Depositary Receipt Programmes Exploring the Benefits

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Depositary Receipt ProgrammesExploring the
Benefits
Depositary Receipts
London Stock Exchange Ukrainian Capital Markets
Summit 25  26 June 2008, Kyiv
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Introducing Depositary Receipts

• US or Internationally-traded equities that
  represent home-market shares
• Can be used to list on an exchange or to raise
  capital in the U.S. or globally
• Can be adapted to meet specific marketing needs
• Increasingly being adopted by stock exchanges as
  the preferred method of standardizing foreign
  securities for listing

No Major Difference Between ADRs and GDRs
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GDR Issuance Procedure
Investor

• 1. Investor contact foreign broker (e.g. Goldman)
  with instructions to purchase

• 2B. Foreign broker purchases shares in the local
  stock market

• 2A. Broker purchases existing DRs on
  international stock exchange

• 3B. Shares are deposited with BNYMs local
  custodian

Ukrainian Stock Exchange

• 4B. Local custodian credits BNYMs account and
  instructs BNYM to issue DRs

• 5B. BNYM delivers DRs to foreign (British) broker
  account via Euroclear

• 6B. Euroclear credits DRs to foreign (British)
  brokers account on behalf of the investor

EUROCLEAR
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Depositary Receipt Market History

• 2003 to 2007 - Markets Rebound and Grow
• Falling U.S. dollar, low interest rates drive DR
  prices
• International equity markets outperform and U.S.
  investors follow rise of BRICs
• Depositary banks increasingly act as consultants

• 2001 to 2002 Markets Consolidate
• Technology bubble implosion
• Corporate Governance reemphasis (Enron, Worldcom)
• Greater demands placed on a depositary banks

• 1990 to 2000 Explosive Growth in the DR Market
• Structural changes, decimalization and tighter
  spreads
• DRs used in privatizations, capital raisings and
  MA
• Depositary role largely administrative and
  operational

• 1930 to 1989 DR Market largely unsponsored and
  investor driven
• Depositary role totally administrative
• and operational

Source The Bank of New York Mellon 12/31/07
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DR Program Comparison
Issuer
Selling New Shares Capital Raising Transactions
Existing Shares Only Non-Capital Raising
Transactions
Level I ADR Over-the-Counter (OTC) Traded Level
I GDR Unlisted
Level III ADR U.S. Listed Level III
GDR Internationally Listed
Level II ADR U.S. Listed Level II
GDR Internationally Listed
Existing shares or new shares can be used
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Requirements Determine Program Type
Level III ADR
High
Level II ADR
Medium
Program Visibility/ Liquidity
RegS GDR London Stock Exchange
Level I ADR
144A/RegS GDR - unlisted
Low
Low
Medium
High
Disclosure Requirements
Generally, Increased Disclosure Results in
Increased Visibility
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Depositary Receipts in Perspective

• Growing base of companies choosing to list DRs
  outside of the US.
• London Stock Exchange DR trading exhibiting
  strong growth.
• Pipeline for future GDR IPOs remains strong.
• IOB trading value was 30 higher year-on-year.
• Of the most actively-traded GDRs on the IOB, the
  most actively traded companies are from Russia,
  Egypt, Taiwan and Korea.

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Creating a DR Program Adds Shareholder Value

• Oxford Metrica Conclusion
• DRs add (on average) up to 10 of shareholder
  value in their first year of trading.
• An upgrade to a U.S.-listed (Levels II or III)
  program adds on average a further 15 of value as
  markets welcome the greater financial disclosure,
  transparency and signal of superior governance.

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The Depositary Receipt Market Today
Number of New Sponsored DRs
(LSE)
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The Depositary Receipt Market Today
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Sponsored DR Programs in Ukraine
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Investment in Ukrainian DRs Geographical
Breakdown
Source U.S. SEC 13-F Public Filings
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The BNYM Ukraine Team
New York Andrew Zelter Managing Director -
EEMEA Relationship Management Andrew.Zelter_at_bnymel
lon.com Tel [phone] Ludmila
Leliavskaia Relationship Management (Russian
Speaker) Ludmila.Leliavskaia_at_bnymellon.com Tel
1 212 815 4493 Maria Mozhina Relationship
Management (Russian Speaker) Maria.Mozhina_at_bnymell
on.com Tel [phone]
Moscow Irina Baichorova Relationship
Management/ New Business Development (Russian
Speaker) Irina.Baichorova_at_bnymellon.com Tel 7
495 967 3110

• London
• Michael Cole-Fontayn
• Chief Executive Officer
• Depositary Receipt Division
• Michael.Cole-Fontayn_at_bnymellon.com
• Tel [phone]
• Graham Marshall
• New Business Development
• (Russian Speaker)
• Graham.Marshall_at_bnymellon.com
• Tel [phone]
• Yury Mandzhiev
• New Business Development
• (Russian Speaker)
• Yury.Mandzhiev_at_bnymellon.com
• Tel [phone]

www.adrbnymellon.com
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