The Role of the Depositary Bank

14 Issuer Services U.S. Securities Regulations and DRs Issuers of DRs must comply with the regulations of the markets in which their DRs are issued. In the U.S., the U.S. Securities and Exchange Commission (SEC) was created as an independent agency of the U.S. government to enforce federal securities laws governing securities offerings, trading practices and persons dealing in the securities markets. The SEC protects U.S. investors and U.S. markets by requiring disclosure of material facts concerning public offerings of securities. The SEC is empowered to issue regulations and enforce provisions of both federal securities laws and its own regulations. The two key U.S. securities laws with which DR issuers must comply are: • Securities Act of 1933; and • Securities Exchange Act of 1934. The primary purpose of the Securities Act is to provide investors with full and fair disclosure of material information regarding an issuer in connection with the offer and sale of its securities. The Securities Exchange Act is different in that its primary purpose is to provide investors trading securities in the secondary market with access to full and fair disclosure of material information about an issuer on an ongoing basis. With the arrival of the more stringent regulatory climate in the U.S., in 2002 some DR issuers initially felt a need to reassess the costs compared to the benefits of their U.S. listings. Many did not see the U.S. regulatory climate as Regulatory Considerations for DRs There are various regulatory aspects to DRs which not only depend on the type of DR, but also the market in which they operate and the issuer’s objective. However, there have been certain regulatory changes which have facilitated the use of the DR product. an obstacle, given that most countries have tightened their compliance rules in recent years. In fact, many equities markets outside the U.S. are known to have equally strict, and perhaps even stricter, corporate governance requirements. Some Investor Relations experts argue that more stringent standards represent an opportunity for companies to differentiate themselves. When investors calculate the risk/ reward equation, there is a greater “comfort factor” with companies known to have cleared certain regulatory hurdles. The SEC noted issuer concerns regarding some of the burdens caused by recent corporate governance legislation. For example, the SEC has applied and is continuing to evaluate certain exemptions for non-U.S. companies from provisions of the Sarbanes-Oxley Act. In addition, a series of reforms came into effect in December 2005 that impacted the securities offering process in the U.S. These measures simplify access to the U.S. capital markets for both U.S. and non-U.S. companies, including those issuing DRs. Safe Harbor Laws of GDRs through Regulation S and Rule 144A Regulation S provides an exclusion from the registration requirements of the Securities Act of 1933 for offerings made outside the U.S. by both U.S. and foreign issuers. A securities offering, whether private or public, made by an issuer outside of the U.S. in reliance on Regulation S need not be registered under the Securities Act. The Regulation S safe harbors are non- exclusive, meaning that an issuer that attempts to comply with Regulation S also may claim the availability of another applicable exemption from registration (such as Rule 144A). Regulation S is available for offerings of both equity and debt securities, such as Global Depositary Receipts and Notes, and targeted towards non-U.S. institutional investors. Similarly, Rule 144A provides a safe harbor from the registration requirements of the Securities Act of 1933 for resales to U.S. institutional investors reasonably believed to be “qualified institutional buyers” (“QIBs”). QIBs include institutions that own and invest at least $100 million in securities and also include registered broker-dealers that own or invest, on a discretionary basis, $10 million in securities of non-affiliates. As a result, securities sold in a Rule 144A offering are “restricted securities” and resales inside the U.S. may only be made to a purchaser that the seller (and any person acting on its behalf) reasonably believes is a QIB. The seller must take reasonable steps to ensure that the purchaser is aware that the seller is relying on Rule 144A exemption. However, securities sold under Rule 144A offerings may not be the same class as listed or quoted securities in the U.S., and cannot be upgraded to unrestricted facilities. The availability of these exemptions for GDR deals makes them an efficient and cost-effective means of implementing cross-border capital- raising transactions. The predominant listing venues for Reg S GDRs are the London and Luxembourg Stock Exchanges, however, GDRs have