Roundtable discussion: Capital market development programme

IPO/SPO 2022-2023 plan

15

IPO/SPO plans for 2022-2023

STATE SHARE

INDUSTRY

100% Automobile

manufacturing

98.6%

85%

Metals and

mining

Metals and mining

100%

96.5%

Banking

Banking

25%

76%

Insurance

Oil and Gas

STATE SHARE

INDUSTRY

94.3%

94.6%

Banking

Insurance

88.3%

84.8%

Metals and

mining

Banking

49%

Air

transportation

100%

75.5%

Banking

Oil and Gas

ALMALYK MMC

UZMETKOMBINAT JSC

2022

Q1

Q2

Q3

Q4

NAVOI MMC

2023

Q1

Q2

Q3

TBD

First local listings, then international listings.

Pre-IPO and IPO preparation in local listings will be based on international standards.

Underwriter syndicate will be a consortium of one international, one regional and one local financial company (license holder).

IPO/SPO size and timing is subject to underwriters` recommendations alongside with market conditions and government approvals.

No any legal/technical restrictions for foreign investors to purchase locally issued shares.

4

pre-IPO preparation

IPO preparation

IPO execution

• Approval of Supervisory Board (SB)/General Meeting of Shareholders (GMS) on IPO

• Appointment of advisors (underwriters, lawyers and others) via official tender

• IPO readiness analysis: - Business plan and strategy - Financials/accounting/disclosure - Capital structure/dividend policy - Corporate structure/governance

• Early look meetings with investors and initial assessment of demand

• Prepare and finalise: - Financial statements - Business plan and strategy - Offering prospectus and other legal documents - investor presentation

• Develop: - equity story - research report for investors - marketing strategy

• Preliminary valuation

• Finalise offer structure

• Approval of Supervisory Board (SB)/General Meeting of Shareholders (GMS) on final prospectus and legal docs, offer structure and price range, and marketing strategy

• Registration by Capital Market Authority (5 to 15 working days) • Registration by Central Securities Depository (1 to 5 working days) • Publication of research • Publication of prospectus • Signals of public “launch” of IPO • Investor feedback and initial valuation thoughts • Analyse feedback and monitor market • Refine and set valuation range • Roadshow • Analyse demand/feedback • Pricing and allocation • Clearing (T+2)

Local IPO process

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Investor

👨

Resident: Individual / legal entity

Non-resident: Individual / legal entity

👨

Account opening procedure: • Submission of documents

• Signing a contract

• Client's deposit account

• Topping-up account

Investment intermediary

Registration of the

application

Entering an application in Single Software Technical

Complex (SSTC)

Collection of applications

Accomplish the final stage of the subscription

Broker

if the application is successful

if the application is unsuccessful

Clearing

Implementation of settlements

Withdrawal of

commissions and fees

Investor/Shareholder

Acquisition of ownership rights to securities

Depositor (905 772)

Resident (902 200)

Non-residents (3,572)

Individuals (837 293)

Legal entities (64,907)

Individuals (3,067)

Legal entities (505)

Opening depo accounts by foreign investors

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Best offer selection Tender

Bid announcement bid evaluation criteria

technical task

Tender announcement tender evaluation criteria

technical task

At least five days before the selection

12-30 days

Technical tasks of the procurements above the

25000 BCV

Technical tasks of the procurements above

25000 BCV

Made automatically by the platform/commission

using score method

Made automatically by the platform/commission

using scoring method

Dealed/rejected Dealed/rejected

Procurement announcements:

Development of procurement documentations:

Examination at the Center for Comprehensive Expertise of Projects and Import Contracts:

Offer evaluations:

Dealing with the winner:

Procurement procedures for each type

*BCV-Basic calculated value

Public procurement process

The procurement process of enterprises with government share of 50 percent or more is regulated by the laws and the legislations of the Republic of Uzbekistan.

A procurement selection procedure is led by commission consisting of at least five members of the procuring company.

Tender documentation for public procurement in an amount exceeding twenty-five thousand minimum wages is subject to examination at the Center for Comprehensive Expertise of Projects and Import Contracts

Procurement of goods (work, services), are carried out under direct contracts on the basis of decrees and resolutions of the President of the Republic of Uzbekistan, resolutions of the Cabinet of Ministers of the Republic of Uzbekistan.

Developments in IT infrastructure

8

Completed projects

The extension of current contracts with vendors for servicing the unified software complex;

Seminar-trainings for the unified software complex’s staff on maintenance of the system;

Approval has been obtained to create disaster recovery and Business Continuity Plan facilities:

construction of permanent Reserve centre in Yunusabad;

purchasing server as a reserve for the short-term;

renovation of the current building.

Implementation of daily publishing of all market activity.

9

Description Status Deadline

Development of an API for interaction between applications and programs to provide access to the unified software complex through mobile applications.

In progress Q1 2022

MOU with KRX that incorporates advanced trainings on unified software complex operations: - increase of the technical capabilities and capacity of the complex, - technological changes of software for the sale of new financial instruments

(mortgage securities, Sukuk, investment funds and etc.) - Surveillance function for the regulator.

In progress Q1 2022

Development of a Central portal as a workflow tool for the capital market: - Disclosure of information by JSCs; - Registration automation, Licensing and Attestation, Learning and development; - Review cases by the regulator.

In progress Q1 2022

National numbering agency function implementation by the CSD Being implemented Q3 2022

Electronic identification (KYC) of residents (individuals) Being implemented Q2 2022

Stock exchange and the currency exchange integration to allow for international investors to trade with government bonds

Being reviewed Q1 2022

Creating an OTC platform for RSE Being reviewed Q3 2022

Ongoing projects

Developments in legal infrastructure

Reform of CM legal infrastructure: summary

Quick enhancements: ongoing changes

Strategic/policy directions:

Capital Markets Law

IOSCO MMoU signing

Collective Investment Schemes, ETFs, Futures, etc

Islamic Finance

Securitization, mortgage market development

12

Description Status Deadline

- Changes related to the online format of shareholder meetings, placement of preferred stocks, - Automatic recognition of the public placement through organized market, - Introducing exchange traded bonds with simplified placement conditions, - Notion of foreign nominal holding introduced, - Investment advisor enabled to provide transfer agent services and more

Completed

- Account opening procedures Electronic authentication and identification process (KYC and FATF for residents Simplified identification for foreign investors

Draft Q1 2022

Reviewing attractiveness of stocks and bonds vs retail banking products, tax amounts review Draft Q4 2021

Allowing nonresidents access to purchase local Government bonds and creation of secondary market for them

Draft Q4 2021

Privatization of State owned enterprises – using the local capital market in the privatization process Draft Q4 2021

Simplification of underwriter consortium forming with foreign banks and financial services institutions Draft Q4 2021

Corporate actions and improvements of dividend payment procedure Draft Q1 2022

Simplifying rules around trading, making everything electronic (documentation) Draft Q1 2022

Draft regulation for issuance of local currency bonds by the international financial institutions has been prepared and in review

Draft Q1 2022

Developing corporate bond market, including possible remove of collateral requirements Being reviewed Q1 2022

Review disclosing requirements/rules – including of Board’s recommendations, cash flows. Simplification of reporting forms

Being reviewed Q1 2022

Procedure improvements

Capital Markets Development Strategy, Technical Assistance

European Bank for Reconstruction and Development EBRD

Capital Markets Roadmap, Technical Assistance

Asian Development Bank ADB

Signing MMoU, diagnosing and streamlining legal framework

IOSCO/IMF

To issue Bonds on behalf of World Bank and Uzbekistan

International Finance Corporation IFC (World Bank Group)

International Co-operation In delivering the reform of the capital market legal infrastructure, the Ministry of Finance is actively working in partnership with international organizations and institutions

Developing capital markets law

US Government (Department of Commerce, US Treasury, SEC)

Developing legal framework for Islamic finance products

Islamic Development Bank IsDB/UNDP

Green Sukuk Initiative, SDGs

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Description Int. Partner Status

Capital Markets Law US Gov., EBRD Drafting

IOSCO MMoU signing IMF/IOSCO/EBRD In progress

Collective Investment Schemes, ETFs, Futures, etc.

ADB/EBRD Drafting

Islamic Finance IsDB/UNDP Drafting

Securitization, mortgage market development ADB/EBRD Drafting

Strategic/policy directions

Capital Markets Law

Draft capital market law in works with support of EBRD and US Government. Law shall comply with best international standards, including IOSCO principles of regulation;

The draft shall overarch major capital markets areas such as:

Defining the regulatory perimeter (regulatory structure and competencies of the regulator);

Professional participants of the market;

Marketplace (categories) and its regulation;

Diversification of the products;

CIS (investment funds), Securitization, Islamic Finance, SROs, credit rating agencies;

Disclosure, surveillance and enforcement.

IOSCO Memorandum (MMoU)

Uzbekistan has committed to sign IOSCO MMoU;

Diagnostic report was produced with the support of the IMF;

Respective areas have been identified and changes to the legislation will be reflected primarily in the new capital markets law as well as ongoing changes to the securities legislation;

Discussions and preparations of screening of the post-amended legislation are underway.

Other financial products

With support of ADB, the work on collective investment schemes and related products has commenced;

The project envisages two directions: elaboration of the law on collective investment schemes (investment funds) and development of the products tailored to the local market. This includes ETFs and gold ETFs;

The preliminary draft law on collective investments schemes is in works and under review to provide basis for further iterations based on the feedback of the Ministry.

Islamic finance

With support of Islamic Development Bank and UNDP, elaboration of the legal framework to enable Islamic finance products is underway;

Tender has been announced and local and international law firms have been retained to provide expertise and prepare respective draft legislation;

Feasibility and preliminary studies have been delivered. Ministry is currently reviewing the memo on the sukuk and is in regular discussions with the local and international firm to guide their work.

Securitization, mortgage refinance

Capital market reform envisages introduction of the ABS/MBS structures to lift the liquidity pressures from the financial market;

Capital markets law will cover the legal concepts required for implementation of such products ultimately leading to the development of fully fledged legislation related to asset backed securities;

Meanwhile, the MOF is overseeing development of legal framework for Zakladnayas to enable safe refinancing of the mortgage loan portfolios of local commercial banks by Uzbekistan Mortgage Refinancing Company.

Thank You!