Dr. Güler Manisali DarmanBA 4834

Special Topics in Corporate Governance

Impact of Institutional Investors on Corporate Governance Practices of the Companies

23 March 2012

Four specific developments increasingly; bring the systems closer, open national markets to international cooperation augment the importance of stock markets.

These developments are; growing role of institutional investors, the integration of financial markets, the increased role of shareholder activism, and the recent wave of privatizations.

The ownership and control structure of a corporation should be fully transparent to all shareholders under all circumstances

Shareholders are often referred to as the “owners” of the corporation. They can choose which companies to invest in, and the companies count them on that basis

Institutional investors are becoming more important in global financial markets, with their assets under management rapidly catching up with those of the banking system. Institutional investors help to ensure deeper and better functioning markets, thus contributing to a more efficient allocation of savings, and their growth may help to counter the decline of household saving ratios associated with ageing populations.

Institutional investors include; mutual funds, pension funds, insurance companies, and similar private institutions like hedgeFunds, Sovereign Wealth Funds etc.

mutual fund is a type of professionally-managed type collective investment scheme that pools money from many investors. While there is no legal definition of mutual fund, the term is most commonly applied only to those collective investment schemes that are regulated, available to the general public and open-ended in nature. Hedge funds are not considered a type of mutual fund.There are 3 types of U.S. mutual funds: open-end, unit investment trust and closed-end. The most common type, the open-end mutual fund, must be willing to buy back its shares from its investors at the end of every business day. Exchange-traded funds are open-end funds or unit investment trusts that trade on an exchange. Open-end funds are most common, but exchange-traded funds have been gaining in popularity.

A pension fund is any plan, fund, or scheme which provides retirement income.

hedge fund is an investment fund that can undertake a wider range of investment and trading activities than other funds, but which is only open for investment from particular types of investors specified by regulators. These investors are typically institutions, such as pension funds, university endowments and foundations, or high net worth individuals. As a class, hedge funds invest in a diverse range of assets, but they most commonly trade liquid securities on public markets. They also employ a wide variety of investment strategies, and make use of techniques such as short selling and leverage.

Hedge funds are typically open-ended, meaning that investors can invest and withdraw money at regular, specified intervals. The value of an investment in a hedge fund is calculated as a share of the fund's net asset value, meaning that increases and decreases in the value of the fund's assets (and fund expenses) are directly reflected in the amount an investor can later withdraw.

Most hedge fund investment strategies aim to achieve a positive return on investment whether markets are rising or falling. Hedge fund managers typically invest their own money in the fund they manage, which serves to align their interests with investors in the fund.] A hedge fund typically pays its investment manager a management fee, which is a percentage of the assets of the fund, and a performance fee if the fund's net asset value increases during the year. Some hedge funds have a net asset value of several billion dollars. As of 2009 hedge funds represented 1.1% of the total funds and assets held by financial institutions. The estimated size of the global hedge fund industry is US$1.9 trillion.

Because hedge funds are not sold to the public or retail investors, the funds and their managers have historically not been subject to the same restrictions that govern other funds and investment fund managers with regard to how the fund may be structured and how strategies and techniques are employed. Regulations passed in the United States and Europe after the 2008 credit crisis are intended to increase government oversight of hedge funds and eliminate certain regulatory gaps

Sermaye Piyasası Mevzuatında Serbest Yatırım Fonları Türkiye'ye yatırım yapan yabancı kurumlar arasında "hedge fonlar" da yer almakta olup Türkiye'de bu tür fonların kuruluşuna imkan sağlamak üzere Kurulun Seri:VII, No:10 sayılı "Yatırım Fonlarına ilişkin Esaslar Tebliği"nde yapılan değişikliklerle,AB'ye giriş sürecinde fon endüstrimizin hizmet kalitesi ve çeşitliliğinin artırılması,Yatırımcı risk getiri beklentilerine uygun yatırım araçlarının ortaya çıkması ve hizmet kalitesinde artışa paralel yatırımcı tabanının genişlemesi,amaçlanmıştır.Yatırım stratejisi ve limitlerini içtüzüklerinde serbestçe belirleyebilme imkanına sahip, yalnızca nitelikli yatırımcılara satılabilen, "Serbest Yatırım Fonları" (SYF) olarak adlandırılan söz konusu yatırım fonlarına ilişkin temel düzenlemeler aşağıda yer almaktadır:1. Serbest Yatırım Fonları"Hedge Fund" karşılığı olarak "Serbest Yatırım Fonları" adının kullanılması öngörülme Bu fonlar, katılma payları sadece nitelikli yatırımcılara satılmak üzere kurulmuş olan yatırım fonları şeklinde tanımlanmaktadır.

2. Yatırımcılara İlişkin KısıtlarSerbest Yatırım Fonlarının yalnızca nitelikli yatırımcılara satılması tercih edilerek, fon yatırımcıları için asgari yatırım tutarı ya da maksimum yatırımcı sayısı konusunda sınırlama getirilmemiştir. Tebliğ uyarınca nitelikli yatırımcı, Yerli ve yabancı yatırım fonları, Emeklilik fonları, Yatırım ortaklıkları, Aracı kurumlar, Bankalar, Sigorta şirketleri, Portföy yönetim şirketleri, İpotek finansmanı kuruluşları, Emekli ve yardım sandıkları, Vakıflar, 506 sayılı Sosyal Sigortalar Kanununun geçici 20 nci maddesi uyarınca kurulmuş olan sandıklar, Kamuya yararlı dernekler Nitelikleri itibariyle bu kurumlara benzer olduğu Kurulca belirlenecek diğer yatırımcılar Fon katılma paylarının halka arz tarihi itibariyle en az 1 milyon TL tutarında Türk ve/veya yabancı para ve sermaye piyasası aracına sahip olan gerçek ve tüzel kişilerdir.3. Yatırım Amacı ve PolitikasıSerbest yatırım fonları diğer yatırım fonlarından farklı olarak herhangi bir karşılaştırma ölçütü kullanmadan ve piyasa getirisinden bağımsız olarak mutlak getiri sağlamayı amaçlayan yatırım stratejileri uygulamakta olup, bu amaca uygun olarak başta türev araçlar olmak üzere çeşitli yatırım araçları kullanmaktadırlar.Bu nedenle Kurulca, Serbest Yatırım Fonları, diğer yatırım fonları için geçerli olan içtüzük sınırlamalarından muaf tutulmuş, Yatırım stratejisi ve limitlerinin fon içtüzüğünde serbestçe belirlenmesi öngörülmüştür. Açığa satış, kredili menkul kıymet, kaldıraç ve türev araç kullanımı gibi daha karmaşık portföy yönetim tekniklerini içtüzüklerinde yer alacak strateji ve limitler çerçevesinde kullanabilmelerine olanak tanınmıştır.

Average household sector holdings of assets managed by institutional investors (including insurance and pension reserves and mutual fund shares) rose from 36% to 44% of total financial assets between 1995 and 2005.

Insurance companies and pension funds are thelargest institutional investors in terms of financial assets. In 2005, their total assets amounted to USD 30 trillion, almost double those held by mutual funds. Insurance companies are in aggregate somewhat larger than pension funds, holding assets of USD 17 trillion, compared with USD 13 trillion for pension funds.

A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold about $6 trillion in assets. In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity. Although the (Japan) Government Pension Investment Fund (GPIF) lost 0.25 percent, in the year ended March 31, 2011 GPIF was still the world's largest public pension fund which oversees 114 trillion Yen ($1.5 trillion).

In countries with well developed private corporate pension schemes (Australia, Canada, the Netherlands, Switzerland, the United Kingdom and the United States), pension funds are generally (apart from in the United Kingdom) the dominant institutional investors, and together they represent 70% of total pension assets in 2005.

In contrast, in Japan, Korea and most euro area countries, insurance companies dominate. This is particularly the case in France and Germany, where life insurance policies have been the main form of retirement savings and private pension funds are relatively new or underdeveloped

TIAA-CREF and CalPERS are the two largest institutional investors in US and are leading good corporate governance advocates. TIAA (Teachers Insurance and Annuity Association of America, a New York-based life insurance company), and CREF (College Retirement Equities Fund, an open-end investment company registered with the SEC), have together $259 billion assets under management.

The investment portfolio market value of CalPERS, The California

Public Employees’ Retirement System, was $167 billion as of 2006. CalPERS has made a decision to shift overseas allocation from 12 to 20 per cent of its assets to diversify and to take advantage of high potential growth in overseas markets. In November 2001, CalPERS allocated $1.7 billion of its investments specifically to pursue “active corporate governance strategies in European and Japanese markets”.

Press Release February 18, 2004Contact:Brad Pacheco/Pat Macht

Office of Public AffairsCalPERS Announces 2004 Emerging Markets Equity Policy

SACRAMENTO, CA - The California Public Employees’ Retirement System’s (CalPERS) Board of Administration has accepted an annual report on its emerging markets investment policy that will slightly change the way the pension fund invests in stocks around the world.

Based on the report, CalPERS will give Argentina, Peru and Turkey - markets that fell below CalPERS required score - one year to improve. CalPERS Board deferred for 30 days a decision to divest in the Philippines.

The good news is that generally countries’ scores have improved over the two year period we have had this policy. We remain optimistic that over time we will continue to see more countries meeting our threshold,” said Rob Feckner, CalPERS Investment Committee Chair. “And our door remains open to discussing how more countries can improve their markets to better support institutional investment.”

CalPERS decides which emerging equity markets it will invest in based on a report prepared by Santa Monica, California-based Wilshire Associates who evaluates markets on economic factors such as market liquidity and volatility, as well as political stability, financial transparency and labor standards.

Argentina, Brazil, Chile, Czech Republic, Hungary, Israel, Jordan, Malaysia, Mexico, Peru, Poland, South Africa, South Korea, Taiwan, and Turkey will remain on CalPERS permissible markets investment list

Malaysia was moved into the investable universe because of improvements made in that country.

Investments in the following equity markets will continue to be banned: India, Morocco, Philippines, Sri Lanka, Thailand, Colombia, China, Egypt, Pakistan, Russia, Venezuela and Indonesia.

The review showed that Argentina, Turkey and Peru, who were on the permissible list last year failed to make the cut. Under CalPERS current policy, the countries will be given one year to improve – a time period CalPERS refers to as the “cure period.”

The Philippines, which was placed in the cure period after last year’s review, improved slightly but not enough to reach CalPERS standards.  

Country and Market Macro-Factors

Country Market

Political Stability Market Liquidity andVolatility

Transparency Market Regulation/Legal

System/Investor Protection

Productive Labor Practices Capital Market Openness

Settlement Proficiency/

Transaction Costs

Separate Country Factor and Market Factor Ranks

Country Factor Ranks Market Factor Ranks1 Hungary 1 Chile2 Czech Republic 2 Pakistan3 Chile 3 South Korea4 Poland 4 Israel5 South Korea 5 Brazil6 Taiwan 6 Hungary7 Israel 7 Philippines8 South Africa 8 Taiwan9 Mexico 9 Thailand

10 Argentina 10 Poland11 Philippines 11 South Africa12 Brazil 12 Indonesia13 Turkey 13 Czech Republic14 Malaysia 14 Mexico15 15 Jordan 15 Peru16 16 India 16 India17 Sri Lanka 17 Jordan18 Peru 18 Egypt19 Thailand 19 Morocco20 Morocco 20 Russia21 Indonesia 21 Turkey22 Colombia 22 Malaysia23 Russia 23 China24 Egypt 24 Colombia25 Venezuela 25 Sri Lanka26 China 26 Argentina27 Pakistan 27 Venezuela

Weights 16.7% 16.7% 16.7% 12.5% 12.5% 12.5% 12.5% 100%Subtotal Weights 100%

Market Reg. Capital Settl. CumulativePolitical Productive Labour Market Liquidity & Legal System Market Proficiency 2007 Mrk Cap as a % Stability Transparency Practices Volatility Investor Protec. Openness Trans.costs Score of total Mark Cap

1Hungary 2.7 2.7 3.0 2.7 2.3 2.7 2.3 2.7 1.09%2 Chile 3.0 2.7 2.3 3.0 2.7 2.7 2.0 2.6 2.77%3 South Korea 2.3 3.0 2.3 3.0 3.0 2.3 2.0 2.6 20.34%4 Czech Republic 2.7 2.7 2.7 2.7 1.7 2.7 2.3 2.5 21.06%5 Poland 2.3 2.7 2.7 3.0 2.3 2.3 2.3 2.5 22.47%6 Israel 2.0 2.7 2.7 2.7 2.7 2.7 2.0 2.5 24.48%7 Taiwan 2.7 2.7 2.0 3.0 2.3 2.7 2.0 2.5 38.76%8 South Africa 2.0 3.0 2.3 3.0 2.7 2.3 1.7 2.4 49.34%9 Brazil 1.7 2.7 1.7 2.7 2.3 2.0 3.0 2.3 61.03%10 Philippines 1.7 2.7 1.7 2.7 3.0 2.0 2.3 2.3 61.38%11 Mexico 2.0 2.7 1.7 2.7 2.0 2.0 2.7 2.2 69.73%12 Jordan 2.0 2.3 1.7 3.0 1.0 2.3 3.0 2.2 70.20%13 Thailand 1.7 2.0 1.7 3.0 2.3 2.0 2.7 2.2 71.50%14 Turkey 1.7 2.3 2.0 2.7 1.7 2.3 2.3 2.1 72.86%15 India 2.0 2.7 1.0 3.0 2.3 1.3 2.7 2.1 81.33%16 Peru 1.3 2.3 2.0 2.7 1.7 2.3 2.7 2.1 81.53%17 Indonesia 1.7 2.3 1.3 3.0 2.3 2.0 2.3 2.1 82.90%18 Malaysia 2.3 2.7 1.0 3.0 2.3 1.3 2.0 2.1 86.20%19 Morocco 2.0 2.0 1.3 2.7 2.0 2.3 2.0 2.0 86.50%20 Argentina 1.7 2.3 2.3 2.0 2.0 2.3 1.3 2.0 87.11%21 Pakistan 1.0 1.7 1.0 3.0 2.7 1.7 3.0 1.9 87.29%22 Egypt 1.3 1.7 1.7 2.7 1.3 2.0 3.0 1.9 88.03%23 Russia 1.0 2.0 1.7 3.0 2.0 1.7 2.3 1.9 97.06%24 Sri Lanka 1.3 2.3 2.0 2.7 1.3 1.7 2.0 1.9 97.11%25 Colombia 1.7 1.7 1.7 2.7 2.0 2.3 1.0 1.9 97.74%26 China 1.3 1.3 1.3 3.0 1.7 1.3 2.3 1.7 99.89%27 Venezuela 1.0 1.7 2.0 1.7 1.0 1.7 2.0 1.6 100.00%

Overall Summary

50% 50%

Country Factors Market Factors

CalPERS has approximately $2.6 billion currently invested in the emerging markets, including $67 million in the Philippines.

Wilshire Associate’s full report on the emerging markets can be found in CalPERS press room on its web site at www.calpers.ca.gov.  

2008 Corporate Governance Focus ListCalPERS named five underperforming companies in our

annual Focus List in March 2008. You can find out more about this action and the five companies by choosing one of the options below

Standard Pacific Corporation (SPF) La-Z-Boy (LZB) Invacare Corporation (IVC) Hilb Rogal & Hobbs Company (HRH) Cheesecake Factory Incorporated (CAKE)

  

Investment companies - such as mutual funds, investment trusts, hedge funds and private equity funds - pool assets for investment purposes. Forexample;

Deutche Asset Management (DeAM), a member of Deutche Bank Group, portrays itself as an activist shareholder which tries to take a long-term view. DeAM, with clients from over 60 countries around the world, and close to €630 billion of funds under management, is considering launching a corporate governance fund.

A report from the independent research house, Matrix Services, quoted in the Financial Times, Fund Management of 19 January 2004, says that the research house’s funds under management in China are predicted to increase ten-fold by 2010 to $1,600 billion, as market reforms unleash a period of extraordinary growth for the Chinese domestic fund management industry

Total Financial Assets of Institutional Investors

Countries1995 2005 1995 2005 1995 2005 1995 2005 1996 2005

Australia 321 1.507 273 807 128 241 146 566 48 700Canada 556 1.432 402 941 172 391 230 550 155 491Euro Area (4) na 10.165 na 5.858 1.871 4.664 na 1.194 1.378 4.307Belgium 114 344 85 226 76 212 9 14 29 118France 1.176 3.008 642 1.646 642 1.614 0 32 534 1.363Germany 1.057 2.152 919 1.856 779 1.573 140 283 138 297Italy na 1.007 na 557 120 528 na 29 130 451Luxemburg 346 1.689 8 53 8 53 na na 338 1.636Netherland 562 1.282 497 1.156 162 407 335 749 65 126Spain 246 682 102 365 84 278 18 87 144 317Japan 4.150 4.710 3.729 4.240 2.999 3.243 731 997 420 470Korea (5) na 621 138 422 103 272 35 150 na 199Mexico na 132 na 84 na 21 na 63 na 47Singapore (6) 226 443 95 132 21 52 74 80 131 311Sweden na 506 90 387 na 268 90 118 35 119Switzerland (7) na 681 na 565 na 227 na 338 48 117UK (5) 1.759 4.014 1.558 3.467 798 1.979 760 1.487 201 547US 10.546 21.811 7.020 12.906 2.804 5.601 4.216 7.305 3.526 8.905Total 46.021 29.810 16.960 12.848 16.214

Insurance Companies & Pension Funds Mutual FundsTotal Total Insurers Pensions

Source: BIS 20072) In billions of US dollars. 3) For the Netherlands and United Kingdom, individual insurance

companies and pension fund data are from different sources and hence do not add up to total insurance and pensions.

4) Mutual fund data are from the Investment Company Institute as the definition of mutual fund data varies across national financial accounts. Funds of funds are not included except for France, Italy and Luxembourg after 2003.

5) Including Belgium, France, Germany, Italy, Luxembourg, the Netherlands and Spain; data are for 1995 and 2004.

6) Data for Korea and the United Kingdom are for 2004.7) Data for Singapore are for 2000 and 2005 respectively.8) Data for Switzerland are for 1999 and 2003 respectively. Sources: Investment Company Institute

(http://www.ici.org/stats/mf/index.html); national sources

SWFs are typically created when governments have budgetary surpluses and have little or no international debt. This excess liquidity is not always possible or desirable to hold as money or to channel it into consumption immediately. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. To reduce the volatility of government revenues, counter the boom-bust cycles' adverse effect on government spending and the national economy or build up savings for future generations, SWFs may be created. One example of such a fund is The Government Pension Fund of Norway.

The first SWF was the Kuwait Investment Board, a commodity SWF created in 1953 from oil revenues before Kuwait even gained independence from Great Britain. According to the Sovereign Wealth Fund Institute, Kuwait's fund is now worth approximately $250 billion.

Another of the first registered SWF is the Kiribati Revenue Equalisation Reserve Fund. Created in 1956 when the British administration of the Gilbert Islands in Micronesia put a levy on the export of phosphates (bird manure) used in fertilizer, the fund has since then grown to $520m

A SWF is “a government investment vehicle which is funded by foreign exchange assets, and which manages these assets separately from official reserves (Morgan Stanley, Global Economic Forum 26 Oct. 2007)

2. Sovereign;2. High foreign currency exposure;3. No explicit liabilities;4. High risk tolerance;5. Long investment horizon

sovereign-wealth funds make up only 2% of the world's $165 trillion-worth of traded securities

sovereign-wealth funds will be worth $10 trillion by 2012, and$12 trillion for 2015

Merrill Lynch and Citigroup became the latest to get the sovereign-wealth treatment, picking up a further $6.6 billion and $14.5 billion respectively, much of it from governments in Asia and the Middle East (Economist 17 Jan 2008)

Cross –listing –ADR’s

Cross listing of shares is when a firm lists its equity shares on one or more foreign stock exchange in addition to its domestic exchange. Examples include: •American Deposit Receipts (ADR), •European Depositary Receipts (EDR), •International Depositary Receipt (IDR) and •Global Registered Shares (GRS).

Listing in US – SEC & SOX requirementsWhen companies list on U.S. exchanges, they have to follow the stock exchange and Securities and Exchange Commission (SEC) requirements on disclosure. Although there are many disclosure exemptions for foreign companies from the domestic rules, the level of disclosure required is generally high.

American Depository Receipts

Because there can be problems in dealing in unfamiliar foreign markets, Depositary Receipts were devised as a method of trading international securities (equity or debt) within the U.S.

This involves depositing the ordinary securities from the foreign market with a bank (called the depositary), who will then issue certificates in the U.S. that represent (and are backed by) the deposited securities.

These certificates are freely traded and are commonly called American Depositary Receipts (or Depositary Receipts for short, or sometimes Global Depositary Receipts for marketing purposes).

American Depository Receipts

The Types of ADRs II.Sponsored ADRs

i. Level 1ii. Level 2iii. Level 3iv. Rule 144A ADR programme

•Unsponsored ADRsIf anybody buys some shares in a company and then issues Depositary Receipts representing those shares - without consulting, or acting with the accord, of the company, then these are termed Unsponsored Depositary Receipts, and in the early days of the ADR market they were quite common.

American Depository Receipts

Sponsored Level 1:

This is the simplest method for foreign companies to issue tradable securities in the U.S. markets.

The ADRs are not listed, and are traded over-the-counter (OTC).

They do not have to adapt any reporting procedures to comply with U.S. Generally Accepted Accounting Principles (GAAP) or Securities and Exchange Commission (SEC) disclosure.

American Depository Receipts –Over the Counter

Over-the-counter (OTC) or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges

For such securities, broker/dealers negotiate directly with one another over computer networks and by phone, and their activities are monitored by the NASD (National Association of Security Dealers –merged with NYSE in 2007). OTC stocks are usually very risky since they are the stocks that are not considered large or stable enough to trade on a major exchange. They also tend to trade infrequently, making the bid-ask spread larger. Also, research about these stocks is more difficult to obtain.

American Depository ReceiptsSponsored Level 2 (listed)Level 2 depositary receipt programs are more complicated for a foreign company. When a foreign company wants to set up a Level 2 program, It must file a registration statement with the SEC and is under SEC regulation. In their filings, the company is required to follow GAAP standards. The advantage that the company has by upgrading their program to Level 2 is that the shares can be listed on a U.S. stock exchange. These exchanges include the New York Stock Exchange (NYSE), NASDAQ, and the American Stock Exchange (AMEX). While listed on these exchanges, the company must meet the exchange’s listing requirements. If it fails to do so, it will be delisted and forced to downgrade its ADR program.

American Depository ReceiptsSponsored Level 3 (offering)Level 3 depositary receipt program is the highest level a foreign company can have. Because of this distinction, the company is required to adhere to stricter rules that are similar to those followed by U.S. companies. Setting up a Level 3 program means that; the foreign company is not only taking some of its shares from its home market and depositing them to be traded in the U.S.; it is actually issuing shares to raise capital. The company must adhere to GAAP standards. Any material information given to shareholders in the home market, must be filed with the SEC Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their U.S. shareholders because they rely on them for capital.

American Depository ReceiptsRestricted programs2.144-ASome foreign companies will set up an ADR program under SEC Rule 144(a). This provision makes the issuance of shares a private placement. Shares of companies registered under Rule 144-A are restricted stock and may only be issued to or traded by Qualified Institutional Buyers (QIBs).

No regular shareholders will have anything to do with these shares and most are held exclusively through the Depository Trust & Clearing Corporation, so the public often has very little information on these companies. 144-A shares may be issued alongside of a Level 1 program

American Depository ReceiptsRestricted programs•Regulation S The other way to restrict the trading of depositary shares is to issue them under the terms of SEC Regulation S.

This regulation means that the shares are not and will not beregistered with any United States securities regulationauthority.

Regulation S shares cannot be held or traded by any “U.S. Person” as defined by SEC Regulation S rules.

The shares are registered and issued to offshore, non-US residents. Regulation S shares can be merged into a Level 1 program after the restriction period has expired

American Depository Receipts

The ADR Market

There are now over 1,600 ADRs from over 50 countries; and the majority of these are OTC (Level 1 type). In many cases the ADRs may constitute 5-15% of the total shareholder base for a company. The depositaries for the ADRs tend to be concentrated among a very few banks; the most active of which is the Bank Of New York, which acts as a depositary for approximately 60% of all issues.

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