QUESTION ONE

Issue management refers to managing issues of corporate securities like equity shares, preference shares and debentures or bonds. It involves marketing of capital issues, of existing companies including rights issues and dilution of shares by letter of offer. Management of issue also involves other issues. The decisions concerning size and timing of the public issue in the light of the market conditions are advised by the merchant bankers. In addition to these, the merchant bankers also assist the corporate units on the designing of a sound capital structure acceptable to the financial institutions and determining the quantum and terms of the public issues of different forms of securities. Further, they also advise the issuing company whether to go for a fresh issue, additional issue, bonus issue, right issue or combination of these. In brief, managing public issue is a complicated and technical job. It involves various strategic decisions and coordination of various agencies. The public issues are managed by the involvement of various agencies, that is, under writers, brokers, bankers, advertising agencies, printers, auditors, legal advisers, registrar to the issue and merchant bankers providing specialized services to make the issue a success. However, merchant bank is the agency at the apex level, who plans, coordinates and controls the entire issue activity and directs different agencies to contribute to the successful marketing of securities. Existing as well as new companies raise funds through various sources for implementing their projects. One of the sources of raising funds is mobilising capital by issuing securities. This can be done in the following three ways; Public Issue, Right Issue and Private Placement. Issue management has tremendous scope and potential in a growing economy where capital market functions as catalyst for the funding needs of the industry. Issue managers in capital market parlance are known as Merchant Bankers or Lead Managers. Although, the term Merchant Banking, covers a wide range of services such as project counseling, portfolio management, investment counseling, mergers and acquisitions. Issue Management constitutes perhaps the most important and sizeable function within it. Required: n) Briefly explain what is meant by the following terms:

a. Public Issue

b. Right Issue

c. Private Placement [5 Marks]

d Explain two distinctive roles that Corporate and Merchant banks perform as a routine activity relating to pre and post issue management. [5 Marks]

e) Issue management has tremendous scope and potential in a growing economy where capital market functions as catalyst for the funding needs of the industry.

i. Briefly state the steps taken in the pre and post issue management. [5Marks]

ii. Identify the significance of the pre and post issue management steps to a Merchant bank. [5 Marks]

iii Would you confidently say Zambia has institutions that support merchant business? Explain your answer.