An Analysis of Performance of Listed Companies on Use and Capital

MAKERERE UNIVERSITY

AN ANALYSIS OF PERFORMANCE OF LISTED COMPANIES ON USE AND CAPITAL

MARKETS IN UGANDA 2010-2015

MWIJUKA AMOS

2013/HD06/2484U

A RESARCH PROJECT REPORT SUBMITTED TO THE COLLEGE OF BUSINESS AND

MANAGEMENT SCIENCES (COBAMS) IN FULFILMENT OF THE REQUIREMENTS

FOR THE AWARD OF MASTERS OF BUSINESS ADMINISTRATION OF

MAKERERE UNIVERSITY

SEPTEMBER 2016

DECLARATION

APPROVAL

DEDICATION

This Research Project Report is dedicated to the almighty God and to my family and friends.

iii

ACKNOWLEDGEMENT

I am very grateful and genuinely thankful to all those who helped me during my education journey as well as production of this research project report.

I would like to appreciate the support from my lecturers and more specifically those who taught me and contributed in many ways towards my studies.

In a special way, am sincerely grateful to the supervisor, Mr. Kitale Chris Charles for his continuous mentoring, guidance, support and tolerance, without your parental guidance, i would have not been able to come up with this. Permit me to say, you are the best supervisor i have ever met. May the almighty God bless you in all your endeavors.

Importantly, i wish to acknowledge the contribution of the respondents from Uganda Capital Markets Authority, Private Sector Foundation, Uganda Securities Exchange, Uganda Investment Authority, Bank of Uganda and the business community; am in no doubt that without their decision to include me among your competing priorities.

Also in a special way i appreciate the College of Business and management sciences (CoBAMS) and its entire staff for endlessly imparting knowledge. I recognise and appreciate all lecturers for their intelligent and diligent knowledge sharing.

And also i could not have completed this journey without the love and friendship of my family and friends; hence thanks are extended to them.

Finally, this Research Project report is dedicated to the Capital market players, Security Exchange brokers, investors and other businesses intending to go listing; majority of them had an idea about Capital markets operations of this country.

My humble thanks giving go to God Almighty for seeing me through it all.

Lastly, to my parents more especially the late Kajubi Eliasaph for their continued support and contribution and hard work just to ensure that am in school and always with full support, thank you for standing with me and for all your prayers.

LIST OF ACRONYMS/ ABBREVIATIONS

CMA Capital Markets Authority USE Uganda Securities Exchange CENT Centum Investment Company Limited DFCU Development Finance Company Uganda MKC Market Capitalization JHL Jubilee Holdings Limited KCB Kenya Commercial Bank NIC National Insurance Corporation NMG Nation Media Group limited ST/UCE Shares Traded/Uganda Commodities Exchange ALSI All- Share Index NVL New Vision Printing and Publishing Company Limited PSP Previous Share Price SBU Stanbic Bank Uganda Limited UCHM Uchumi Supermarket Limited UCL Uganda Clays limited IPOs Initial Price Offers ASEA African Securities Exchanges Association JSE Johannesburg Securities Exchange SMEs Small and Medium sized Enterprises ICPAU Institute of Certified Public Accountants of Uganda GEMS Growth Enterprises Market Segment IMF International Monetary Fund MIMS Main Investment Market Segment APA American Psychological Association KQ Kenya Airways NSE Nairobi Securities Exchange DSE Dar es Salaam Securities Exchange EBL Equity bank Limited BOBU Bank of Baroda Uganda

TABLE OF CONTENTS

DECLARATION ...... i

APPROVAL ...... ii

DEDICATION ...... iii

ACKNOWLEDGEMENT ...... iv

LIST OF ACRONYMS/ ABBREVIATIONS ...... v

TABLE OF CONTENTS ...... vi

LIST OF TABLES ...... ix

LIST OF FIGURES ...... x

ABSTRACT ...... xi

CHAPTER ONE ...... 1

INTRODUCTION...... 1

1.1Background to the study ...... 1

1.2 Statement of the Problem ...... 6

1.3 Purpose of the study ...... 7

1.4 Objectives of the study...... 7

1.5 The specific questions ...... 7

1.6 The significance of the study...... 8

1.7 The scope of the study ...... 8

1.8 Theoretical review ...... 8

CHAPTER TWO ...... 11

LITERATURE REVIEW ...... 11

2.0 Introduction ...... 11

2.1 The procedures and listing requirements on the Uganda Securities Exchange (USE)...... 13

2.2 The Uganda Securities Exchange (USE) application procedures and listing process ...... 14

2.2.1 The milestones of Uganda Stock Exchange (USE)...... 16

2.3 The challenges facing the listed Companies in Uganda...... 23

2.3.1. Empirical evidence and issues regarding Securities exchange...... 24

CHAPTER THREE ...... 26

METHODOLOGY ...... 26

3.0 Introduction ...... 26

3.1 Research Design...... 26

3.2 Survey population and sample size...... 26

3.3 Sample and Sampling Frame ...... 27

3.4 Sources of data ...... 27

3.5 Data analysis ...... 28

3.6 Limitations of the study ...... 28

CHAPTER FOUR ...... 29

PRESENTATION AND INTERPRETATION OF FINDINGS ...... 29

4.0 Introduction ...... 29

4.1 Biographic characteristics of the respondents...... 29

4.1.1 The ages of the respondents ...... 30

4.1.2 The highest levels of education of the respondents...... 31

4.1.3 Marital Status distribution` of respondents...... 33

4.1.4 Business legal status of respondents...... 34

4.1.5 Respondents/ firms engaged in Uganda’s Securities Exchange (USE)...... 35

4.1.6 Awareness/knowledge about Uganda Securities Exchange (USE)...... 36

4.2 The proportionate performance and the central roles of the listed Countries ...... 37

4.2.1 The Scatter graph representing Sub- Saharan African Capital Markets listings ...... 38

4.3 The procedures and listing requirements for companies on the (USE) ...... 39

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4.4 The challenges facing the listed Companies on the Uganda Securities Exchange ...... 40

CHAPTER FIVE ...... 41

DISCUSSION OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ...... 41

5.0 Introduction ...... 41

5.1 DISCUSSION OF FINDINGS ...... 41

5.1.1 Objective one: Finding on the listing procedures and requirements for listing...... 41

5.1.2 Objective two: The findings on the performance of listed Companies...... 42

5.1.3 Objective three: The findings on the challenges that inhibit Companies from listing ...... 42

5.2 The secondary data analysis...... 42

5.3 CONCLUSION ...... 42

5.4 RECOMMENDATIONS ...... 43

5.5 SCOPE FOR FURTHER RESEARCH...... 44

REFERENCES ...... 45

APPENDICES ...... 51

APPENDIX 2: GLOSSARY OF SOME COMMONLY USED TERMS...... 56

APPENDIX 3: PROJECT RESEARCH QUESTIONNAIRE...... 66

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LIST OF TABLES

Table 1: showing the Sample size of Respondents representing Capital Market Players...... 26

Table 2: showing the gender distribution of respondents ...... 29

Table 3: Showing Ages of the respondents...... 31

Table 4: showing the Education level of respondents ...... 32

Table 5: showing the marital status of respondents...... 33

Table 6: Showing the Business legal status of respondents...... 34

Table 7: Showing Respondents/ firms engaged in Uganda’s Securities Exchange...... 35

Table 8: showing respondents knowledge about USE ...... 36

LIST OF FIGURES

Figure1: Showing the population and sample size of respondents ...... 27 Figure 2: Showing the Bar graph of gender distribution of respondents...... 30 Figure3: Showing Ages of the respondents...... 31 Figure4: Showing the Education level of Respondents...... 32 Figure 5: Showing Marital Status distribution` of respondents...... 33 Figure 6 : Shows the Business legal status of respondents...... 34 Figure7: Showing the responses of firms engaged in Uganda’s Securities Exchange...... 35 Figure8: Showing the “Low” and “Very low” decisions about Capital Markets...... 36 Figure 9: Showing the Sub- Saharan African Listed Stock Exchanges...... 37 Figure10: showing the scatter graph on Sub- Saharan African Capital Markets...... 39

ABSTRACT

The objective of the study was to investigate the listed Companies performance on USE and Capital markets in Uganda 2010-2015. The researcher was concerned with how listed Companies performance has had an impact on Capital Markets in Uganda.

The literature was reviewed based on research objectives, several roles, listing procedures/process and the empirical issues/studies. Although this project report study used secondary data that was obtained through literature reviews, primary data was also collected using the questionnaire and interview guide.

The research methodology was more qualitative in nature and a case study approach was adopted. A sample of 16 listed companies, 28 commercial banks, 26 insurance companies, 46 private businesses, and 75 business individuals were used on the basis of purposive sampling procedure from the above listed institutions.

The study findings arrived at, predicts the listing requirements need to be simplified for companies to list. The findings also suggest that periodic review of the requirements and increased public awareness would lead to improved listings.

Further research was recommended on the reasons as to why sales turnover fluctuates and companies are reluctant to list on the Uganda Securities Exchange (USE) other than listing requirements and fluctuating sales turnover.

The conclusion arrived at from the findings of the study was that Uganda’s Capital markets is accompanied with the challenges like: lack of marketability and information, un awareness of local investors about the listing requirements on USE, too high fees rules at Uganda Stock market exchange (USE), Shareholders’ fund increment from time to time, majority of the population being un skilled on investment expertise of stock market trade.

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The Stock market in Uganda is still nascent and small. USE is one of the newest Stock markets in Africa and was established in 1997, and became operational in 1998 with only 1 listing, a bond from East African Development bank, with a limited amount of trades per week.

Today there are 16 listings of domestic and East African Companies in the stock market. USE is still nascent and trading in shares on the USE was still done manually, on a white board and markers up until July 2015 when the automated trading system (ATS) was launched.

The major challenge of USE is limited number of listings and low market capitalisation. Most

Ugandan private sectors have a negative attitude towards listing on the stock market, as these fears to lose managerial control to shareholders, more so private Companies do not want to be pioneer in going public, and they prefer bank loans as a source of capital to finance their businesses. While multinational Companies are reluctant to issue shares on USE as these rely of their own funds and less on alternative sources of funds (Bohnstedt etal 2000).

Despite low listings and market capitalisation levels in USE the turnover ratios are promising. In

2010 the USE was the best performing Stock exchange in Sub- Saharan Africa with an ALSI

(All Shares Index) return of 74% between January and November 2010 (Wikipedia 2015). The puzzle is whether listed Stock market has had an impact on Company listed in Uganda.

Capital markets are markets for trading long term financial securities, including ordinary shares, long term debt securities such as debentures, unsecured loan stock and convertible bonds;

1 government bonds and other public sector securities such as treasury bills that are traded on capital markets Authority.

Osamwonyi, (2005) witnesses Capital market as an exchange system set up to deal in long-term credit instrument of high quality. The transaction/dealing in long term instruments facilitates the execution of some desirable and profitable project bearing direct relationship with economic development.

Capital Markets are markets for securities (debt or equity) where business enterprises/companies and governments can raise long term loans. Capital markets can also be defined as markets in which money is provided for periods longer than a year. The Capital market includes the stock market (equity securities) and bond market (market debts).

Nwanko, (1999) agrees that Capital markets offer a wide range of financial instruments that enable economic agents to pool, price and exchange risk. Through assets with attractive yields, liquidity and risk characteristics, saving is encouraged in financial form.

Ekundayo (2000) argues that a nation requires a lot of local and foreign investments to attain sustainable economic growth and development hence the capital market provides a way through which this is made possible.

Ewah, et al (2009) is of the opinion that capital markets provide the opportunities for the purchase and sale of existing securities among investors thereby encouraging the population to invest in securities and fostering economic growth and development.

Chiwuba and Amos, (2011) contend that capital market can affect economic development through the mobilization of long-term resources, the provision of liquidity, risk diversification, privatization, risk transfers and determination of the cost of capital for project valuation.

The Uganda Securities Exchange registered in 1997 and commenced its business operations by the year 2000 with three listed companies,; namely Uganda Clays, East African Breweries and

British American Tobacco: Uganda Clays Limited (UCL) commenced the business on 18th

January 2000 with 900,000,000 shares while East African Breweries Limited (EABL) commenced the business on 27thMarch 2000 with 790,774,356 shares and British American

Tobacco Uganda (BATU) commenced the business on 3rdOctober 2000 with 49,080,000 shares.

The Uganda Securities Exchange (USE) is a private body regulated by the Authority (CMA). It was formulated as a private Company limited by guarantee whose shareholders are equity brokers/dealers and Investment advisors hence it (USE) is a self- regulatory body.

The Uganda Securities Exchange (USE) was licensed to operate as an approved Stock Exchange in June 1997 by the Uganda Capital Market Authority (CMA). After listing in the East African

Development Bank (EADB) bond in January 1998, Uganda Securities Exchange (USE) has over the past decade registered a tremendous growth in terms of listings on Uganda Securities

Exchange (USE) growth in market capitalisation, Shareholder growth and activity turnovers.

To date the Uganda Securities Exchange (USE) is comprised of; sixteen equity listings, over six corporate bonds and thirty government bonds.

The Capital Markets Authority (CMA) ensures that Companies disclose to their investors on a continuous basis (8th September 2011 National Insurance Corporation (NIC), was reinstated on

3 the Uganda Securities Exchange after a long period of time without performing due to failure to follow the Authority Rules and Regulations).

To invest on the capital markets, one must use services of a licensed intermediary such as brokers and unit trust managers who are paid a commission for their services.

The main roles of the capital markets play in daily today business operations includes: Capital

Market by E. Ngare et al. Journal of Economics and Business 74 (2014) 24–39 25 1: Observed that the central role of the financial sector in economic growth has received a considerable attention since the commencement work of Gurley and Shaw (1955), who argued that financial sector development promotes economic growth by enhancing physical capital accumulation in nearly all the countries in Africa. However, majority of African countries Capital markets operations are unpopular signified by the low levels of development and few listings in place.

The listing on the Uganda Securities Exchange (USE) has largely been a product of the privatization program meaning the challenge for the coming years that may attract listings from privately held and family owned businesses.

The major players in the Uganda stock market are Uganda Securities Exchange (USE), Uganda

Capital Markets Authority (CMA), Uganda Stock Brokers (USB), listed Companies on the USE and investors.

According to what was published in 2013 under Uganda Securities Exchange (USE), there are plans to integrate the four Exchanges (Uganda Securities Exchange, Nairobi Securities

Exchange, Dar el Salaam Securities Exchange and Rwanda Securities Exchange) to form a single

East African bourse.

The last decade has seen the Uganda’s Capital Markets growing witnessed by the substantial increase in trade volumes at USE and increase in both equity and debt listings; Capital Markets

Authority (CMA) being the Capital market player; the public profile of a company has not improved thus attracting no greater business opportunities. However, the Capital markets industry in Uganda is still in its infancy but enhances the inflow of international capital when international investors participate in debt and equity instruments.

There are number of theories that have been advanced to explain stock exchange and capital markets growth and development. One of such theories is Capital Markets theory. Its authors are

Jensen (1962, 1964 and 1968). The theory illuminates portfolio and corporate financial problems. It is about the Capital Market foundations through its mean a variance. The foundations lie in the mean variance portfolio model of Markowitz that deals with the determination of the prices of Capital assets under conditions of uncertainty. The theory assumes the following: All investors are single period expected utility of terminal wealth maximisers who choose among alternative portfolios on the basis of mean and variance (or standard deviation) of return; all investors can borrow or lend unlimited amount at an exogenously given risk free rate of interest and there are no restrictions on short sales of any asset; all investors have identical subjective estimates of the means, variances and covariances of return among all assets; all assets are perfectly divisible and perfectly liquid that is all assets are marketable and there are no transaction costs; there are no taxes; all investors are price takers; and the quantities of all assets are given.

Capital Markets theory has the following weaknesses: The market is described as the only source of risk; empirical evidence is mixed and the tests may not be genuine tests on the model; the

5 model is unable to provide an explanation of some persistent anomalies in market returns; and it is difficult to make reliable and stable estimates of its parameters.

This study was aimed to inform the public to know about the Capital Markets operations in

Uganda and come up with cheapest methods for listing for this Country, and appropriate admission requirements favorable for SMEs especially private business operations as well; equitable Equity determination or computation formulae for the entire business community in

Uganda, listing time frame and proposed fees from step to step, weekly action responsibility plan and methods of listings and uniform costing rates of foreign currencies against the local currency.

1.2 Statement of the Problem

According to the historic perspective of Uganda, majority of company owners and the public have a negative attitude towards listing on the stock market due to fear to lose managerial control to shareholders; private Companies do not want to pioneer in going public hence they prefer bank loans as a source of Capital and multinational Companies to issue shares on USE as they rely to their own fund.

According to the Uganda’s listing requirements and procedure, the process is very complicated that requires the conversion process from private to public ownership; thereby changing the business from private ownership to public ownership by altering the Articles and the

Memorandum of Association as the major challenge to the Company owners faced in order to go listing.

Other challenges facing companies are lack of general public awareness on stock exchange trade and marketability needed to be applied, inadequate capital, poor understanding of finance capital

6 and cost of money as most entrepreneurs do not seek professional advice, high levels of non- disclosure of final accounts.

Faced with the talked-above challenges, the capital Markets theory, one of the foremost theories advanced to explain stock exchange and capital market growth and development, does not outright provide answers to the cited challenges limiting Uganda stock exchange and capital market growth and development. Basing on the above capital markets challenges and gaps, the researcher was prompted to carry out a research and come out with a project report on analysis of performance of listed Companies at hand and Capital Markets in Uganda 2010 - 2015.

1.3 Purpose of the study

The purpose of the study was to analyse relationship between procedures and listing requirements, expected return on market portfolio, challenges that inhibit companies from listing and the Capital Markets performance in Uganda.

1.4 Objectives of the study

(i) To evaluate the listing procedures and requirements for listing on the Uganda Stock

Exchange (USE).

(ii) To evaluate listed companies performance in terms of trading volumes (turnover) and

listed companies.

(iii)To examine the challenges faced the Capital market industry.

1.5 The specific questions

(i) Are the listing procedures and requirements appropriate for Companies that require

listing?

(ii) Has the listed Companies performance in Uganda attracted high sales volumes of trade?

(iii)What are the challenges facing the listed Companies on the Uganda Securities Exchange

(USE)?

1.6 The significance of the study.

(i) The study would help the Uganda Securities Exchange (USE) to review their performance

and identify way forward for further improvements to ease new listing entrants.

(ii) The findings arrived at would help the Capital markets Authority (CMA), Capital markets

players and interested investors involvement to Uganda Capital Markets to appreciate the

Capital markets industry.

(iii)The study will also be useful to scholars, prospective investors, corporations and financial

institutions for their search of knowledge and academic research work.

(iv) The findings arrived at should encourage/ discourage the public to invest stock exchange

trade or not without engaging in gainful employment.

1.7 The scope of the study

The study covered the period 2010- 2015 on the listed Companies performance of USE more especially the listing requirements and procedures, performance areas and the challenges that might affect the Capital markets industry of Uganda.

1.8 Theoretical review

One of the theories fronted to explain capital markets growth and development is Capital

Markets: Theory and Evidence. The theory was proposed by Jensen (1962, 1964 and 1968). It elucidates on the portfolio and corporate financial problems. Theory’s exact title is: The foundations and Current State of Capital Market theory. It may be summarised as follows: The theory is about foundations and current state of mean- variance Capital Market theory. The

8 foundations lie in the mean variance portfolio model of Markowitz that deals with the determination of the prices of Capital assets under conditions of uncertainty.

The theory uses two approaches to the development of modern capital theory and empirical evidence bearing on this theory: The mean variance models following Markowitz tradition; and the state preference models due originally to Arrow and Debreu. Both approaches are generalizations to a world of uncertainty of the work of Irving Fisher on the theory of interest.

Capital market theory’s main assumptions are: All investors are single period expected utility of terminal wealth maximisers who choose among alternative portfolios on the basis of mean and variance (or standard deviation) of return; all investors can borrow or lend unlimited amount at an exogenously given risk free rate of interest and there are no restrictions on short sales of any asset; all investors have identical subjective estimates of the means, variances and covariances of return among all assets; all assets are perfectly divisible and perfectly liquid that is to say all assets are marketable and there are no transaction costs; there are no taxes; all investors are price takers; and the quantities of all assets are given.

Capital market theory’s strengths are: The opportunity set available to investor in the absence of riskless asset; maximisation of expected utility by investing in portfolio; expected return determination; riskless rate of interest determination; and Optimal solution to the portfolio problem only where the investment is restricted to risky assets; and an investor faced with the possibility of an investment in a risky free asset that allows the combination of risk and return along the line connecting the assets in the mean standard deviation plane; The weaknesses include: It is dependent on a number of simplifying assumptions; the market is described as the only source of risk; empirical evidence is mixed and the tests may not be genuine tests on the

9 model; the model is unable to provide an explanation of some persistent anomalies in market returns; it is difficult to make reliable and stable estimates of its parameters; there exists doubt that returns are only dependent on systematic risk (beta).

Capital market theory’s main variables are: Riskless rate of interest; market risk premium per unit of risk; expected return on market portfolio; standard deviation of return on the market portfolio; covariance between the return on asset and return on market portfolio; and standard deviation of future return.

Capital market theory is applied to proposed study. It provides managers with the opportunity to design investment strategies whereby their portfolios would be exposed to one or more risk factors. It also provides opportunities for active investment management and improved share selection and portfolio construction, but this is constrained by investment managers’ ability to measure the factors accurately and to accurately predict unexpected changes therein.

Dwelling on the theoretical review the following conceptual framework was drawn.

Figure 1: Conceptual Framework.

Procedures and listing requirements

Appropriateness for listing Capital markets under USE performance

Challenges that inhibit companies from listing

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter covers partly to the objectives of the study like; the listing procedures and requirements for listing on the USE; evaluation of Capital Markets performance and listed

Companies in terms of sales and the challenges that might inhibit Companies from listing on the

Uganda Securities Exchange (USE) together with the challenges faced by the investors, the empirical issues and empirical evidence of the study.

Capital markets are markets for trading long-term financial securities, including ordinary shares, long-term debt securities such as debentures; unsecured loan stock and convertible bonds, government bonds and other public sector securities such as treasury bills and debentures.

The capital market industry came into being in 1996 with the enactment of the Capital Markets

Act Cap 84 of the Capital Markets Authority (CMA) which paved the way for the formation of the Uganda Securities Exchange (USE) 1997.

At the end of December 2011, CMA had licensed 22 market players; eight brokers/dealers, six fund managers, and eight investment advisors.

Since the inception, the Capital markets in Uganda have witnessed the listings of sixteen (16) companies; eight (8) cross listings from the Uganda Securities Exchange (USE) and an equivalent domestic listings.

Pardy 1992 stated that security markets have a big role to play in financial performance. He further stated that financial security markets are mechanisms for capital allocation and corporate

11 monitoring and as a means of government to exercise market based rather than direct fiscal and monitoring policies.

Ekineh, (1996) says that an efficient capital market reduces the transaction costs of trading the ownership of the physical assets and thereby paves the way for the emergence of an optimal ownership structure. Thus, efficient and liquid capital markets provide avenues for the effective utilization of funds for long-term investment purposes by mobilizing them from the surplus spending economic units to the deficit spending economic units. Therefore, efficiently functioning capital market affects liquidity, acquisition of information about firms, risk diversification, savings mobilization and corporate control (Anyanwu 1998).

Wang and Ane, 2004 defined Stock Exchange as modern focal for raising cheap long term capital for the mobilization of savings. Capital markets also help to increase transparency in the privatization process by encouraging wider share ownership. Stock Exchanges improve efficiency in resource allocation through a competitive mechanism and also increase risk capital and liquidity of the Company.

According to Samuel Kamudaya 2010 stated that many capital markets in Africa are still immature / infancy stage and their capitalisation are majorly dominated by a few firms. He added that Africa has to attract international investors in order to grow (Capital markets) in order to move to the next level in decades to come. To achieve capital markets growth in Africa, there is a need for massive economic, political, and business reforms in order to win investors’ confidence.

Factors affecting Capital Markets performance include among others like the value of shares determined by the forces of demand and supply, type of industry, the performance of the

12 economy, government policy especially encouragement of savings as opposed to investment on the Exchange, external factors like the world prices and country’s inflation rates the business

The reasons for the Uganda Securities Exchange (USE) listings these include: It is cheaper to raise equity capitalization rather than relying on debt finance to fund the expansion of companies business and listed companies are able to raise such capital; the listing company is capable of obtaining other forms of finance such as a bank loan; listed company stands a better chance of using its shares to fund acquisition as more sellers prefer to accept listed shares as consideration.

2.1 The procedures and listing requirements on the Uganda Securities Exchange (USE).

The growth rate of African Capital Markets can be shown by the proportionate contribution by each Stock Exchange market in comparison to African Stock Exchange Markets; capital markets growth industry in Sub- Saharan Africa securities exchange now exists with over 23 listings.

Uganda Securities Exchange (USE) listing requirement is the Company should have 1 billion

Capital and net assets worth 2 billion Uganda Shillings as the qualification for listing.

According to the literature about African Stock Exchange Market listings, there are 2,078 listings

(two thousand seventy eight listings) represented by a proportion of 99.95%; Uganda itself registered in 1997 and begun its operations in the year 2000 on 18th January 2000 with Uganda

Clays Limited; today it has 16 listings (sixteen listings) majority of which are multinationals;

Capital market industry is still infancy.

In Africa especially the Sub- Saharan Africa, there are twenty eight (28) countries listed under

Stock Exchange Markets Authority.

2.2 The Uganda Securities Exchange (USE) application procedures and listing process in case where the securities are shares.

Today it is the public Company that goes for listing because only the public Company is allowed to raise Capital by issuing securities to the public and trade freely. If it is not (public), then the necessary steps must be taken to convert the company from private to public. All resolutions by the Shareholders should be made and filed with the Registrar of Companies.

A prospectus or information of memorandum as the case may be has to be compiled in accordance with the provisions of the companies Act cap 110, and Capital Markets Authority

(CMA) Act.

The listing procedure under Uganda Securities Exchange (USE) involves the five straight steps including Conversion from Private Company to public Company; Appointment of Advisors;

Submission of a prospectus or statement in lieu of prospectus; Registration of prospectus and approval of listings by the Uganda Securities Exchange (USE).

Steps can be summarized in the below table:

Steps

Step 1: Conversion from Private Company to public Company.

Step 2: Appointment of Advisors.

Step 3: Submission of a prospectus or statement in lieu of prospectus.

Step 4: Registration of prospectus and,

Step 5: Approval of listings by the Uganda Securities

Exchange (USE/ (CMA).

Step 1: Conversion from Private Company to Public Company: This alters the Private

Company’s Articles and Memorandum of Association in accordance with section 31(1) and cease to be a Private Company. This means the Company to be listed here in Uganda must be a

Public registered Company. Under Section 29 of the Companies Act defines the Private

Company as one that restricts the right to transfer its shares; limits the number of its members to

50 and prohibits any invitation to the public to subscribe any shares or debentures of the

Company.

Step 2: Appointment of advisors: Raising capital through a share offer requires advice from various professionals including lawyers, accountants, brokers/dealers and other professional knowledgeable persons in securities and company business. The Company should appoint a team necessary for documentation and advisory services on the laws and procedures to follow.

Step 3: Submission of a prospectus or statement in lieu of prospectus: Section 31 of the

Companies Act of Uganda requires a Company to submit a prospectus or statement in lieu of prospectus to the Registrar of Companies for registration within 14 days following the alteration of the Articles and Memorandum of Association thereafter submitted where the Company does not wish to offer shares for sale.

The Company is required to seek approval of the offer from the Capital Markets Authority

(CMA) whose approval is offered in exercise of its power in section 42 of the Companies Act and section 5(2)(i) of the Capital Markets Authority (CMA).

The prospectus must disclose all the information required for the potential investors to make informed decisions in compliance with the Companies Act and the Capital Markets Prospectus

Requirements/ Regulations.

Hence a summary of Prospectus requirements is attached to the Articles and Memorandum of

Association. The main contents of a Prospectus/information memorandum include a caution statement contains a clear letter and outstanding letter spelling out Capital Markets Authority

(CMA) granted permission, opinions expressed in the Prospectus/ information memorandum; the purpose of this issue; statement of legal status affairs of the issuer; rights of shareholders; list and particulars of Directors and employees; financial statements; Accountant’s report; loan /debt profile; information on Banker’s; Company policy on dividends and future developments; professional advisor details and risk factors.

Step 4: Registration of prospectus. After approval of the offer, the Company is required to submit the Prospectus for registration by the Registrar of Companies.

Step 5: Approval of listings by the Uganda Securities Exchange (USE)/Capital Markets

Authority (CMA).

Upon the offer being approved by the Capital Markets Authority (CMA) and the Prospectus being registered by the Registrar of Companies, the Company should apply to the Uganda

Securities Exchange (USE) for listing of its shares on the secondary markets. This is governed by the listing rules and regulations of the Uganda Securities Exchange (USE).

A summary of the listing requirements is attached; also attached is the general information about the Capital markets Authority (CMA), procedures to be followed when issuing securities to the public, Capital markets roles and challenges faced.

2.2.1 The milestones of Uganda Stock Exchange (USE).

The licensing of the Uganda Stock Exchange (USE) by the Capital Markets Authority (CMA) to operate as an approved Stock Exchange took place in June 1997, the listing of Uganda Stock

Exchange (USE’s) first security was the Ugx 10 billion 4 year East African development Bank

(EADB) Bond in January 1998. The listing of the 5year Ugx 8.3 billion Preferential Trade Area

(PTA) commenced in March 1999. The listing of first USE’s equity the Uganda Clays Limited shares were issued on the 18th January 2000. Uganda Clays Limited (UCL) share were 15% share was oversubscribed.

The floatation of British American Tobacco Uganda (BATU) limited shares through the Uganda

Securities Exchange (USE) was on 28th June 2000. BATU shares were 5% oversubscribed and represented the second divestiture of government held shares in a Company took place through the Exchanges.

The first ever cross boarder listing in the East African market occurred with the listing of the

East African Breweries Limited (EABL) on the Uganda Capital Markets on 27th March 2001.

EABL was ranked among top 10 Companies on the Nairobi Stock Exchange (NSE) in terms of capitalisation.

The listing of the Kenya Airways (KA) share on the Uganda Capital Markets was on 28th of

March 2002 becoming the USE’s second cross listed product, the shares are currently with

Nairobi Stock Exchange (NSE).

The first floatation of a Commercial Bank’s shares on the Uganda Capital Markets occurred on the 2nd September 2002 when Bank of Baroda offered 20% of its stock to the public through the

USE. Shares worth 80 million were on sale in multiples of 100 at Ugx 600 per share. Its shares were 16.7% oversubscribed making it best response so far. The official listing of Bank of Baroda

Uganda (BOBU) on the USE was on November 2002 making it the first financial institution to list on the Uganda Capital Market.

The listing of the first launch of Ugx 24 billion of the Ugx 54 billion UTL medium term was launched on 16th September 2003 with Capital Markets Authority (CMA) and all the share index was done on 23rd October 2003.

Official listing of the 2 year Bond of Ugx 20 billion; Uganda government 20% Coupon rate

Treasury Bond was launched on January 15th 2004 making it the first Government Bond to be listed on Uganda Securities Exchange (USE).

Currently, there are 2 year Bonds, 3 year Bonds, 5 year Bonds and 10 year Bonds listed on the

Uganda Securities Exchange (USE).

In 2004, DFCU group went public making it Uganda’s second financial institution to list on the

Uganda Capital Market. In 2004 New Vision offered 20% of its shareholding for sale to the public making it the 5th local Company to conduct an Initial Public Offer (IPO) in the Uganda

Capital market and New Vision was officially listed on 16th December 2004.

In December 2005, East African Development Bank (EADB) listed the 8 year bond. On 14th

February 2006 was the official cross listing of Jubilee Holdings Limited (JHL) on the Uganda

Securities Exchange (USE); it became the first insurance company on the Uganda Capital

Market.

In 2007, 25th January Stanbic Bank Uganda was listed on the Uganda Securities Exchange (USE) following a successful Initial Public Offer (IPO) that was 200% oversubscribed.

2.2.2 The Capital Market Performance on listed Companies in Uganda.

Demirguc- Kunt (1992) stated that commercial banks are the main financial institution where most internal resources and informal credit markets are financed. He further urged that the loan

18 contracts of commercial banks are generally short term, and formal direct credit markets for long term debt or equity which does not exists at all thereby constraining both corporate and economic growth.

Wagacha, 2001 stated the advanced reasons for the poor performance of Capital markets include the interest rate policy, taxation system, legal and regulatory framework, lack of expertise and lack of technological progress . Further, it would be cheaper to raise capital on the Stock

Exchange thus lowering the cost of capital and initial public offers (IPO) costs are tax deductible.

Nakiyemba, 2007 analysed that financial performance of listed companies on the Uganda

Securities Exchange (USE), asserted that the financial performance of all the listed firms on the

USE is poor characterized by the fluctuations in the trend of liquidity financial leverage and profitability for the firms.

Uganda’s stock market performance is measured using the All -Shares Index (ALSI) which reflects the movement in prices for the listed stocks. An increase in ALSI reflects overall growth in share prices while a decline reflects a downward trend. A case for investing in Uganda’s stock market is backed by fairly good performance over the last five years where growth in share prices average over 24% as shown in the table below.

ALL -SHARES INDEX (ALSI) 2009-2013. YEAR CLOSING ALSI % GROWTH 2009 733 - 2010 1188 62 2011 864 (27) 2012 1203 39 2013 1504 25

Source: www.use.org.ug

Presently, there are over 28 listed Countries in Sub- Saharan Africa that shows an improvement in Capital Markets performance in Africa.

Uganda Securities exchange (USE) managed to perform in a fluctuating environment between

2010 and 2015 as follows:

National Insurance Corporation (NIC) year 2010 profits declined. During the first quarter of

2010, the Uganda Securities Exchange (USE) had the settlement and Clearing Depository electronically trading system.

According to the published report in January 2011, other electronic modalities were being considered on that time. In 2010, Uganda Securities Exchange (USE) was the best performing

Stock Exchange in Sub Saharan Africa with all shares index return of 74% between January and

November 2010. Vision Group Uganda profits went up 309% by 26th September 2010 to the year ended 2010.

May 28th 2011, the treasury bills rates doubled to new highs as the Bank of Uganda (BOU) maintained a tight monetary policy to manage inflation. June 24th 2011, the Stanbic Bank

Closure show its share price dropping sharply from high of Ugx 350 during the bonus issue to

Ugx 155 at the end of 24th June 2011; Bank of Baroda lists Ugx 600 million shares on the Stock

Exchange at that date.

June 2011 investors had options to buy shares after Bank of Baroda listed Ugx 600 million bonus shares at the Stock Exchange that month of June.

July 11th 2010, Uganda Securities Exchange (USE) gave National Insurance Corporation (NIC) up to July 14th to publish its 2010 audited year end final accounts.

July 14th 2011, some economists reported that there were no significant roles of Stock markets or securities exchange play in fostering economic growth and development in Uganda.

3rd August 2011 total market turnover rose to Ugx 934 million from Ugx 168.2 million, major dealers were the Bank of Baroda Uganda (BOBU) and Uganda Clays Limited (UCL).

8th August 2011, National Insurance Corporation (NIC) finally released its full 2010 year results indicating a decline in profits from 3.3 billion as a requirement of Uganda Securities Exchange

(USE).

On 8th September 2011 Brokerage firms were encouraging investors on the Uganda Securities

Exchange (USE) to open Securities Central Depository Accounts (SCDA).

Stock analysis 8th August 2011 to 12th August 2011; the week of trade opened with a turnover of

Ugx 423 million with over 95% attributed to Stanbic Bank.

On 11th August 2011 Stanbic Bank had bounced back to its dominant market position picking from 309 million in turnover from 11th August 2011 from 2.1 million (the same day Stanbic bank back on the table of Uganda Securities Exchange).

Stock analysis 15th August 2011 to 19th August 2011, the Uganda Securities Exchange (USE) started another week of trading (15/8/2011 to 19/8/2011) as turnover continued to fall; Bank of

Baroda registered the lowest turnover. Turnover drop continued on the Uganda Securities

Exchange (USE); 19/8/2011 turnover at the USE dipped to 8 million on 16th August 2011 from

327 million.

30th September 2011, Uganda National Insurance Corporation (NIC) management put up a spirited fight at reassuring shareholders about the state to raise Ugx 7 billion.

A London private equity firm known as ACTIS halted the sale of Uganda Bank Shares; 20th

October 2011, Ownership of DFCU Limited a Ugandan Bank remained intact. The trading on the

Uganda Securities Exchange (USE) for the week opened 18th October 2011 and ended 21st

October 2011 was characterized by less activity as compared to the number of Companies performed that day.

On the equity market of 25th November 2011, Stanbic Bank regained its position as it yielded the highest gains throughout the week of trading opened 21st November 2011 and closed 25th

November 2011.

On the trading of Uganda Securities Exchange (USE) on 15th November 2011, DFCU made the highest gains at Uganda Securities Exchange (USE) at Ugx 30million after a sale of 30,000 shares at weighted average price.

Trading on the Uganda Securities Exchange (USE) for the week opened 7th November 2011 to

11th November 2011. Monday opened with four Companies of which British American Tobacco

Uganda (BATU) was inclusive.

Improvements in the Secondary market saw Uganda Securities Exchange (USE) registering a turnover of Ugx 19.4 billion from Ugx 3.5 billion in quarter one of 2012, Ugx 18.3 billion in the fourth quarter of 2012, represented a daily average approximately Ugx 335 million.

Secondary market performance at Uganda Securities Exchange (USE) in the first quarter showed a slight improvement in activity following a pick-up of investors’ appetite and confidence in

Stock Market. The number of shares traded was up by 37.2% at 239.5 million shares compared to 174 million shares traded in the quarter four of 2012, while the total number of deals recorded was 1097 down of the previous quarter.

Uganda Securities Exchange (USE) registered a growth of Ugx 1.1 billion on the first of year

2013 indicating improvements in equity performance following the increase in equity share prices and the listing of Umeme.

On 20th July 2015 the Uganda Securities Exchange (USE) initiated its electronic trading platform, backed by three independent Data Servers, cutting to three days (previously five days) that time it took to transact trade.

2.3 The challenges facing the listed Companies in Uganda.

This study report found that there was lack of marketability needed to be applied hence the majority of local investors were unaware of the positions to meet the regulatory requirements of the stock exchange listings.

Rutega, 1999 and Weigh, 1998 observed the regulations perceived to be vital to boast investors’ confidence but due to lack of marketability and information, local investors are unaware of listing requirements on Securities Exchange.

Information: It was found that Investors consider information and regulatory risks and costs involved during the capital market exchange trade; fees rules at Uganda Stock market exchange

(USE) are high and frequently revised from time to time sometimes affect operational activities of the Capital markets industry in the country; Shareholders’ fund increase from time to time also affect operational activities of the Capital markets industry worldwide; general public un awareness on stock exchange trade activities, majority of the population are less skilled on investment expertise of stock market trade ; listed companies vary greatly due to differences in accounting policies, nature of business, gearing and risks involved worldwide.

Other challenges to the growth of Capital Markets in Uganda today include: Ignorance of

Capital market instrument derivatives and how to invest in Stock markets by business actors; high transaction costs like subscription fees, brokerage fees and registration requirements; there are limited financial instruments derivatives traded on Uganda Securities markets for instance lack of futures and options; marketability of securities (most securities issued is hard to trade in due markets), because of lack of secondary markets implying that the buyer has to hold it to maturity and hence competition with other developed markets worldwide.

Olisaemeka (2009) identifies several challenges that has affected capital market globally as following: A Global phenomenon that presents collapse of the world economy that’s why many stock markets of countries, from USA to Britain, from China to Japan, Russia, France and others are in serious trouble because the world is indeed a global village and the interrelatedness of world economies is very evident that any development in any part of the world affects other parts as well. Consequently, the Uganda capital market is not insulated from this global disease that may not be cured; lack of Infrastructure and high production costs of doing business is high in

Uganda. Basic infrastructures like good roads, power supply are lacking, leading to high cost of doing business; impact of Commercial Banks unwillingness to lend due to lack of collateral securities.

2.3.1. Empirical evidence and issues regarding Securities exchange.

Several empirical studies were reviewed on economic growth resulting from financial development, capital accumulation and productivity improvements focused specifically on stock markets proposed by Levine and Zervos (1993, 1998), Atje and Jovanovic (1993), Rousseau and Wachtel (2000), Beck and Levine (2002) seconded by Caporale, Howells, and Soliman

(2004) among others could be achieved without the international integration since majority may not be direct contributors of the country’s growth and development.

The empirical study reviewed by Atje and Jovanovic (1993) using cross-sectional regressions finally said that stock markets have long-run impacts on economic growth, as was equally summarised by Harris (1997) and Levine and Zervos (1998) study of 48 countries (1973–1993) finally concluded that stock market liquidity positively predicts growth, capital accumulation and productivity improvements that could attract participants/players.

In addition, they showed that stock market size, volatility and international integration are not true contributors of country’s growth and development.

Rousseau and Wachtel (2000) and Beck and Levine (2002) used the same models like cross country regression framework to measure the stock market development was strongly correlated to growth rates of real GDP per capita. More importantly, they found truly that stock market liquidity and banking development both can predict the future growth rate of the economy when the two variables both enter the growth regression.

According to the Studies conducted by Arestis, Demetriades, and Luintel (2001) using time series data analysis on five industrialized countries (not named but sampled) depicted that stock markets play a role in country’s general growth whilst scholars like Caporale et al. (2004) using the different techniques developed by Toda and Yamamoto (1995) described that the well- developed stock markets in any country may foster economic growth only in the long run period.

The above empirical evidences suggested by different scholars above provide topics that are helpful to capital markets performance and investments from authors like Arestis, Demetriades, and Luintel; notably for the country’s economy to grow; Capital market growth should be emphasized according to the authors.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter is divided into seven (7) sub- sections covering the research design, sample and sampling frame, survey population, and sample size, types of data, data analysis, and limitations of the study.

This study is more qualitative in nature and a case study approach was adopted, a sample of one hundred questionnaires were issued to respondents; only seventy one responded based on purposive sampling procedure of the population.

3.1 Research Design.

The study was descriptive to the extent of analysing Ugandan Capital Markets performance and listed Companies. The design chosen was the most appropriate for data collection that was focused on examining the trend and central roles of listed companies, analysis of procedure and requirements on companies that need listings and the challenges/factors that inhibit the Capital markets industry growth.

3.2 Survey population and sample size.

The study population was made up of listed companies, commercial banks, insurance companies, private businesses and business individuals represented by seventy one (71) individual questionnaires as in sample area and sampling frame table below: Table 1: showing the Sample size of Respondents representing Capital Market Players. CATEGORY POPULATION SAMPLE POPN PERCENTAGE (%) Listed companies 16 8 11% Commercial banks 28 10 14% Insurance companies 26 12 17% Private businesses 25 16 23% Business individuals 30 25 35% TOTAL 125 71 Source: Field data December 2015. 26

3.3 Sample and Sampling Frame

The sample area covered eight (8) listed Companies, insurance companies (10), commercial banks (12), private businesses (16) and business individuals (25); all totaling seventy one (71) individual respondents.

Interpretation: According to the figure below shows the listed Companies and domestic private businesses were the majorly contributors of this study report.

Figure1: Showing the population and sample size of respondents

11% Listed companies 35% 14% Commercial banks Insurance companies Private businesses 17% Business individuals 23%

Source of data: Field data December 2015.

3.4 Sources of data

The study used both primary and secondary data. The primary data was obtained from the field in Kampala City while secondary data was obtained from the newsletters, internet, journals,

Articles, magazines and financial reports of USE.

The above sources of data collection helped to identify common issues on the analysis of performance of listed companies on USE and Capital markets. All relevant literature was reviewed to provide a basis for interpretation of responses.

3.5 Data analysis

Data was collected, data entry was done by the use of the Microsoft excel spread sheets and

SPSS (Statistical Package of the Social Scientist) Software were used; tables, line graph, bar charts were drawn to show the analysis of listed Companies performance on USE and Capital markets. The capital market performance in Sub- Saharan Africa (SSA) were analysed using the regression analysis and a scatter diagram where the line of best fit was drawn to determine the correctness of analysis of data.

3.6 Limitations of the study

The study was confined to the performance of listed companies on Uganda Securities Exchange

(USE) and Capital markets 2010-2015; Capital Markets listing procedures and requirements; the challenges/factors that inhibit the Companies/investors from listing. Hence the research project was limited to the under listed factors:

i. There was limited adequate information especially on listing procedures and general

capital market performance since some information were considered confidential by

some respondents so the researcher had to go through listed Companies to find this

information which was a long process.

ii. The research involved expenditures such internet, printing costs, time for proof reading

and transport implying that the researcher was once challenged financially and always

tried to look for alternatives like working thoroughly before printing, use of telephone

instead of transport in order to avoid costs. iii. The response time especially for questionnaires was not easy for the researcher so it was

time consuming, the researcher therefore sent out questionnaires early enough which

gave respondents enough time to fill the questionnaires through closed ended questions.

CHAPTER FOUR

PRESENTATION AND INTERPRETATION OF FINDINGS

4.0 Introduction

This chapter presents results of the analysis of data that was collected using the questionnaire interview / primary and secondary data; these results were presented in line with the research objectives, literature review and inferences of statement of the problem. Statistical results presented include line graphs, figures, scatter diagrams and bar graphs. Also this chapter focuses on the presentation, analysis, and interpretation of major findings. The presentation is as follows:

4.1 Biographic characteristics of the respondents.

This section presents the results basing on biographic characteristics presented include the ages, level of education, gender and business legal status.

In general a total of 71 respondents comprised of 43 males and 28 female respondents were interviewed using the questionnaire. The findings were characterized by 8 listed Companies, 10

Commercial banks, 12 insurance companies, 16 private businesses and 25 business owners represented of 43 (61%)males were the majority of capital market players represented by the above listed institutions and 28 (39%) females illustrated in the table below:

Table 2: showing the gender distribution of respondents

SEX FREQUENCY PERCENT OF RESPONDENTS (%). Male 43 61% Female 28 39% Total 71 100% Source of data: primary

The table above shows the results of male and female respondents as 61% and 39% respectively. More than a half was the male respondents showing the highest business participants of the study.

Figure 2: Showing the Bar graph of gender distribution of respondents.

Males were represented by 61% while females were represented 39% implying that many men are employed in the Capital markets industry.

RESPONDENTS % AGE

39%

MALE 61% FEMALE

Source: Field data December 2015.

4.1.1 The ages of the respondents

The result shows the age bracket 31-40 with the highest frequency 51%, this implies the majority of business respondents were above the age of 30 years as shown in the below table.

Table 3: Showing Ages of the respondents

Respondents Frequency Respondent's age % 18-30 12 17% 31-40 36 51% 41-50 20 28% Above 50 years 3 4% Total 71

Source of data: Field Data December 2015.

Figure3: Showing Ages of the respondents.

Respondent's age in percentage (%)

4% 17% 28% 18-30 31-40 41-50 51% Above 50 years

Source: Field data December 2015.

4.1.2 The highest levels of education of the respondents.

This section presents the levels of education of the respondents comprised of Diploma holders represented by 16%; Undergraduates represented by 59% and Master’s degree represented by

25% as shown in the below table:

Table 4: showing the Education level of respondents

Education level Frequency Education level (%)

Diploma 11 16%

Degree 42 59%

Master’s Degree 18 25%

Total 71

Source of data: Field data December 2015.

According to the below figure, the results show the Undergraduates and master’s degree holders were the popular respondents implying that businesses employ highly qualified people as shown in the below figure:

Figure 4: Showing the Education level of Respondents

Education level of respondents (%)

0% 0% 0%

25% 16% O' Level A' Level Diploma Degree 59% masters Degree Others

Source: Field data; December 2015.

4.1.3 Marital Status distribution` of respondents.

The results show the gender distribution of respondents that was comprised of 18 (25%) singles and 53 (75%) married according to the findings. The results indicate the sex composition was considered most important as shown in the below table:

Table 5: showing the marital status of respondents.

Marital status Frequency Marital status (%)

Single 18 25%

Married 53 75%

Total 71

Source of data: Field data December 2015.

The married contributed highly to this study compared to singles as shown in the below pie chart.

Figure 5: Showing Marital Status distribution` of respondents. Marital status of respondents (%)

25%

Single

75% Married

Source of data: Field data December 2015.

4.1.4 Business legal status of respondents.

Business legal status of respondents comprised of Sole proprietors 7 (10%), partnerships 46

(65%) and limited liability Companies represented by 18 (25%) as shown below.

Table 6: Showing the Business legal status of respondents.

BUSINESS FREQUENCY PERCENTAGE (%) Sole proprietorship 7 10% Partnership 46 65%

Limited Liability company 18 25%

Total 71

Source: Field data; December 2015

In this study the majority of respondents were firms especially Auditors, Accountants, Lawyers and business individuals contributing to the reliability of data as shown in the below Figure 6.

Figure 6 : Shows the Business legal status of respondents.

BUSINESS LEGAL STATUS OF RESPONDENTS IN PERCENTAGE (%)

25% 10% Sole proprietorship

Partnership

65% Limited Liability company

Source: Field data; December 2015. 34

4.1.5 Respondents/ firms engaged in Uganda’s Securities Exchange (USE).

There were 71 individuals registered responses that recorded “yes” (37%) and “no” (63%), implying that the majority have no idea about Capital Markets operations in Uganda.

Table 7: Showing Respondents/ firms engaged in Uganda’s Securities Exchange.

USE Response Number CMA Response (% age) Yes 26 37% No 45 63% Total 71 Source: Field data; December 2015

According to the table above the majority are unaware of the existence of the Capital markets as shown in the Figure7 below.

Figure7: Showing the responses of firms engaged in Uganda’s Securities Exchange.

CMA Response (% age)

37%

Yes 63% No

Source: Field data; December 2015.

4.1.6 Awareness/knowledge about Uganda Securities Exchange (USE).

On Uganda Securities Exchange (USE) knowledge 71 were the respondents reacted as High 8

(11%); Low 15 (21%) and Very low 48 (68%) implied that the majority of respondents had no knowledge about the Capital Markets operations of this country as shown in the below table:

Table 8: showing respondents knowledge about USE

CMA Knowledge Number People's Knowledge (%) on USE High 8 11% Low 15 21% Very low 48 68% Total 71 Source of data: Field data; December 2015.

According to the table above results show no knowledge about Capital markets operations by over 89% of “Low” (21%) and “Very low” (68%).

Hence USE players the majority of the respondents are ignorant about Capital Markets operations as shown in below figure 8.

Figure8: Showing the “Low” and “Very low” decisions about Capital Markets.

People's Knowledge in (%) on USE

11% 21% High

68% Low Very low

Source: Field data; December 2015.

4.2 The proportionate performance and the central roles of the listed Countries of Sub-

Saharan Africa.

The African Securities Exchange of Sub- Saharan African listings were represented by the

Figure below showing the proportionate percentage number of companies listed per country with the majority of Country’s proportionate percentage was declining as contained in the literature review of this study.

This was intended to derive the growth of African Capital markets industry; those commenced business earlier ago as 1880’s are the successful listed Countries in Sub- Saharan Africa as compared to those recently listed Countries (in 1990’s and 2000’s listings) shown in figure 9 below:

Figure 9: Showing the Sub- Saharan African Listed Stock Exchanges.

0.82% 0% 0.77% 3.08% 1.88% 0.24% 2.12% 0.10% 0.82% 2.69% Cote d'voire 0% 0.48% Algeria 2.60% Botswana Cameroon 0 19.34% Egypt 40% Ghana Kenya 0% Libya 0.19% 10.73% Malawi 0.24% Mauritius Morocco 0% 0% 1.64% Mozambique 0% 3.90% 4.23% 0.67% 0.34% 3.08%

Source: Secondary data; June 2015.

Egypt 40.07% with 833 listings founded in the year 1883; South Africa with 19.34% with 402 listings founded in the year 1887; Nigeria 10.73% with 223 listings founded in the year 1960

;Morocco 3.9% with 81 listings founded in 1929; Mauritius 4.23% with 88 listings founded in

1988; Kenya 3.08% with 64 listings founded in the year 1954;Sudan 2.60% with 54 listings founded in the year 1994; Zimbabwe with 64 listings representing 3.08%; Tunisia with 56 listings represented by 2.69%; Ghana with 64 listings represented by1.64%; Botswana with 44 listings represented by 2.12%; Cote d’voire with 39 listings represented by 1.88%;Uganda and

Tanzania with 16 listings each Country represented by 0.82%; Zambia Stock Exchange with 16 listings represented by 0.77%;Malawi Stock Exchange with 14 listings founded in 1995 represented by 0.67% and many others falling below 0.67% like Swaziland with 10 listings founded in 1990 represented by 0.48%; Libyan Stock Exchange founded in the 2007 with 7 listings represented by 0.34% ;Algeria and Rwanda founded in 1997 and 2008 respectively with

5 listings for each country represented by 0.24%; Seycheles founded in the year 2012 with 4 listings represented by 0.48% and Cameroon/Douala Stock Exchange founded in the year 2001 with 2 listings represented by 0.10% as at June 2015.

4.2.1 The Scatter graph representing Sub- Saharan African Capital Markets listings with their respective business commencement dates

The scatter diagram shows the Stock exchange listings of Sub- Saharan Africa; developing countries with few listings as illustrated in the below scatter diagram:

Figure 10: showing the scatter graph on Sub- Saharan African Capital Markets.

Figure 3: Scatter graph respresenting African Capital Markets listings. 1000 800

600

400 y = -11.721x + 244.17

listisng 200 R² = 0.3196 0 0 5 10 15 20 25 30 -200

Numberi of Capital Markets Markets of Capital Numberi Listings

Source: Secondary data; June 2015.

Figure above: The scatter diagram above; regression line Y= -11.721X + 244.17; the intercept is

244.17, slope is -11.721; when count the number of scatters dotted above and below the line of best fit are equal. The result of the negative slope represented by the equation=-11.721X +

244.17; shows that the number of African listing drops from time to time represented by the

Scatter diagram.

In this study “Analysis of listed Companies on Securities exchange and Capital markets” is accurate and reliable to the extent that the challenges facing the capital markets institutions do exists. Such that the negative slope would be reversed as long as there is an improvement on performance.

4.3 The procedures and listing requirements for companies on the Uganda Securities

Exchange (USE) from the questionnaire were summarised as:

The results show the capital market listing procedure as a complicated one; a company must be a public Company according to the listing process and procedures; in Uganda the majority of

39 businesses are privately owned by indigenous people and foreigners whose Company Articles and Memorandum of association must be amended to attract a prospectus. According to the study the listing procedures and processes favour only public Companies.

4.4 The challenges facing the listed Companies on the Uganda Securities Exchange (USE) according to the study include:

The value of net assets required by CMA is too high to raise; lawfully private companies cannot go listing unless amends the Articles and Memorandum of association; majority of the people are ignorant about the Capital markets operations; lack of conferences and seminars to sensitize the public; low levels of trading of shares.

CHAPTER FIVE

DISCUSSION OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction

The secondary and primary data analyses have been done in Chapters two and four. The findings derived from analysis are presented in this chapter five.

5.1 DISCUSSION OF FINDINGS

The Descriptive statistics showed no single company listings between 2010 to 2015, no new entry/admission on listed companies. This research project study provides evidence in support of positive analysis between listed Companies performance on USE and Capital markets 2010-

2015. The findings of this research project report are very important to the Uganda Capital markets.

Summary of findings include: Finding by objectives like findings on the listing procedures and requirements for listing; findings on the performance of the listed Companies and findings on the factors/ challenges that might inhibit Companies from listing and the secondary data analysis, primary data analysis,.

5.1.1 Objective one: Finding on the listing procedures and requirements for listing.

According to the findings in the study the listing procedure on USE listing manual shows the listing process only and excludes the fees payable and equity determination/ computation formulae, cost as suggested by Charles(2003:2) who argued that capital markets in Africa have fewer participants because of complicated listing procedures and skilled investment analysis.

Uganda’s listing procedure is complicated and costly that requires five straight steps to go listing/ registration for private entities. Not only the listing procedures but the Company should 41 have the strong financial background like 2 billion share capital, sound net assets for listing requirements.

5.1.2 Objective two: The findings on the performance of listed Companies.

According to the study 2010-2015, Capital Markets performance reveals fluctuations in sales turnover of Company performance. Apart from cross boarder listings Uganda has 8 listings which are very few. Uganda stock exchange has 8 cross listings, analysis show financial performance of listed Companies very poor and fluctuating (Nakiyemba 2007) witnessed by fluctuations of liquidity financial leverage and profitability for the listed companies.

5.1.3 Objective three: The findings on the factors/challenges that inhibit Companies from listing on the Uganda Securities Exchange (USE).

The study reveal that lack of marketability, information, high fees rules and shareholder’s fund are the major hindrances of Capital market performance in Uganda. Other challenges that affected Capital markets globally were stated by Olisaemek 2009.

5.2 The secondary data analysis.

Many Capital markets in the Sub-Saharan Africa are still at infancy stage whose Capitalization is dominated by few firms (Samuel Kamudaya 2010). This requires attraction of international investors in order to enable Capital markets to grow. Today only Johannes Stock Exchange (JSE)

1887 and Egypt 1883 are the only ones with higher listings in Sub Saharan Africa.

5.3 CONCLUSION

The conclusion arrived at from the findings of the study; majority are unaware of securities exchange operations as a challenge, no periodic review on listing and complicated listing procedures in this country; it is that Uganda’s Capital markets is accompanied with the challenges ranging from what was put forward by Rutega (1999) and Weigh (1998) like lack of

42 marketability and information, un awareness of local investors about the listing requirements on

USE, too high fees rules at Uganda Stock market exchange (USE) ,Shareholders’ fund increment from time to time, majority of the population being un skilled on investment expertise of stock market trade; differences in accounting policies originating from nature of business worldwide.

Hence the readers should observe and understand that listing on the CMA is a mandatory requirement knowingly they should prepare for the listed challenges.

5.4 RECOMMENDATIONS

From the findings of this study, the number of recommendations ranged from education and promotion of the Securities exchange transactions were observed. This study came up with a number of recommendations that might boast the Uganda Securities Exchange (USE) like:

(i) There should be continuous in public education through various mediums of

communications like internet, television stations, newspapers, radio stations, public

conferences and seminars by the concerned institutions like government ministry of

finance, Institute of Certified Public Accountants of Uganda (ICPAU), Capital Markets

Authority (CMA), Uganda Securities Exchange (USE), Commercial banks and financial

consultancy firms. Alternatively, the government should emphasize the capacity building

through training the Capital markets participants/players, investors and the general public

at large to ensure a clear understanding of capital markets performance and benefits like

tax incentives, dividends, free tradable) / operations of Ugandan Capital markets.

(ii) It is recommended that measures to encourage more firms for listing be put in place

inclusive of amending existing listing laws of Uganda, such measures included;

intensifying public education .and awareness programs, a revision on the prevailing

listing requirements and put in place a tax levy or reduction on cross border foreign

companies for cross listing.

(iii)The study further recommended that CMA should work with consultancy firms in

advising and encouraging Companies to regularly prepare final accounts that comply

with the acceptable accounting or auditing international standards. This will position

most firms to meet one of the demanding requirements.

5.5 SCOPE FOR FURTHER RESEARCH.

This study has been limited to performance of listed Companies on USE and Capital markets:

(i) It is the duty of Capital Markets Authority (CMA) to carry out its functions in order to

protect the investors and properly regulate the Uganda Capital Markets performance and

listed Companies.

(ii) Proper regulation of the Capital markets is a risk management strategy that must be

(iii)It is also necessary that subsequent research should focus on the role of Capital Markets

Authority (CMA) in the management of micro- finance institutions of Uganda.

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APPENDICES

TABLE 1: AFRICAN LISTED CAPITAL MARKETS AS OF MAY 2014.

ECONOMY EXCHANGE FOUNDED LISTINGS PROPORTION (%)

Egypt Egyptian Exchange* 1883 833 40.07

South Africa JSE Limited* 1887 402 19.34

Morocco Casablanca Stock Exchange* 1929 81 3.9

Zimbabwe Zimbabwe Stock Exchange* 1948 64 3.08 UGANDA Securities Kenya 1954 64 3.08

Exchange*

Nigeria Nigerian Stock Exchange* 1960 223 10.73

Tunisia Bourse de Tunis* 1969 56 2.69

Mauritius Stock Exchange of Mauritius 1988 88 4.23

Botswana Botswana Stock Exchange* 1989 44 2.12

Ghana Ghana Stock Exchange* 1990 34 1.64

Swaziland Swaziland Stock Exchange* 1990 10 0.48

Sudan Khartoum Stock Exchange* 1994 54 2.6

Zambia Lusaka Stock Exchange* 1994 16 0.77

Malawi Malawi Stock Exchange* 1995 14 0.67

Algeria Algiers Stock Exchange 1997 5 0.24

Uganda Uganda Securities Exchange* 1997 16 0.77 Bourse Régionale des Valeurs Cote d'voire 1998 39 1.88

Mobilières* Dar es Salaam Stock Tanzania 1998 17 0.82

Exchange*

Cameroon Douala Stock Exchange* 2001 2 0.1

Libya Libyan Stock Market* 2007 7 0.34

Rwanda Rwanda Stock Exchange 2008 5 0.24 Seychelles Securities Seychelles 2012 4 0.19

Exchange (Trop-X)* TOTAL 2,078 99.95 Source of data: Secondary data: www.wikipedia.org.

TABLE 2: THE UGANDA SECURITIES EXCHANGE LISTED COMPANIES.

THE UGANDA SECURITIES EXCHANGE SHARES ISSUED.

ISSUED COMPANY SYMBOL ISIN LISTED DATE SHARES

1 Uganda Clays Ltd UCL UG0000000014 18/01/2000 900,000,000 2 East African Breweries Ltd EABL KE0009081092 27/03/2000 790,774,356 British American Tobacco BATU UG0000000022 3/10/2000 49,080,000

3 Uganda

4 Kenya Airways Ltd KA KE0009081084 28/03/2002 461,615,484

5 Bank of Baroda (Uganda) Ltd BOBU UG0000000055 14/11/2002 300,000,000,000 Development Finance DFCU UG0000000147 14/10/2004 248,600,911

6 Company of Uganda Ltd New Vision Printing and NVL UG0000000162 16/12/2004 76,500,000

7 Publishing Company Ltd

8 Jubilee Holdings Ltd JHL KE0000000273 14/02/2006 45,000,000

9 Stanbic Bank Uganda Ltd SBU UG0000000386 25/01/2007 51,188,669,700 Kenya Commercial Bank KCB KE0000000315 11/11/2008 2,217,777,777

10 Group

11 Equity Bank Ltd EBL KE0000000554 18/06/2009 3,702,777,020 National Insurance NIC UG0000000758 25/03/2010 403,880,000

12 Corporation Ltd

13 Nation Media Group Ltd NMG KE0000000380 19/10/2010 157,118,572 Centum Investment Company CENT KE0000000265 10/02/2011 604,947,013

14 Ltd

15 Umeme Ltd UMEME UG0000001145 30/11/2012 1,623,878,005

16 Uchumi Supermarkets Ltd UCHM KE0000000489 13/11/2013 265,426,614 TOTAL SHARES ISSUED 362,736,045,452 Source: Uganda Securities Exchange/www.use.org.ug.

TH TABLE 3: USE FINANCIAL PERFORMANCE AS AT 13 OCTOBER 2015.

UGANDA SECURITIES EXCHANG (USE) DAILY SHARE REPORT OCTOBER 13TH 2015. MARKET

SHARE PRICE CAPITALIZATION

PREVIOUSLY BILLION (SHS.) SECURITY SHARE TRADED CURRENT 10,000 490.80 BATU - 10,000 155 387.50 Bank of Baroda - 155 980 487.25 DFCU Group - 980 9,506 7,335.85 EA Breweries - 9,277 1,608 5,945.18 Equity Bank - 1,606 18,010 1,059.98 Jubilee Insurance - 17,697 193 291.00 KQ - 194 1,599 4,684.86 KCB - 1,570 13 18.41 NIC - 13 5,110 968.72 NMG - 5,138 602 46.05 New Vision - 602 32 1,650.83 Stanbic Bank 4,476 32 15 13.50 Uganda Clays - 15 625 1,015.17 Umeme - 625 1,778 1,181.21 CENT - 1,775 357 94.70 UCHUMI - 357 Source: Daily Share Report: Monitor; October 13th 2015.

TABLE 4.EAST AFRICAN SECURITIES EXCHANGE AS AT 13TH OCTOBER 2015.

WEDNESDAY OCTOBER 14 2015

EAST AFRICAN SECURITIES EXCH USE NSE DSE RSE

ALSI 1,878 140.92 4,592.00 134.06

-0.60% -1.7% -0.17% 0.45%

BANK OF UGANDA FOREX EXCHANGE.

13TH OCTOBER 2015 USD PS EURO KSH

BUY 3,666 5,624 4,169 35.6

SELL 3,676 5,639 4,180 35.7

Source of data: Daily share: Monitor 13th October 2015.

TABLE 5. CAPITAL MARKET LISTINGS AS OF SEPTEMBER 2015.

Number Symbol Company Activity/ies

1 BOBU Bank of Baroda (Uganda) Finance, banking

2 BATU British American Tobacco Tobacco products

3 DFCU DFCU Group Finance, banking

4 EABL East African Breweries Brewing, gin, distilled beverages

5 JHL Jubilee Holdings Insurance

6 KA Kenya Airways Aviation

7 KCB KCB Group Finance, banking

Printing, publishing, broadcasting,

8 NVL New Vision Group television

9 SBU Stanbic Bank (Uganda) Limited Finance, banking

10 UCL Uganda Clays Limited Manufacturing, construction materials

11 EBL Equity Group Holdings Limited Banking, finance

12 NIC National Insurance Corporation Insurance

13 UCHM Uchumi Supermarkets Supermarkets

Publishing, printing, broadcasting, 14 NMG Nation Media Group television

15 CENT Centum Investment Company Limited Investments, private equity, real estate

16 UMEME Umeme Power distribution

Source of data: Secondary data: www.use.org.ug.

APPENDIX 2: GLOSSARY OF SOME COMMONLY USED TERMS.

An individual, means a Uganda citizen or a resident individual within the meaning of the whereby all such securities are immobilised or dematerialised and dealings in respect of those securities are affected by means of entries in securities accounts without the physical necessity of certificates.

A body corporate means a company incorporated under the Companies Act, or a foreign company registered under Part X of the Companies Act, or any other body corporate established or incorporated in Uganda under the provisions of any written law which permits or facilitates the settlement or registration of securities transactions or dealings in securities without the physical necessity of certificates; and to provide other facilities and services incidental thereto; the other company controls the composition of the first mentioned company’s board of directors: or the other company holds more than half in nominal value of that company’s equity share capital or the company is a subsidiary of any company which is the other company’s subsidiary;

1. Ordinary-shares give the shareholder part ownership of the company in proportion to the

number of shares held and entitle him/her to dividends.

2. Preference-shares bear a fixed annual rate of dividend and have a right over all ordinary

shares in the distribution of dividends. They also have a prior claim to repayment of

capital in case a company winds up.

3. Redeemable-shares can be redeemed by the company either at fixed dates and prices, or

on certain, specified terms at the discretion of the board: A merger, acquisition or joint

venture and debentures or bonds issued or proposed to be issued by a government;

Act refers to the Capital Markets Act, Cap 485A and includes the Regulations and Guidelines issued thereunder;

Additional Issue means a capitalisation, rights, scrip dividend or bonus issue;

Agent: An Agent is normally a representative of a stockbroker and does the business of buying and selling of securities for a return commission.

Allotment Committee means a committee comprising representatives of the issuer and advisors whose mandate it is to oversee allotment of securities;

Alternative Investment Market Segment means a market segment for which securities of issuers that satisfy the eligibility requirements prescribed under regulation 7(1)(b) of the Capital

Markets (Securities) (Public Offers, Listing and Disclosure) Regulations, 2002 and set out in the

First Schedule of Part V of these rules, are listed;

Annual General Meeting (AGM): It is a mandatory meeting held annually by law by all public companies and to which all shareholders is invited to attend, to discuss the affairs and performance of their companies.

Annual Report: It is a document issued by a company to its shareholders containing the chairman’s statement, and the financial performance including the assets and liabilities, profits and losses and other relevant information on the company. An annual report is mandatory for all public companies.

Asset(s): The term “Assets” refers to all the properties and stock of investments including cash and bank deposits, which a company owns.

Associated Person has the meaning assigned to it in Section 3 of the Capital Markets Act;

Authorized Share Capital: This is the company’s share capital, which is stated in the memorandum and articles of association as required by law. To increase the authorized share capital, a resolution must be passed to that effect by the majority of the shareholders and an application made to the registrar of companies for authority to increase the shares. A block split

57 or stock dividend and debentures, shares, or bonds issued or proposed to be issued by a body corporate;

Bid: A buy side of the quoted share, which is the highest price a buyer is willing to pay to purchase a security.

Bonus: These are shares given to existing shareholders at a specified ratio and paid from the company’s normal revenue reserve.

Board refers to the Board of Directors of the UGANDA Stock Exchange Limited as prescribed by the Capital Markets Act;

Bonds: These are long term fixed interest securities issued by government and corporate bodies.

In effect they are promissory notes in which the issuer makes an obligation to pay interest at specified times and intervals, and to pay back the original amount at maturity of the Bond.

Books Closing Date refers to the day (including time) set by a company for purposes of determining members for the issue of entitlements;

Borrowing Company means an issuer with respect to debt securities;

Broker: A person who buys and sells securities on behalf of clients at the stock exchange; earnings and dividends of an unusual nature and any right, warrant, option or futures in respect of any debenture, shares, bonds, notes or in respect of commodities;

Capitalisation or bonus issue is an issue of fully paid shares capitalised from the issuer’s share premium, capital redemption reserve fund or reserves (or combinations thereof) to existing shareholders of the issuer in proportion to their shareholdings at a specific date;

Central Depository means a company approved by the Authority under section 5 of the Central

Depositories Act, 2000 to establish and operate a system for the central handling of securities:

Companies Act means Chapter 486 of the Laws of Uganda;

Convertible securities are securities which are convertible into or exchangeable for other securities or securities accompanied by warrant or options to subscribe or purchase other securities and conversion and convertible should be construed accordingly; the acquisition or loss of a significant contract and any unit, interest or share offered under a collective investment scheme; or

Day means calendar days excluding Saturdays and Sundays and public holidays unless stated otherwise;

De listing means removal of a security or a company from the Official List of The Exchange;

Dealers: A person who buys and sells securities on his/ her own behalf at a stock exchange.

Debenture in relation to loan securities means, debenture or debenture stock which in addition to any other security in respect thereof, are secured by a charge over the whole or substantially the whole of the assets and undertaking of the borrowing or guarantor companies;

Dividend(s): It is part of a company’s profits distributed to shareholders as cash after it has been declared and approved in an Annual General Meeting (AGM). The amount of profits not distributed is retained as reserves of the company;

Equity Securities means ordinary shares, rights or interests (whether described as units, shares or otherwise) and rights or options to subscribe for any of the foregoing;

Exchange means UGANDA Stock Exchange Limited;

Fixed Income Securities include debentures or debenture stocks, secured or unsecured, within the meaning of the Companies Act, securities of the Government of Uganda, securities guaranteed by the Government of Uganda, corporate bonds and commercial papers;

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)

59 of the Capital Markets (Securities) (Public Offers, Listing and Disclosure) Regulations 2002 and set out in the Second Schedule under Part V of these rules, are listed;

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” should be construed accordingly;

Foreign investor means any person who is not a resident of Uganda;

Foreign issuer means anybody corporate incorporated outside Uganda and registered in Uganda; a call of securities for redemption;

Guarantor Company, used in relation to a Borrowing Company, means a Company that has guaranteed or has agreed to guarantee the repayment of any money received or to be received by the Borrowing Company in response to an invitation to the public to subscribe for or purchase loan securities of the Borrowing Company; the public or private sale of a significant amount of additional securities and the purchase or sale of a significant asset;

IAS means International Accountings Standards;

ITA means the Income Tax Act;

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 to subscribe for the purchase of securities;

Initial Public Offering (IPO): An IPO is the first time the company invites the public to subscribe for securities. This is sometimes referred to as a public offer.

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;

Introduction is a method of bringing securities to listing not involving an issue of new securities or any marketing of existing securities subject to compliance with the condition of listing in the relevant market segment;

Investment Advisor: Licensed person(s), who engage in the business of advising their clients about securities on issues of whether it is advisable to invest, purchase or sell securities. Advisers also carry out analysis or reports concerning securities. They can also manage a range of investments under a contract or on agreement with investors.

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, privatization 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;

Issuer means a company or other legal entity incorporated in or established under the laws of

Uganda that offers securities to the public or a section thereof, whether or not such securities are the subject of an application for admission or have been admitted to listing;

Issuer: The term “Issuer” refers to any company or other legal entities whose securities are the subject of an application for listing: A significant labour dispute; a significant law suit against the issuer and establishment of a programme to make purchases of the issuer’s own shares;

Limited in accordance with the Act and the rules of the Exchange;

Listed Company means an issuer any part of whose shares have been listed;

Listed means admitted to the Official List of the Exchange, and listing should be construed accordingly; a tender offer for another issuer’s securities;

Main Investment Market Segment means a market segment for which securities of issuers that satisfy the eligibility requirements prescribed under Regulation 7 (1) (a) of the Capital.

Market Capitalisation is a market estimate of a company’s value, based on perceived future prospects, economic and monetary conditions. Also represents the public opinion of a

Company’s net worth and a determining factor in stock valuation.

Market Capitalisation can also be defined as a measure of corporate economic size equal to the share price times the number of shares outstanding of a public Company, providing a total value for the company’s shares and thus for the company as a whole.

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; Markets (Securities) (Public

Offers, Listing and Disclosure) Regulations, 2002, and set out in the First Schedule of Part V of these rules, are listed in the Capital Markets Act;

Material Contract is any contract the details of which would be necessary for the purpose of making an informed assessment of the financial position and prospects of the issuer;

Material Information means any information that may affect the price of an issuer’s securities or influence investment decisions and includes information on –

Member refers to a body corporate admitted to membership of the Uganda Stock Exchange.

Offer for Subscription is an invitation to the public by, or on behalf of, an issuer to subscribe for securities of the issuer not yet in issue or allotted and may be in the form of an invitation to tender at or above a stated price;

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;

Offer to the public refers to an offer is made to persons in Uganda which is made to the public.

Offer: This is the opposite of a bid, it is the price at which a seller is willing to sell a security.

Official List means a list specifying all securities, which have been admitted for listing on any of the market segments of the Exchange;

Placing Agent means a Member of the Exchange appointed by an issuer to sell the issuer’s securities to members of the public;

Private Company: A private company is a limited company with a minimum of two shareholders and a maximum of fifty. Private companies have restrictions on the transfer of shares.

Privatization: This is the act of transferring government owned assets (i.e. state owned enterprises) into private hands or the general public, either through public offering, tender or private contract. The act is also referred to as divestiture since it entails divestment by the government.

Prospectus: A prospectus is a document, notice, circular or advertisement inviting the public to purchase any shares or securities of a company.

Public Company: A public company is a limited liability company with a minimum of seven shareholders and no maximum. A public company does not have restriction on the transfer of shares. Public companies are required by law to disclose all material and relevant information about their performance, activities, operations and accounts

Registrar has the meaning assigned to it in Section 2 of the Companies Act;

Resident of Uganda in relation to share offers and issues;

Ruling price means the closing price at the last trading session at which that security was traded before the day on which an announcement is made;

Scrip Dividend refers to new shares, which a shareholder elects to receive in lieu of a cash dividend where the shareholder is given the right to make such an election;

Securities means:

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;

Shares: Shares represent part ownership of the company and are classified into the following categories:

Sponsoring Stockbroker means a member of the Exchange appointed by an issuer in accordance with Rule 4;

Stock Market Index: The index is a measure of stock market trends and performance. The index may be used as an indicator of the movement (up and down) of the stock market prices. An upward movement in the index shows that on the average, the shares are appreciating. The index is therefore a weighted average of the market performance.

Subsidiary Company means a company that is a member of another company in which:

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;

The Authority means the Capital Markets Authority established under section 5 of the Capital

Markets Act;

The Chief Executive refers to the Chief Executive Officer of the Exchange;

The Committee means a committee of the Board of the Exchange acting as the Listing

Committee constituted and assigned the mandate with respect to listing of securities under the general direction and guidance of the Board;

Underwriting means the purchase or commitment to purchase or distribute, by dealers or other persons approved by the Authority of any securities that have not been subscribed during the offer of securities to the public by the issuer;

What is a listed company? A listed company is one which has offered securities for the public to buy and hence makes part of its shareholding available for trading at a stock exchange.

What is a primary market? This refers to the purchase of shares in an Initial Public Offering

(IPO), whereby a company offers its shares to members of the public for the first time and those wishing to acquire securities apply to that company or institution.

What is a Secondary Market? A secondary market is a facility (called an exchange or over the counter market) where securities initially acquired from the primary market are traded. At the secondary market, shares can only be bought through a licensed broker/dealer who buys and sells securities on behalf of investors for a commission or a brokerage fee.

APPENDIX 3: PROJECT RESEARCH QUESTIONNAIRE.

PROJECT RESEARCH QUESTIONNAIRE

MAKERERE UNIVERSITY

Dear respondent,

This questionnaire is intended to facilitate the study “An analysis of listed Companies performance on USE and Capital markets in Uganda 2010-2015”. The study is for academic purposes and carried out as partial requirement of the award of Masters of Business

Administration (MBA) by Mwijuka Amos- Makerere University Kampala (MUK).

Your responses will also be treated as with utmost confidentiality.

Thank you for your valuable time and response.

SECTION A: BACKGROUND INFORMATION

Name of organization (Optional)…………………………………………………………..

Name of the respondent (Optional)…………………………………………………………..

1) Gender: Male Female

2) Age of respondent in years.

Tick under one of the 18-30 31-40 41-50 Above 50

options

3) Highest level of education.

Tick Ordinary Advanced level Diploma Degree Masters’ Others under level Degree (Please

one of the specify) options 4) Marital status

Tick under one of the options Single Married

5) What is the legal status of your Company?

Tick under one Sole proprietorship Partnership Limited Liability company

of the options

6) Are you very engaged in transactions with the Uganda Securities Exchange (USE) or the

Capital Market Authority (CMA)?

Tick under one of the options YES NO

7) How would you rate your knowledge of the stock exchange market in Uganda?

Tick under one of the options High Low Very low

SECTION B: For this section please indicate your level of Agreement or

Disagreement to the following statements:

8) The procedures and requirements for listing on Uganda Securities Exchange (USE)

listings.

Extent of agreement

S/N The procedures and listing requirements on listing of Uganda

Securities Exchange (USE)

Strongly Strongly disagree Disagree sure Not Agree Strongly agree Uganda Securities Exchange (USE) listing procedures are very 1 irrelevant. We strongly feel the listing procedures should be revised to meet the 2 current business trends. Uganda Securities Exchange (USE) listing procedures were a very 3 big problem when we were trying to get on the security market. Some Companies have been discouraged from opening up by the 4 Uganda Securities Exchange (USE) listing procedures. The Uganda Securities Exchange (USE) listing procedures should 5 be simplified so that more Companies are encouraged to join USE. The Uganda Securities Exchange (USE) listing procedures are so 6 time consuming so that it is sometimes unwise to pursue them. The Uganda Securities Exchange (USE) criterion makes it very 7 difficult for a company to open up for listing. It takes every technical person to perform and implement the 8 Uganda Securities Exchange (USE) listing procedures in order to be listed. Many Companies are complaining about the procedure that opening 9 up on the Uganda Securities Exchange (USE). I feel that Uganda Securities Exchange (USE) listing procedures are 10 kept away from the stock market by the brokerage firms. Source of data: Primary.

SECTION C: THE CHALLENGES THAT INHIBIT COMPANIES FROM LISTING.

9) The following requirements are prohibitive to companies seeking to list on the Uganda

Securities Exchange (USE).

S/N Extent of agreement

Challenges that inhibit Companies from listing

disagree Disagree sure Not Agree Strongly agree on the Uganda Securities Exchange (USE). Strongly 1 Do private Companies in Uganda go for listing on Uganda Securities Exchange (USE)? 2 Do Companies trust Uganda Securities Exchange (USE) market and its staff? 3 Uganda Securities Exchange (USE) market staffs are open, trust worthy and honest with Companies intending to register with Uganda Securities Exchange (USE). 4 The Uganda Securities Exchange (USE) officials are quite knowledgeable about the USE market deals and practices. 5 I have no doubt Uganda Securities Exchange (USE) always delivers promptly what they promise. 6 The Uganda Securities Exchange (USE) is very reliable. 7 I feel very little risk when dealing with the Uganda Securities Exchange (USE) market authorities. 8 Uganda Securities Exchange (USE) authorities are prepared to be asked questions of what is not being done right. 9 If I share my problem with Uganda Securities Exchange (USE) authorities they would respond constructively. 10 Uganda Securities Exchange (USE) officials are friendly and approachable. Source of data: Primary.

10) Please list any other issues you fill that are responsible for your unwillingness to list

on the Uganda Stock Exchange (USE) market: The stated factors/challenges that

inhibit Companies from listing include:

………………………………………………………………………………………………