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—— DRs provide flexibility to adjust the
stock price in line with peers in the
overseas market through the use of
DR ratio
• Seamless Asset Servicing
—— DR issuers can leverage depositary
banks to provide seamless asset
servicing, which is a benefit that is
not available in the case of ordinary
share listing
—— Issuers can benefit from the “one
stop shop” in case of DRs, in which
appointing a share registrar and
transfer agent is the Depositary
Bank’s responsibility; in ordinary
share listings, the issuer will have to
deal with multiple service providers.
• Cost-Effective
—— DR issuers will avoid the need to
have costly infrastructure in place
to service overseas listed securities
—— In certain cases, DR banks absorb
costs associated with the listing
Table 2: Benefits of a DR program
The Role of the Depositary Bank
| Introduction
• Value-Add Services
—— Issuers will benefit from the
complimentary IR Advisory services
provided by Citi
—— Issuers will also have access to
dedicated account managers who
will be a single point of contact
and will coordinate with the issuer
and industry participants on all
DR-related matters including
regulatory and tax matters
—— Issuers will benefit from the
Depositary Bank’s equity
distribution network which will
help gauge investor sentiment
on real-time basis and facilitate
systematic investor targeting.
Cross-border Transactional
benefits of DRs
DRs can play a critical role in multiple
types of cross-border transactions,
such as privatizations, mergers and
acquisitions, corporate actions, and
strategic Issuer objectives.
Privatizations
The privatization of state-owned
assets is an important undertaking for
governments worldwide, as countries
seek to restructure their economies
and reduce fiscal deficits. Infrastructure
and service enterprises such as
telecommunications, utilities, airlines
and petrochemicals are among those
commonly targeted for privatization.
DRs have been used successfully by
governments seeking to privatize
state-owned enterprises. Privatizations
require a successful offering of
securities to investors, and DRs provide
an effective mechanism both to
increase private ownership and to raise
capital overseas.
M&A and Other Corporate Actions
DRs can enhance the ease of trading
and settlement related to cross-border
mergers and acquisitions. Types of M&A
transaction that have made successful
use of DRs include:
• Spin-offs of non-U.S. subsidiaries;
• Equity-based acquisitions of U.S.
business entities; and
• Equity-based acquisitions of non-U.S.
business entities.
Strategic Objectives
Issuers can also structure a DR program
based on particular corporate objectives.
An issuer’s aims in selecting and
establishing a DR program to align with
their strategic objectives may include:
• Expanding its shareholder base;
• Gaining international recognition
for the company name and for its
products and services;
• Using DRs as a capital-raising tool;
and
• Providing a convenient investment
vehicle for its globally based employees.
Benefits of a DR program specific to
issuers and investors are highlighted
in Table 2.
DRs enable issuers to:
DRs aid investors by:
Access capital outside the issuer’s
home market
Facilitating diversification into
non-U.S. securities
Build issuer visibility in the United States
and/or internationally
Trading, clearing and settling in
accordance with the practices of the
investor’s home market
Broaden and diversify issuer
shareholder base
Eliminating cross-border custody
safe-keeping changes
Increased opportunities to increase
local share prices as a result of global
demand/trading
Enhancing accessibility of research
and of price and trading information
Enlarge the market for the issuer’s shares,
potentially increasing liquidity
Allowing easy comparison to securities
or similar companies trading in the
investor’s home market
Adjust share price levels to those of
peers through a DR ratio
Permitting dividend payments in U.S.
dollars and corporate action processing
Utilize DRs to facilitate privatizations,
M&A and strategic corporate objectives
for the Issuer
Enabling uniform proxy and corporate
action processing
Develop stock option plans and stock
purchase plans for employees outside the
issuer’s home market
Providing opportunities to move between
markets