Focus on Central and Eastern Europe, Focus on Central and Eastern Europe, Russia and CISRussia and CIS

Eoghainn CalderEoghainn CalderManaging Director Managing Director Goldman Sachs Goldman Sachs

Daniel WinterfeldtDaniel WinterfeldtPartnerPartnerCMSCMS

Alex AinleyAlex AinleyManaging Director Managing Director UniCredit UniCredit

1April 2012

Mathias StrasserMathias StrasserPartnerPartnerCMSCMS

Sarah BlomfieldSarah BlomfieldHead of IB LegalHead of IB LegalNM Rothschild & NM Rothschild & SonsSons

Maria LeistnerMaria LeistnerMD and General Counsel MD and General Counsel EMEAEMEACredit SuisseCredit Suisse

11 CEE, Russia and CIS Market updateCEE, Russia and CIS Market update

22 Recent regulatory developments in AustriaRecent regulatory developments in Austria

Issues / practice points – AustriaIssues / practice points – Austria

44 London Stock Exchange and Bucharest Stock Exchange Collaboration AgreementLondon Stock Exchange and Bucharest Stock Exchange Collaboration Agreement

55 Issues / practice points – Holding company and listing jurisdictionIssues / practice points – Holding company and listing jurisdiction

66 Issues / practice points – Corporate governanceIssues / practice points – Corporate governance

33

2April 2012

77 Issues / practice points – SettlementIssues / practice points – Settlement

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 3April 2012

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

4April 2012

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

5April 2012

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

6April 2012

Market update

Ukraine

Increase in ECM activity, with a continued focus on Warsaw Stock Exchange IPOs

7April 2012

Market update

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)

8April 2012

Recent regulatorydevelopments 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)

9April 2012

Recent regulatorydevelopments 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)

10April 2012

Recent regulatorydevelopments 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))

11April 2012

Recent regulatorydevelopments 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

12April 2012

Recent regulatorydevelopments 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

13April 2012

Recent regulatorydevelopments 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)

14April 2012

Recent regulatorydevelopments 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

15April 2012

Recent regulatorydevelopments in 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

16April 2012

Issues / practice pointsAustria

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

17April 2012

Issues / practice pointsAustria

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

18April 2012

Issues / practice pointsAustria

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

19April 2012

Issues / practice pointsAustria

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

20April 2012

The London Stock Exchange &Bucharest Stock Exchange Collaboration Agreement

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

21April 2012

Issues / practice points: holding company jurisdiction

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)

22April 2012

Issues / practice points: listing venue

IPO preparation and corporate governance Board of directors and independent directors

Fiduciary duties

Shareholder structure

Shareholder approvals

23April 2012

Issues / practice pointsCorporate governance

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

24April 2012

Issues / practice pointsSettlement issues

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

25April 2012

Issues / practice pointsSettlement issues (continued)

26April 2012

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