Dividends: When a company makes a profit, the Board of Directors usually gives a percentage of the profit to its shareholders. This is known as a dividend. In other cases, the directors can propose to retain the profits in the company in order to increase its capital. These are known as retained earnings. Ideally if profits increase from year to year, then the dividend should also increase. Shares therefore offer the possibility of an increasing income to the investor.

Capital growth: If the company is growing, the value of the shares will also grow.

Capital Gains: When shares are sold at a price that is higher than the price at which they were purchased, this represents a profit. This profit is called a capital gain.

Capital growth: If the company is growing, the value of the shares will also grow.

Capital Gains: When shares are sold at a price that is higher than the price at which they were purchased, this represents a profit. This profit is called a capital gain.

Voting rights: Shares give a shareholder the right to attend and vote on important company policies at the company’s Annual General Meetings including making a choice on the directors of the company.

Collateral: Shares may be accepted as collateral (for example security for a loan).

Transferability: Shares are negotiable, can be passed onto another person; and they can be inherited.

Share prices can go down as well as up, depending on a number of factors such as the performance of the company, the economy, demand and supply factors. If the company’s profits fall, the dividend will fall and if the company makes a loss it may not be able to pay any dividend.

If the share price falls, the share value lessens and if the company collapses or becomes insolvent, the shares become worthless. If the company goes into liquidation, ordinary shareholders are the last to be paid after all other creditors.

Capital markets are similar to other markets such as Nakasero market (A local food market in Kampala), but differ in terms of the products traded and their organisation. Capital markets deal with the trading of financial products such as company shares, bonds issued by governments or private companies, units in collective investment schemes, debentures, commercial paper and notes. These financial products can also be referred to as securities and are generally traded on a stock (securities) exchange. In Uganda, the market where these securities are traded is called the Uganda Securities Exchange

Capital Markets Authority (CMA) is the regulatory body that oversees the capital markets industry in Uganda, whereas the Uganda Securities Exchange (USE) is the actual market where capital markets products, namely, bonds and shares, are traded. The USE is licensed and regulated by the CMA.

CMA has a number of functions, these include;

The development of all aspects of the capital markets with particular emphasis on the removal of impediments to, and the creation of incentives for longer term investments in productive enterprises.
The creation, maintenance and regulation, through implementation of a system in which the markets participants are self-regulatory to the maximum practicable extent of a market in which securities can be issued and traded in an orderly, fair and efficient manner.
The protection of investor interests; The operation of an investor compensation fund. In its role as a regulator, the CMA oversees the activities of the Uganda Securities Exchange (USE), licensed intermediaries such as broker/dealers and investment advisors.

These are professionals licensed by CMA to buy and sell shares on behalf of clients or on their own behalf. They are the only ones authorised to trade in securities on the USE trading floor. They also provide professional advice on selection and management of investments. A list of licenced broker/ dealers can be obtained from CMA. They are commonly referred to as stock brokers.

Yes, the stock broker charges you a commission for helping you trade in shares. S/he charges a fixed commission of 2.1% of the total value of your transaction. This amount reduces with investments above UShs 200 million as below;

First 200 million
2.1%
Next 800 million
1.9%
More than 1 billion UGX
1.2%

This refers to the market in which a company offers its shares to members of the public for the first time. It is also known as an Initial Public Offering (IPO). To apply for shares during an IPO, a Share Application Form (SAF) is obtained from participating broker/dealers and authorised selling agents, which is completed by the prospective investor. The SAF is then sent to the Lead Broker and Registrar for processing, and the share allocation is made. For the MTN IPO, you can use the electronic application system available on your fully registered MTN number to apply for the shares.

Once payment is made, a receipt is issued to the purchaser. If the offer is over-subscribed (applications exceeding the number of shares available), the shares available are divided among applicants according to the allotment criteria and the investor then receives a refund for the shares paid for, but not allocated.

Get in touch with SCD Registrars and put their contact information as shown below.