall, subject to these Regulations, contain all such information as investors would reasonably require, and reasonably expect to find therein, for the purpose of making an informed assessment of (a) the assets and liabilities, financial position, profits and losses, and prospects of the issuer of the securities; and (b) the rights attaching to those securities.

(2) The information to be included by virtue of these Regulations shall be such information as is referred to in paragraph (1) which is within the knowledge of any person responsible for the prospectus, or which it would be reasonable for him to obtain by making enquiries.

[Issue 1] 150 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (3) In determining what information is required to be included in a prospectus by virtue of these Regulations, regard shall be had to the nature of the securities and of the offeror of the securities.

(4) The Authority may require additional information to be included in a prospectus if, in its opinion, it deems it in the interests of investors to be in a prospectus, supplementary prospectus or information memorandum.

(5) A Securities Exchange may require additional information to be included in a listing statement if, in its opinion, it is in the interest of investors to be in a listing statement.

[L.N.

61/2012, s.

10.] 13.

Supplementary prospectus (1) Where a prospectus has been approved under these Regulations in respect of a public offer of securities and, at any time between the opening date and the closing date while an agreement in respect of those securities can be entered into in pursuance of that public offer (a) there is a significant change affecting any matter contained in the prospectus the inclusion of which was required by these Regulations; or (b) a significant new matter arises the inclusion of information in respect of which would have been so required if it had arisen when the prospectus was prepared; or (c) there is a significant inaccuracy in the prospectus, the offeror shall, of its own motion, with prior consent of the Authority, or if required by the Authority, publish a supplementary prospectus containing particulars of the change or new matter or, in the case of an inaccuracy, correct it and deliver the supplementary prospectus to the Registrar for registration.

(2) In paragraph (1), the word significant means significant for the purpose of making an informed assessment of the matters mentioned in these Regulations.

(3) Where a supplementary prospectus has been approved in respect of a public offer of securities, the preceding paragraphs of these Regulations shall have effect as if any reference to a prospectus were a reference to the prospectus originally registered and that supplementary prospectus, taken together.

(4) The provisions of regulation 6 shall apply to a supplementary prospectus.

13A.

Supplementary listing statement (1) Where a listing statement has been approved under these Regulations, and at any time between the date of the listing statement and the date of listing of the relevant securities (a) there is a significant change affecting any matter contained in the listing statement the inclusion of which was required by these regulations; (b) a significant new matter arises the disclosure of which would have been required if it had arisen when the listing statement was prepared; or (c) there is a significant inaccuracy in the listing statement, the issuer shall, on its own motion, with prior consent of the Securities Exchange, or if required by the Securities Exchange, publish a supplementary listing statement containing particulars of the change or new matter or in the case of inaccuracy, correct it.

(2) For the purposes of this regulation, significant means material change for the purposes of making an informed assessment of the matters mentioned in these Regulations.

[L.N.

61/2012, s.

11.] 151 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 14.

Power of Authority to extend, re-open or cancel Where, in the opinion of the Authority, circumstances have occurred or new information has emerged that fundamentally alters the basis of approval of a public offer before the allotment date or date of listing in the case of an introduction which renders the information memorandum inadequate, the Authority may require the issuer (a) to issue a supplementary prospectus disclosing such additional information; or (b) extend the offer to allow investors to make an informed decision in light of the new disclosure; or (c) re-open the offer for such period as shall be determined by the Authority to allow investors either to re-confirm their applications for subscription or withdraw their applications; or (d) cancel the offer.

[L.N.

30/2008, s.

9.] 15.

Exceptions The Authority may authorise the omission from a prospectus or supplementary prospectus of information whose inclusion would otherwise be required by these Regulations if the Authority considers that the disclosure of that information would be prejudicial to the interest of the offer or but does not prejudice the interest of investors.

15A.

Listing statement exceptions The Securities Exchange may, in consultation with the Authority, authorize the omission from a listing statement, information whose inclusion would otherwise be required by these Regulations if the Securities Exchange considers that the disclosure of that information would be prejudicial to the interests of the issuer but does not prejudice the interests of investors.

[L.N.

61/2012, s.

12.] 16.

Advertisements, etc., in connection with offer of securities (1) An advertisement, notice, poster or documents including a bridge prospectus announcing a public offer or listing of securities for which a prospectus or a listing statement is or will be required under these Regulations shall not be issued to or caused to be issued to the public in Kenya unless it states that a prospectus or a listing statement is or will be published, as the case may be, and gives an address in Kenya from which it can be obtained or will be obtainable.

(2) The advertisements, notices, posters or documents referred to in paragraph (1) shall be submitted to the Authority or Securities Exchange in the case of listing on the Growth Enterprise Market Segment not later than forty-eight hours prior to publication, and the Authority or the Securities Exchange may require such amendments thereto as it may consider necessary.

(3) Every application form for subscription of the securities offered in a prospectus shall state, in a conspicuous position, where the prospectus may be obtained, and the issuer shall disclose to the Authority the number of copies of the prospectus printed.

(4) Every issuer shall publish a bridge prospectus in at least two daily newspapers of national circulation and such prospectus shall disclose basic information on the issuer, including (a) a summary of balance sheet and profit and loss accounts for the three years immediately preceding the issue; (b) the broad shareholding structure prior to the issue and the anticipated structure after the issue; [Issue 1] 152 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (c) important highlights of the issue; and (d) any other information on the issue considered essential by the issuer.

[L.N.

30/2008, s.

10, L.N.

61/2012, s.

13.] 17.

Persons responsible for prospectus (1) Subject to paragraphs (2) and (3), the persons who, for the purposes of these Regulations are responsible for a prospectus or a supplementary prospectus or a listing statement or a supplementary statement are (a) the issuer of the securities to which the prospectus or supplementary prospectus or a listing statement or a supplementary statement relates; (b) where the issuer is a body corporate, each person who is a director of that body corporate at the time when the prospectus or supplementary prospectus or a listing statement or a supplementary statement or a listing statement or a supplementary statement is published; (c) where the issuer is a body corporate, each person who has given his consent to be named and is so named in the prospectus or supplementary prospectus as a director or as having agreed to become a director of that body corporate either immediately or at a future time; (d) each person who accepts, and is stated in the prospectus or supplementary prospectus or a listing statement or a supplementary statement as accepting, responsibility for, or for any part of, the prospectus or supplementary prospectus; (e) the offer or of the securities, where the offer or is not the issuer; (f) where the offer or is a body corporate, but is not the issuer and is not making the offer in association with the issuer, each person who is a director of that body corporate at the time when the prospectus or supplementary prospectus or a listing statement or a supplementary statement is published; and (g) each person not falling within any of the foregoing paragraphs who has authorised the contents of, or of any part of, the prospectus or supplementary prospectus or a listing statement or a supplementary statement.

(2) Notwithstanding the provisions of paragraph (1), a person shall not be responsible for a prospectus or a supplementary prospectus or a listing statement or a supplementary statement (a) under paragraph (1)(a), (b) or (c), unless the issuer has made or authorized the offer in relation to which the prospectus or supplementary prospectus or a listing statement or a supplementary statement is published; or (b) under paragraph (1) (b), if such prospectus or supplementary prospectus or a listing statement or a supplementary statement is published without his knowledge or consent and on becoming aware of its publication, he forthwith gives reasonable notice to the public and to the Authority that the prospectus or supplementary prospectus was published without his knowledge or consent.

(3) Where a person has accepted responsibility for, or authorised, only part of the contents of any prospectus or supplementary prospectus or a listing statement or a supplementary statement, he shall be responsible under paragraph (1)(d) or (g) only for that part and only if it is included or substantially included in the form and context to which he has agreed.

[L.N.

61/2012, s.

14.] 153 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] 18.

Underwriting requirements (1) Every issuer shall seek professional financial advice to determine whether or not underwriting of the public offer of securities is deemed necessary and any underwriting arrangement shall be subject to the prior approval of the Authority.

(2) Where the underwriter is a person related or associated to the issuer, the underwriter shall undertake to the Authority to dispose of any share arising from the underwriting agreement within a period predetermined by the issuer and approved by the Authority.

(3) The Authority may extend the period referred to in paragraph (2) if satisfied that such extension would be in the best interest of the holders of ordinary shares of the company, having regard to the prevailing market conditions and any other factors that are relevant in the circumstances.

(4) Where the Authority extends the period referred to in paragraph (2) in accordance with paragraph (3), the issuer shall make a public announcement disclosing the period of such extension, any conditions attached to the extension and the circumstances necessitating the extension, in at least two daily newspapers of wide circulation.

PART III CONTINUING OBLIGATIONS AND MISCELLANEOUS PROVISIONS 19.

Continuing obligations (1) Every issuer whose securities have been offered to the public or listed shall comply with the continuing obligations specified in the Fifth Schedule with respect to the relevant market segment.

(2) In relation to the continuing obligation to disclose information, an issuer shall make immediate public disclosure of information which might reasonably be expected to have a material effect on market activity in and prices of, its securities.

(3) The information required to be disclosed under these Regulations shall be disclosed within twenty-four hours of the event, simultaneously to the Authority, the securities exchange at which the issuers securities are listed, if applicable, and to the public during non-trading hours of the relevant market segment.

(4) The announcement shall state whether the consent of the Authority or the securities exchange or other person is necessary and where necessary, the issuer shall apply for such consent within seven days of the announcement.

(5) An issuer who fails to comply with any continuing obligation within the prescribed time shall be liable to pay a penalty at the rate prescribed by the Authority.

[L.N.

61/2012, s.

15.] 20.

Exceptions (1) These Regulations shall not apply to (a) securities issued by or on behalf of the Government of Kenya or a body corporate established under any written law in Kenya other than the Companies Act (Cap.

486); and (b) private offers.

(2) In considering the issue and listing of securities by a body corporate falling under subparagraph (a) of paragraph (1), the Authority shall take into account the issuers ability to meet all financial obligations arising out of the issue and approve the issue subject to such conditions as may be necessary for the protection of investors or the public interest.

[Issue 1] 154 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] 21.

Meaning of private offers (1) For purposes of these Regulations, an offer of securities shall be regarded as private offer and accordingly shall be deemed not to be an offer to the public in Kenya if, to the extent that the offer is made to persons in Kenya under the following conditions (a) the securities are offered to not more than one hundred persons; (b) the securities are offered to the members of a club or association (whether or not incorporated) and the members can reasonably be regarded as having a common interest with each other and with the club or association in the affairs of the club or association and in what is to be done with the proceeds of the offer; (c) the securities are offered to a restricted circle of persons whom the offeror reasonably believes to be sufficiently knowledgeable to understand the risks involved in accepting the offer; (d) the securities are offered in connection with a bona fide invitation to enter into an underwriting agreement with respect to them; (e) the securities are of a private company and are offered by that company to (i) members or employees of the company; (ii) members of the families of any such members or employees; or (iii) the securities are offered to a restricted circle of persons whom the offeror reasonably believes to be sufficiently knowledgeable to understand the risks involved in accepting the offer; (f) the minimum subscription for securities per applicant is not less than Kenya Shillings one hundred thousand (Kshs.

100,000); (g) the securities result from the conversion of convertible securities and a prospectus relating to the convertible securities was approved by the Authority and published in accordance with these Regulations; (h) the securities of a listed company are offered in connection with a take-over scheme approved by the Authority; or (i) the securities are not freely transferable.

(2) For the purposes of paragraph (e)(ii) the members of a persons family are the persons husband or wife, widow or widower and children (including stepchildren) and their descendants, and any trustee (acting in his capacity as such) of a trust the principal beneficiary of which is the person himself or herself, or any of those relatives.

22.

Suspension and de-listing (1) No security shall be suspended or de-listed by a securities exchange without the prior approval of the Authority.

(2) The Authority may require a securities exchange to suspend a listed security where (a) a decision has been made or is imminent that will lead to the placing of the issuer of such securities under statutory management, receivership, liquidation or voluntary winding-up; (b) there is a significant restructuring involving the listed securities such as in the process of acquisition, mergers or takeovers; or (c) a recommendation has been made by the directors to the shareholders to have the securities suspended and where the holders of such securities through a special resolution at which a minimum of 75% of such security 155 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] holders are represented without objection to the proposed suspension from at least 10% of the holders of securities resolve to have the securities suspended.

(3) The suspension of securities shall be subject to such time as predetermined by the Authority.

(4) The Authority may require a securities exchange to de-list a security where (a) the issuer of such securities has been placed under statutory management, receivership or liquidation or voluntary winding-up; (b) as a result of restructuring involving the listed securities, the issuer ceases to exist; or (c) a recommendation has been made by the directors to the shareholders to have the securities de-listed and where the share holders of such securities through a special resolution at which a minimum of 75% of such security holders are represented without objection to the proposed withdrawal from at least 10% of the holders of securities resolve to have the securities de- listed.

(5) Notwithstanding the provisions of paragraphs (2) and (4), the Authority may require the suspension or de-listing of an issuer in any other circumstances, which in the opinion of the Authority, serves to protect the interest of the investors.

(6) Where a security has been suspended or de-listed, the securities exchange shall publish such information in at least two local English dailies of national circulation.

23.

Revocation of L.N.

13/2002 The Capital Markets (Securities) (Public Offers and Listing Requirements) Regulations, 2002 are revoked.

24.

Amendment of L.N.

429/1992 The Capital Markets Rules, 1992 are amended by deleting Parts XI and XII.

25.

Amendment of L.N.

428/1992 The Capital Markets Authority Regulations, 1992 are amended by deleting Part VIII.

[Issue 1] 156 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] ubject to any PART C Segment ed and fully paid up ordinary The issuer to be listed shall be a public company limited by shares and registered under the Companies Act (Cap.

486 of the Laws of Kenya).

The issuer shall have a minimum authorizshare capital of ten million shillings; and The issuer must have not less than one hundred thousand shares in issue.

Shares to be listed shall be freely transferable and not srestrictions on marketability or any pre-emptive rights.

Criteria for the Growth Enterprise Market ubject to any PART B Market Segment ed issued and fully paid up suer shall have audited ds (IFRS) for an accounting OFFERING OF SHARES AND LISTING Criteria for the Alternative Investment The issuer to be listed shall be a public company limited by shares and registered under the Companies Act (Cap.

486 of the Laws of Kenya).

The issuer shall have a minimum authorizordinary share capital of twenty million shillings.

Net assets immediately before the public offering or listing of shares should not be less than twenty million shillings.

Shares to be listed shall be freely transferable and not srestrictions on marketability or any preemptive rights.

The isfinancial statements complying with International Financial Reporting Standar FIRST SCHEDULE n1)(a) and (b), L.N.

30/2008, s.

11, L.N.

61/2012, s.

16.] ubject to any of the Laws of Kenya).

[Rule 7(EQUIREMENTS FOR PUBLICPART A Segment issuer to be listed shall be a ed issued and fully paid up suer shall have audited ds (IFRS) for an accounting The public company limited by shares and registered under the Companies Act (Cap.

486The issuer shall have a minimum authorizordinary share capital of fifty millioshillings.

Net assets immediately before the public offering or listing of shares should not be less than one hundred million shillings.

Shares to be listed shall be freely transferable and not srestrictions on marketability or any preemptive rights.

The isfinancial statements complying with International Financial Reporting Standar ELIGIBILITY RCriteria for the Main Investment Market capital Requirement Share assets Incorporation status Size: Net Free transferability of shares Availability and reliability of financial records 157 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] ruptcy th at least a third of up petition pending or PART C Segment.

iod of at least two years priorany petition under bankor insolvency laws in anyjurisdiction pending orthreatened against the director (for individuals), or any winding-threatened against it (for corporate bodies); The issuer must have a minimum of five directors, withe Board as non executivedirectorsAs at the date of the application and for a perto the date of the application, no director of the issuer shall have- (i) Criteria for the Growth Enterprise Market eport emphasis of iod on a going PART B continuedMarket Segment iod of at least two years prior any petition under bankruptcy or insolvency laws in anyjurisdiction pending or threatened against the director (for director (for individuals), or any winding-up petition pending or threatened against it (for corporate bodies); period ending on a date not more than four months prior to the proposed date of the offer or listing for issuers whose securities are not listed at the securities exchange, and six months for issuers whose securities are listed at the securities exchange.

The Issuer must have prepared financial statements for the latest accounting perconcern basis and the audit rmust not contain anymatter or qualification in this regard.

At the date of the application, the issuer must not be in breach of any of its loan covenants particularly in regard to the maximum debt capacity.

As at the date of the application and for a perto the date of the application, no director of the issuer shall have - Criteria for the Alternative Investment eport FIRST SCHEDULE emphasis of iod on a going PART A Segment iod of at least two years prior any petition under bankruptcy or insolvency laws in anyjurisdiction pending or threatened against the director (for director (for individuals), or any winding-up petition pending or threatened against it (for corporate bodies); period ending on a date not more than four months prior to the proposed date of the offer or listing for issuers whose securities are not listed at the securities exchange, and six months for issuers whose securities are listed at the securities exchange.

The Issuer must have prepared financial statements for the latest accounting perconcern basis and the audit rmust not contain anymatter or qualification in this regard.

At the date of the application, the issuer must not be in breach of any of its loan covenants particularly in regard to the maximum debt capacity.

As at the date of the application and for a perto the date of the application, no director of the issuer shall have - Criteria for the Main Investment Market Requirement Competence and suitability of directors and management [Issue 1] 158 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] within any any other iction.

PART C Segment d ctors and senior e any criminal proceedings in which the director was convicted of fraud or any criminal offence, nor be named the subject of pending criminal proceeding, oroffence or action eitheror outside Kenya; or been the subject of any ruling of a court of competent jurisdiction or any governmental body in anyjurisdiction, that permanentlyor temporarily prohibits such director from acting as an investment adviser or as a director or employee of a stockbroker, dealer, orfinancial service institution orengaging in any type of business practice or activity in that juris (ii) (iii) The dirmanagement of an applicant must collectively have appropriate expertise and experience for the governance and management of the applicant and its business.

Criteria for the Growth Enterprise Market isdiction the iction.

PART B within or outside Kenya; d continuedMarket Segment any criminal proceedings in which the director was convicted of fraud or any criminal offence, nor be named the subject of pending criminal proceeding, or any other offence or action eitheror been the subject of any ruling of a court of competent juror any governmental body in any jurisdiction, that permanently or temporarily prohibits such director fromacting as an investment adviser or as a director or employee of a stockbroker, dealer, or any financial service institution or engaging in any type of business practice or activity in that juris Criteria for the Alternative Investment - - The issuer must have suitable seniormanagement with relevant experience for at least one year priorto the listing, none of whom shall have committed any serious offence in any jurisdiction that may be considered inappropriate formanagement of a listed company.

isdiction the FIRST SCHEDULE iction.

PART A Segment within or outside Kenya; d any criminal proceedings in which the director was convicted of fraud or any criminal offence, nor be named the subject of pending criminal proceeding, or any other offence or action eitheror been the subject of any ruling of a court of competent juror any governmental body in any jurisdiction, that permanently or temporarily prohibits such director fromacting as an investment adviser or as a director or employee of a stockbroker, dealer, or any financial service institution or engaging in any type of business practice or activity in that juris - - The issuer must have suitable seniormanagement with relevant experience for at least one year priorto the listing, none of whom shall have committed any serious offence in any jurisdiction that may be considered inappropriate formanagement of a listed company.

Criteria for the Main Investment Market Requirement 159 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] the ants PART C Segment reason of a serious offence or be inappropriate for Details of such expertise and experience must be disclosed in any listing particulars prepared byapplicant.

appropriate expertise and experience shall mean at least one year experience in the applicbusiness, or where the applicant has no previous record, experience in similar line of business.

One third of the directors must have completed the Directors Induction Programme (DIP) prior to listing and the remainder must complete the same within six months after listing.

The issuer shall ensure continued retention of qualified management during listing and no change of management for a period of twelve months following the listing otherthan forthat may be considered to affect the integritymanagement of a listed company.

Criteria for the Growth Enterprise Market ting and no for a period flect a profit e eason of a serious PART B continuedMarket Segment opriate for management of a Criteria for the Alternative Investment The issuer shall ensure continued retention of suitably qualified management during lischange of managementof twelve months following the listing other than for roffence that may be considered to affect the integrity or be inapprlisted company.

The issuer must have at least a third of the Board as non executive directors.

The issuer must have been in existence in the same line of business for a minimum of two years one of which should rwith good growth potential.

FIRST SCHEDULEting and no for a period ast three of the eason of a serious PART A Segment opriate for management of a The issuer shall ensure continued retention of suitably qualified management during lischange of managementof twelve months following the listing other than for roffence that may be considered to affect the integrity or be inapprlisted company.

The issuer must have at least a third of the Board as non executive directors.

The issuer must have declared profits after tax attributable to shareholders in at lelast five completed accounting periods to the date of the offer.

Criteria for the Main Investment Market Requirement Track record, profitabilityand future prospects [Issue 1] 160 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] of s ciated or e adequate PART Ce held by a controlling Segment The issuer should not be insolvent.

The issuer should havworking capital.

The Directors of the Issuer shall give an opinion on the adequacy of working capital for at least twelve months immediately following the share offering, and the auditorthe issuer shall confirm in writing the adequacy of that capital.

The Issuer must ensure at least fifteen per cent of the issued shares (excluding thosshareholder or people assoacting in concert with him; or the Companys Senior Managers) are available for trade by the public.

Criteria for the Growth Enterprise Market e adequate of the shares PART B continuedMarket Segment per centums of the controlling Criteria for the Alternative Investment For purposes of listing by introduction by issuers listed on a foreign securities exchange, the issuer must have been listed for a minimum of two years.

The issuer must have a clear future dividend policy.

The issuer should not be insolvent.

The issuer should havworking capital.

Following the public share offering or immediately prior to listing in the case of an introduction, at least twenty must be held by not less than one hundred shareholders excluding employees of the issuer or family membershareholders.

FIRST SCHEDULE e adequate of the shares PART A Segment per centum ng the public share offering or For purposes of listing by introduction by issuers listed on a foreign securities exchange, the issuer must have been listed for a minimum of two years.

The issuer must have a clear future dividend policy.

The issuer should not be insolvent.

The issuer should havworking capital.

Followiimmediately prior to listing in the case of an introduction, at least twenty five must be held by not less than one thousand shareholders excluding employees of the issuer.

Criteria for the Main Investment Market Requirement policy Dividend Solvency and adequacy of working capital Share ownership structure 161 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] the enty- months hole of their lling shareholder oreholders who have o PART C Segment An issuer shall cease to be eligible for listing upon the expiry of three months of the listing date, if the securities available for trade bypublic are held by less than twfive shareholders (excluding those held by a contrpeople associated or acting in concert with him, or the Companys Senior Managers.) The issuer must ensure that the existing shareholders, associated persons or such other group of controlling sharinfluence over management shall give an undertaking in terms agreeable to the Authority and the Securities Exchange restricting the sale of part or the wshareholding before the expiry of a period of twenty fourfollowing listing and such undertaking shall be disclosed in the listing statement.

Criteria for the Growth Enterprise Market per levant e of the twenty eholders who have shareholding before PART B continuedMarket Segment per centum shareholding.

piry period of twenty four Criteria for the Alternative Investment No investor shall hold more than three centumThe issuer must ensure that the existing shareholders, associated persons or such other group of controlling sharinfluence over management shall give an undertaking to the Authority not to sell theirthe exmonths following listing and such undertaking shall be disclosed in the Information Memorandum.

If the issuer is listed in a securities exchange outside Kenya or is licensed by any regulator the Authority shall obtain a certificate of no objection from that foreign securities exchange and the rregulators.

FIRST SCHEDULE months ons or such other PART A Segment In the case of a listing by introduction, the issuer shall ensure that the existing shareholders, associated persgroup of controlling shareholders who have influence over management shall give an undertaking not to sell theirshareholding before the expiry of a period of twenty fourfollowing listing and such undertaking shall be disclosed in the Information Memorandum.

Criteria for the Main Investment Market comfort Requirement of Certificate [Issue 1] 162 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] visor at all d PART C Segment o.

4 of 2000).

All issued shares must be deposited at a central depository established under the Central Depositories Act, 2000 (NThe issuer must appoint a Nominated Advisor in terms of a written contract and must ensure that it has a Nominated Atimes.

Criteria for the Growth Enterprise Market PART B continued Market Segment Criteria for the Alternative Investment FIRST SCHEDULE PART A Segment Criteria for the Main Investment Market Advisor Requirement hares to be Listed Simmobilized Nominated 163 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] SECOND SCHEDULE [Rule 7(1)(c), L.N.

30/2008, s.

12.] ELIGIBILITY REQUIREMENTS FOR PUBLIC OFFERING OF FIXED INCOME SECURITIES AND LISTING ON THE FIXED INCOME SECURITIES MARKET SEGMENT REQUIREMENT CRITERIA Incorporation status The issuer to be listed shall be a body corporate.

Size: share capital and net The issuer shall have minimum issued and fully paid up share capital assets of issuer of fifty million shillings and net assets of one hundred million shillings before the public offering or listing of the securities.

Listing and transferability of All fixed income securities offered to the public or a section thereof securities except for commercial papers shall be listed and shall be freely transferable and not subject to any restrictions on marketability or pre- emptive rights.

Commercial papers are not transferable or to be listed at a securities exchange.

Availability and reliability of The issuer other than the Government of Kenya issuing Treasury financial records Bonds or other Government Securities, must have audited financial statements complying with International Financial Reporting Standards (IFRS) for an accounting period ending on a date not more than four months prior to the proposed date of the offer.

The issuer must have prepared financial statements for the latest accounting period on a going concern basis and the audit report must not contain any emphasis of matter or qualification in this regard.

At the date of the application, the issuer must not be in breach of any of its loan covenants particularly in regard to the maximum debt capacity.

Directors and senior In the case of issuers whose securities are listed at a securities management exchange in Kenya but where not more than six months have elapsed since the end of the financial year, un-audited financial statements covering the period preceding the six months must be included in or appended to the Information Memorandum.

As at the date of the application and for a period of at least two years prior to the date of the application, no director of the issuer shall have any petition under bankruptcy or insolvency laws in any jurisdiction pending or threatened against the director (for individuals), or any winding-up petition pending or threatened against it (for corporate bodies); any criminal proceedings in which the director was convicted of fraud or any criminal offence, to be named subject of pending criminal proceeding, or any other offence or action either within or outside Kenya; or been the subject of any ruling of a court of competent jurisdiction or any governmental body in any jurisdiction, that permanently or temporarily prohibits such director from acting as an investment advisor or as a director or employee of a stockbroker, dealer or any financial institution or engaging in any type of business practice or activity in that jurisdiction.

The issuer must have suitable senior management with relevant experience for at least one year prior to the listing, none of whom shall have committed any serious offence that may be considered inappropriate for the management of a listed company.

At least one third of the issuers Board of Directors shall be non- executive directors.

[Issue 1] 164 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] SECOND SCHEDULEcontinued REQUIREMENT CRITERIA Certificate of comfort If the issuer is licensed to operate by any regulator in any country the Authority shall obtain a certificate of no objection from the relevant regulators.

Where there is a guarantor, the consent of its regulator shall be obtained by the Authority.

Where there is a guarantor, the guarantor shall provide the Authority with a financial capability statement duly certified by its auditors.

Profitable historic track The issuer must have declared profits after tax attributable to record and future prospects shareholders in at least two of the last three financial periods preceding the application for the issue.

Guarantee requirements Where the issuer does not satisfy the requirements it may seek a credit enhancement to have the securities it seeks to issue guaranteed.

The guarantor may only be a bank or an insurance company or any other institution with necessary financial capacity acceptable to the Authority and a copy of the guarantee document shall be subject to approval of an be submitted to the Authority with the Information Memorandum.

Debt ratios Total indebtedness, including the new issue if fixed income securities shall not exceed four hundred per centum of the companys net worth (or gearing ratio of 4:1) as the latest balance sheet.

The funds from operations to total debt for the three trading periods preceding the issue shall be maintained as long as the fixed income securities remain outstanding.

The conditions as provided must be maintained as long as the fixed income securities remain outstanding.

Size of the issue The minimum size of the issue shall be fifty million shillings.

The minimum issue lot size shall be: (i) one hundred thousand for corporate bonds and preference shares or such higher amount s as may be required by the Authority; and (ii) one million shillings for commercial paper.

Minimum size for listing For an issuer to maintain listing of its fixed income security, the minimum size of the fixed income security listed shall be fifty million shillings except in the case of redemption.

Renewal date Every issuer of commercial paper shall apply for renewal at least three months before the expiry of the approved period of twelve months from the date of approval.

THIRD SCHEDULE [Rule 7(1)(d), L.N.

30/2008, s.

13, L.N.

61/2012, s.

17, Regulation 10(a).] PART A MAIN INVESTMENT MARKET SEGMENT DISCLOSURE REQUIREMENTS FOR PUBLIC OFFERINGS ID.A.00.

Identity of directors, senior management and advisers (i.e.

persons responsible for the information disclosed) A.01 The name, home or business address and function of each of the persons giving the declaration set out in paragraph A.02 165 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] THIRD SCHEDULE, continued A.02 A declaration in the following form The directors of [the issuer], whose names appear on page [ ] of the prospectus, accept responsibility for the information contained in this document.

To the best of the knowledge and belief of the directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with facts and does not omit anything likely to affect the import of such information.

A.03 The names, addresses and qualifications of the auditors who have audited the issuers annual accounts in accordance with IAS for the last three financial years.

A.04 If auditors have resigned, have been removed or have not been re-appointed during the last three financial years and have deposited a statement with the issuer of circumstances which they believe should be brought to the attention of members and creditors of the issuer, details of such matters must be disclosed.

A.05 The names and addresses of the issuers bankers, legal advisers, sponsors, reporting accountants and any other expert to whom a statement or report included in the prospectus has been attributed.

ID.B.00.

Offer statistics and expected timetable B.01 (1) A statement that the Authority has approved the public offering and listing of the shares on the Main Investment Market Segment of a securities exchange.

(2) Cautionary statement of the Authority.

B.02 A statement that a copy of the prospectus has been delivered to the Registrar.

B.03 If the offer is by more than one method, for each method of offering, state the total amount of the issue, including the expected issue price or the method of determining the price and the number of securities expected to be issued.

B.04 For each public offering, and separately for each group of targeted potential investors, state the following information to the extent applicable (a) the period during which the offer will be open, and where and to whom purchase or subscription applications shall be addressed.

Describe whether the purchase period may be extended or shortened, and the manner and duration of possible extensions or possible early closure or shortening of the period.

Describe the manner in which the latter shall be made public.

If the exact dates are not known when the documents are first filed or distributed to the public, describe arrangement for announcing final or definitive date or period; (b) method and time limits for paying up securities; (c) method and time limits for delivery of securities (including provisional certificates, if applicable) to subscribers or purchasers; (d) in case of pre-emptive purchase rights, the procedure for the exercise of any right of pre-emption, the negotiability of subscription rights and the treatment of subscription rights not exercised; and (e) a full description of the manner in which results of the distribution of securities are to be made public, and when appropriate, the manner for refunding excess amounts paid by applicants (including whether interest is to be paid).

ID.C.00.

Information on the issuer C.01 The name, registered office and, if different, head office of the issuer.

If the issuer has changed its name within the last five years, the old name must be printed in bold type under the new name.

[Issue 1] 166 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] THIRD SCHEDULE, continued C.02 The country of incorporation of the issuer.

C.03 The date of incorporation and the length of life of the issuer, except where indefinite.

C.04 The legislation under which the issuer operates and the legal form which it has adopted under that legislation.

C.05 A description of the issuers principal objects and reference to the clause(s) of the memorandum of association in which they are described.

C.06 The place and date of registration of the issuer and its registration number.

C.07 A statement that for a period of not less than five working days from the date of the prospectus or for the duration of any offer to which the prospectus relates, if longer, at a named place as the Authority may agree, the following documents (or copies thereof), where applicable, could be inspected (a) the memorandum and articles of association of the issuer; (b) any trust deed of the issuer or of its subsidiary companies which is referred to in the prospectus; (c) each document mentioned in paragraphs C.18 (material contracts) and E.11 (directors service contracts) or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; (d) copies of service agreements with managers or secretary/ies; underwriting, vendors and promoters agreements entered into during the last two financial years; (e) in the case of an issue of shares in connection with a merger, the division of a company, the transfer of all or part of an undertakings assets and liabilities, or a take over offer, or as consideration for the transfer of assets other than cash, the documents describing the terms and conditions of such operations, together, where appropriate, with any opening balance sheet, if the issuer has not prepared its own or consolidated annual accounts (as appropriate); (f) the latest competent persons report, in the case of a mineral company; (g) the latest certified appraisals or valuations relative to movable and immovable property and items of a similar nature, if applicable; (h) all reports, letters, and other documents, balance sheets, valuations and statements by any expert any part of which is included or referred to in the prospectus; (i) written statements signed by the auditors or accountants setting out the adjustments made by them in arriving at the figures shown in any accountants report pursuant to paragraph G.04 and giving the reasons therefor; and (j) the audited accounts of the issuer or, in the case of a group, the consolidated audited accounts of the issuer and its subsidiary undertakings for each of the five financial years preceding the publication of the prospectus, including, in the case of a company incorporated in Kenya, all notes, reports or information required by the Companies Act (Cap.

486).

C.08 Where any of the documents listed in paragraph C.07 are not in the English language, translations into English must also be available for inspection.

In the case of any document mentioned in paragraph C.18 (material contracts), a translation of a summary of such document may be made available for inspection, if the Authority so requires.

167 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] C.09 The amount of the issuers authorised and issued capital and the amount of any capital agreed to be issued, the number and classes of the shares of which it is composed with details of their principal characteristics.

If any part of the issued capital is still to be paid up, a statement of the number, or total nominal value, and the type of the shares not yet fully paid up, broken down, where applicable, according to the extent to which they have been paid up.

C.10 Where the issuer has authorised but un-issued capital or is committed to increase the capital, an indication of (a) the amount of such authorised capital or capital increase and, where appropriate, the duration of the authorisation; (b) the categories of persons having preferential subscription rights for such additional portions of capital; and (c) the terms and arrangements for the share issue corresponding to such portions.

C.11 If the issuer has shares not representing capital (a) the number and main characteristics of such shares; (b) the amount of any outstanding convertible debt securities, exchangeable debt securities or debt securities with warrants; and (c) a summary of the conditions governing and the procedures for conversion, exchange or subscription of such securities.

C.12 A summary of the provisions of the issuers memorandum and articles of association regarding changes in the capital and in the respective rights of the various classes of securities.

C.13 A summary of the changes during the three preceding years in the amount of the issued capital of the issuer and, if material, the capital of any member of the group and/or the number and classes of securities which it is composed.

Intra-group issues by partly owned subsidiaries and changes in the capital structure of subsidiaries which have remained wholly owned throughout the period may be disregarded.

Such summary must also state the price and terms granted and (if not already fully paid) the dates when any instalments are in arrears.

If any asset has been acquired or is to be acquired out of the proceeds of the issue, its value must be stated.

If there are no such issues, an appropriate negative statement must be made.

C.14 The names of the persons, so far as they are known to the issuer, who, directly or indirectly, jointly or severally, exercise or could exercise control over the issuer, and particulars of the proportion of the voting capital held by such persons.

For these purposes, joint control means control exercised by two or more persons who have concluded an agreement which may lead to their adopting a common policy in respect of the issuer.

C.15 Details of any change in controlling shareholder(s) as a result of the issue.

C.16 The history of any change in the controlling shareholder(s) and trading objectives of the issuer and its subsidiaries during the previous two financial years.

A statement of the new trading objectives and the manner in which the new objects will be implemented.

If the issuer or the group, as the case may be, carries on widely differing operations, a statement showing the contributions of such respective differing statement showing the contributions of such respective differing operations to its trading results.

The proposed new name, if any, the reasons for the change and whether or not consent to the change has been obtained from the Registrar.

C.17 If the issuer has subsidiary undertakings or parent undertakings, a brief description of the group of undertakings and of the issuers position within it stating, where the issuer is a subsidiary undertaking, the name of and number of shares in the issuer held (directly or indirectly) by each parent undertaking of the issuer.

[Issue 1] 168 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] C.18 A summary of the principal contents of (a) each material contract (not being a contract entered into in the ordinary course of business) entered into by any member of the group within the two years immediately preceding the publication of the prospectus, including particulars of dates, parties, terms and conditions, any consideration passing to or from the issuer or any other member of the group, unless such contracts have been available for inspection in the last two years in which case it will be sufficient to refer to them collectively as being available for inspection in accordance with paragraph C.07; and (b) any contractual arrangement with a controlling shareholder required to ensure that the company is capable at all times of carrying on its business independently of any controlling shareholder, including particulars of dates, terms and conditions and any consideration passing to or from the issuer or any other member of the group.

C.19 If any contract referred to in paragraph C.18 relates to the acquisition of securities in an unlisted subsidiary, or associate company, where all securities in the company have not been acquired, state the reason why 100% of the shareholding was not acquired, and whether anyone associated with the controlling shareholder(s) of the issuer, or associate companies, or its subsidiaries is interested and to what extent.

C.20 Details of the name of any promoter of any member of the group and the amount of any cash, securities or benefits paid, issued or given within the three years immediately preceding the date of publication of the prospectus, or proposed to be paid, issued or given to any such promoter in his capacity as a promoter and the consideration for such payment, issue or benefit.

Where the interest of such promoter consists in being a member of a partnership, company, syndicate or other association of persons, the nature and extent of the interest of such partnership, company, syndicate or other association, and the nature and extent of such promoters interest in the partnership, company, syndicate or other association.

C.21 A statement of all sums paid or agreed to be paid within the three years immediately preceding the date of publication of the prospectus, to any director or to any company in which he is beneficially interested, directly or indirectly, or of which he is director, or to any partnership, syndicate or other association of which he is a member, in cash or securities or otherwise, by any person either to induce him to become or to qualify him as a director, or otherwise for services rendered by him or by the company, partnership, syndicate or other association in connection with the promotion or formation of the issuer.

C.22 Where securities are issued in connection with any merger, division of a company, takeover offer, acquisition of an undertakings assets and liabilities or transfer of assets (a) a statement of the aggregate value of the consideration for the transaction and how it was or is to be satisfied; (b) if the total emoluments receivable by the directors of the issuer will be varied in consequence of the transaction, full particulars of the variation; if there will be no variation, a statement to that effect; and (c) if the business of the issuer or any of its subsidiaries or any part thereof is managed or is proposed to be managed by a third party under a contract or arrangement, the name and address (or the address of its registered office, if a company) of such third party and a description of the business so managed or to be managed and the consideration paid in terms of the contract or arrangement and any other pertinent details relevant to such contract or arrangement.

169 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] C.23 A description of the groups principal activities, stating the main categories of products sold and/or services performed.

Where the issuer or its subsidiaries carries on or proposes to carry on two or more businesses which are material having regard to the profits or losses, assets employed or to be employed, or any other factor, information as to the relative importance of each such business.

C.24 For the business(es) described in paragraph C.23 above, the degree of any government protection and of any investment encouragement law affecting the business(es).

C.25 Information on any significant new products and/or activities.

C.26 A breakdown of net turnover during the last five financial years by categories of activity and into geographical markets in so far as such categories and markets differ substantially from one another, taking account of the manner in which the sale of products and the provision of services falling within the groups ordinary activities are organised.

C.27 The location, size and tenure of the groups principal establishments and summary information about land or buildings owned or leased.

Any establishment which accounts for more than 10% of net turnover or production shall be considered a principal establishment.

C.28 Details of any material changes in the businesses of the issuer during the past five years.

C.29 Where the information given pursuant to paragraphs C.23 to C.28 has been influenced by exceptional factors, that fact must be mentioned.

C.30 Summary of information on the extent to which the group is dependent, if at all, on patents or licences, industrial, commercial or financial contracts or new manufacturing processes, where such factors are of fundamental importance to the groups business or profitability.

C.31 Particulars of royalties payable or items of a similar nature in respect of the issuer and any of its subsidiaries.

C.32 Information on any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware) which may have or have had in the recent past (covering at least the previous nine months) a significant effect on the groups financial position or an appropriate negative statement.

C.33 Information on any interruptions in the groups business which may have or have had during the recent past (covering at least the previous nine months) a significant effect on the groups financial position.

C.34 A description, with figures, of the main investments made, including interests such as shares, debt securities, etc., in other undertakings over the last five financial years and during the current financial year.

C.35 Information concerning the principal investments (including new plant, factories and research and development) during the current financial year being made, with the exception of interests being acquired in other undertakings, including (a) the geographical distribution of these investments; and (b) the method of financing such investments.

C.36 Information concerning the groups principal future investments (including new plant, factories, and research and development, if any), with the exception of interests to be acquired in other undertakings, on which the issuers directors have already made firm commitments.

C.37 Information concerning policy on the research and development of new products and processes over the past three financial years, where significant.

C.38 The basis for any statements made by the issuer regarding its competitive position shall be disclosed.

[Issue 1] 170 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] ID.D.00.

Operating and financial review and prospectus (the recent development and prospects of the group) D.01 Unless otherwise approved by the Authority in exceptional circumstances (a) general information on the trend of the groups business since the end of the financial year to which the last published annual accounts relate, and in particular; (i) the most significant recent trends in production, sales, stocks and the state of the order book; and (ii) recent trends in costs and selling prices; and (b) information on the groups prospects for at least the current financial year.

Such information must relate to the financial and trading prospects of the group together with any material information which may be relevant thereto, including all special trade factors or risks (if any) which are not mentioned elsewhere in the prospectus and which are unlikely to be known or anticipated by the general public, and which could materially affect the profits.

D.02 Provide information on the risk factors that are specific to the issuer or its industry and make an offering speculative or on high risk in a section headed Risk Factors.

D.03 Describe the (a) extent to which the financial statements disclose material changes in net revenues, provide a narrative discussion of the extent to which such changes are attributable to changes in prices or to changes in the volume or amount of products or services being sold or to the introduction of new products or service; (b) impact of inflation if material if the currency in which financial statements are presented is of a country that has experienced hyperinflation, the existence of such inflation, a five year history of the annual rate of inflation and discussion of the impact of the hyperinflation on the issuers business shall be disclosed; (c) impact of foreign currency fluctuations on the issuer, if material, and the extent to which foreign currency net investments are hedged by the currency borrowing and other hedging instruments; and (d) impact of any governmental factors that have materially affected or could materially affect, directly or indirectly, the issuers operations or investments by the host country shareholders.

D.04 Where a profit forecast or estimate appears, the principal assumptions upon which the issuer has based its forecast or estimate must be stated.

Where so required, the forecast or estimate must be examined and reported on by the reporting accountants or auditors and their report must be set out.

There must also be set out a report from the sponsor confirming that the forecast has been made after due and careful enquiry by the directors.

D.05 The opinion of the directors, stating the grounds therefor, as to the prospects of the business of the issuer and of its subsidiaries and of any subsidiary or business undertaking to be acquired, together with any material information which may be relevant thereto.

ID.E.00.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) the senior management of the issuer including the chief executive, board secretary and finance director, with details of professional qualifications and period of employment with the issuer for each such person; and (c) founders, if the issuer has been established as a family business or in existence for fewer than five years and the nature of family relationship; if any (d) detailed disclosure of chief executive or other senior management changes planned or expected during twenty-four months following the issue and listing of the security or appropriate negative statement.

E.02 A description of other relevant business interests and activities of every such person as is mentioned in paragraph E.01 and, if required by the Authority particulars of any former forename or surname of such persons.

E.03 In the case of a foreign issuer, information similar to that described in E.01 and E.02 above, relative to the local management, if any.

Where the Authority considers the parent company is not adequately represented on the directorate of its subsidiaries, an explanation is required.

E.04 The total aggregate of the remuneration paid and benefits in kind granted to the directors of the issuer by any member of the group during the last two completed financial years under any description whatsoever.

E.05 A statement showing the aggregate of the direct and indirect interests of the directors in, and the direct and indirect interests of each director holding in excess of 3% of the share capital of the issuer, distinguishing between beneficial and non-beneficial interests, or an appropriate negative statement.

The statement should include by way of a note any change in those interests occurring between the end of the financial year and the date of publication of the prospectus, or if there has been no such change, disclosure of that fact.

E.06 All relevant particulars regarding the nature and extent of any interests of directors of the issuer in transactions which are or were unusual in their nature or conditions or significant to the business of the group, and their nature or conditions or significant to the business of the group, and which were effected by the issuer during (a) the current or immediately preceding financial year; or (b) an earlier financial year and remain in any respect outstanding or unperformed; or an appropriate negative statement.

E.07 The total of any outstanding loans granted by any member of the group to the directors and also of any guarantees provided by any member of the group for their benefit.

E.08 Details of any schemes for involving the staff in the capital of any member of the group.

E.09 Particulars of any arrangement under which a director of the issuer has waived or agreed to waive future emoluments together with particulars of waivers of such emoluments which occurred during the past financial and particulars of waivers in force at the date of the prospectus.

E.10 An estimate of the amounts payable to directors of the issuer, including proposed directors, by any member of the group for the current financial year under the arrangements in force at the date of the listing prospectus.

2012] CAP.

485A Capital Markets [Subsidiary] (b) the date of the contract, the unexpired term and details of any notice periods; (c) full particulars of the directors remuneration including salary and other benefits; (d) any commission or profit sharing arrangements; (e) any provision for compensation payable upon early termination of the contract; (f) details of any other arrangements which are necessary to enable investors to estimate the possible liability of the company upon early termination of the contract; and (g) details relating to restrictions prohibiting the director, or any person acting on his behalf or connected to him, from any dealing in securities of the company during a close period or at a time when the director is in possession of unpublished price sensitive information in relation to those securities.

E.12 A summary of the provisions of the memorandum and articles of association of the issuer with regards to (a) any power enabling a director to vote on a proposal, arrangement, or contract in which he is materially interested; (b) any power enabling the directors, in the absence of an independent quorum, to vote remuneration (including pension or other benefits) to themselves or any members of their body; and (c) retirement or non-retirement of directors under an age limit.

E.13 Any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person referred to in E.01 above, was selected as a director or member of senior management.

E.14 The average numbers of employees and changes therein over the last five financial years (if such changes are material), with, if possible, a breakdown of persons employed by main categories of activity.

E.15 Details relating to the issuers audit committee, remuneration committee and nomination committee including the names of committee members and a summary of the terms of reference under which the committees operate.

ID.F.00.

Major shareholders and related party transactions F.01 The following information shall be provided regarding the issuers major shareholders, which means shareholders that are the beneficial owners of at least 3% or more of each class of the issuers voting securities (a) provide the names of the major shareholders, and the number of shares and the percentage of outstanding shares of each class owned by each of them as of the most recent practicable date, or an appropriate negative statement if there are no major shareholders; (b) disclose any significant change in the percentage ownership held by any major shareholders during the past three years; and (c) indicate whether the issuers major shareholders have different voting rights, or an appropriate negative statement.

F.02 Information shall be provided as to the portion of each class of securities held in Kenya and the number of shareholders in Kenya.

F.03 To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled by any other corporation(s), foreign government or any other natural or legal person(s) severally or jointly, and, if so, give the name(s) of such controlling corporation(s), government or other person(s), and briefly describe the nature of such control, including the amount and proportion of capital held giving a right to vote.

173 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] F.04 Describe any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer.

F.05 In so far as is known to the issuer, the name of any person other than a director who, directly or indirectly, is interested in 10% or more of the issuers capital, together with the amount of each such persons interest.

F.06 Provide the information required on (a) and (b) below for the period since the beginning of the issuers preceding five financial years up to the date of the prospectus, with respect to transactions or loans between the issuer and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the issuer; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the issuer that gives them significant influence over the issuer, and close members of any such individuals family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the issuer, including directors and senior management of the issuer and close members of such individuals families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

This includes enterprises owned by directors or major shareholders of the issuer and enterprises that have a number of key management in common with the issuer.

Shareholders beneficially owning a 10% interest in the voting power of the issuer are presumed to have a significant influence on the issuer including (i) the nature and extent of any transactions or presently proposed transactions which are material to the issuer or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer or any of its parent or subsidiary(ies) was a party; and (ii) the amount of outstanding loans (including guarantees of any kind) made by the issuer or any of its parent or subsidiaries to or for the benefit of any of the persons listed above.

The information given should include the largest amount outstanding during the period covered, the amount outstanding as of the latest practicable date, the nature of the loan, the transaction in which it was incurred, and the interest rate on the loan.

F.07 Full information of any material inter-company finance.

F.08 Where a statement or report attributed to a person as an expert is included in the prospectus, a statement that it is included, in the form and context in which it is included, with the written consent of that person, who has authorised the contents of that part of the prospectus, and has not withdrawn his consent.

F.09 If any of the named experts employed on a contingent basis, owns an amount of shares in the issuer or its subsidiaries which is material to that person, or has a material, direct or indirect economic interest in the issuer or that depends on the success of the offering, provide a brief description of the nature and terms of such contingency or interest.

ID.G.00.

Financial information G.01 A statement that the annual accounts of the issuer for the of the last five financial years have been audited.

If audit reports on any of those accounts have been refused by the auditors or contain qualifications, such refusal or such qualifications must be reproduced in full and the reasons given.

[Issue 1] 174 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] G.02 A statement of what other information in the prospectus has been audited by the auditors.

G.03 Financial information as required by paragraphs G.14 and G.15 set out in the form of a comparative table together with any subsequent interim financial statements if available.

G.04 Financial information as required by paragraphs G.14 and G.15 set out in the form of an accountants report.

G.05 If applicable, an accountants report, as set out in paragraphs G.14 and G.15 on the asset which is the subject of the transaction.

G.06 (1) If the issuer prepares consolidated annual accounts only, it must include those accounts in the prospectus in accordance with paragraph G.03 or G.04.

(2) If the issuer prepares both own and consolidated annual accounts, it must include both sets of accounts in the prospectus in accordance with paragraph G.03 or G.04.

However, the issuer may exclude its own accounts on condition that they do not provide any significant additional information to that contained in the consolidated accounts with the approval of the Authority and such accounts shall be available for inspection in accordance with paragraph C.07.

G.07 (1) Where the issuer includes its annual accounts in the prospectus, it must state the profit or loss per share arising out of the issuers ordinary activities, after tax for each of the last five financial years.

(2) Where the issuer includes consolidated annual accounts in the prospectus, it must state the consolidated profit or loss per share for each of the last five financial years; this information must appear in addition to that provided in accordance with (1) above where the issuer also includes its own annual accounts in the prospectus.

G.08 If, in the course of the last five financial years, the number of shares in the issuer has changed as a result, for example, of an increase in or reduction or reorganisation of capital, the profit or loss per share referred to in paragraph G.07 must be adjusted to make them comparable; in that event the basis of adjustment used must be disclosed.

G.09 Particulars of the (a) dividend policy to be adopted; (b) pro-forma balance sheet prior to and immediately after the proposed issue of securities; and (c) effect of the proposed issue of securities on the net asset value per share.

The above particulars must be prepared and presented in accordance with IAS.

If the issuer is a holding company, the information must be prepared in consolidated form.

G.10 The amount of the total dividends, the dividend per share and the dividend cover for each of the last three financial years, adjusted, if necessary, to make it comparable in accordance with paragraph G.08.

G.11 (1) Where not more than nine months have elapsed since the end of the financial year to which the last published annual accounts relate, an interim audited financial statement covering at least the first six months following the end of that financial year must be included in or appended to the prospectus.

Where not more than six months have elapsed since the end of the financial year, un-audited financial statements covering the period preceding the six months shall be included in the prospectus of the issuer whose securities are already listed at a securities exchange.

(2) Where the issuer prepares consolidated annual accounts, the interim financial statements must either be consolidated statements or include a statement that, in the opinion of the issuers directors, the interim financial statements enable investors to make an informed assessment of the results and activities of the group for the period.

175 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] G.12 A description of any significant change in the financial or trading position of the group which has occurred since the end of the last financial period for which either audited financial statements or interim financial statements have been published, or an appropriate negative statement.

G.13 If the issuers own annual or consolidated annual accounts do not give a true and fair view of the assets and liabilities, financial position and profits and losses of the group, more detailed and/or additional information must be given.

In the case of issuers incorporated in a country where issuers are not obliged to draw up their accounts so as to give a true and fair view, but are required to draw them up to an equivalent standard, the latter may be sufficient.

G.14 A table showing the changes in financial position of the group over each of the last five financial years in the form of a cash-flow statement.

G.15 (1) Information in respect of the matters listed below relating to each undertaking in which the issuer holds (directly or indirectly) on a long term basis an interest in the capital that is likely to have a significant effect on the assessment of the issuers own assets and liabilities, financial position or profits and losses (a) the name and address of the registered office; (b) the field of activity; (c) the proportion of capital held; (d) the issued capital; (e) the reserves; (f) the profit or loss arising out of ordinary activities, after tax, for the last financial year; (g) the value at which the issuer shows in its accounts the interest held; (h) any amount still to be paid up on shares held; (i) the amount of dividends received in the course of the last financial year in respect of shares held; and (j) the amount of the debts owed to and by the issuer with regard to the undertaking.

(2) The items of information listed in (1) above must be given in any event for every undertaking in which the issuer has a direct or indirect participating interest, if the book value of that participating interest represents at least 20% of the capital and reserves of the issuer or if that interest accounts for at least 20% of the net profit or loss of the issuer or, in the case of a group, if the book value of that participating interest represents at least 20% of the consolidated net assets or at least 20% of the consolidated net profit or loss of the group.

(3) The information required by (1)(e) and (f) above may be omitted where the undertaking in which a participating interest is held does not publish annual accounts.

(4) The information required by (1)(d) to (j) above may be omitted if the annual accounts of the undertakings in which the participating interests are held are consolidated into the group annual accounts or, with the exception of (1)(i) and (j) above, if the value attributable to the interest under the equity method is disclosed in the annual accounts, provided that in the opinion of the Authority, the omission of the information is not likely to mislead the public with regard to the facts and circumstances, knowledge of which is essential for the assessment of the securities in question.

G.16 The name, registered office and proportion of capital held in respect of each undertaking not failing to be disclosed under paragraph G.15(1) or (2) in which the issuer holds at least 20% of the capital.

These details may be omitted when they are of negligible [Issue 1] 176 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] importance for the purpose of enabling investors and their investment advisers to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the issuer or group and of the rights attaching to the securities for which application is made.

G.17 When the prospectus includes consolidated annual accounts, disclosure (a) of the consolidation principles applied (which must be described explicitly where such principles are not consistent with IAS); (b) of the names and registered offices of the undertakings included in the consolidation, where that information is important for the purpose of assessing the assets and liabilities, financial position and profits and losses of the issuer; it is sufficient to distinguish them by a symbol in the list of undertakings of which details are required in paragraph G.15; and (c) for each of the undertakings referred to in (b) above (i) the total proportion of third-party interests, if annual accounts are wholly consolidated; or (ii) the proportion of the consolidation calculated on the basis of interests, if consolidation has been effected on a pro rata basis.

G.18 Particulars of any arrangement under which future dividends are waived or agreed to be waived.

G.19 (1) Details on a consolidated basis as at the most recent practicable date (which must be stated and which in the absence of exceptional circumstances must not be more than fourteen days prior to the date of publication of the prospectus) of the following, if material (a) the borrowing powers of the issuer and its subsidiaries exercisable by the directors and the manner in which such borrowing powers may be varied; (b) the circumstances, if applicable, under which the borrowing powers have been exceeded during the past three years.

Any exchange control or other restrictions on the borrowing powers of the issuer or any of its subsidiaries; (c) the total amount of any loan capital outstanding in all members of the group, and loan capital created but un-issued, and term loans, distinguishing between loans guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties), and unsecured; (d) all off-balance sheet financing by the issuer and any of its subsidiaries; (e) the total amount of all other borrowings and indebtedness in the nature of borrowing of the group, distinguishing between guaranteed, unguaranteed, secured and unsecured borrowings and debts, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments and obligations under finance leases; (f) the total amount of any material commitments, lease payments and contingent liabilities or guarantees of the group; or (g) how the borrowings required to be disclosed under paragraphs (c) to (f) above arose, stating whether they arose from the purchase of assets by the issuer or any of its subsidiaries.

(2) An appropriate negative statement must be given in each case where relevant, in the absence of any loan capital, borrowings, indebtedness and contingent liabilities described in (1) above.

As a general rule, no account shall be taken of liabilities or guarantees between undertakings within the same group, a statement to that effect being made if necessary.

(3) For each item identified in (1) above, where applicable (a) the names of the lenders if not debenture holders; 177 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) the amount, terms and conditions of repayment or renewal; (c) the rates of interest payable on each item; (d) details of the security, if any; (e) details of conversion rights; and (f) where the issuer or any of its subsidiaries has debts which are repayable within twelve months, state how the payments are to be financed.

(4) If the issuer prepares consolidated annual accounts, the principles laid down in paragraph G.06 apply to the information set out in this paragraph G.19.

G.20 Details of material loans by the issuer or by any of its subsidiaries stating (a) the date of the loan; (b) to whom made; (c) the rate of interest; (d) if the interest is in arrears, the last date on which it was paid and the extent of the arrears; (e) the period of the loan; (f) the security held; (g) the value of such security and the method of valuation; (h) if the loan is unsecured, the reasons therefor; and (i) if the loan was made to another company, the names and addresses of the directors of such company.

G.21 Details as described in paragraph G.20 above of loans made or security furnished by the issuer or by any of its subsidiaries for the benefit of any director or manager or any associate of any director or manager.

G.22 Disclose how the loans receivable arose, stating whether they arose from the sale of assets by the issuer or any of its subsidiaries.

G.23 A statement that in the opinion of the directors, the issued capital of the issuer (including the amount to be raised in pursuance of this issue) is adequate for the purposes of the business of the issuer and of its subsidiaries for the foreseeable future, and if the directors are of the opinion that it is inadequate, the extent of the inadequacy and the manner in which and the sources from which the issuer and its subsidiaries are to be financed The statement should be supported by a report from the issuers auditor, reporting accountant, investment banker, sponsoring stockbroker or other adviser acceptable to the Authority.

G.24 The foreseeable future should normally be construed as the nine months subsequent to the date of the publication of the prospectus.

G.25 The following information regarding the acquisition, within the last five years, or proposed acquisition by the issuer or any of its subsidiaries, of any securities in or the business undertaking of any other company or business enterprise or any immovable property or other property in the nature of a fixed asset (collectively called the property) or any option to acquire such property shall be disclosed (a) the date of any such acquisition or proposed acquisitions; (b) the consideration, detailing that settled by the issue of securities, the payment of cash or by any other means, and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; (d) any goodwill paid and how such goodwill was or is to be accounted for; [Issue 1] 178 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (e) any loans incurred, or to be incurred, to finance the acquisition, or proposed acquisition; (f) the nature of title or interest acquired or to be acquired; and (g) details regarding the vendors as described in paragraph I.01.

G.26 The following details regarding any property disposed of during the past five years, or to be disposed of, by the issuer, or any of its subsidiaries (a) the dates of any such disposal or proposed disposal; (b) the consideration received, detailing that settled by the receipt of securities or cash or by any other means and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; and (d) the names and addresses of the purchasers of assets sold.

If any purchaser was a company, the names and addresses of the beneficial shareholders of the company.

If any promoter or director had any interest, directly or indirectly, in such transaction or where any promoter or director was a member of a partnership, syndicate or other association of persons which had such an interest, the names of any such promoter or director, and the nature and extent of his interest.

G.27 Where the financial statements provided under paragraphs G.01 to G.05 are prepared in a currency other than Kenya shillings, disclosure of the exchange rate between the financial reporting currency and Kenya shillings should be provided, using the mean exchange rate designated by the Central Bank of Kenya for this purpose, if any (a) at the latest practicable date; (b) the high and low exchange rates for each month during the preceding twelve months; and (c) for the five most recent financial years and any subsequent interim period for which financial statements are presented, the average rates for each period, calculated by using the average of the exchange rates on the last day of each month during the period.

ID.H.00.

The offer and listing H.01 An indication whether or not all the shares have been marketed or are available in whole or in part to the public in conjunction with the application.

H.02 A statement of the resolutions, authorisations and approvals by virtue of which the shares have been or will be created and/or issued.

H.03 The nature and amount of the issue.

H.04 The number of shares which have been or will be created and/or issued, if predetermined.

H.05 (1) A summary of the rights attaching to the shares for which application is made, and in particular the extent of the voting rights, entitlement to share in the profits and, in the event of liquidation, in any surplus and any other special rights.

Where there is or is to be more than one class of shares of the issuer in issue, like details must be given for each class.

(2) If the rights evidenced by the securities being offered or listed are or may be materially limited or qualified by the rights evidenced by any other class of securities or by the provisions of any contract or other documents, include information regarding such limitation or qualification and its effect on the rights evidenced by the securities qualification and its effect on the rights evidenced by the securities to be listed or offered.

H.06 The time limit (if any) after which entitlement to dividend lapses and an indication of the person in whose favour the lapse operates.

179 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.07 A statement regarding tax on the income from the shares withheld at source (a) in the country of origin; and (b) in Kenya.

H.08 Arrangements for transfer of the shares and (where permitted) any restrictions on their free transferability (for example, provisions requiring transfers to be approved).

H.09 The fixed date(s) (if any) on which entitlement to dividends arises.

H.10 Other securities exchanges (if any) where admission to listing is being or will be sought.

H.11 The names and addresses of the issuers Registrar and paying agent(s) for the shares in any other country where admission to listing has taken place.

H.12 The following information must be given concerning the terms and conditions of the issue of the securities whether through a public or private placing with respect to the listing at a securities exchange where such issue or placing is being effected at the same time as the listing or has been effected within the three months preceding admission (a) a statement of any right of pre-emption of shareholders exercisable in respect of the shares or of the disapplication of such right (and where applicable, a statement of the reasons for the disapplication of such right; in such cases, the directors justification of the issue price where the issue is for cash; if the disapplication of the right of pre-emption is intended to benefit specific persons, the identity of those persons); (b) the total amounts which have been or are being issued or placed and the number of shares offered, where applicable by category; (c) if a public or private issue or placing has been or is being made simultaneously on the markets of two or more countries and if a tranche has been or is being reserved for any of these, details of any such tranche including (i) the issue price or offer or placing price, stating the nominal value or, in its absence, the accounting par value or the amount to be capitalised; (ii) the issue premium and the amount of any expenses specifically charged to any subscriber or purchaser; and (iii) the methods of payment of the price, particularly as regards the paying-up of shares which are not fully paid; (d) the procedure for the exercise of any right of pre-emption, transferability of subscription rights and treatment of subscription rights not exercised; (e) the period during which the issue or offer remained open or will remain open after publication of the prospectus, and the names of the receiving agents; (f) the names, addresses and descriptions of the persons underwriting or guaranteeing the issue and where the underwriter is a company, the description must include (i) the place and date of incorporation and registered number of the company; (ii) the names of the directors of the company; (iii) the name of the secretary of the company; (iv) the bankers to the company; and (v) the authorised and issued share capital of the company; (g) where not all of the issue has been or is being underwritten or guaranteed, a statement of the portion not covered; (h) a statement or estimate of the overall amount and/or of the amount per share of the charges relating to the issue payable by the issuer, stating the total [Issue 1] 180 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] remuneration of the financial intermediaries, including the underwriting commission, margin, guarantee commission placing or selling agents commission; and (i) the estimated net proceeds accruing to the issuer from the issue and the intended application of such proceeds.

If the capital offered is more than the amount of the minimum subscription referred to in paragraph H.13 below, the reasons for the difference between the capital offered and the said minimum subscription.

H.13 The minimum amount which, in the opinion of the directors, must be raised by the issue of the securities in order to provide the sums, or, if any part thereof is to be defrayed in any other manner, the balance of the sums required to be provided, in respect of each of the following matters (a) the purchase price of any property, as referred to in paragraph G.25, purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the issue; (b) any preliminary expenses payable by the issuer, and any commission payable to any person in consideration for his agreeing to subscribe for, or of his procuring or agreeing to procure subscriptions for or of his underwriting any securities of the issuer; (c) the repayment of any monies borrowed in respect of any of the foregoing matters; (d) working capital, stating the specific purposes for which it is to be used and the estimated amount required for each of such purposes; (e) any other material expenditure, stating the nature and purpose thereof and the estimated amount in each case; (f) the amounts to be provided in respect of the matters aforesaid otherwise than out of the proceeds of the issue, and the sources from which those amounts are to be provided; and (g) if the proceeds are being used directly or indirectly to acquire assets, other than in the ordinary course of business, briefly describe the assets and their cost.

If the assets will be acquired from affiliates of the issuer or associates, disclose the person from whom they will be acquired and how the cost to the issuer will be determined.

H.14 A description of the shares for which application is made and, in particular, the number of shares and nominal value per share or, in the absence of nominal value, the accounting par value or the total nominal value, the exact designation or class, and coupons attached.

H.15 If shares are to be marketed and no such shares have previously been sold to the public, a statement of the number of shares made available to the market (if any) and of their nominal value, or, if they have no nominal value, of their accounting par value, or a statement of the total nominal value and, where applicable, a statement of the minimum offer price.

H.16 The securities exchange at which the shares will be listed and the dates on which the shares will be admitted to listing and on which dealings will commence.

H.17 The names of the securities exchanges (if any) on which shares of the same class are already listed.

H.18 If during the period covered by the last financial year and the current financial year, there has occurred any public takeover offer by a third party in respect of the issuers shares, or any public takeover offer by the issuer in respect of another companys shares, a statement to that effect and a statement of the price or exchange terms attaching to any such offers and the outcome thereof.

181 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.19 Where the shares for which application is being made are shares of a class which is already listed, information regarding the price history of the securities to be offered or listed shall be disclosed as indicated from (a) to (c) below.

This information shall be given with respect to the market price at the securities exchange at which the securities are listed in Kenya and the principal trading market outside Kenya.

If significant trading suspensions occurred in the prior three years, the issuer shall disclose (a) for the five most recent full financial years, the annual high and low market prices; (b) for the two most recent full financial years and any subsequent period, the high and low market prices for each full financial quarter; and (c) for the most recent six months, the high and low market prices for each month.

H.20 A statement whether the issuer assumes responsibility for the withholding of tax at source.

H.21 To the extent known to the issuer, indicate whether major shareholders, directors or members of the issuers management, supervisory or administrative bodies intend to subscribe in the offering, or whether any person intends to subscribe for more than 5% of the offering.

H.22 Identify any group of targeted potential investors to whom the securities are offered.

If the offering is being made simultaneously in the markets of two or more countries and if a tranche has been or is being reserved for any of these, indicate any such tranche.

H.23 If securities are reserved for allocation to any group of targeted investors, including, for example, offerings to existing shareholders, directors, or employees and past employees of the issuer or its subsidiaries, provide details of these and any other preferential allocation arrangements.

H.24 Indicate whether the amount of the offering could be increased by the issuer or vendor by the exercise of a greenshoe option subject to a maximum of 15% of the securities offered in the prospectus in case of over subscription of securities.

H.25 Indicate the amount, and outline briefly the plan of distribution, of any securities that are to be offered otherwise than through underwriters.

If the securities are to be offered through the selling efforts of stockbrokers or dealers, describe the plan of distribution and the terms of any agreement or understanding with such entities and identify the stockbroker(s) or dealer(s) that will participate in the offering stating the amount to be offered through each.

H.26 If the securities are to be offered in connection with the writing of exchange- traded call options where applicable, (in the case of issuers listed, in securities exchange(s) outside Kenya) describe briefly such transactions.

H.27 Where there is a substantial disparity between the public offering price and the effective cash cost to directors or senior management, or affiliated persons, of securities acquired by them in transactions during the past five years, or which they have the right to acquire, include a comparison of the public contribution in the proposed public offering and the effective cash contributions of such persons.

H.28 Disclose the amount and percentage of immediate dilution resulting from the offering, computed as the difference between the offering price per share and the net book value per share for the equivalent class of security, as of the latest balance sheet date.

H.29 In the case of a subscription offering to existing shareholders, disclose the amount and percentage of immediate dilution if they do not subscribe to the new offering.

2012] CAP.

485A Capital Markets [Subsidiary] disclosed, as well as the percentage such commissions represent of the total amount of the offering and the amount of discounts or commissions per share; (b) an itemised statement of the major categories of expenses incurred in connection with the issuance and distribution of the securities to be listed or offered and by whom the expenses are payable, if other than the issuer.

The following expenses shall be disclosed separately (i) advertisement; (ii) printing of prospectus; (iii) approval and listing fees; (iv) brokerage commissions; (v) financial advisory fees; (vi) legal fees; and (vii) underwriting fees.

If any of the securities are to be offered for the account of a selling shareholder, indicate the portion of such expenses to be borne by such shareholder.

The information may be given subject to future contingencies.

If the amounts of any items are not known, estimates (identified as such) shall be given; and (c) a statement or estimate of the overall amount, percentage and amount per share of the charges relating to the issue payable by the issuer, stating the total remuneration of the intermediaries, including the underwriting commission or margin, guarantee commission, placing or selling agents commission.

H.31 Disclose the minimum amount which in the opinion of the directors must be raised through the issue of securities in the form of total subscriptions in shares and value.

ID.I.00.

Vendors I.01 The names and addresses of the vendors of any assets purchased or acquired by the issuer or any subsidiary company during the five years preceding the publication of the prospectus or proposed to be purchased, or acquired, on capital account and the amount paid or payable in cash or securities to the vendor, and where there is more than one separate vendor, the amount so paid or payable to each vendor, and the amount (if any) payable for goodwill or items of a similar nature.

The cost of assets to the vendors and dates of purchase by them if within the preceding five financial years.

Where the vendor is a company, the names and addresses of the beneficial shareholders, direct and indirect, of the company, if required by the Authority.

Where this information is unobtainable, the reasons therefore are to be stated.

I.02 State whether or not the vendors have given any indemnities, guarantees or warranties.

I.03 State whether the vendors agreements preclude the vendors from carrying on business in competition with the issuer or any of its subsidiaries, or impose any other restriction on the vendor, and disclose details of any cash or other payment regarding restraint of trade and the nature of such restraint of trade.

I.04 State how any liability for accrued taxation, or any apportionment, thereof to the date of acquisition, will be settled in terms of the vendors agreements.

I.05 Where securities are purchased in a subsidiary company, a reconciliation between the amounts paid for the securities and the value of the net assets of that company.

Where securities are purchased in companies other than subsidiary companies, a statement as to how the value of the securities was arrived at.

183 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] I.06 Where any promoter or director had any beneficial interest, direct or indirect, in such transaction or where any promoter or director was a member of a partnership, syndicate or other association of persons which had such an interest, the names of any such promoter or director, and the nature and extent of his interest.

Where the vendors or any of them are a partnership, the members of the partnership shall not be treated as separate vendors.

I.07 The amount of any cash or securities paid or benefit given within five preceding years or proposed to be paid or given to any promoter not being a director, and the consideration for such payment or benefit.

I.08 State whether the assets acquired have been transferred into the name of the issuer or any of its subsidiary companies and whether or not the assets have been ceded or pledged.

PART B ALTERNATIVE INVESTMENT MARKET SEGMENT DISCLOSURE REQUIREMENTS FOR PUBLIC OFFERINGS [Regulation 10(b).] ID.A.00.

Identity of directors, senior management and advisers (i.e.

persons responsible for the information disclosed) A.01 The name, home or business address and function of each of the persons giving the declaration set out in paragraph A.02.

A.02 A declaration in the following form The directors of [the issuer], whose names appear on page [ ], of the prospectus accept responsibility for the information contained in this document.

A.03 The names, addresses and qualifications of the auditors who have audited the issuers annual accounts in accordance with IAS for the last two financial years.

A.04 If auditors have resigned, have been removed or have not been re-appointed during the last two financial years and have deposited a statement with the issuer of circumstances which they believe should be brought to the attention of members and creditors of the issuer, details of such matters must be disclosed.

A.05 The names and addresses of the issuers bankers, legal advisers, sponsors, reporting accountants and any other expert to whom a statement or report included in the prospectus has been attributed.

ID.B.00.

Offer statistics and expected timetable B.01 (1) A statement that the Authority has approved the public offering and listing of the shares on the Alternative Investment Market Segment of a securities exchange.

(2) Cautionary statement of the Authority.

B.02 A statement that a copy of the prospectus has been delivered to the Registrar.

B.03 If the offer is by more than one method, for each method of offering state the total amount of the issue, including the expected issue price or the method of determining the price and the number of securities expected to be issued.

Describe whether the purchase period may be extended or shortened, and the manner and [Issue 1] 184 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] duration of possible extensions or possible early closure or shortening of the period.

Describe the manner in which the latter shall be made public.

ID.C.00.

Information on the issuer C.01 The name, registered office and, if different, head office of the issuer.

If the issuer has changed its name within the last two years, the old name must be printed in bold type under the new name.

C.02 The country of incorporation of the issuer.

C.03 The date of incorporation and the length of life of the issuer, except where indefinite.

C.04 The legislation under which the issuer operates and the legal form which it has adopted under the legislation.

C.05 A description of the issuers principal objects and reference to the clause(s) of the memorandum of association in which they are described.

C.06 The place and date of registration of the issuer and its registration number.

485A [Rev.

2012] Capital Markets [Subsidiary] (h) all reports, letters, and other documents, balance sheets, valuations and statements by any expert any part of which is included or referred to in the prospectus; (i) written statements signed by the auditors or accountants setting out the adjustments made by them in arriving at the figures shown in any accountants report pursuant to paragraph G.04 and giving the reasons therefor; and (j) the audited accounts of the issuer or, in the case of a group, the consolidated audited accounts of the issuer and its subsidiary undertakings for each of the two financial years (three years, if the issuer has been in existence for such a period) preceding the publication of the prospectus, including, in the case of a company incorporated in Kenya, all notes, reports or information required by the Companies Act (Cap.

486).

C.08 Where any of the documents listed in paragraph C.07 are not in the English language, translations into English must also be available for inspection.

In the case of any document mentioned in paragraph C.18 (material contracts), a translation of a summary of such document may be made available for inspection, if the Authority so requires.

C.09 The amount of the issuers authorised and issued capital and the amount of any capital agreed to be issued, the number and classes of the shares of which it is composed with details of their principal characteristics.

C.12 A summary of the provisions of the issuers memorandum and articles of association regarding changes in the capital and in the respective rights of the various classes of securities.

C.13 A summary of the changes during the two preceding financial years in the amount of the issued capital of the issuer and, if material, the capital of any member of the group and/or the number and classes of securities of which it is composed.

Intra-group issues by partly owned subsidiaries and changes in the capital structure of subsidiaries which have remained wholly owned throughout the period may be disregarded.

Such summary must also state the price and terms granted and (if not already fully paid) the dates when any instalments are in arrears.

If any asset has been acquired or is to be acquired out of the proceeds of the issue, its value must be stated.

If there are no such issues, an appropriate negative statement must be made.

[Issue 1] 186 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] C.14 The names of the persons, so far as they are known to the issuer, who, directly or indirectly, jointly or severally, exercise or could exercise control over the issuer, and particulars of the proportion of the voting capital held by such persons.

For these purposes, joint control means control exercised by two or more persons who have concluded an agreement which may lead to their adopting a common policy in respect of the issuer.

C.15 Details of any change in controlling shareholder(s) as a result of the issue.

C.16 The history of any change in the controlling shareholder(s) and trading objectives of the issuer and its subsidiaries during the previous two financial years.

A statement of the new trading objectives and the manner in which the new objectives will be implemented.

If the issuer or the group, as the case may be, carries on widely differing operations, a statement showing the contributions of such respective differing operations to its trading results.

The proposed new name, if any, the reasons for the change and whether or not consent to the change has been obtained from the Registrar.

C.17 If the issuer has subsidiary undertakings or parent undertakings, a brief description of the group of undertakings and of the issuers position within it stating, where the issuer is a subsidiary undertaking, the name and number of shares in the issuer held (directly or indirectly) by each parent undertaking of the issuer.

C.18 A summary of the principal contents of (a) each material contract (not being a contract entered into in the ordinary course of business) entered into by any member of the group within the two years immediately preceding the publication of the prospectus, including particulars of dates, parties, terms and conditions, any consideration passing to or from the issuer or any other member of the group, unless such contracts have been available for inspection in the last two years in which case it will be sufficient to refer to them collectively as being available for inspection in accordance with paragraph C.07; and (b) any contractual arrangement with a controlling shareholder required to ensure that the company is capable at all times of carrying on its business independently of any controlling shareholder, including particulars of dates, terms and conditions and any consideration passing to or from the issuer or any other member of the group.

C.19 If any contract referred to in paragraph C.18 relates to the acquisition of securities in an unlisted subsidiary, or associate company where all securities in the company have not been acquired, state the reason why 100% of the shareholding was not acquired, and whether anyone associated with the controlling shareholder(s) of the issuer, or associate companies, or its subsidiaries is interested and to what extent.

C.20 Details of the name of any promoter of any member of the group and the amount of any cash, securities or benefits paid, issued or given within the two years immediately preceding the date of publication of the prospectus, or proposed to be paid, issued or given to any such promoter in his capacity as a promoter and the consideration for such payment, issue or benefit.

C.21 A statement of all sums paid or agreed to be paid within the two years immediately preceding the date of publication of the prospectus, to any director or to any company in which he is beneficially interested, directly or indirectly, or of which he is director, or to any partnership, syndicate or other association of which he is a member, in cash or securities or otherwise, by any person either to induce him to become or to qualify him as a director, or otherwise for services rendered by him or by the company, partnership, syndicate or other association in connection with the promotion or formation of the issuer.

187 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] C.22 Where securities are issued in connection with any merger, division of a company, take-over offer, acquisition of an undertakings assets and liabilities or transfer of assets (a) a statement of the aggregate value of the consideration for the transaction and how it was or is to be satisfied; (b) if the total emoluments receivable by the directors of the issuer will be varied in consequence of the transaction, full particulars of the variation; if there will be no variation, a statement to that effect; and (c) if the business of the issuer or any of its subsidiaries or any part thereof is managed or is proposed to be managed by a third party under a contract or arrangement, the name and address (or the address of its registered office, if a company) of such third party and a description of the business so managed or to be managed and the consideration paid in terms of the contract or arrangement and any other pertinent details relevant to such contract or arrangement.

C.23 A description of the groups principal activities, stating the main categories of products sold and/or services performed.

C.24 For the business(es) described in paragraph C.23 above, the degree of any government protection and of any investment encouragement law affecting the business(es).

C.25 Information on any significant new products and/or activities.

C.26 A breakdown of net turnover during the last two financial years (three where available) by categories of activity and into geographical markets in so far as such categories and markets differ substantially from one another, taking account of the manner in which the sale of products and the provision of services falling within the groups ordinary activities are organised.

C.27 Particulars of royalties payable or items of a similar nature in respect of the issuer and any of its subsidiaries.

C.28 Information on any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware) which may have or have had in the recent past (covering at least the previous four months) a significant effect on the groups financial position or an appropriate negative statement.

C.29 Information on any interruptions in the groups business which may have or have had during the recent past (covering at least the previous four months) a significant effect on the groups financial position.

C.30 A description, with figures, of the main investments made, including interests such as shares, debt securities, etc., in other undertakings over the last two financial years and during the current financial year.

C.31 Information concerning the principal investments (including new plant, factories and research and development) during the current financial year being made, with the exception of interests being acquired in other undertakings, including (a) the geographical distribution of these investments; and (b) the method of financing such investments.

C.32 Information concerning the groups principal future investments (including new plant, factories, and research and development, if any), with the exception of interests to be acquired in other undertakings, on which the issuers directors have already made firm commitments.

[Issue 1] 188 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] C.33 Information concerning policy on the research and development of new products and processes over the past two financial years, where significant.

C.34 The basis for any statements made by the company regarding its competitive position shall be disclosed.

ID.D.00.

Operating and financial review and prospectus (the recent development and prospects of the group) D.01 Unless otherwise approved by the Authority in exceptional circumstances (a) general information on the trend of the groups business since the end of the financial year to which the last published annual accounts relate, and in particular (i) the most significant recent trends in production, sales and stocks and the state of the order book; and (ii) recent trends in costs and selling prices; and (b) information on the groups prospects for at least the current financial year.

D.02 Provide information on the risk factors that are specific to the issuer or its industry and make an offering speculative or on high risk in a section headed Risk Factors.

D.03 Describe the (a) extent to which the financial statements disclose material changes in net revenues, provide a narrative discussion of the extent to which such changes are attributable to changes in prices or to changes in the volume or amount of products or services being sold or to the introduction of new products or services; (b) impact of inflation if material if the currency in which financial statements are presented is of a country that has experienced hyperinflation, the existence of such inflation, a history of the annual rate of inflation covering the period, and discussion of the impact of the hyperinflation on the issuers business shall be disclosed; (c) impact of foreign currency fluctuations on the issuer, if material, and the extent to which foreign currency net investments are hedged by the currency borrowing and other hedging instruments; and (d) impact of any material governmental factors that have materially affected or could materially affect, directly or indirectly the issuers operations or investments by the host country shareholders.

D.04 Where a profit forecast or estimate appears, the principal assumptions upon which the issuer has based its forecast or estimate must be stated.

Where so required, the forecast or estimate must be examined and reported on by the reporting accountants or auditors and their report must be set out.

There must also be set out a report from the sponsor confirming that the forecast has been made after due and careful enquiry by the directors.

189 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] ID.E.00.

Directors and employees E.01 The full name, age (or date of birth) home or business address, nationality and function in the group of each of the following persons and an indication of the principal activities performed by them outside the group where these are significant with respect to the group (a) directors, alternate and proposed directors of the issuer and each of its subsidiaries, including details of other directorships; and (b) the senior management of the issuer including the chief executive, board secretary and finance director, with details of professional qualifications and period of employment with the issuer for each such person; and (c) founders, if the issuer has been established as a family business or has been in existence for fewer than five years and the nature of family relationship, if any; and (d) detailed disclosure of chief executive or other senior management changes planned or expected during twenty-four months following the issue and listing of the security or appropriate negative statement.

E.03 In the case of a foreign issuer, information similar to that described in E.01 and E.02 above, relative to the local management if any.

Where the Authority considers the parent company is not adequately represented on the directorate of its subsidiaries, an explanation is required.

E.06 All relevant particulars regarding the nature and extent of any interests of directors of the issuer in transactions which are or were unusual in their nature or conditions or significant to the business of the group, and which were effected by the issuer during (a) the current or immediately preceding financial year; or (b) an earlier financial year and remain in any respect outstanding or unperformed, or an appropriate negative statement.

E.07 The total of any outstanding loans granted by any member of the group to the directors and also of any guarantees provided by any member of the group for their benefit.

E.08 Particulars of any arrangement under which a director of the issuer has waived or agreed to waive future emoluments together with particulars of waivers of such emoluments in force at the date of the prospectus.

E.09 An estimate of the amounts payable to directors of the issuer, including proposed directors, by any member of the group for the current financial year under the arrangements in force at the date of the prospectus.

[Issue 1] 190 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] E.10 Details of existing or proposed directors service contracts (excluding contracts previously made available for inspection in accordance with paragraph C.07 and not subsequently varied); such details to include the matters specified in paragraphs (a) to (g) below or an appropriate negative statement (a) the name of the employing company; (b) the date of the contract, the un-expired term and details of any notice periods; (c) full particulars of the directors remuneration including salary and other benefits; (d) any commission or profit sharing arrangements; (e) any provision for compensation payable upon early termination of the contract; (f) details of any other arrangements which are necessary to enable investors to estimate the possible liability of the company upon early termination of the contract; and (g) details relating to restrictions prohibiting the director, or any person acting on his behalf or connected to him, from any dealing in securities of the company during a close period or at a time when the director is in possession of unpublished price sensitive information in relation to those securities.

E.11 A summary of the provisions of the memorandum and articles of association of the issuer with regards to (a) any power enabling a director to vote on a proposal, arrangement, or contract in which he is materially interested; (b) any power enabling the directors, in the absence of an independent quorum, to vote remuneration (including pension or other benefits) to themselves or any members of their body; and (c) retirement or non-retirement of directors under an age limit.

E.12 Any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person, referred to in E.01 above, was selected as a director or member of senior management.

E.13 Details relating to the issuers audit, remuneration and nomination committees including the names of committee members and a summary of the terms of reference under which the committees operate.

ID.F.00.

Major shareholders and related party transactions F.01 The following information shall be provided regarding the issuers major shareholders, which means shareholders that are the beneficial owners of at least 3% or more of each class of the issuers voting securities (a) provide the names of the major shareholders, and the number of shares and the percentage of outstanding shares of each class owned by each of them as at the most recent practicable date, or an appropriate negative statement if there are no major shareholders; (b) disclose any significant change in the percentage ownership held by any major shareholders during the past three financial years; and (c) indicate whether the issuers major shareholders have different voting rights, or an appropriate negative statement.

F.02 Information shall be provided as to the portion of each class of securities held in Kenya and the number of shareholders in Kenya.

F.03 To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled by any other corporation(s), foreign government or other 191 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] natural or legal person(s) severally or jointly, and, if so, give the name(s) of such controlling corporation(s), government or other person(s), and briefly describe the nature of such control, including the amount and proportion of capital held giving a right to vote.

F.04 Describe any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer.

F.05 Insofar as is known to the issuer, the name of any person other than a director who, directly or indirectly, is interested in 10% or more of the issuers capital, together with the amount of each such persons interest.

F.06 Provide information required on (a) and (b) below for the period since the beginning of the issuers preceding two financial years (three where available) up to the date of the prospectus, with respect to transactions or loans between the issuer and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the issuer; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the issuer that gives them significant influence over the issuer, and close members of any such individuals family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the issuer, including directors and senior management of the issuer and close members of such individuals families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

This includes enterprises owned by directors or major shareholders of the issuer and enterprises that have a number of key management in common with the issuer.

Shareholders beneficially owing a 10% interest in the voting power of the issuer are presumed to have a significant influence on the issuer including (i) the nature and extent of any transactions or presently proposed transactions which are material to the issuer or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer or any of its parent or subsidiary(ies) was a party; and (ii) the amount of outstanding loans (including guarantees of any kind) made by the issuer or any of its parent or subsidiaries to or for the benefit of any of the persons listed above.

F.07 Full information of any material inter-company finance.

[Issue 1] 192 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] ID.G.00.

Financial information G.01 A statement that the annual accounts of the issuer for the last two financial years (three where available) have been audited.

If audited reports on any of those accounts have been refused by the auditors or contain qualifications, such refusal or such qualifications must be reproduced in full and reasons given.

G.02 A statement of what other information in the prospectus has been audited by the auditors.

G.03 Financial information as required by paragraphs G.14 and G.15 set out in the form of a comparative table together with any subsequent interim financial statements if available.

G.04 Financial information as required by paragraphs G.14 and G.15 set out in the form of an accountants report.

G.05 If applicable, an accountants report, as set out in paragraphs G.14 and G.15 on the asset which is the subject of the transaction.

G.06 (1) If the issuer prepares consolidated annual accounts only, it must include those accounts in the prospectus in accordance with paragraph G.03 or G.04.

(2) If the issuer prepares both own and consolidated annual accounts, it must include both sets of accounts in the prospectus in accordance with paragraph G.03 or G.04.

07.

(2) Where the issuer includes consolidated annual accounts in the prospectus, it must state the consolidated profit or loss per share for each of the last two financial years; this information must appear in addition to that provided in accordance with (1) above where the issuer also includes its own annual accounts in the prospectus.

G.08 If, in the course of the last two financial years, the number of shares in the issuer has changed as a result, for example, of an increase in or reduction or reorganisation of capital, the profit or loss per share referred to in paragraph G.07 must be adjusted to make them comparable; in that event the basis of adjustment used must be disclosed.

G.09 Particulars of (a) the dividend policy to be adopted; (b) the pro-forma balance sheet prior to and immediately after the proposed issue of securities; and (c) the effect of the proposed issue of securities on the net asset value per share, The above particulars must be prepared and presented in accordance with IAS.

If the issuer is a holding company, the information must be prepared in consolidated form.

G.10 The amount of the total dividends, the dividend per share and the dividend cover for each of the last two financial years, adjusted, if necessary, to make it comparable in accordance with paragraph G.08.

Where not more than six months 193 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] have elapsed since the end of the financial year, un-audited financial statements covering the period preceding the six months shall be included in the prospectus of the issuer whose securities are currently listed at a securities exchange.

(2) Where the issuer prepares consolidated annual accounts, the interim financial statement must either be consolidated statements or include a statement that, in the opinion of the issuers directors, the interim financial statements enable investors to make an informed assessment of the results and activities of the group for the period.

G.12 A description of any significant change in the financial or trading position of the group which has occurred since the end of the last financial period for which either audited financial statements or interim financial statements have been published, or an appropriate negative statement.

G.14 A table showing the changes in financial position of the group over each of the last two financial years (three where available) in the form of a cash flow statement.

G.15 (1) Information in respect of the matters listed below relating to each undertaking in which the issuer holds (directly or indirectly) on a long-term basis an interest in the capital that is likely to have a significant effect on the assessment of the issuers own assets and liabilities, financial position or profits and losses (a) the name and address of the registered office; (b) the field of activity; (c) the proportion of capital held; (d) the issued capital; (e) the reserves; (f) the profit or loss arising out of ordinary activities, after tax, for the last financial year; (g) the value at which the issuer shows in its accounts the interest held; (h) any amount still to be paid up on shares held; (i) the amount of dividends received in the course of the last financial year in respect of shares held; and (j) the amount of the debts owed to and by the issuer with regard to the undertaking.

(3) The information required by (1)(e) and (f) above may be omitted where the undertaking in which a participating interest is held does not publish annual accounts.

2012] CAP.

485A Capital Markets [Subsidiary] provided that in the opinion of the Authority the omission of the information is not likely to mislead the public with regard to the facts and circumstances, knowledge of which is essential for the assessment of the securities in question.

These details may be omitted when they are of negligible importance for the purpose of enabling investors and their investment advisers to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the issuer or group and of the rights attaching to the securities for which application is made.

G.17 When the prospectus includes consolidated annual accounts, disclosure (a) of the consolidation principles applied (which must be described explicitly where such principles are not consistent with IAS); (b) of the names and registered offices of the undertakings included in the consolidation, where that information is important for the purpose of assessing the assets and important for the purpose of assessing the assets and liabilities, financial position and profits and losses of the issuer; it is sufficient to distinguish them by a symbol in the list of undertakings of which details are required in paragraph G.15; and (c) for each of the undertakings referred to in (b) above; (i) the total proportion of third-party interests, if annual accounts are wholly consolidated; or (ii) the proportion of the consolidation calculated on the basis of interest, if consolidation has been effected on a pro rata basis.

G.18 Particulars of any arrangement under which future dividends are waived or agreed to be waived.

G.19 (1) Details on a consolidated basis as at the most recent practicable date (which must be stated and which in the absence of exceptional circumstances must not be more than fourteen days prior to the date of publication of the prospectus) of the following, if material (a) the borrowing powers of the issuer and its subsidiaries exercisable by the directors and the manner in which such borrowing powers may be varied; (b) the circumstances, if applicable, if the borrowing powers have been exceeded during the past two years.

Any exchange control or other restrictions on the borrowing powers of the issuer or any of its subsidiaries; (c) the total amount of any loan capital outstanding in all members of the group, and loan capital created but un issued, and term loans, distinguishing between loans guaranteed, un guaranteed, secured (whether the security is provided by the issuer or by third parties), and unsecured; (d) all off-balance sheet financing by the issuer and any of its subsidiaries; (e) the total amount of all other borrowings and indebtedness in the nature of borrowing of the group, distinguishing between guaranteed, un guaranteed, secured and unsecured borrowings and debts, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments and obligations under finance leases; (f) the total amount of any material commitments, lease payments and contingent liabilities or guarantees of the group; or (g) how the borrowings required to be disclosed by paragraphs (c) to (f) above arose, stating whether they arose from the purchase of assets by the issuer or any of its subsidiaries.

195 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (2) An appropriate negative statement must be given in each case where relevant, in the absence of any loan capital, borrowings, indebtedness and contingent liabilities described in (1) above.

As a general rule, no account should be taken of liabilities or guarantees between undertakings within the same group, a statement to that effect being made if necessary.

(3) For each item identified in (1) above, where applicable (a) the names of the lenders if not debenture holders; (b) the amount, terms and conditions of repayment or renewal; (c) the rates of interest payable on each item; (d) details of the security, if any; (e) details of conversion rights; and (f) where the issuer or any of its subsidiaries has debts which are repayable within twelve months, state how the payments are to be financed.

(4) If the issuer prepares consolidated annual accounts, the principles laid down in paragraph G.06 apply to the information set out in this paragraph G.19.

G.22 Disclose how the loans receivable arose, stating whether they arose from the sale of assets by the issuer or any of its subsidiaries.

G.24 The statement should be supported by a report from the issuers auditor, reporting accountant, investment banker, sponsoring stockbroker or other adviser acceptable to the Authority.

The foreseeable future should normally be construed as the nine months subsequent to the date of the publication of the prospectus.

G.25 The following information regarding the acquisition, within the last two financial years, or proposed acquisition by the issuer or any of its subsidiaries, of any securities in [Issue 1] 196 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] or the business undertaking of any other company or business enterprise or any immovable property or other property in the nature of a fixed asset (collectively called the property) or any option to acquire such property shall be disclosed (a) the date of any such acquisition or proposed acquisitions; (b) the consideration, detailing that settled by the issue of securities, the payment of cash or by any other means, and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; (d) any goodwill paid and how such goodwill was or is to be accounted for; (e) any loans incurred, or to be incurred, to finance the acquisition, or proposed acquisition; (f) the nature of title or interest acquired or to be acquired; (g) details regarding the vendors as described in paragraph I.01.

G.26 The following details regarding any property disposed of during the past two years (three where available), or to be disposed of, by the issuer, or any of its subsidiaries (a) the dates of any such disposal or proposed disposal; (b) the consideration received, detailing that settled by the receipt of securities or cash or by any other means and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; and (d) the names and addresses of the purchasers of assets sold.

If any purchaser was a company, the names and addresses of the beneficial shareholders of the company.

G.27 Where the financial statements provided under paragraphs G.01 to G.05 are prepared in a currency other than Kenya shillings, disclosure of the exchange rate between the financial reporting currency and Kenya shillings should be provided, using the exchange rate designated by the Central Bank of Kenya for this purpose, if any (a) at the latest practicable date; (b) the high and low exchange rates for each month during the preceding twelve months; and (c) for the two most recent financial years and any subsequent interim period for which financial statements are presented, the average rates for each period, calculated by using the average of the exchange rates on the last day of each month during the period.

ID.H.00.

The offer and listing H.01 An indication whether or not all the shares have been marketed or are available in whole or in part to the public in conjunction with the application.

H.02 A statement of the resolutions, authorisations and approvals by virtue of which the shares have been or will be created and/or issued.

H.03 The nature and amount of the issue.

H.04 The number of shares which have been or will be created and/or issued, if predetermined.

197 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.05 (1) A summary of the rights attaching to the shares for which application is made, and in particular the extent of the voting rights, entitlement to share in the profits and, in the event of liquidation, in any surplus and any other special rights.

Where there is or is to be more than one class of shares of the issuer in issue, like details must be given for each class.

H.06 The time limit (if any) after which entitlement to dividend lapses and an indication of the person in whose favour the lapse operates.

H.07 A statement regarding tax on the income from the shares withheld at source (a) in the country of origin; and (b) in Kenya.

H.08 Arrangements for transfer of the shares and (where permitted) any restrictions on their free transferability (for example, provisions requiring transfers to be approved).

H.09 The fixed date(s) (if any) on which entitlement to dividends arises.

H.10 Other securities exchanges (if any) where admission to listing to being or will be sought.

H.11 The names and addresses of the issuers Registrar and paying agent(s) for the shares in any other country where admission to listing has taken place.

H.12 The following information must be given concerning the terms and conditions of the issue of securities whether through a public or private placing with respect to the listing at a securities exchange where such issue or placing is being effected at the same time as the listing or has been effected within the three months preceding admission (a) a statement of any right of pre-emption of shareholders exercisable in respect of the shares or of the disapplication of such right (and where applicable, a statement of the reasons for the disapplication of such right; in such cases, the directors justification of the issue price where the issue is for cash; if the disapplication of the right of pre-emption is intended to benefit specific persons, the identity of those persons); (b) the total amounts which have been or are being issued or placed and the number of shares offered, where applicable by category; (c) if a public or private issue or placing has been or is being made simultaneously on the markets of two or more countries and if a tranche has been or is being reserved for any of these, details of any such tranche including (i) the issue price or offer or placing price, stating the nominal value or, in its absence, the accounting par value or the amount to be capitalised; (ii) the issue premium and the amount of any expenses specifically charged to any subscriber or purchaser; and (iii) the methods of payment of the price, particularly as regards the paying-up of shares which are not fully paid; (d) the procedure for the exercise of any right of pre-emption, transferability of subscription rights and treatment of subscription rights not exercised; (e) the period during which the issue or offer remained open or will remain open after publication of the prospectus, and the names of the receiving agents; [Issue 1] 198 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (f) the names, addresses and descriptions of the persons underwriting or guaranteeing the issue and where the underwriter is a company, the description must include (i) the place and date of incorporation and registered number of the company; (ii) the names of the directors of the company; (iii) the name of the secretary of the company; (iv) the bankers to the company; and (v) the authorised and issued share capital of the company; (g) where not all of the issue has been or is being underwritten or guaranteed, a statement of the portion not covered; (h) a statement or estimate of the overall amount and/or of the amount per share of the charges relating to the issue payable by the issuer, stating the total remuneration of the financial intermediaries, including the underwriting commission or margin, guarantee commission, placing or selling agents commission; and (i) the estimated net proceeds accruing to the issuer from the issue and the intended application of such proceeds.

H.13 The minimum amount which, in the opinion of the directors, must be raised by the issue of the securities in order to provide the sums, or, if any part thereof is to be defrayed in any other manner, the balance of the sums required to be provided, in respect of each of the following matters (a) the purchase price of any property, as referred to in paragraph G.25, purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the issue; (b) any preliminary expenses payable by the issuer, and any commission payable to any person in consideration for his agreeing to subscribe for, or of his procuring or agreeing to procure subscriptions for or of his underwriting any securities of the issuer; (c) the repayment of any moneys borrowed in respect of any of the foregoing matters; (d) working capital, stating the specific purposes for which it is to be used and the estimated amount required for each such purpose; (e) any other material expenditure, stating the nature and purpose(s) thereof and the estimated amount in each case; (f) the amount(s) to be provided in respect of the matters aforesaid otherwise than out of the proceeds of the issue, and the sources from which those amounts are to be provided; and (g) if the proceeds are being used directly or indirectly to acquire assets, other than in the ordinary course of business, briefly describe the assets and their cost.

If the assets will be acquired from affiliates of the issuer or associates, disclose the person from whom they will be acquired and how the cost to the issuer will be determined.

H.14 A description of the shares for which application is made and, in particular, the number of shares and nominal value per share in the absence of nominal value, the accounting par value or the total nominal value, the exact designation or class, and coupons attached.

199 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.15 If shares are to be marketed and no such shares have previously been sold to the public, a statement of the number of shares made available to the market (if any) and of their nominal value, or, if they have no nominal value, of their accounting par value, or a statement of the total nominal value and, where applicable, a statement of the minimum offer price.

H.16 The securities exchange at which the shares are to be listed and the dates on which the shares will be admitted to listing and on which dealings will commence.

H.17 The names of the securities exchanges (if any) on which shares of the same class are already listed.

H.19 Where the shares for which application is being made are shares of a class which is already listed, information regarding the price history of the securities to be offered or listed shall be disclosed as indicated from (a) to (c) below.

This information shall be given with respect to the market price at the securities exchange at which the securities are listed in Kenya and the principal trading market outside Kenya.

If significant trading suspensions occurred in the prior two years, the issuer shall disclose (a) for the two most recent full financial years, the annual high and low market prices; (b) for the one most recent full financial year, and any subsequent period, the high and low market prices for each full financial quarter; and (c) for the most recent six months, the high and low market prices for each month.

H.20 A statement whether the issuer assumes responsibility for the withholding of tax at source.

H.22 Identify any group of targeted potential investors to whom the securities are offered.

If the offering is being made simultaneously in the markets of two or more countries and if a tranche has been or is being reserved for any of these, indicate any such tranche.

H.25 Indicate the amount, and outline briefly the plan of distribution of any securities that are to be offered otherwise than through underwriters.

[Issue 1] 200 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] H.26 If the securities are to be offered in connection with the writing of exchange- traded call options where applicable in the case of an issuer whose securities are listed at a securities exchange outside Kenya, describe briefly such transactions.

H.29 In the case of a subscription offering to existing shareholders, disclose the amount and percentage of immediate dilution if they do not subscribe to the new offering.

H.30 The following information on expenses shall be provided (a) the total amount of the discounts or commissions agreed upon by the underwriters or other placement or selling agents and the issuer shall be disclosed, as well as the percentage such commissions represent of the total amount of the offering and the amount of discounts or commissions per share; (b) an itemised statement of the major categories of expenses incurred in connection with the issuance and distribution of the securities to be listed or offered and by whom the expenses are payable, if other than the issuer; The following expenses shall be disclosed separately (i) advertisement; (ii) printing of prospectus; (iii) approval and listing fees; (iv) brokerage commissions; (v) financial advisory fees; (vi) legal fees; and (vii) underwriting fees.

If any of the securities are to be offered for the account of a selling shareholder, indicate the portion of such expenses to be borne by such shareholder.

The information may be given subject to future contingencies.

H.31 Disclose the minimum amount which in the opinion of the directors must be raised through the issue of securities in form of total subscriptions in shares and value.

ID.I.00.

Vendors I.01 The names and addresses of the vendors of any assets purchased or acquired by the issuer or any subsidiary company during the two years preceding the publication of the prospectus or proposed to be purchased, or acquired, on capital account and the amount paid or payable in cash or securities to the vendor, and where there is more than one separate vendor, the amount so paid or payable to each vendor, and the amount (if any) payable for goodwill or items of a similar nature.

The cost of assets to the vendors and dates of purchase by them if within the preceding two years.

Where the vendor is a 201 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] company, the names and addresses of the beneficial shareholders, direct and indirect, of the company if required by the Authority.

Where this information is unobtainable, the reasons therefor are to be stated.

I.02 State whether or not the vendors have given any indemnities, guarantees or warranties.

I.03 State whether the vendors agreements preclude the vendors from carrying on business in competition with the issuer or any of its subsidiaries, or impose any other restriction on the vendor, and disclose of any cash or other payment regarding restraint of trade and the nature of such restraint of trade.

I.04 State how any liability for accrued taxation, or any apportionment thereof to the date of acquisition, will be settled in terms of the vendors agreements.

I.05 Where securities are purchased in a subsidiary company, a reconciliation between the amounts paid for the securities and the value of the net assets of that company.

Where securities are purchased in companies other than subsidiary companies, a statement as to how the value of the securities was arrived at.

I.06 Where any promoter or director had any beneficial interest, direct or indirect, in such transaction or where any promoter or director was a member of a partnership, syndicate or other association of persons which had such an interest, the names of any such promoter or director, and the nature and extent of his interest.

Where the vendors or any of them are a partnership, the members of the partnership shall not be treated as separate vendors.

I.07 The amount of any cash or securities paid or benefit given within two preceding years or proposed to be paid or given to any promoter not being a director, and the consideration for such payment or benefit.

I.08 State whether the assets acquired have been transferred into the name of the issuer or any of its subsidiary companies and whether or not the assets have been ceded or pledged.

PART C FIXED INCOME SECURITIES MARKET SEGMENT DISCLOSURE REQUIREMENTS FOR PUBLIC ISSUES [Regulation 10(c).] ID.A.00.

Identity of directors, senior management and advisers (i.e.

persons responsible for the information disclosed) A.01 The name, home or business address and function of each of the persons giving the declaration set out in paragraph A.02.

A.02 A declaration in the following form The directors of [the issuer], whose names appear on page [ ] of the prospectus, accept responsibility for the information contained in this document.

A.03 The names, addresses and qualifications of the auditors who have audited the issuers annual accounts in accordance with IAS for the last two financial years.

A.05 The names and addresses of the issuers bankers, legal advisers, sponsors, reporting accountants and any other expert to whom a statement or report included in the prospectus has been attributed.

[Issue 1] 202 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] ID.B.00.

Offer statistics and expected timetable B.01 (1) A statement that the Authority has approved the public offering and listing of the securities at the Fixed Income Securities Market Segment of a securities exchange.

(2) Cautionary statement of the Authority.

B.02 A statement that a copy of the prospectus has been delivered to the Registrar.

ID.C.00.

Information on the issuer C.01 The name, registered office and, if different, head office of the issuer.

If the issuer has changed its name within the last three years, the old name must be printed in bold type under the new name.

C.02 The country of incorporation of the issuer.

C.03 The date of incorporation and the length of life of the issuer, except where indefinite.

C.04 The legislation under which the issuer operates and the legal form which it has adopted under that legislation.

C.05 A description of the issuers principal objects and reference to the clause(s) of the memorandum of association in which they are described.

C.06 The place and date of registration of the issuer and its registration number.

C.07 A statement that for a period of not less than five working days from the date of the information memorandum or for the duration of any offer to which the information memorandum relates, if longer, at a named place as the Authority may approve, where the following documents or copies thereof (where applicable) could be inspected (a) the memorandum and articles of association of the issuer; (b) any trust deed of the issuer or of its subsidiary undertakings which is referred to in the information memorandum; (c) each document mentioned in paragraphs C.12 (material contracts) or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; (d) copies of service agreements with managers or secretary/ies, underwriting, vendors and promoters agreements entered into during the last two financial years; (e) the latest certified appraisals or valuations relative to movable and immovable property and items of a similar nature, if applicable; (f) all reports, letters, and other documents, balance sheets, valuations and statements by any expert any part of which is included or referred to in the prospectus; (g) written statements signed by the auditors or accountants setting out the adjustments made by them in arriving at the figures shown in any accountants report included pursuant to paragraph G.04 and giving the reasons therefor; and (h) the audited accounts of the issuer or, in the case of a group, the consolidated audited accounts of the issuer and its subsidiary undertakings for each of the two financial years preceding the publication of the prospectus, including, in the case of a company incorporated in Kenya, all notes, reports or information required by the Companies Act (Cap.

486).

C.08 Where any of the documents listed in paragraph C.07 are not in the English language, translations into English must also be available for inspection.

In the case of any document mentioned in paragraph C.12 (material contracts), a translation of a summary of such document may be made available for inspection, if the Authority so requires.

203 [Issue 1] CAP.

485A [Rev.

C.10 The names of the persons, so far as they are known to the issuer, who, directly or indirectly, jointly or severally, exercise or could exercise control over the issuer, and particulars of the proportion of the voting capital held by such persons.

For these purposes, joint control means control exercised by two or more persons who have concluded an agreement, which may lead to their adopting a common policy in respect of the issuer.

C.11 If the issuer has subsidiary undertakings or parent undertakings, a brief description of the group of undertakings and of the issuers position within it stating, where the issuer is a subsidiary undertaking, the name of and number of shares in the issuer held (directly or indirectly) by each parent undertaking of the issuer.

C.12 A summary of the principal contents of (a) each material contract (not being a contract entered into in the ordinary course of business) entered into by any member of the group within the two years immediately preceding the publication of the prospectus, including particulars of dates, parties, terms and conditions, any consideration passing to or from the issuer or any other member of the group, unless such contracts have been available for inspection in the last two years in which case it will be sufficient to refer to them collectively as being available for inspection in accordance with paragraph C.07; and (b) any contractual arrangement with a controlling shareholder required to ensure that the issuer is capable at all times of carrying on its business independently of any controlling shareholder, including particulars of dates, terms and conditions and any consideration passing to or from the issuer or any other member of the group.

C.13 If any contract referred to in paragraph C.12 relates to the acquisition of securities in an unlisted subsidiary, or associated company, where all securities in the issuer have not been acquired, state the reason why 100% of the shareholding was not acquired, and whether anyone associated with the controlling shareholder(s) of the issuer, or associated companies, or its subsidiaries is interested and to what extent.

C.14 A description of the groups principal activities, stating the main categories of products sold and/or services performed.

C.15 Details of any material changes in the businesses of the issuer during the past five years.

C.16 Where the information given pursuant to paragraphs C.14 to C.15 has been influenced by exceptional factors, that fact must be mentioned.

C.17 Information on any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware) which may have or have had in the recent past (covering at least the previous four months) a significant effect on the groups financial position or an appropriate negative statement.

C.18 Information on any interruptions in the groups business, which may have or have had during the recent past (covering at least the previous four months) a significant effect on the group financial position.

[Issue 1] 204 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] C.19 Information concerning the principal investments (including new plant, factories and research and development) being made during the current financial year, with the exception of interests being acquired in other undertakings, including (a) the geographical distribution of these investments; and (b) the method of financing such investments.

C.20 Information concerning the groups principal future investments (including new plant, factories, and research and development, if any), with the exception of interests to be acquired in other undertakings, on which the issuers directors have already made firm commitments.

C.21 Information concerning policy on the research and development of new products and processes over the past three financial years, where significant.

C.22 The basis for any statements made by the issuer regarding it competitive position shall be disclosed.

ID.D.00.

Operating and financial review and prospectus (the recent development and prospects of the group) D.01 Unless otherwise approved by the Authority in exceptional circumstances (a) general information on the trend of the groups business since the end of the financial year to which the last published annual accounts relate, and in particular (i) the most significant recent trends in production, sales and stock and the state of the order book; and (ii) recent trends in costs and selling prices; and (b) information on the groups prospects for at least the current financial year.

D.02 Provide information on the risk factors that are specific to the issuer or its industry and make an offering speculative or on high risk in a section headed Risk Factors.

D.03 Where a profit forecast or estimate appears, the principal assumptions upon which the issuer has based its forecast or estimate must be stated.

Where so required, the forecast or estimate must be examined and reported on by the reporting accountants or auditors and their report must be set out; there must also be set out a report from the sponsor confirming that the forecast has been made after due and careful enquiry by the directors.

D.04 The opinion of the directors, stating the grounds therefor, as to the prospects of the business of the issuer and of its subsidiaries and of any subsidiary or business undertaking to be acquired, together with any material information which may be relevant thereto.

ID.E.00.

485A [Rev.

E.02 In the case of a foreign issuer, information similar to that described in E.01, relative to the local management, if any.

Where the Authority considers the parent company is not adequately represented on the directorate of its subsidiaries, an explanation is required.

E.03 A statement showing the aggregate of the direct and indirect interests of the directors in, and the direct and indirect interests of each director holding in excess of 3% of the share capital of the issuer, distinguishing between beneficial and non-beneficial interests, or an appropriate negative statement.

ID.F.00.

Major shareholders and related party transactions F.01 The following information shall be provided regarding the issuers major shareholders, which means shareholders that are the beneficial owners of at least 3% or more of the issuers voting securities (a) provide the names of the major shareholders, and the number of shares and the percentage of outstanding shares of each class owned by each of them as of the most recent practicable date, or an appropriate negative statement if there are no major shareholders; (b) disclose any significant change in the percentage ownership held by any major shareholders during the past three financial years; and (c) indicate whether the issuers major shareholders have different voting rights, or an appropriate negative statement.

F.02 Information shall be provided as to the portion of each class of securities held in Kenya and the number of shareholders in Kenya.

F.03 To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled by another corporation(s), by any foreign government or by any other natural or legal person(s) severally or jointly, and, if so, give the name(s) of such controlling corporation(s), government or other person(s), and briefly describe the nature of such control, including the amount and proportion of capital held giving a right to vote.

F.04 Describe any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer.

F.06 Provide information required on (a) and (b) below for the period since the beginning of the issuers preceding five financial years up to the date of the information memorandum, with respect to transactions or loans between the issuer and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under intermediaries, control or are controlled by, or are under common control with, the issuer; (b) associates; [Issue 1] 206 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (c) individuals owning, directly or indirectly, an interest in the voting power of the issuer that gives them significant influence over the issuer, and close members of any such individuals family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the issuer, including directors and senior management of the issuer and close members of such individuals families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

This includes enterprises owned by directors or major shareholders of the issuer and enterprises that have a number of key management in common with the issuer.

Shareholders beneficially owning a 10% interest in the voting power of the issuer are presumed to have a significant influence on the issuer, including (i) the nature and extent of any transactions or presently proposed transactions which are material to the issuer or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer or any of its parent or subsidiaries was a party; and (ii) the information given should include the largest amount outstanding during the period covered, the amount outstanding as of the latest practicable date, nature of the costs, the transaction(s) in which it was incurred and the interest rate on such transaction(s); (iii) the amount of outstanding loans (including guarantees of any kind) made by the issuer or any of its parent or subsidiary(ies) to or for the benefit of any of the persons listed above.

F.07 Full information of any material inter-company finance.

F.08 Where a statement or report attributed to a person as an expert is included in the information memorandum, a statement that it is included, in the form and context in which it is included, with the written consent of that person, who has authorised the contents of that part of the information memorandum, and has not withdrawn his consent.

F.09 If any of the named experts was employed on a contingent basis, owns an amount of shares in the issuer or its subsidiaries which is material to that person, or has a material, direct or indirect economic interest in the issuer or that depends on the success of the offering, provide a brief description of the nature and terms of such contingency or interest.

ID.G.00.

Financial information G.01 A statement that the annual accounts of the issuer for the last three financial years have been audited.

If audit reports on any of those accounts have been refused by the auditors or contain qualifications, such refusal or such qualifications must be reproduced in full and the reasons given.

G.02 A statement of what other information in the prospectus has been audited by the auditors.

G.03 Financial information as required by paragraphs G.09 to G.11 set out in the form of a comparative table together with any subsequent interim financial statements if available.

G.04 Financial information as required by paragraphs G.09 to G.11 set out in the form of an accountants report.

G.05 If applicable, an accountants report, as set out in paragraphs G.09 to G.11 n the asset which is the subject of the transaction.

207 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] G.06 (a) If the issuer prepares consolidated annual accounts only, it must include those accounts in the prospectus in accordance with paragraph G.03 or G.04.

(b) If the issuer prepares both own and consolidated annual accounts, it must include both sets of accounts in the prospectus in accordance with paragraph G.03 or G.04.

However, the issuer may exclude its own accounts on condition that they do not provide any significant additional information to that contained in the consolidated accounts, with the approval of the Authority.

G.07 (a) Where the issuer includes its own annual accounts in the prospectus, it must state the profit or loss per share arising out of the issuers ordinary activities, after tax for each of the last five financial years.

(b) Where the issuer includes consolidated annual accounts in the prospectus, it must state the consolidated profit or loss per share for each of the last five financial years; this information must appear in addition to that provided in accordance with (a) above where the issuer also includes its own annual accounts in the prospectus.

G.08 A description of any significant change in the financial or trading position of the group which has occurred since the end of the last financial period for which either audited financial statements or interim financial statements have been published, or an appropriate negative statement.

G.09 If the issuers own annual or consolidated annual accounts do not give a true and fair view of the assets and liabilities, financial position and profits and losses of the group, more detailed and/or additional information must be given.

G.10 A table showing the changes in financial position of the group over each of the last three financial years in the form of a cash flow statement.

G.11 The accountants report shall disclose a pro-forma balance sheet, profit and loss account and a cash flow projection for the next twelve months following the issue and the following ratios for the last three financial years immediately preceding the issue (a) earnings before interest and taxes interest cover; (b) funds from operations to total debt percentage; (c) free cash flow to total debt percentage; (d) total free cash flow to short-term debt obligations; (e) not profit margin; (f) post-tax return (before financing on capital employed); (g) long term debt to capital employed; and (h) total debt to equity.

G.12 Where the prospectus includes consolidated annual accounts, disclosures are required (a) of the consolidation principles applied (which must be described explicitly where such principles are not consistent with IAS); (b) of the names and registered offices of the undertakings included in the consolidation, where that information is important for the purpose of assessing the assets and liabilities, financial position and profits and losses of the issuer; it is sufficient to distinguish them by a symbol in the list of undertakings of which details are required in paragraph G.15; and (c) for each of the undertakings referred to in (b) above (i) the total proportion of third party interests, if annual accounts are wholly consolidated; or [Issue 1] 208 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (ii) the proportion of the consolidation calculated on the basis of interests, if consolidation has been effected on a pro rata basis.

G.13 (1) Details on a consolidated basis as at the most recent practicable date (which must be stated and which in the absence of exceptional circumstances must not be more than fourteen days prior to the date of publication of the prospectus) of the following, if material (a) the borrowing powers of the issuer and its subsidiaries exercisable by the directors and the manner in which such borrowing powers may be varied; (b) the circumstances, if applicable, if the borrowing powers have been exceeded during the past two years.

Any exchange control or other restrictions on the borrowing powers of the issuer or any of its subsidiaries; (c) the total amount of any loan capital outstanding in all members of the group, and loan capital created but un-issued, and term loans, distinguishing between loans guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties), and unsecured; (d) all off-balance sheet financing by the issuer and any of its subsidiaries; (e) the total amount of all other borrowings and indebtedness in the nature of borrowing of the group, distinguishing between guaranteed, unguaranteed, secured and unsecured borrowings and debts, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire-purchase commitments and obligations under finance leases; (f) the total amount of any material commitments, lease payments and contingent liabilities or guarantees of the group; or (g) how the borrowings required to be disclosed by paragraphs (c) to (f) above arose, stating whether they arose from the purchase of assets by the issuer or any of its subsidiaries.

(2) An appropriate negative statement must be given in each case where relevant, in the absence of any loan capital; borrowings, indebtedness and contingent liabilities described in (1) above; as a general rule, no account should be taken of liabilities or guarantees between undertakings within the same group, a statement to that effect being made if necessary.

(3) For each item identified in (1) above, where applicable (a) the names of the lenders, if not debenture holders; (b) the amount, terms and conditions of repayment or renewal; (c) the rates of interest payable on each item; (d) details of the security, if any; (e) details of conversion rights; (f) where the issuer or any of its subsidiaries has debts which are repayable within twelve months, state how the payments are to be financed; and (g) if the issuer prepares consolidated annual accounts, the principles laid down in paragraph G.06 apply to the information set out in this paragraph G.13.

G.14 Details of material loans by the issuer or by any of its subsidiaries stating (a) the date of the loan; (b) to whom made; (c) the rate of interest; (d) if the interest is in arrears, the last date on which it was paid and the extent of the arrears; (e) the period of the loan; 209 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (f) the security held; (g) the value of such security and the method of valuation; (h) if the loan is unsecured, the reasons therefor; and (i) if the loan was made to another company, the names and addresses of the directors of such company.

G.15 (1) Information in respect to matters listed below relating to each undertaking in which the issuer holds (directly or indirectly) on a long-term basis an interest in the capital that is likely to have a significant effect on the assessment of the issuers own assets and liabilities, financial position or profits or losses (a) the name and address of the registered office; (b) field of activity; (c) the proportion of capital held; (d) the issued capital; (e) the reserves; (f) the profit or loss arising out of ordinary activities, after tax, for the last financial year; (g) the value at which the issuer shows in its accounts the interest held; (h) any amount still to be paid up on shares held; (i) the amount of dividends received in the course of the last financial year in respect of shares held; and (j) the amount of the debts owed to and by the issuer with regard to the undertaking.

(2) The items of information listed in (1) above must be given in any event for every undertaking in which the issuer has a direct or indirect participating interest, if the book value of that participating interest represents at least 20% of the capital and reserves of the issuer or if that interest accounts for at least 20% of the net profit or loss of the issuer or, in the case of a group, if the book value of that participating interest represents at least 20% of the consolidate net assets or at least 20% of the consolidated net profit or loss of the group.

(3) The information required by (1)(e) and (f) above may be omitted where the undertaking in which a participating interest is held does not publish annual accounts.

(4) The information required by (1)(d) to (j) above may be omitted if the annual accounts of the undertakings in which the participating interests are held are consolidated into the group annual accounts, or, with the exception of (1)(i) and (j) above, if the value attributable to the interest under the equity method is disclosed in the annual accounts, provided that in the opinion of the Authority, the omission of the information is not likely to mislead the public with regard to the facts and circumstances, knowledge of which is essential for the assessment of securities in question.

G.16 A statement by the directors of the issuer that in their opinion the working capital available to the group is sufficient for the groups present requirements, or, if not, how it is proposed to provide the additional working capital thought by the directors of the issuer to be necessary.

The working capital statement should be prepared on the group, as enlarged by the acquisition of assets.

G.17 Where the financial statements provided under paragraphs G.01 to G.05 are prepared in a currency other than Kenya shillings, disclosure of the exchange rate between the financial reporting currency and Kenya shillings should be provided, using the mean exchange rate designated by the Central Bank of Kenya for this purpose, if any (a) at the latest practicable date; [Issue 1] 210 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (b) the high and low exchange rates for each month during the preceding twelve months; (c) for the five most recent financial years and any subsequent interim period for which financial statements are presented, the average rates for each period, calculated by using the average of the exchange rates on the last day of each month during the period; and (d) if the proceeds are being used directly or indirectly to acquire assets, other than in the ordinary course of business, briefly describe the assets and their cost.

If the assets will be acquired from affiliates of the issuer or associates, disclose the person from whom they will be acquired and how the cost to the issuer will be determined.

FI.H.00.

The debt securities for which application is being made H.01 A statement that application has been made to the Authority for the securities to be listed (if applicable) in the Fixed Income Securities Market Segment, setting out the relevant debt securities.

H.02 A statement whether or not all the debt securities have been marketed or are available in whole or in part to the public in conjunction with the application.

H.03 A statement that a copy of the information memorandum or prospectus, as the case may be, has been delivered to the Registrar.

H.04 The nominal amount of the debt securities and if this amount is not fixed, a statement to that effect must be made.

H.05 The nature, number and numbering of the debt securities and the denominations.

H.06 Except in the case of continuous issues of short-term debt securities, the issue and redemption prices and nominal interest rate.

If several interest rates or variable interest rates are provided for, an indication of the conditions for changes in the rate.

H.07 The procedures for the allocation of any other advantages and the method of calculating such advantages.

H.08 A statement regarding tax on the income from the debt securities withheld at source (a) in the country of origin (if applicable); and (b) in Kenya.

H.09 A statement whether the issuer assumes responsibility for the withholding of tax at source.

H.10 Arrangements for the amortisation of the loan, including the repayment procedures.

H.11 The names and addresses of the issuers Registrar and paying agent(s) for the securities in any other country where the securities listing (if applicable) has taken place.

H.12 The currency of the loan and any currency option; if the loan is denominated in units of account, the contractual status of such units.

H.13 The final repayment date and any earlier repayment dates.

H.14 The date from which interest becomes payable and the due dates for interest.

H.15 The time limit on the validity of claims to interest and repayment of principal.

H.16 The procedures and time limits for delivery of the debt securities, and a statement as to whether temporary documents of title will be issued.

H.17 Except in the case of continuous issues in respect of short-term securities, a statement of yield.

The method whereby that yield is calculated must be described in summary form.

211 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.18 A statement of the resolutions, authorisations and approvals by virtue of which the debt securities have been or will be created and/or issued.

H.19 The nature and amount of the issue.

H.20 The number of debt securities which have been or will be created and/or issued.

H.21 The nature and scope of the guarantees, sureties and commitments intended to ensure that the loan will be duly serviced as regards both the repayment of the debt securities and the payment of interest.

H.22 Details of trustees or of any other representation for the body of debt security holders.

H.23 (1) The name, function, description and head office of the trustee or other representative of the debt security holders; and (2) the main terms of the document governing such trusteeship or representation and in particular the conditions under which such trustee or representative may be replaced.

H.24 A summary of clauses subordinating the loan to other debts of the issuer already contracted or to be contracted.

H.25 A statement of the legislation under which the debt securities have been created and the courts competent in the event of litigation.

H.26 A statement whether the debt securities are in registered or certificate form or where dematerialised a statement of account to be issued.

H.27 Details of any arrangements for transfer of the securities and any restrictions on the free transferability of the debt securities.

H.28 Other securities exchanges (if any) where listing is being or will be sought.

H.29 (1) The names, addresses and descriptions of the persons underwriting or guaranteeing the issue, and (a) where the underwriter is a company, the description must include (i) the place and date of incorporation and registered number of the issuer; (ii) the names of the directors of the company; (iii) the name of the secretary of the company; (iv) the bankers to the company where applicable; and (v) the authorised and issued share capital of the company; (b) (i) where the issue is fully or partially guaranteed, the guarantor shall assume the responsibility and redemption obligation under the issue and in that regard, shall satisfy the Authority of its financial capacity to guarantee the issue; (ii) where the guarantor is a bank or an insurance company licensed to operate in Kenya, the consent of the Central Bank of Kenya or the Commissioner of Insurance, as the case may be, will be required.

(2) Where not all of the issue is underwritten or guaranteed, a statement of the portion not covered shall be made.

H.30 If a public or private offer or placing has been or is being made simultaneously on the markets of two or more countries and if a tranche has been or is being reserved for certain of these, details of any such tranche.

H.31 The names of the securities exchanges (if any) on which debt securities of the same class are already listed.

[Issue 1] 212 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] H.32 If debt securities of the same class have not yet been listed but are dealt in on one or more other regulated, regularly operating, recognised, open markets, an indication of such markets.

H.33 If an issue is being effected at the same time as listing or has been effected within the three months preceding such listing the following information must be given (a) the procedure for the exercise of any right of pre-emption; the negotiability of subscription rights, the treatment of subscription rights not exercised and (i) the issue price or offer or placing price, stating the nominal value or, in its absence, the accounting par value or the amount to be capitalised; (ii) the issue premium or discount and the amount of any expenses specifically charged to the subscriber or purchaser; and (iii) the methods of payment of the price, particularly as regards the paying-up of securities which are not fully paid; (b) except in the case of continuous debt security issues, the period during which the issue or offer remained open or will remain open and any possibility of early closure; (c) the methods of and time limits for delivery of the securities and a statement as to whether temporary documents of title have been or will be issued; (d) the names of the receiving agents; (e) a statement, where necessary, that the subscriptions may be reduced and a statement of the relative facts where it is the intention, in the event of over subscription, to extend a preference on allotment to any particular company or group such as employees and pension funds; (f) except in the case of continuous debt security issues, the estimated net proceeds of the loan.

If the capital offered is more than the amount of the minimum subscription referred to in paragraph H.34, the reason for the difference between the capital offered and the said minimum subscription; (g) the purpose of the issue and intended application of its proceeds.

H.34 The minimum amount which, in the opinion of the directors, must be raised by the issue of the securities in order to provide the sums, or, if any part thereof is to be defrayed in any other manner, the balance of the sums required to be provided, in respect of each of the following matters (a) the purchase price of any property, purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the issue; (b) any preliminary expenses payable by the issuer, and any commission payable to any person in consideration for his agreeing to subscribe for, or of his procuring or agreeing to procure subscriptions for or of his underwriting or guaranteeing any securities of the issuer; (c) the repayment of any moneys borrowed in respect of any of the forgoing matters; (d) working capital, stating the specific purposes for which it is to be used and the estimated amount required for each such purpose; (e) any other material expenditure, stating the nature and purposes thereof and the estimated amount in each case; and (f) the amounts to be provided in respect of the matters aforesaid otherwise than out of the proceeds of the issue, and the sources from which those amounts are to be provided.

H.35 A summary of the rights conferred upon the holders of the debt securities and particulars of the security (if any) therefor.

213 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.36 Where debt securities are issued by way of conversion or replacement of debt securities previously issued, a statement of all material difference between the security for the old debt securities and the security for the new debt securities, or, if appropriate, a statement that the security for the new debt securities is identical with all security for the old debt securities.

H.37 Particulars of the profits cover for interest (if fixed), and of the net tangible assets.

H.38 Where the debt securities for which application is being made are offered by way of rights or open offer to the holders of an existing listed security, the following information must be given (a) (i) the pro rata entitlement; (ii) the last date on which transfers were or will be accepted for registration for registration for participation in the issue; (iii) how the securities rank for interest; (iv) the nature of the document of title and its proposed date of issue; (b) in the case of a rights issue or open offer, how debt securities not taken up will be dealt with and the time in which the offer may be accepted; (c) a statement pointing out possible tax implications for non-residents.

H.39 In respect of convertible debt securities, information concerning the nature of the shares offered by way of conversion, exchange or for subscription and the rights attaching thereto.

H.40 In respect of convertible debt securities, the conditions of and procedures for conversion, exchange or subscription and details of the circumstances in which they may be amended.

H.41 Where the debt securities for which application is being made are debt securities of a class which is already listed, being.

offered by way of rights or open offer, a table of market values for the securities of the class to which the rights issue or offer relates for the first dealing day in each of the six months before the date of the particulars, for the last dealing day before the announcement of the rights issue or offer and (if different) the latest practicable date prior to publication of the particulars.

H.42 Where an issuer seeks to raise additional capital amounting to twenty percent or more of the aggregate value of its listed fixed income securities such issuer shall obtain prior approval of the holders of such listed fixed income securities and the Authority.

PART CC GROWTH ENTERPRISES MARKET SEGMENT DISCLOSURE REQUIREMENTS [Rule 10(1)(cc), L.N.

61/2012, s.

17.] ID.A.00 Identity of directors, senior management and advisors (i.e persons responsible for the information disclosed) A.01 The name, home or business address and function of each of the persons giving the declaration set out in paragraph A.02.

02 A declaration in the following form The directors of the issuer, whose names appear on page [ ], of the listing statement accept responsibility for the information contained in this document.

A.03 The names and addresses of the issuers bankers, legal advisers, sponsors, reporting accountants and any other expert to whom a statement or report included in the listing statement has been attributed.

[Issue 1] 214 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] ID.B.00 Offer statistics and expected timetable B.01 (1) A statement that the Securities Exchange has approved listing of the shares on the Growth Enterprise Market Segment of the securities exchange.

(2) Cautionary statement of the Exchange.

B.02 The proposed listing price and the basis of determining the price.

B.03 The total amount of the securities to be listed.

ID.C.00 Information on the issuer C.01 The name, registered office and, if different, head office of the issuer.

If the issuer has changed its name within the last two years, the old name must be printed in bold type under the new name.

C.02 The country of incorporation of the issuer.

C.03 The date of incorporation and the length of life of the issuer, except where indefinite.

C.04 The legislation under which the issuer operates and the legal form which it has adopted under that legislation.

C.05 A description of the issuers principal objects and reference to the clause(s) of the memorandum of association in which they are described.

C.06 The place and date of registration of the issuer and its registration number.

C.07 A statement that for a period of not less than five working days from the date of the listing statement, at a named place as the Securities Exchange may agree, the following documents (or copies thereof), where applicable, could be inspected (a) the memorandum and articles of association of the issuer; (b) any trust deed of the issuer or of its subsidiary companies which is referred to in the listing statement; (c) each document mentioned in paragraphs C.18 (material contracts) and E.10 (directors service contracts) or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; (d) copies of service agreements with managers or secretary/ies, underwriting, vendors and promoters agreements entered into during the last two financial years; (e) in the case of an issue of shares in connection with a merger, the division of a company, the transfer of all or part of an undertakings assets and liabilities, or a takeover offer, or as consideration for the transfer of assets other than cash, the documents describing the terms and conditions of such operations, together, where appropriate, with any opening balance sheet, if the issuer has not prepared its own or consolidated annual accounts (as appropriate); (f) the latest competent persons report, in the case of a mineral company; (g) the latest certified appraisals or valuations relative to movable and immovable property and items of a similar nature, if applicable; (h) all reports, letters, and other documents, balance sheets, valuations and statements by any expert any part of which is included or referred to in the listing statement; (i) written statements signed by the auditors or accountants setting out the adjustments made by them in arriving at the figures shown in any accountants report in accordance with paragraph G.04 and giving the reasons therefor; and 215 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (j) the audited accounts of the issuer or, in the case of a group, the consolidated audited accounts of the issuer and its subsidiary undertakings for at least one year (two years, if the issuer has been in existence for such a period) preceding the publication of the listing statement, including, in the case of a company incorporated in Kenya, all notes, reports or information required under the Companies Ac (Cap.

486).

C.08 Where any of the documents listed in paragraph C.07 are not in the English language, translations into English must also be available for inspection.

In the case of any document mentioned in paragraph C.18 (material contracts), a translation of a summary of such document may be made available for inspection, if the securities exchange so requires.

C.09 The amount of the issuers authorized and issued capital and the amount of any capital agreed to be issued, the number and classes of the shares of which it is composed with details of their principal characteristics.

C.10 Where the issuer has authorized but un issued capital or is committed to increase the capital, an indication of (a) the amount of such authorized capital or capital increase and, where- appropriate, the duration of the authorization; (b) the categories of persons having preferential subscription rights for such additional portions of capital; and (c) the terms and arrangements for the share issue corresponding to such portions.

C.12 A summary of the provisions of the issuers memorandum and articles of association regarding changes in the capital and in the respective rights of the various classes of securities.

C.13 If an issuer has been in operation, a summary of the changes during the preceding one financial year in the amount of the issued capital of the issuer and, if material, the capital of any member of the group or the number and classes of securities of which it is composed.

Intra group issues by partly owned subsidiaries and changes in the capital structure of subsidiaries which have remained wholly owned throughout the period may be disregarded.

Such summary must also state the price and terms granted and (if not already fully paid) the dates when any installments are in arrears.

If any asset has been acquired or is to be acquired out of the proceeds of the issue, its value must be stated.

If there are no such issues, an appropriate negative statement must be made.

C.14 The names of the persons so far as they are known to the issuer, who, directly or indirectly, jointly or severally, exercise or could exercise control over the issuer, and particulars of the proportion of the voting capital held by such persons.

For these purposes, joint control means control exercised by two or more persons who have concluded an agreement which may lead to their adopting a common policy in respect of the issuer.

C.15 Details of any change in controlling shareholder(s) as a result of the issue.

[Issue 1] 216 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] C.16 The history of any change in the controlling shareholder(s) and trading objectives of the issuer and its subsidiaries during the previous financial year.

A statement of the new trading objectives and the manner in which the new objectives will be implemented.

If the issuer or the group, as the case may be, carries on widely differing operations, a statement showing the contributions of such respective differing operations to its trading results.

The proposed new name, if any, the reasons for the change and whether or not consent to the change has been obtained from the Registrar.

C.17 If the issuer has subsidiary undertakings or parent undertakings, a brief description of the group of undertakings and of the issuers position within it stating, where the issuer is a subsidiary undertaking, the name and number of shares in the issuer held (directly or indirectly) by each parent undertaking of the issuer.

C.18 A summary of the principal contents of (a) each material contract (not being a contract entered into in the ordinary course of business) entered into by any member of the group within the year immediately preceding the publication of the listing statement, including particulars of dates, parties, terms and conditions, any consideration passing to or from the issuer or any other member of the group, unless such contracts have been available for inspection in the last year in which case it will be sufficient to refer to them collectively as being available for inspection in accordance with paragraph C.07; and (b) any contractual arrangement with a controlling shareholder required to ensure that the company is capable at all times of carrying on its business independently of any controlling shareholder, including particulars of dates, terms and conditions and any consideration passing to or from the issuer or any other member of the group.

C.20 Details of the name of any promoter of any member of the group and the amount of any cash, securities or benefits paid, issued or given within the year immediately preceding the date of publication of the listing statement, or proposed to be paid, issued or given to any such promoter in his capacity as a promoter and the consideration for such payment, issue or benefit.

C.21 A statement of all sums paid or agreed to be paid within the year immediately preceding the date of publication of the listing statement, to any director or to any company in which he is beneficially interested, directly or indirectly, or of which he is director, or to any partnership, syndicate or other association of which he is a member, in cash or securities or otherwise, by any person either to induce him to become or to qualify him as a director, or otherwise for services rendered by him or by the company, partnership, syndicate or other association in connection with the promotion or formation of the issuer.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) If the total emoluments receivable by the directors of the issuer will be varied in consequence of the transaction, full particulars of the variation; if there will be no variation, a statement to that effect; and (c) if the business of the issuer or any of its subsidiaries or any part thereof is managed by a third party under a contract or arrangement, the name and address (or the address of its registered office, if a company) of such third party and a description of the business so managed or to be managed and the consideration paid in terms of the contract or arrangement and any other pertinent details relevant to such contract or arrangement.

C.23 A description of the groups principal activities, stating the main category of products sold or services performed.

C.24 For the business(es) described in paragraph C.23 above, the degree of any government protection and of any investment encouragement law affecting the business(es).

C.25 Information on any significant new products or activities.

C.26 Particulars of royalties payable or items of a similar nature in respect of the issuer and any of its subsidiaries.

C.27 Information on any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware) which may have or have had in the recent past (covering at least the previous four months) a significant effect on the groups financial position or an appropriate negative statement.

C.28 Information on any interruptions in the groups business which may have or have had during the recent past (covering at least the previous four months) a significant effect on the groups financial position.

C.29 A description, with figures, of the main investments made, including interests such as shares, debt securities etc., in other undertakings over the last financial year and during the current financial year.

C.30 Information concerning the principal investments (including new plant, factories and research and development) during the current financial year being made, with the exception of interests being acquired in other undertakings, including (a) the geographical distribution of these investments; and (b) the method of financing such investments.

C.31 Information concerning the groups principal future investments (including new plant, factories, and research and development, if any), with the exception of interests to be acquired in other undertakings, on which the issuers directors have already made firm commitments.

C.32 Information concerning policy on the research and development of new products and processes over the past two financial years, where significant.

C.33 The basis for any statements made by the company regarding its competitive position shall be disclosed.

ID.D.00 Operating and financial review and listing statements (the recent development and prospects of the group) D.01 Unless otherwise approved by a securities exchange in exceptional circumstances and with the approval of the Authority: [Issue 1] 218 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] If the issuer had declared annual accounts in the past (a) general information on the trend of the groups business since the end of the financial year to which the last published annual accounts relate, if the issuer has published annual accounts in the past, and in particular (i) the most significant recent trends in production, sales and stocks and the state of the order book; and (ii) recent trends in costs and selling prices; and (b) information on the groups prospects for at least the current financial year.

Such information must relate to the financial and trading prospects of the group together with any material information which may be relevant thereto, including all special trade factors or risks (if any) which are not mentioned elsewhere in the listing statement and which are unlikely to be known or anticipated by the general public, and which could materially affect the profits.

D.02 Provide information on the risk factors that are specific to the issuer or its industry and make an offering speculative or on high risk in a section headed Risk Factors.

D.03 Describe the (a) extent to which the financial statements disclose material changes in net revenues, provide a narrative discussion of the extent to which such changes are attributable to changes in prices or to changes in the volume or amount of products or services being sold or to the introduction of new products or services; (b) impact of inflation if material - if the currency in which financial statements are presented is of a country that has experienced hyperinflation, the existence of such inflation, a history of the annual rate of inflation covering the period, and discussion of the impact of the hyperinflation on the issuers business shall be disclosed; (c) impact of foreign currency fluctuations on the issuer, if material, and the extent to which foreign currency net investments are hedged by the currency borrowing and other hedging instruments; and (d) impact of any material governmental factors that have materially affected or could materially affect, directly or indirectly the issuers operations or investments by the host country shareholders.

D.04 Where a profit forecast or estimate appears, the principal assumptions upon which the issuer has based its forecast or estimate must be stated.

Where so required, the forecast or estimate must be examined and reported on by the reporting accountants or auditors and their report must be set out.

There must also be set out a report from the sponsor confirming that the forecast has been made after due and careful enquiry by the directors.

ID.E.00 Directors and employees E.01 The full name, age (or date of birth) home or business address, nationality and function in the group of each of the following persons and an indication of the principal activities performed by them outside the group where these are significant with respect to the group (a) directors, alternate and proposed directors of the issuer and each of its subsidiaries, including details of other directorships; 219 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) the senior management of the issuer including the chief executive, board secretary and finance director, with details of professional qualifications and period of employment with the issuer for each such person; and (c) founders, if the issuer has been established as a family business or has been in existence for fewer than five years and the nature of family relationship, if any; and (d) detailed disclosure of chief executive or other senior management changes planned or expected during twenty four months following the issue and listing of the security or appropriate negative statement.

E.02 A description of other relevant business interests and activities of every such person as is mentioned in paragraph E.01 and, if required by the securities exchange particulars of any former forename or surname of such persons.

E.03 In the case of a foreign issuer, information similar to that described in E.01 and E.02 above, relative to the local management if any.

Where the securities exchange considers the parent company is not adequately represented on the directorate of its subsidiaries, an explanation is required.

E.04 The total aggregate of the remuneration paid and benefits in kind granted to the directors of the issuer by any member of the group during the last completed financial year under any description whatsoever.

E.05 A statement showing the aggregate of the direct and indirect interests of the directors in, and the direct and indirect interests of each director holding in excess of 5% of the share capital of the issuer, distinguishing between beneficial and non-beneficial interests, or an appropriate negative statement.

The statement should include by way of a note any change in those interests occurring between the end of the financial year and the date of publication of the listing statement, or if there has been no such change, disclosure of that fact.

E.06 All relevant particulars regarding the nature and extent of any interests of directors of the issuer in transactions which are or were unusual in their nature or conditions or significant to the business of the group, and which were effected by the issuer during (a) the current or immediately preceding financial year; or (b) an earlier financial year and remain in any respect outstanding or unperformed; or (c) an appropriate negative statement.

E.07 The total of any outstanding loans granted by any member of the group to the directors and also of any guarantees provided by any member of the group for their benefit.

E.10 Details of existing or proposed directors service contracts (excluding contracts previously made available for inspection in accordance with paragraph C.07 and not subsequently varied); such details to include the matters specified in paragraphs (a) to (g) below or an appropriate negative statement (a) the name of the employing company; (b) the date of the contract, the un-expired term and details of any notice periods; [Issue 1] 220 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (c) full particulars of the directors remuneration including salary and other benefits; (d) any commission or profit sharing arrangements; (e) any provision for compensation payable upon early termination of the contract; (f) details of any other arrangements which are necessary to enable investors to estimate the possible liability of the company upon early termination of the contract; and (g) details relating to restrictions prohibiting the director, or any person acting on his behalf or connected to him, from any dealing in securities of the company during a close period or at a time when the director is in possession of unpublished price sensitive information in relation to those securities.

E.11 A summary of the provisions of the constitution documents of the issuer regarding (a) any power enabling a director to vote on a proposal, arrangement, or contract in which he is materially interested; (b) any power enabling the directors, in the absence of an independent quorum, to vote remuneration (including pension or other benefits) to themselves or any members of their body; and (c) retirement or non-retirement of directors under an age limit.

E.12 Any arrangement or understanding with major security holders, customers, suppliers or others, pursuant to which any person referred to in E.01 above, was selected as a director or member of senior management.

E.13 Details relating to the issuers audit committee, remuneration committee and nomination committee including the names of committee members and a summary of the terms of reference under which the committees operate.

ID.F.00 Major shareholders and related party transactions F.01 The following information shall be provided regarding the issuers major security holders which means security holders that are the beneficial owners of at least three per cent or more of each class of the issuers voting securities (a) provide the names of the major security holders, and the number of securities and the percentage of outstanding securities of each class owned by each of them as of the most recent practicable date, or an appropriate negative statement if there are no major security holders; (b) disclose any significant change in the percentage ownership held by any major security holders during the past year; and (c) indicate whether the issuers major security holders have different voting rights, or an appropriate negative statement.

F.02 Information shall be provided as to the portion of each class of securities held in Kenya and the number of security holders in Kenya.

F.03 To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled by any other corporation, foreign government or any other natural or legal person severally or jointly, and, if so, give the name of such controlling corporation, government or other person, and briefly describe the nature of such control, including the amount and proportion of capital held giving a right to vote.

F.04 Describe any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer.

221 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] F.05 In so far as is known to the issuer, the name of any person other than a director who, directly or indirectly, is interested in 3% per cent or more of the issuers capital, together with the amount of each such persons interest.

F.06 Provide the information required on (a) and (b) below for the period since the beginning of the issuers preceding five financial years up to the date of the Information Memorandum, with respect to transactions or loans between the issuer and (a) enterprises that directly of indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the issuer; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the issuer that gives them significant influence over the issuer, and close members of any such individuals family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the issuer, including directors and senior management of the issuer and close members of such individuals families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

This includes enterprises owned by directors or major security holders of the issuer and enterprises that have a number of key management in common with the issuer.

Shareholders beneficially owning a3% interest in the voting power of the issuer are presumed to have a significant influence on the issuer including (i) the nature and extent of any transactions or presently proposed transactions which are material to the issuer or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer or any of its parent or subsidiary(ies) was a party; and (ii) the amount of outstanding loans (including guarantees of any kind) made by the issuer or any of its parent or subsidiaries to or for the benefit of any of the persons listed above.

F.07 Full information of any material inter-company finance.

F.08 Where a statement or report attributed to a person as an expert is included in the listing statement, a statement that it is included, in the form and context in which it is included, with the written the form and context in which it is included, with the written consent of that person, who has authorized the contents of that part of the listing statement, and has not withdrawn his consent.

F.09 If any of the named experts employed on a contingent basis, owns an amount of securities in the issuer or its subsidiaries which is material to that person, or has a material, direct or indirect economic interest in the issuer or that depends on the success of the listing, provide a brief description of the nature and terms of such contingency or interest.

F.10 Provide a copy of the share register to the securities exchange.

ID.G.00 Financial information G.01 Financial information as required by paragraphs G.11 and G.12 set out in the form of an accountants report.

[Issue 1] 222 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] G.02 If applicable, an accountants report, as set out in paragraphs G.11 and G.12 on the asset which is the subject of the transaction.

G.03 (1) If the issuer prepares consolidated annual accounts only, it must include those accounts in the listing statement in accordance with paragraph G.01.

(2) If the issuer prepares both own and consolidated annual accounts, it must include both sets of accounts in the listing statement in accordance with paragraph G.03 or G.04.

However, the issuer may exclude its own accounts on condition that they do not provide any significant additional information to that contained in the consolidated accounts with the approval of the securities exchange and such accounts shall be available for inspection in accordance with paragraph C.

07.

G.04 (1) Where the issuer includes its annual accounts in the listing statement, it must state the profit or loss per share arising out of the issuers ordinary activities, after tax for each of the last one financial year.

(2) Where the issuer includes consolidated annual accounts in the listing statement, it must state the consolidated profit or loss per share for each of the preceeding financial year; this information must appear in addition to that provided in accordance with (1) above where the issuer also includes its own annual accounts in the listing statement.

G.05 If, in the course of the preceding financial year, the number of shares in the issuer has changed as a result, for example, of an increase in or reduction or re- organisation of capital, the profit or loss per share referred to in paragraph G.07 must be adjusted to make them comparable; in that event the basis of adjustment used must be disclosed.

G.06 Particulars of the dividend policy to be adopted (a) the dividend policy to be adopted; (b) the pro-forma balance sheet prior to and immediately after the proposed issue of securities; (c) the effect of the proposed issue of securities on the net asset value per share.

The above particulars must be prepared and presented in accordance with IAS.

If the issuer is a holding company, the information must be prepared in a consolidated form.

G.07 The amount of the total dividends, the dividend per share and the dividend cover for each of the last financial year, adjusted, if necessary, to make it comparable in accordance with paragraph G.05.

G.09 A description of any significant change in the financial or trading position of the group which has occurred since the end of the last financial period for which either audited financial statements or interim financial statements have been published, or an appropriate negative statement.

G.10 If the issuers own annual or consolidated annual accounts do not give a true and fair view of the assets and liabilities, financial position and profits and losses of the group, more detailed and/or additional information must be given.

G.11 A table showing the changes in financial position of the group over each of the last one financial year in the form of a cash-flow statement.

G.12 (1) Information in respect of the matters listed below relating to each undertaking in which the issuer holds (directly or indirectly) on a long term basis an interest in the capital that is likely to have a significant effect on the assessment of the issuers own assets and liabilities, financial position or profits and losses (a) the name and address of the registered office; 223 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (b) the field of activity; (c) the proportion of capital held; (d) the issued capital; (e) the reserves; (f) the profit or loss arising out of ordinary activities, after tax, for the last financial year; (g) the value at which the issuer shows in its accounts the interest held; (h) any amount still to be paid up on securities held; (i) the amount of dividends received in the course of the last financial year in respect of shares held; and (j) the amount of the debts owed to and by the issuer with regard to the undertaking.

(2) The items of information listed in (1) above must be given in any event for every undertaking in which the issuer has a direct or indirect participating interest, if the book value of that participating interest represents at least 20% of the capital and reserves of the issuer or if that interest accounts for at least twenty per cent of the net profit or loss of the issuer or, in the case of a group, if the book value of that participating interest represents at least twenty per cent of the consolidated net assets or at least twenty per cent of the consolidated net profit or loss of the group.

(3) The information required by (I)(e) and (f) above may be omitted where the undertaking in which a participating interest is held does not publish annual accounts.

(4) The information required by (1)(d) to (j) above may be omitted if the annual accounts of the undertakings in which the participating interests are held are consolidated into the group annual accounts or, with the exception of 1(i) and (j) above, if the value attributable to the interest under the equity method is disclosed in the annual accounts, provided that in the opinion of the securities exchange, the omission of the information is not likely to mislead the public with regard to the facts and circumstances, knowledge of which is essential for the assessment of the securities in question.

G.13 The name, registered office and proportion of capital held in respect of each undertaking not failing to be disclosed under paragraph G.12(1) or (2) in which the issuer holds at least twenty per centum of the capital.

G.14 When the listing statement includes consolidated annual accounts, disclosure (a) of the consolidation principles applied (which must be described explicitly where such principles are not consistent with International Financial Reporting Standards (IFRS); (b) of the names and registered offices of the undertakings included in the consolidation, where that information is important for the purpose of assessing the assets and liabilities, financial position and profits and losses of the issuer; it is sufficient to distinguish them by a symbol in the list of undertakings of which details are required in paragraph G.12; and (c) for each of the undertakings referred to in (b) above (i) the total proportion of third-party interests, if annual accounts are wholly consolidated; or (ii) the proportion of the consolidation calculated on the basis of interests, if consolidation has been effected on a pro rata basis.

[Issue 1] 224 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] G.15 Particulars of any arrangement under which future dividends are waived or agreed to be waived.

G.16 (1) Details on a consolidated basis as at the most recent practicable date (which must be stated and which in the absence of exceptional circumstances must not be more than fourteen days prior to the date of publication of the listing statement of the following, if material (a) the borrowing powers of the issuer and its subsidiaries exercisable by the directors and the manner in which such borrowing powers may be varied; (b) the circumstances, if applicable, under which the borrowing powers have been exceeded during the past three years.

Any exchange control or other restrictions on the borrowing powers of the issuer or any of its subsidiaries; (c) the total amount of any loan capital outstanding in all members of the group, and loan capital created but unissued, and term loans, distinguishing between loans guaranteed, un-guaranteed, secured (whether the security is provided by the issuer or by third parties), and unsecured; (d) all off-balance sheet financing by the issuer and any of its subsidiaries; (e) the total amount of all other borrowings and indebtedness in the nature of borrowing of the group, distinguishing between guaranteed, un-guaranteed, secured and unsecured borrowings and debts, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments and obligations under finance leases; (f) the total amount of any material commitments, lease payments and contingent liabilities or guarantees of the group; or (g) how the borrowings required to be disclosed under paragraphs (c) to (f) above arose, stating whether they arose from the purchase of assets by the issuer or any of its subsidiaries.

(2) An appropriate negative statement must be given in each case where relevant, in the absence of any loan capital, borrowings, indebtedness and contingent liabilities described in (1) above; As a general rule, no account shall be taken of liabilities or guarantees between undertakings within same group, a statement to that effect being made if necessary.

(4) The principles set out in paragraph G.06 shall apply where the issuer prepares consolidated annual accounts under this paragraph.

G.17 Details of material loans by the issuer or by any of its subsidiaries stating (a) the date of the loan; (b) to whom made; (c) the rate of interest; (d) if the interest is in arrears, the last date on which it was paid and the extent of the arrears; (e) the period of the loan; 225 [Issue 1] CAP.

485A [Rev.

G.18 Details as described in paragraph G.17 above of loans made or security furnished by the issuer or by any of its subsidiaries for the benefit of any director or manager or any associate of any director or manager.

G.19 Disclose how the loans receivable arose, stating whether they arose from the sale of assets by the issuer or any of its subsidiaries.

G.20 A statement that in the opinion of the directors, the issued capital of the issuer is adequate for the purposes of the business of the issuer and of its subsidiaries for the foreseeable future, and if the directors are of the opinion that it is inadequate; the extent of the inadequacy and the manner in which and the sources from which the issuer and its subsidiaries are to be financed.

The statement should be supported by a report from the issuers auditor, reporting accountant, investment banker, sponsoring stockbroker or other adviser acceptable to the Authority.

The foreseeable future should normally be construed as the nine months subsequent to the date of the publication of the listing statement.

G.21 The issuer shall make the following information regarding the acquisition, within the last year, or proposed acquisition by the issuer or any of its subsidiaries, of any securities in or the business undertaking of any other company or business enterprise or any immovable property or other property in the nature of a fixed asset (collectively called the property) or any option to acquire such property shall be disclosed (a) the date of any such acquisition or proposed acquisitions; (b) the consideration, detailing that settled by the issue of securities, the payment of cash or by any other means, and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; (d) any goodwill paid and how such goodwill was or is to be accounted for; (e) any loans incurred, or to be incurred, to finance the acquisition, or proposed acquisition; (f) the nature of title or interest acquired or to be acquired; and (g) details regarding the vendors as described in paragraph I.O.

G.22 The following details regarding any property disposed of during the past year, or to be disposed of, by the issuer, or any of its subsidiaries (a) the dates of any such disposal or proposed disposal; (b) the consideration received, detailing that settled by the receipt of securities or cash or by any other means and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; and (d) the names and addresses of the purchasers of assets sold.

If any purchaser was a company, the names and addresses of the beneficial shareholders of the company.

[Issue 1] 226 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] Where the financial statements provided under paragraphs G.01 to G.05 are prepared in a currency other than Kenya shillings, disclosure of the exchange rate between the financial reporting currency and Kenya shillings should be provided, using the mean exchange rate designated by the Central Bank of Kenya for this purpose, if any (a) at the latest practicable date; (b) the high and low exchange rates for each month during the preceding twelve months; and (c) for the most recent financial year and any subsequent interim period for which financial statements are presented, the average rates for each period, calculated by using the average of the exchange rates on the last day of each month during the period.

ID.H.00 The listing H.01 A statement of the resolutions, authorizations and approvals by virtue of which the securities are to be listed.

H.02 The nature and amount of the securities to be listed.

H.03 (1) A summary of the rights attaching to the securities, and in particular the extent of the voting rights, entitlement to share in the profits and, in the event of liquidation, in any surplus and any other special rights.

Where there is or is to be more than one class of shares of the issuer in issue, like details must be given for each class.

(2) If the rights evidenced by the securities being listed are or may be materially limited or qualified by the rights evidenced by any other class of securities or by the provisions of any contract or other documents, include information regarding such limitation or qualification and its effect on the rights evidenced by the securities to be listed.

(3) The time limit (if any) after which entitlement to dividend lapses and an indication of the person in whose favour the lapse operates.

H.04 A statement regarding tax on the income from the shares withheld at source (a) in the country of origin; and (b) in Kenya.

H.05 The fixed date(s) (if any) on which entitlement to dividends arises.

H.06 Details of any other securities exchanges (if any) where admission to listing is being or will be sought.

H.07 The following information must be given concerning the terms and conditions of the listing at a securities exchange where such listing is being effected at the same time as the subject listing or has been effected within the three months preceding application of the subject listing (a) if the listing has been or is being made simultaneously on the markets of two or more countries (i) the listing price, stating the nominal value or, in its absence, the accounting par value; and (ii) the share premium; (b) the period during which the listing statement will be available prior to the admission to listing and the names of the agents where the listing statement may be accessed; (c) a statement or estimate of the overall amount of the charges relating to the listing payable by the issuer, stating the total remuneration of the financial intermediaries 227 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] H.9A description of the securities for which application is made and, in particular, the number of securities and nominal value per security or, in the absence of nominal value, the accounting par value or the total nominal value, the exact designation or class, and coupons attached.

H.10 The securities exchange at which the securities will be listed and the dates on which the securities will be admitted to listing and on which dealings will commence.

H.11 The names of the securities exchanges (if any) on which securities of the same class are already listed.

12 If during the period covered by the last financial year and the current financial year, there has occurred any public takeover offer by a third party in respect of the issuers shares, or any public takeover offer by the issuer in respect of another companys shares, a statement to that effect and a statement of the price or exchange terms attaching to any such offers and the outcome thereof.

H.13 A statement whether the issuer assumes responsibility for the withholding of tax at source.

H.14 Where there is a substantial disparity between the listing price and the effective cash cost to directors or senior management, or affiliated persons, of securities acquired by them in transactions during the past five years, or which they have the right to acquire, include a comparison between that offer price and the listing price.

H.15 Disclose the amount and percentage of immediate dilution resulting from the listing, computed as the difference between the listing price per share and the net book value per share for the equivalent class of security, as of the latest balance sheet date.

H.16 The following information on expenses shall be provided (a) the total amount of the discounts or commissions agreed upon by the financial intermediaries and the issuer shall be disclosed, as well as the percentage such commissions represent of the total amount of the listing costs per share; (b) an itemised statement of the major categories of expenses incurred in connection with the listing and by whom the expenses are payable, if other that the issuer.

The following expenses shall be disclosed separately (i) advertisement; (ii) printing of listing statement; (iii) approval and listing fees; (iv) financial advisory fees; and (v) the legal fees; The information may be given subject to future contingencies.

If the amounts of any items are not known, estimates (identified as such) shall be given; and (c) a statement or estimate of the overall amount, percentage and amount per share of the charges relating to the listing are payable by the issuer, stating the total remuneration of the intermediaries.

ID.I.00 Vendors I.01 The names and addresses of the vendors of any assets purchased or acquired by the issuer or any subsidiary company during the year preceding the publication of the Information Memorandum or proposed to be purchased, or acquired, on capital account and the amount paid or payable in cash or securities to the vendor, and where there is more than one separate vendor, the amount so paid or payable to each vendor, and the amount (if any) payable for goodwill or items of a similar nature.

The cost of assets to the vendors and dates of purchase by them if within the preceding five financial years.

Where [Issue 1] 228 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] the vendor is a company, the names and addresses of the beneficial shareholders, direct and indirect, of the company, if required by the Authority.

Where this information is unobtainable, the reasons therefor are to be stated.

I.02 State whether or not the vendors have given any indemnities, guarantees or warranties.

I.04 State how any liability for accrued taxation, or any apportionment, thereof to the date of acquisition, will be settled in terms of the vendors agreements.

I.05 Where securities are purchased in a subsidiary company, reconciliation between the amounts paid for the securities and the value of the net assets of that company.

Where securities are purchased in companies other than subsidiary companies, a statement as to how the value of the securities was arrived at.

Where the vendors or any of them are a partnership, the members of the partnership shall not be treated as separate vendors.

I.07 The amount of any cash or securities paid or benefit given within the preceding year or proposed to be paid or given to any promoter not being a director, and the consideration for such payment or benefit.

I.08 State whether the assets acquired have been transferred into the name of the issuer or any of its subsidiary companies and whether or not the assets have been ceded or pledged.

PART D DISCLOSURE REQUIREMENTS FOR LISTING BY INTRODUCTION [Regulation 10(1)(d), L.N.

30/2008, s.

13.] ID.A.00.

Directors and advisors A.01 A declaration in the following form: The directors of [the issuer], whose names appear on page [ ] of the Information Memorandum, accept responsibility for the information contained in this document.

A.02 The name, home or business address and function of each of the persons giving the declaration set out in paragraph A.01 A.03 The names, addresses and qualifications of the auditors who have audited the issuers annual accounts in accordance with International Financial Reporting Standards (IFRS) for the last three financial years.

A.05 The names and addresses of the issuers bankers, legal advisers, sponsors, reporting accountants and any other expert to whom a statement or report included in the Information Memorandum has been attributed.

229 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] ID.B.00.

Listing Statistics B.01 (1) A statement that the Authority has approved the listing of the securities on the relevant market segment of a securities exchange.

(2) Cautionary statement of the Authority.

B.02 A statement that a copy of the Information Memorandum has been delivered to the Registrar.

B.03 The proposed listing price and the basis of determining the price.

B.04 The total amount of the securities to be listed.

ID.C.00.

Information on the issuer C.01 The name, registered office and, if different, head office of the issuer.

If the issuer has changed its name within the last five years, the old name must be printed in bold type under the new name.

C.02 The country of incorporation of the issuer.

C.03 The date of incorporation and the length of life of the issuer, except where indefinite.

C.04 The legislation under which the issuer operates and the legal from which it has adopted under that legislation.

C.05 A description of the issuers principal objects with reference to its constitution documents.

C.06 The place and date of registration of the issuer and its registration number.

C.07 A statement that for a period of not more than fourteen days before the date of listing and until fourteen days after the date of listing, at a named place as the Authority may agree, the following documents (or copies thereof), where applicable, could be inspected (a) the Information Memorandum; (b) the constitution documents of the issuer; (c) any trust deed of the issuer or of its subsidiary undertakings which is referred to in the Information Memorandum; (d) each document mentioned in paragraphs C.17 (material contracts) and E.11 (directors service contracts) or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; (e) copies of service agreements with managers or secretary/ies; underwriting, vendors and promoters agreements entered into during the last two financial years; (f) in the case of a listing in connection with a merger, the division of a company, the transfer of all or part of an undertakings assets and liabilities, or a takeover offer, or as consideration for the transfer of assets other than cash, the documents describing the terms and conditions of such operations, together, where appropriate, with any opening balance sheet, if the issuer has not prepared its own or consolidated annual accounts (as appropriate); (g) the latest competent persons report, in the case of a mineral company; (h) the latest certified appraisals or valuations relative to movable and immovable property and items of a similar nature, if applicable; (i) all reports, letters, and other documents, balance sheets, valuations and statements by any expert any part of which is included or referred to in the Information Memorandum; [Issue 1] 230 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (j) written statements signed by the auditors or accountants setting out the adjustments made by them in arriving at the figures shown in any accountants report pursuant to paragraph G.04 and giving the reasons therefore; and (k) the audited accounts of the issuer or, in the case of a group, the consolidated audited accounts of the issuer and its subsidiary undertakings for each of the five financial years preceding the publication of the Information Memorandum, including, in the case of a company incorporated in Kenya, all notes, reports or information required by the Companies Act (Cap.

486).

C.08 Where any of the documents listed in paragraph C.07 are not in the English language, translations into English must also be available for inspection.

In the case of any document mentioned in paragraph C.17 (material contracts), a translation of a summary of such document may be made available for inspection, if the Authority so requires.

C.09 The amount of the issuers authorised and issued capital, the number and classes of the shares of which it is composed with details of their principal characteristics.

C.12 A summary of the provisions of the issuers constitution documents regarding the respective rights of the various classes of securities.

Intra group issues by partly owned subsidiaries and changes in the capital structure of subsidiaries which have remained wholly owned throughout the period may be disregarded.

Such summary must also state the price and terms granted and (if not already fully paid) the dates when any instalments are in arrears.

For these purposes, joint control means control exercised by two or more persons who have concluded an agreement which may lead to their adopting a common policy in respect of the issuer.

C.15 The history of any change in the controlling shareholder(s) and trading objectives of the issuer and its subsidiaries during the previous two financial years.

A statement of the new trading objectives and the manner in which the new objects will be 231 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] implemented.

If the issuer or the group, as the case may be, carries on widely differing operations, a statement showing the contributions of such respective differing operations to its trading results.

The proposed new name, if any, the reasons for the change and whether or not consent to the change has been obtained from the Registrar.

C.16 If the issuer has subsidiary undertakings or parent undertakings, a brief description of the group of undertakings and of the issuers position within it stating, where the issuer is a subsidiary undertaking, the name of and number of shares in the issuer held (directly or indirectly) by each parent undertaking of the issuer.

C.17 A summary of the principal contents of (a) each material contract (not being a contract entered into in the ordinary course of business) entered into by any member of the group within the two years immediately preceding the publication of the Information Memorandum, including particulars of dates, parties, terms and conditions, any consideration passing to or from the issuer or any other member of the group, unless such contracts have been available for inspection in the last two years in which case it will be sufficient to refer to them collectively as being available for inspection in accordance with paragraph C.07; and (b) any contractual arrangement with a controlling shareholder required to ensure that the company is capable at all times of carrying on its business independently of any controlling shareholder, including particulars of dates, terms and conditions and any consideration passing to or from the issuer or any other member of the group.

C.18 If any contract referred to in paragraph C.17 relates to the acquisition of securities in an unlisted subsidiary, or associate company, where all securities in the company have not been acquired, state the reason why 100% of the shareholding was not acquired, and whether anyone associated with the controlling shareholder(s) of the issuer, or associate companies, or its subsidiaries is interested and to what extent.

C.19 Details of the name of any promoter of any member of the group and the amount of any cash, securities or benefits paid, issued or given within the three years immediately preceding the date of publication of the Information Memorandum, or proposed to be paid, issued or given to any such promoter in his capacity as a promoter and the consideration for such payment, issue or benefit.

C.20 A statement of all sums paid or agreed to be paid within the three years immediately preceding the date of publication of the Information Memorandum, to any director or to any company in which he is beneficially interested, directly or indirectly, or of which he is director, or to any partnership, syndicate or other association of which he is a member, in cash or securities or otherwise, by any person either to induce him to become or to qualify him as a director, or otherwise for services rendered by him or by the company, partnership, syndicate or other association in connection with the promotion or formation of the issuer.

C.21 Where securities are listed in connection with any merger, division of a company, takeover offer, acquisition of an undertakings assets and liabilities or transfer of assets (a) a statement of the aggregate value of the consideration for the transaction and how it was or is to be satisfied; (b) if the total emoluments receivable by the directors of the issuer will be varied in consequence of the transaction, full particulars of the variation; if there will be no variation, a statement to that effect; and [Issue 1] 232 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (c) if the business of the issuer or any of its subsidiaries or any part thereof is managed or is proposed to be managed by a third party under a contract or arrangement, the name and address (or the address of its registered office, if a company) of such third party and a description of the business so managed or to be managed and the consideration paid in terms of the contract or arrangement and any other pertinent details relevant to such contract or arrangement.

C.22 A description of the groups principal activities, stating the main categories of products sold and/or services performed.

C.23 For the business described in paragraph C.22 above, the degree of any government protection and of any investment encouragement law affecting the business.

C.24 Information on any significant new products and/or activities.

C.25 A breakdown of net turnover during the last five financial years by categories of activity and into geographical markets in so far as such categories and markets differ substantially from one another, taking account of the manner in which the sale of products and the provision of services falling within the groups ordinary activities are organised.

C.26 The location, size and tenure of the groups principal establishments and summary information about land or buildings owned or leased.

Any establishment which accounts for more than ten per centum of net turnover or production shall be considered a principal establishment.

C.27 Details of any material changes in the business of the issuer during the past five years.

C.28 Where the information given pursuant to paragraphs C.22 to C.27 has been influenced by exceptional factors, that fact must be mentioned.

C.29 Summary of information on the extent to which the group is dependent, if at all, on patents or licences, industrial, commercial or financial contracts or new manufacturing processes, where such factors are of fundamental importance to the groups business or profitability.

C.30 Particulars of royalties payable or items of a similar nature in respect of the issuer and any of its subsidiaries.

C.31 Information on any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware) which may have or have had in the recent past (covering at least the previous nine months) a significant effect on the groups financial position or an appropriate negative statement.

C.32 Information on any interruptions in the groups business which may have or have had during the recent past (covering at least the previous nine months) a significant effect on the groups financial position.

C.33 A description, with figures, of the main investments made, including interests such as shares, debt securities etc., in other undertakings over the last five financial years and during the current financial year.

C.34 Information concerning the principal investments (including new plant, factories and research and development) during the current financial year being made, with the exception of interests being acquired in other undertaking, including (a) the geographical distribution of these investments; and (b) the method of financing such investments.

233 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] C.35 Information concerning the groups principal future investments (including new plant, factories, and research and development, if any), with the exception of interests to be acquired in other undertakings, on which the issuers directors have already made firm commitments.

C.36 Information concerning policy on the research and development of new products and processes over the past three financial years, where significant.

C.37 The basis for any statements made by the issuer regarding its competitive position shall be disclosed.

ID.D.00.

Operating and financial review (the recent development and prospects of the group) D.01 Unless otherwise approved by the Authority in exceptional circumstances (a) general information on the trend of the groups business since the end of the financial year to which the last published annual accounts relate, and in particular (i) the most significant recent trends in production, sales, stocks and the state of the order book; and (ii) recent trends in costs and selling prices; and (b) information on the groups prospects for at least the current financial year.

Such information must relate to the financial and trading prospects of the group together with any material information which may be relevant thereto, including all special trade factors or risks (if any) which are not mentioned elsewhere in the Information Memorandum and which are unlikely to be known or anticipated by the general public, and which could materially affect the profits.

D.02 Provide information on the risk factors that are specific to the issuer or its industry in a section headed Risk Factors and highlight those that make the security speculative or high risk.

D.03 Describe (a) the extent to which the financial statements disclose material changes in net revenues, provide a narrative discussion of the extent to which such changes are attributable to changes in prices or to changes in the volume or amount of products or services being sold or to the introduction of new products or service; (b) the impact of inflation if material - if the currency in which financial statements are presented is of a country that has experienced hyperinflation, the existence of such inflation, a five year history of the annual rate of inflation and discussion of the impact of the hyperinflation on the issuers business shall be disclosed; (c) the impact of foreign currency fluctuations on the issuer, if material, and the extent to which foreign currency net investments are hedged by the currency borrowing and other hedging instruments; and (d) the impact of any governmental factors that have materially affected or could materially affect, directly or indirectly, the issuers operations or investments by the host country shareholders.

D.04 Where a profit forecast or estimate appears, the principal assumptions upon which the issuer has based its forecast or estimate must be stated.

Where so required, the forecast or estimate must be examined and reported on by the reporting accountants or auditors and their report must be set out.

There must also be set out a report from the sponsor confirming that the forecast has been made after due and careful enquiry by the directors.

[Issue 1] 234 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] D.05 The opinion of the directors, stating the grounds therefore, as to the prospects of the business of the issuer and of its subsidiaries and of any subsidiary or business undertaking to be acquired, together with any material information which may be relevant thereto.

ID.E.00.

Directors and employees E.01 The full name, age (or date of birth) home or business address, nationality and function in the group of each of the following persons and an indication of the principal activities performed by them outside the group where these are significant with respect to the group (a) directors, alternate and proposed directors of the issuer and each of its subsidiaries including details of other directorships; (b) the senior management of the issuer including the chief executive, board secretary and finance director, with details of professional qualifications and period of employment with the issuer for each such person; and (c) founders, if the issuer has been established as a family business or in existence for fewer than five years and the nature of family relationship, if any; (d) detailed disclosure of chief executive or other senior management changes planned or expected during twenty four months following the listing of the security or appropriate negative statement.

E.03 In the case of a foreign issuer, information similar to that described in E.01 and E.02 above, relative to the local management, if any.

Where the Authority considers the parent company is not adequately represented on the directorate of its subsidiaries, an explanation is required.

E.05 A statement showing the aggregate of the direct and indirect interests of the directors in, and the direct and indirect interests of each director holding in excess of three per centum of the share capital of the issuer, distinguishing between beneficial and non- beneficial interests, or an appropriate negative statement.

The statement should include by way of a note any change in those interests occurring between the end of the financial year and the date of publication of the Information Memorandum, or if there has been no such change, disclosure of that fact.

E.06 All relevant particulars regarding the nature and extent of any interests of directors of the issuer in transactions which are or were unusual in their nature or conditions or significant to the business of the group, and which were effected by the issuer during (a) the current or immediately preceding financial year; or (b) an earlier financial year and remain in any respect outstanding or unperformed; or an appropriate negative statement.

E.07 The total of any outstanding loans granted by any member of the group to the directors and also of any guarantees provided by any member of the group for their benefit.

E.08 Details of any schemes for involving the staff in the capital of any member of the group.

235 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] E.09 Particulars of any arrangement under which a director of the issuer has waived or agreed to waive future emoluments together with particulars of waivers of such emoluments which occurred during the past financial year and particulars of waivers in force at the date of the Information Memorandum.

E.11 Details of existing or proposed directors service contracts (excluding contracts previously made available for inspection in accordance with paragraph C.07 and not subsequently varied); such details to include the matters specified in paragraph (a) to (g) below or an appropriate negative statement (a) the name of the employing company; (b) the date of the contract, the unexpired term and details of any notice periods; (c) full particulars of the directors remuneration including salary and other benefits; (d) any commission or profit sharing arrangements; (e) any provision for compensation payable upon early termination of the contract; (f) details of any other arrangements which are necessary to enable investors to estimate the possible liability of the company upon early termination of the contract; and (g) details relating to restrictions prohibiting the director, or any person acting on his behalf or connected to him, from any dealing in securities of the company during a close period or at a time when the Director is in possession of unpublished price sensitive information in relation to those securities.

E.12 A summary of the provisions of the constitution documents of the issuer regarding (a) any power enabling a director to vote on a proposal, arrangement, or contract in which he is materially interested; (b) any power enabling the directors, in the absence of an independent quorum, to vote remuneration (including pension or other benefits) to themselves or any members of their body; and (c) retirement or non-retirement of directors under an age limit.

E.13 Any arrangement or understanding with major security holders, customers, suppliers or others, pursuant to which any person referred to in E.01 above, was selected as a director or member of senior management.

ID.F.00.

Major security holders and related party transactions F.01 The following information shall be provided regarding the issuers major security holders, which means security holders that are the beneficial owners of at least three per centum or more of each class of the issuers voting securities (a) provide the names of the major security holders, and the number of securities and the percentage of outstanding securities of each class owned by each of [Issue 1] 236 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] them as of the most recent practicable date, or an appropriate negative statement if there are no major security holders; (b) disclose any significant change in the percentage ownership held by any major security holders during the past three years; and (c) indicate whether the issuers major security holders have different voting rights, or an appropriate negative statement.

F.02 Information shall be provided as to the portion of each class of securities held in Kenya and the number of security holders in Kenya.

F.04 Describe any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer.

F.05 In so far as is known to the issuer, the name of any person other than a director who, directly or indirectly, is interested in ten per centum or more of the issuers capital, together with the amount of each such persons interest.

F.06 Provide the information required on (a) and (b) below for the period since the beginning of the issuers preceding five financial years up to the date of the Information Memorandum, with respect to transactions or loans between the issuer and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the issuer; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the issuer that gives them significant influence over the issuer, and close members of any such individuals family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the issuer, including directors and senior management of the issuer and close members of such individuals families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

This includes enterprises owned by directors or major security holders of the issuer and enterprises that have a number of key management in common with the issuer.

Security holders beneficially owning a ten per centum interest in the voting power of the issuer are presumed to have a significant influence on the issuer including (i) the nature and extent of any transactions or presently proposed transactions which are material to the issuer or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer or any of its parent or subsidiary(ies) was a party; and (ii) the amount of outstanding loans (including guarantees of any kind) made by the issuer or any of its parent or subsidiaries to or for the benefit of any of the persons listed above.

F.07 Full information of any material inter-company finance.

237 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] F.08 Where a statement or report attributed to a person as an expert is included in the Information Memorandum, a statement that it is included, in the form and context in which it is included, with the written consent of that person, who has authorised the contents of that part of the Information Memorandum, and has not withdrawn his consent.

F.10 Provide a copy of the share register to the Authority.

ID.G.00.

Financial information G.01 A statement that the annual accounts of the issuer for the last five financial years have been audited.

If audit reports on any of those accounts have been refused by the auditors or contain qualifications, such refusal or such qualifications must be reproduced in full and the reasons given.

G.02 A statement of what other information in the Information Memorandum has been audited by the auditors.

G.03 Financial information as required by paragraphs G.14 and G.15 set out in the form of a comparative table together with any subsequent interim financial statements if available.

G.04 Financial information as required by paragraphs G.14 and G.15 set out in the form of an accountants report.

G.05 If applicable, an accountants report, as set out in paragraphs G.14 and G.15 on the asset which is the subject of the transaction.

G.06 (1) If the issuer prepares consolidated annual accounts only, it must include those accounts in the Information Memorandum in accordance with paragraph G.03 or G.04.

(2) If the issuer prepares both own and consolidated annual accounts, it must include both sets of accounts in the Information Memorandum in accordance with paragraph G.03 or G.04 However, the issuer may exclude its own accounts on condition that they do not provide any significant additional information to that contained in the consolidated accounts with the approval of the Authority and such accounts shall be available for inspection in accordance with paragraph C.07.

G.07 (1) Where the issuer includes its annual accounts in the Information Memorandum, it must state the profit or loss per share arising out of the issuers ordinary activities, after tax for each of the last five financial years.

(2) Where the issuer includes consolidated annual accounts in the Information Memorandum, it must state the consolidated profit or loss per share for each of the last five financial years; this information must appear in addition to that provided in accordance with (1) above where the issuer also includes its own annual accounts in the Information Memorandum.

G.09 Particulars of the dividend policy to be adopted.

[Issue 1] 238 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] G.11 A description of any significant change in the financial or trading position of the group which has occurred since the end of the last financial period for which either audited financial statements or interim financial statements have been published, or an appropriate negative statement.

G.12 If the issuers own annual or consolidated annual accounts do not give a true and fair view of the assets and liabilities, financial position and profits and losses of the group, more detailed and/or additional information must be given.

G.13 A table showing the changes in financial position of the group over each of the last five financial years in the form of a cash-flow statement.

G.14 (1) Information in respect of the matters listed below relating to each undertaking in which the issuer holds (directly or indirectly) on a long term basis an interest in the capital that is likely to have a significant effect on the assessment of the issuers own assets and liabilities, financial position or profits and losses (a) the name and address of the registered office; (b) the field of activity; (c) the proportion of capital held; (d) the issued capital; (e) the reserves; (f) the profit or loss arising out of ordinary activities, after tax, for the last financial year; (g) the value at which the issuer shows in its accounts the interest held; (h) any amount still to be paid up on securities held; (i) the amount of dividends received in the course of the last financial year in respect of shares held; and (j) the amount of the debts owed to and by the issuer with regard to the undertaking.

(2) The items of information listed in (1) above must be given in any event for every undertaking in which the issuer has a direct or indirect participating interest, if the book value of that participating interest represents at least twenty per centum of the capital and reserves of the issuer or if that interest accounts for at least twenty per centum of the net profit or loss of the issuer or, in the case of a group, if the book value of that participating interest represents at least twenty per centum of the consolidated net assets or at least twenty per centum of the consolidated net profit or loss of the group.

(3) The information required by (1)(e) and (f) above may be omitted where the undertaking in which a participating interest is held does not publish annual accounts.

(4) The information required by (1)(d) to (j) above may be omitted if the annual accounts of the undertakings in which the participating interests are held are consolidated into the group annual accounts or, with the exception of 1(i) and (j) above, if the value attributable to the interest under the equity method is disclosed in the annual accounts, provided that in the opinion of the Authority, the omission of the information is not likely to mislead the public with regard to the facts and circumstances, knowledge of which is essential for the assessment of the securities in question.

G.15 The name, registered office and proportion of capital held in respect of each undertaking not disclosed under paragraph G.15(1) or (2) in which the issuer holds at least twenty per centum of the capital.

These details may be omitted when they are of negligible importance for the purpose of enabling investors and their investment advisers 239 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the issuer or group and of the rights attaching to the securities to be listed.

G.16 When the Information Memorandum includes consolidated annual accounts, disclosure (a) of the consolidation principles applied (which must be described explicitly where such principles are not consistent with International Financial Reporting Standards (IFRS)); (b) of the names and registered offices of the undertakings included in the consolidation, where that information is important for the purpose of assessing the assets and liabilities, financial position and profits and losses of the issuer; it is sufficient to distinguish them by a symbol in the list of undertakings of which details are required in paragraph G.15; and (c) for each of the undertakings referred to in (b) above (i) the total proportion of third-party interests, if annual accounts are wholly consolidated; or (ii) the proportion of the consolidation calculated on the basis of interests, if consolidation has been effected on a pro rata basis.

G.17 Particulars of any arrangement under which future dividends are waived or agreed to be waived.

G.18 (1) Details on a consolidated basis as at the most recent practicable date (which must be stated and which in the absence of exceptional circumstances must not be more than fourteen days prior to the date of publication of the Information Memorandum) of the following, if material (a) the borrowing powers of the issuer and its subsidiaries exercisable by the directors and the manner in which such borrowing powers may be varied; (b) the circumstances, if applicable, under which the borrowing powers have been exceeded during the past three years.

Any exchange control or other restrictions on the borrowing powers of the issuer or any of its subsidiaries; (c) the total amount of any loan capital outstanding in all members of the group, and loan capital created but un-issued, and term loans, distinguishing between loans guaranteed, un-guaranteed, secured (whether the security is provided by the issuer or by third parties), and unsecured; (d) all off-balance sheet financing by the issuer and any of its subsidiaries; (e) the total amount of all other borrowings and indebtedness in the nature of borrowing of the group, distinguishing between guaranteed, un-guaranteed, secured and unsecured borrowings and debts, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments and obligations under finance leases; (f) the total amount of any material commitments, lease payments and contingent liabilities or guarantees of the group; or (g) how the borrowings required to be disclosed under paragraphs (c) to (f) above arose, stating whether they arose from the purchase of assets by the issuer or any of its subsidiaries.

(2) An appropriate negative statement must be given in each case where relevant, in the absence of any loan capital, borrowings, indebtedness and contingent liabilities described in (1) above; As a general rule, no account shall be taken of liabilities or guarantees between undertakings within the same group, a statement to that effect being made if necessary.

[Issue 1] 240 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] (3) For each item identified in (1) above, where applicable (a) the names of the lenders if not debenture holders; (b) the amount, terms and conditions of repayment or renewal; (c) the rates of interest payable on each item; (d) details of the security, if any; (e) details of conversion rights; and (f) where the issuer or any of its subsidiaries has debts which are repayable within twelve months, state how the payments are to be financed.

(4) If the issuer prepares consolidated annual accounts, the principles laid down in paragraph G.06 apply to the information set out in this paragraph G.18.

G.19 Details of material loans by the issuer or by any of its subsidiaries stating (a) the date of the loan; (b) to whom made; (c) the rate of interest; (d) if the interest is in arrears, the last date on which it was paid and the extent of the arrears; (e) the period of the loan; (f) the security held; (g) the value of such security and the method of valuation; (h) if the loan is unsecured, the reasons therefor; and (i) if the loan was made to another company, the names and addresses of the directors of such company.

G.20 Details as described in paragraph G.19 above of loans made or security furnished by the issuer or by any of its subsidiaries for the benefit of any director or manager or any associate of any director or manager.

G.21 Disclose how the loans receivable arose, stating whether they arose from the sale of assets by the issuer or any of its subsidiaries.

G.22 A statement that in the opinion of the directors, the issued capital of the issuer is adequate for the purposes of the business of the issuer and of its subsidiaries for the foreseeable future, and if the directors are of the opinion that it is inadequate, the extent of the inadequacy and the manner in which and the sources from which the issuer and its subsidiaries are to be financed.

The statement should be supported by a report from the issuers auditor, reporting accountant, investment banker, sponsoring stockbroker or other adviser acceptable to the Authority.

The foreseeable future should normally be construed as the nine months subsequent to the date of the publication of the Information Memorandum.

G.23 The following information regarding the acquisition, within the last five years, or proposed acquisition by the issuer or any of its subsidiaries, of any securities in or the business undertaking of any other company or business enterprise or any immovable property or other property in the nature of a fixed asset (collectively called the property) or any option to acquire such property shall be disclosed (a) the date of any such acquisition or proposed acquisitions; (b) the consideration, detailing that settled by the issue of securities, the payment of cash or by any other means, and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; (d) any goodwill paid and how such goodwill was or is to be accounted for; 241 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (e) any loans incurred, or to be incurred, to finance the acquisition, or proposed acquisition; (f) the nature of title or interest acquired or to be acquired; (g) details regarding the vendors as described in paragraph I.01; and G.24 The following details regarding any property disposed of during the past five years, or to be disposed of, by the issuer, or any of its subsidiaries (a) the dates of any such disposal or proposed disposal; (b) the consideration received, detailing that settled by the receipt of securities or cash or by any other means and detailing how any outstanding consideration is to be settled; (c) details of the valuation of the property; and (d) the names and addresses of the purchasers of assets sold.

If any purchaser was a company, the names and addresses of the beneficial security holders of the company.

G.25 Where the financial statements provided under paragraphs G.01 to G.05 are prepared in a currency other than Kenya shillings, disclosure of the exchange rate between the financial reporting currency and Kenya shillings should be provided, using the mean exchange rate designated by the Central Bank of Kenya for this purpose, if any (a) at the latest practicable date; (b) the high and low exchange rates for each month during the preceding twelve months; and (c) for the five most recent financial years and any subsequent interim period for which financial statements are presented, the average rates for each period, calculated by using the average of the exchange rates on the last day of each month during the period.

ID.H.00.

Particulars of the listing H.01 A statement of the resolutions, authorisations and approvals by virtue of which the securities are to be listed.

H.02 The nature and amount of the securities to be listed.

Where there is or is to be more than one class of shares of the issuer in issue, like details must be given for each class.

(3) The time limit (if any) after which entitlement to dividend lapses and an indication of the person in whose favour the lapse operates.

H.04 A statement regarding tax on the income from the securities withheld at source (a) in the country of origin; and (b) in Kenya.

[Issue 1] 242 [Rev.

2012] CAP.

485A Capital Markets [Subsidiary] H.05 The fixed date(s) (if any) on which entitlement to dividends arises.

H.06 Details of any other securities exchanges (if any) where admission to listing is being or will be sought.

H.07 The names and addresses of the issuers registrar and paying agent(s) for the shares in any other country where admission to listing has taken place.

H.08 The following information must be given concerning the terms and conditions of the listing at a securities exchange where such listing is being effected at the same time as the subject listing or has been effected within the three months preceding application of the subject listing (a) if the listing has been or is being made simultaneously on the markets of two or more countries (i) the listing price, stating the nominal value or, in its absence, the accounting par value; and (ii) the share premium; (b) the period during which the Information Memorandum will be available prior to the admission to listing and the names of the agents where the Information Memorandum may be accessed; (c) a statement or estimate of the overall amount of the charges relating to the listing payable by the issuer, stating the total remuneration of the financial intermediaries.

H.9A description of the securities for which application is made and, in particular, the number of securities and nominal value per security or, in the absence of nominal value, the accounting par value or the total nominal value, the exact designation or class, and coupons attached.

H.10 The securities exchange at which the securities will be listed and the dates on which the securities will be admitted to listing and on which dealings will commence.

H.11 The names of the securities exchanges (if any) on which securities of the same class are already listed.

H.12 If during the period covered by the last financial year and the current financial year, there has occurred any public takeover offer by a third party in respect of the issuers shares, or any public takeover offer by the issuer in respect of another companys shares, a statement to that effect and a statement of the price or exchange terms attaching to any such offers and the outcome thereof.

H.13 A statement whether the issuer assumes responsibility for the withholding of tax at source.

The following expenses shall be disclosed separately (i) advertisement; 243 [Issue 1] CAP.

485A [Rev.

2012] Capital Markets [Subsidiary] (ii) printing of Information Memorandum; (iii) approval and listing fees; (iv) financial advisory fees; and (v) legal fees; the information may be given subject to future contingencies.

If the amounts of any items are not known, estimates (identified as such) shall be given; and (c) a statement or estimate of the overall amount, percentage and amount per share of the charges relating to the listing are payable by the issuer, stating the total remuneration of the intermediaries.

ID.I.00.

Vendors I.01 The names and addresses of the vendors of any assets purchased or acquired by the issuer or any subsidiary company during the five years preceding the publication of the Information Memorandum or proposed to be purchased, or acquired, on capital account and the amount paid or payable in cash or securities to the vendor, and where there is more than one separate vendor, the amount so paid or payable to each vendor, and the amount (if any) payable for goodwill or items of a similar nature.