Focus on Central and Eastern Europe, Russia and CIS

Alex Ainley

Managing Director UniCredit

Maria Leistner

MD and General Counsel EMEA Credit Suisse

Sarah Blomfield

Head of IB Legal NM Rothschild & Sons

Mathias Strasser

Partner CMS

Eoghainn Calder

Managing Director Goldman Sachs

Daniel Winterfeldt

Partner CMS April 2012 1

April 2012

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CEE, Russia and CIS Market update

Recent regulatory developments in Austria Issues / practice points – Austria London Stock Exchange and Bucharest Stock Exchange Collaboration Agreement Issues / practice points – Holding company and listing jurisdiction Issues / practice points – Corporate governance Issues / practice points – Settlement 2

Market update

 The economic situation in Europe and thus indirectly the European capital markets continue to be dominated by macro topics      Global growth Eurozone debt Inflation Earnings revision expected to continue, with investors increasingly questioning the “attractive” DAX and ATX valuation levels IPO market shaky – with few successful deals in Q1/2012 (e.g., Ziggo)  Primary market activity in Austria back to zero following limited activity in HY1/2011 (AMAG, Isovoltaic), currently no visible transactions  In CEE, ambitious privatization programs in Romania, Poland and Russia show a constant stream of capital markets activity April 2012 3

Market update

Romania

 Romania has adopted a privatization program, a key condition of the $20bn bailout the country received from the IMF, World Bank, and EU in 2009  A number of privatizations are in the pipeline for 2012  Recently, an attempt was made to revise the privatization process with the sale of a 15% strake in the state power firm Transelectrica; the government was set to raise EUR 37.7m from the secondary offering  The government is very focused on increasing corporate governance, which is expected to have a positive impact on the Bucharest stock exchange  The London Stock Exchange and Bucharest Stock Exchange Collaboration April 2012 4

Market update

Poland

 Poland has experienced solid economic growth through the financial crisis, which has increased the attractiveness of the Polish capital markets from the perspective of international investors and companies  Poland’s Warsaw Stock Exchange (WSE) continues to be highly successful; in 2011, the WSE managed to attract 47% of the total European IPO market with 203 companies have listed on the two stock markets operated by the WSE, up from 112 in 2010 April 2012 5

Market update

Russia

 Russia is looking to reclaim liquidity lost to foreign exchanges (for instance Gazprom and Lukoil went to the London stock exchange)  Following a merger between Russian exchanges in 2011, the newly unified MICEX/RTS group plans to play a greater role in the CEE region  The country’s key task for the coming year will be to ‘westernize’ the structure of its capital markets and corporate governance systems to attractive foreign investors  Some bond transactions, but focus on ECM transactions, many with London GDRs  Government privatisations on the increase April 2012 6

Market update

Ukraine

 Increase in ECM activity, with a continued focus on Warsaw Stock Exchange IPOs April 2012 7

Recent regulatory developments in Austria

Proposed Changes to the Austrian Capital Markets Act in Response to EU Directive 2010/73 (1)

 “Qualified purchaser” to be defined by reference to MiFID requirements  More permissive private placement exemptions  No prospectus required for offerings with minimum denominations of EUR 100K (compared with 50K under the current rules)  No prospectus required for offerings to up to 150 persons (other than qualified purchasers) per EU member state (compared with 100 under the current rules)  Under the new rules, financial institutions will be allowed to issue up to EUR 75M per year in non-equity securities without having to publish a prospectus (compared with EUR 50M under the current rules) April 2012 8

Recent regulatory developments in Austria

Proposed Changes to the Austrian Capital Markets Act in Response to EU Directive 2010/73 (2)

 Employee offerings to be exempt from the prospectus requirement  EU issuers will generally be exempt (currently EU issuers must have securities listed on an EU regulated market to benefit from the exemption) and  Non-EU issuers will be exempt if they have securities listed on an EU regulated market or a non-EU regulated market deemed to be

equivalent

 To benefit from the exemption, both EU and non-EU issuers must provide employees with an information document setting for the number and type of the securities being offered along with details of the offering – the document must be in German or in a language customary in international finance (English) April 2012 9

Recent regulatory developments in Austria

Proposed Changes to the Austrian Capital Markets Act in Response to EU Directive 2010/73 (3)

 Under the new rules, prospectus supplements need to be published until the later of closing or the first day of trading (by comparison, under the current rules, supplements must be published by the earlier of the two dates)  Withdrawal rights apply only if the significant new development or error to which the supplement relates occurred prior to the earlier of the end of the offering period or closing  Retail cascades will be simplified by allowing financial

intermediaries to use the issuer’s prospectus for 12 months from

approval, provided the issuer consents – otherwise a new prospectus is needed (under the current rules, all secondary offerings require a separate prospectus) April 2012 10

Recent regulatory developments in Austria

Proposed Changes to the Austrian Capital Markets Act in Response to EU Directive 2010/73 (4)

 The new rules codify existing market practice by providing that any prospectus summary must contain key information (Schluesselinformationen) about the issuer and the securities being offered  Issuers must present the key information in a “uniform format” – the rules mirror the requirements set forth in EU Directive 2010/73  In the future, an issuer passporting a prospectus must furnish any associated final terms to the regulator of the host member state (compared with the current rules, which provide that it is sufficient for the final terms to be deposited with the Austrian Financial Markets Supervisory Authority (FMA)) April 2012 11

Recent regulatory developments in Austria

Proposed Changes to the Austrian Stock Exchange Act

 Issuers listed on a regulated market no longer need to file with the FMA and publish an annual document summarizing all capital markets related information they file in other EU member states or third countries  The significant shareholding reporting rules now cover additional

derivative instruments

 Any derivatives affording voting power  Any other derivatives affording the right to participate in increases in the issuer’s share price  Includes both cash and physical settlement  Includes both the issuer’s shares and any basket/index of which the issuer’s shares account for at least 20%  Suspension of voting rights in case of violations April 2012 12

Recent regulatory developments in Austria

Changes to the Austrian Stock Corporation Act

  Companies may issue only registered shares (Namensaktien); any bearer shares (Inhaberaktien) must be converted  An exemption is available for companies whose shares are listed on a regulated market and shares for which a company, according to its articles of association, seeks a listing on a regulated market  No comparable exemption applies to unregulated markets (other than a grandfathering exemption for the Vienna Stock Exchange’s unregulated market)  In case of a delisting, any bearer shares must be converted into registered shares All bearer shares must be dematerialized and represented in the form of global share certificates that must be deposited with a depository  Definitive securities (Einzelverbriefung) and interim share certificates (Zwischenscheine) may no longer be used April 2012 13

Recent regulatory developments in Austria

Changes to the Austrian Issuer Compliance Regulation

 The new version of the regulation covers not only inside information but also information relevant from a compliance perspective (compliance-relevante Informationen)  Inside information means specific information of a confidential nature that relates to financial instruments or issuers thereof and whose disclosure could have a material effect on the price of these instruments  Information relevant from a compliance perspective means (1) inside information and (2) other information that is confidential and price sensitive but not (yet) specific or capable of materially affecting the

price of a financial instrument

 Ad-hoc information is inside information  Both types of information are treated identically (e.g., with respect to compliance areas, insider lists, trading blackouts) April 2012 14

Recent regulatory developments in Austria

Changes to the Austrian Tax Code

 Whereas dividends and interest payments are subject to a 25% withholding tax, capital gains realized upon the disposal of a security in the past were not taxable if the investor held the security for at least one year  In the future, such gains will also be subject to a 25% withholding

tax

 The tax covers a broad range of securities, including shares, bonds, investment and real estate fund units, derivatives and insurance policies (the tax applies to the difference between the insurance premiums and the payout received)  The new rules apply to shares bought after December 31, 2010 and sold after March 31, 2012 as well as bonds and derivatives bought after March 31, 2012 April 2012 15

Issues / practice points Austria

Prospectus liability regime trumps capital maintenance rules

    The Austrian supreme court recently weighed in on a question often discussed in Austria, which is whether shareholders may

claim damages from issuers for false or misleading prospectus

disclosure or whether such claims are barred/limited under the capital maintenance rules, which provide that a company may not repay a shareholder’s capital contributions (Verbot der

Einlagenrückgewähr)

The court resolved the conflict in favor of the prospectus liability regime According to the court, the claimant is entitled to be put in the

position in which he or she would be if they had not acquired the

shares (negatives Interesse) The decision covers only statutory prospectus liability and does not

touch on contractual indemnification

April 2012 16

Issues / practice points Austria

Research safe harbor

 Austria does not have a statutory safe harbor for broker-dealer research published on a company’s securities  However, an Austrian court recently clarified that where a broker-

dealer affiliated to an issuer regularly publishes information about

the issuer’s securities and continues to do so in proximity to an offering, the publication does not in and of itself constitute “advertising” (which, among other things, would attract liability for false and misleading statements)  In order for the rules on advertising to be applicable, the

information must be recognizably related to the offer

 A reference to the prospectus in a publication does not in and of itself create a link to the offering April 2012 17

Issues / practice points Austria

Prospectus disclosure omitting offer price

   In most Austrian transactions, issuers used either price range or maximum offer price prospectuses that disclosed price related items such as net proceeds and offering expenses by reference to the mid-point of the range or the maximum price, as the case may be Recently the FMA confronted a prospectus for an offering in a

volatile market that omitted any reference to price

After consulting with the German Financial Markets Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), the FMA required the issuer to  include an estimate of both net proceeds and offering expenses in the prospectus and  file the final price with the FMA by way of a prospectus supplement, rather than a pricing statement April 2012 18

Issues / practice points Austria

Financial statements

 The FMA decided that any prospectus filed for approval in Austria must include financial statements prepared in euros  The FMA also confirmed its long-standing practice that where a prospectus contains English language financial statements, it must state – and accounting firms will make reference to this fact in the comfort letter – that the issuer’s audited financial statements and the audit opinion thereon have been prepared in German and

the versions thereof included in the prospectus are English translations

 The FMA will accept two years of historical financial statements, provided they include comparative figures for the third year, but only if the omission of the full third year is acceptable to the regulators of any EU member states into which the prospectus is passported April 2012 19

The London Stock Exchange & Bucharest Stock Exchange Collaboration Agreement

Presentation by Axel Kalinowsi of the Primary Markets Team, The London Stock Exchange

April 2012 20

Issues / practice points: holding company jurisdiction

Choice of holding company jurisdiction

 Holding company jurisdiction  Relevant considerations  Corporate governance and related investor expectations  Tax considerations  Typical choices  Luxembourg  Netherlands  Cyprus  United Kingdom April 2012 21

Issues / practice points: listing venue

Choice of listing venue

 Listing venue  Relevant considerations  Where is peer group listed?

 Market liquidity  Regulatory burden, time and expense  Typical choices  Warsaw  Frankfurt Stock Exchange  London Stock Exchange (larger issuers) April 2012 22

Issues / practice points Corporate governance

IPO preparation and corporate governance

 Board of directors and independent directors  Fiduciary duties  Shareholder structure  Shareholder approvals April 2012 23

Issues / practice points Settlement issues

Settlement issues

 Dematerialization of shares  Choice of custodian and depositary  Special problem: GDR facilities  Settlement for international investors (DIs, DRs and other mechanisms)  Currency issues April 2012 24

Issues / practice points Settlement issues (continued)

Settlement

 Even in underwritten offerings, Polish banks expect the subscription certificates to be signed by the investors directly (instead of the banks signing the certificates and transferring the shares on to investors)  This is particularly true where the issuer is located outside of Poland (which is often the case with listings on the Warsaw Stock Exchange)  If the issuer is located in a jurisdiction where the subscription certificates are subject to a substantive review by a court or commercial register, this may result in logistical and timetable issues  The usual remedy is to involve a bank based in the issuer’s home jurisdiction in the settlement process April 2012 25

CMS Cameron McKenna LLP Mitre House 160 Aldersgate Street EC1A 4DD London, England CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH Ebendorferstrasse 3 A-1010 Vienna, Austria

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