Answer:

Depository Receipts
Depository receipts are financial instruments that represent ownership of a company's shares. They are typically created when shares of a company listed in one country are delivered to a depository bank, which then issues depository receipts that can be traded on foreign exchanges.

Types of Depository Receipts
There are two main types of depository receipts:

1. American Depository Receipts (ADRs): ADRs are issued by a depository bank in the United States and represent ownership of foreign company shares. They trade on U.S. exchanges and are denominated in U.S. dollars.

2. Global Depository Receipts (GDRs): GDRs are issued by a depository bank outside the United States and are used to facilitate the trading of foreign company shares on international markets. They can be listed on multiple exchanges and are usually denominated in a currency other than the local currency of the company.

Conversion Process
When a company's ordinary shares are delivered to a depository bank, the bank creates and issues the corresponding depository receipts. This process involves the following steps:

1. Delivery of Ordinary Shares: The company delivers its ordinary shares to the depository bank.

2. Creation of Depository Receipts: The depository bank creates the depository receipts in the form of ADRs or GDRs, depending on the market where they will be traded.

3. Issuance to Investors: The depository receipts are then issued to investors, who can buy and sell them on the respective exchange where they are listed.

4. Trading on Foreign Exchanges: Investors can trade the depository receipts on foreign exchanges, allowing them to gain exposure to the company's shares without directly owning the underlying shares.

5. Dividend Payments: Dividends paid by the company are typically distributed to depository receipt holders through the depository bank.

Advantages of Depository Receipts
Depository receipts offer several advantages for both companies and investors:

1. Access to International Capital: Companies can raise capital from international investors by listing their depository receipts on foreign exchanges.

2. Diversification: Investors can diversify their portfolios by investing in companies from different countries and industries through depository receipts.

3. Liquidity: Depository receipts provide investors with liquidity, as they can be easily bought and sold on the exchanges where they are listed.

4. Currency Flexibility: GDRs are denominated in a currency other than the local currency of the company, providing investors with the flexibility to invest in a different currency.

Conclusion
Depository receipts, such as GDRs, are created when a company's ordinary shares are delivered to a depository bank. These financial instruments allow investors to trade the company's shares on foreign exchanges and provide companies with access to international capital. They offer various advantages, including diversification, liquidity, and currency flexibility.