The Board of directors of Horizon Ltd. at a Board meeting has decided to augment resources for expansion and diversification projects which are scheduled to happen in the next three to five years. Henry, an independent d

(i) Nature of instruments and its various types: An American Depository Receipt ("ADR") is a dollar denominated form of equity ownership in the form of Depository receipts in a non-US company. It represents the foreign shares of the company held on deposit by a custodian bank in the company's home country and carries the corporate and economic rights of the foreign shares. Following are the types of ADRs: Level I ADR (unlisted, OTC traded/Pink Sheets): This is the least expensive level to provide for issuance of shares in ADR form in the US. The company issuing ADRs has to comply with the SEC registration requirements but can be exempted from full SEC reporting requirements under certain circumstances. It can only be traded over-the counter and cannot be listed on a national exchange in the US. The electronic OTC markets are also called pink sheets which is a centralized quotation service that collects and publishes market maker quotes for OTC securities in real time. Level II ADRs US Listed, Non-capital Raising Transaction (i.e. without going for public issue): This programme gives more liquidity and marketability as it enables listing of ADRs in one or more of the US exchanges. Under this programme the company has to comply with the registration requirements, reporting requirements of SEC. Level III ADRs (US listed Capital Raising Transaction i.e., through fresh issue of shares): This type of ADRs which are to comply with SECA Registration, Reporting requirement and after document filing. Rule 144A Depository Receipts (Privately placed for QIBs and cannot be bought on the public exchanges or over the counter.) (ii) Scheme of sponsored ADRs: In a layman's language, the Scheme of Sponsored ADRs/GDRs is a process of disinvestments by the Indian shareholders of their holdings in overseas markets. The concerned company sponsors the ADRs/GDRs against the shares offered for disinvestments. Such shares are converted into ADRs/GDRs according to a pre-fixed ratio and sold to overseas investors. The proceeds realized are distributed to the shareholders in proportion to the shares sold by them. An Indian company may sponsor an issue of ADRs/GDRs with an overseas depository against shares held by its shareholders at a price to be determined by the Lead Manager. The proceeds of the issue shall be repatriated to India within a period of one month. The sponsoring company shall comply with the provisions of the Scheme and guidelines issued in this regard by the Central Government from time to time. The sponsoring company shall furnish full details of such issue, in the form specified under the Scheme, to the Foreign Investment Division, Exchange Control Department, Reserve Bank of India, Central Office, Mumbai within 30 days from the date of closure of the issue.