1. Julia Lemonia Raptis, LL.M. (Columbia), LL.M. (Vienna) Senior Officer, Markets and Exchanges Supervision Financial Market AuthorityBaku, October 10-12, 2012 Expert Mission on Prospectus Requirements INT MARKT IND/EXP 49302 organised in co-operation with State Committee for Securities of the Republic of Azerbaijan

2. Agenda Q&As Day 1? Content of the Summary of Prospectus Base Prospectus (BP) Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 2

3. Agenda Q&As Day 1? Content of the Summary of Prospectus Base Prospectus (BP) Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 3

4. Revamped Summary Regime (1) Before the amendment of the PD, summaries were sometimes conceived as not clear enough, not comprehensible enough and/or not allowing (enough) comparison of the summaries of similar products. Resulted in a new, standardised regime determining the format and content of summaries: Directive 2010/73/EU of the European Parliament and of the Council of November 24, 2010 amending the PD Commission Delegated Regulation (EU) No 486/2012 of March, 30 2012 amending the PR Implementation since July 1 st, 2012 Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 4

5. Prospectus Directive (PD) (1) Article 5 : The prospectus … shall also include a summary that, in a concise manner and in non- technical language, provides key information in the language in which the prospectus was originally drawn up. Article 2: Definitions (s) ‘key information’ means essential and appropriately structured information which is to be provided to investors with a view to enabling them to understand the nature and the risks of the issuer, guarantor and the securities that are being offered to them or admitted to trading on a regulated market and, without prejudice to Article 5(2)(b), to decide which offers of securities to consider further. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 5

6. Prospectus Directive (PD) (2) Article 2 (cont‘d): In light of the offer and securities concerned, the key information shall include the following elements: -a short description of the risks associated with and essential characteristics of the issuer and any guarantor, including the assets, liabilities and financial position; -a short description of the risk associated with and essential characteristics of the investment in the relevant security, including any rights attaching to the securities; -general terms of the offer, including estimated expenses charged to the investor by the issuer or the offeror; -details of the admission to trading; -reasons for the offer and use of proceeds; Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 6

7. Prospectus Directive (PD) (3) Article 5 (cont‘d): The format and content of the summary of the prospectus shall provide, in conjunction with the prospectus, appropriate information about essential elements of the securities concerned in order to aid investors when considering whether to invest in such securities. The summary shall be drawn up in a common format in order to facilitate comparability of the summaries of similar securities and its content should convey the key information of the securities concerned in order to aid investors when considering whether to invest in such securities. Where the prospectus relates to the admission to trading on a regulated market of non-equity securities having a denomination of at least EUR 100 000, there shall be no requirement to provide a summary Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 7

8. Prospectus Directive (PD) (4) Article 5 (cont‘d): The summary shall also contain a warning that: -it should be read as an introduction to the prospectus; -any decision to invest in the securities should be based on consideration of the prospectus as a whole by the investor; -where a claim relating to the information contained in a prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the prospectus before the legal proceedings are initiated; and -civil liability attaches to those persons who have tabled the summary including any translation thereof, and applied for its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus. (see also Article 6 PD) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 8

9. Prospectus Directive (PD) (5) Article 11: Incorporation by reference The summary shall not incorporate information by reference. Article 16: Supplements to the prospectus The summary, and any translations thereof, shall also be supplemented, if necessary, to take into account the new information included in the supplement. (Supplements: Day 3) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 9

10. PD Annex I (1) Prospectus - Summary The summary shall provide in a few pages the most important information included in the prospectus, covering at least the following items: identity of directors, senior management, advisers and auditors; offer statistics and expected timetable essential information concerning selected financial data; capitalisation and indebtedness; reasons for the offer and use of proceeds; risk factors information concerning the issuer -history and development of the issuer -business overview Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 10

11. PD Annex I (2) Prospectus - Summary operating and financial review and prospects -research and development, patents and licences, etc. -trends directors, senior management and employees major shareholders and related-party transactions financial information -consolidated statement and other financial information -significant changes details of the offer and admission to trading -offer and admission to trading -plan for distribution -markets Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 11

12. PD Annex I (3) Prospectus - Summary -selling shareholders -dilution (equity securities only) -expenses of the issue additional information -share capital -memorandum and articles of association -documents on display Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 12

13. Revamped Summary Regime (2) Recital (15) Directive 2010/73/EU: The summary of the prospectus should be a key source of information for retail investors. It should be a self- contained part of the prospectus and should be short, simple, clear and easy for targeted investors to understand. The format of the summary should be determined in a way that allows comparison of the summaries of similar products by ensuring that equivalent information always appears in the same position in the summary. Recital (10) Regulation (EU) No 486/2012: Accordingly, where an element is not applicable to a prospectus, that element should appear in the summary with the mention ‘not applicable’. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 13

14. Revamped Summary Regime (3) Recital (11) Where there is no obligation to include a summary in a prospectus but an overview section is produced in the prospectus, this section should not be entitled ‘Summary’ unless the overview section complies with all the disclosure requirements for summaries. Summaries should be drafted in plain language, presenting the information in an easily accessible way. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 14

15. Prospectus Regulation (PR) (1) Article 24: Content of the summary of the prospectus, of the BP and of the individual issue A summary shall contain the key information items set out in Annex XXII Where an item is not applicable to a prospectus, such item shall appear in the summary with the mention ‘not applicable’. The length of the summary shall take into account the complexity of the issuer and of the securities offered, but shall not exceed 7 % of the length of a prospectus or 15 pages, whichever is the longer. It shall not contain cross-references to other parts of the prospectus. The order of the sections and of the elements of Annex XXII shall be mandatory. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 15

16. Prospectus Regulation (PR) (2) Article 24 (cont‘d): The summary shall be drafted in clear language, presenting the key information in an easily accessible and understandable way. No overview entitled as ‘summary’ Annex XXII: Disclosure requirements in summaries Summaries are constructed on a modular basis according to the Annexes from the PR on which the prospectus has been based. E.g., the summary for a share prospectus would disclose the information required for the Elements for Annexes I and III. Each summary will be made up of five tables. The order of the sections and within each of the sections is mandatory. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 16

17. Prospectus Regulation (PR) (3) Annex XXII (cont‘d): ‚n/a‘ To the extent required by an element, descriptions should be brief. Summaries should not contain cross-references to specific parts of the prospectus. Voluntary summaries (see also ESMA Q&A no. 41) & overviews (which are not ‘summaries’) Structure – five Tables: -Section A — Introduction and warnings -Section B — Issuer and any guarantor -Section C — Securities -Section D — Risks -Section E — Offer Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 17

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23. Implementing Technical Standards (ITS) to be drafted by ESMA Article 5 PD: In order to ensure uniform conditions of application of the PD and of the delegated acts adopted by the Commission, ESMA shall develop draft implementing technical standards in order to ensure uniform conditions of application of the delegated acts in relation to a uniform template for the presentation of the summary and to allow investors to compare the security concerned with other relevant products. ESMA Q&A no. 80 contains initial guidance Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 23

24. Agenda Q&As Day 1? Content of the Summary of Prospectus Base Prospectus (BP) Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 24

25. Purpose of the Base Prospectus Regime (1) Alternative for regular prospectuses (in a single document or in separate documents) for certain types of securities Information about the issuer has to be in the BP, certain pieces of information about the securites can be included in the Final Terms (FT) (FT are not ‚supplements‘!) FT do not have to be approved by, but only filed with the competent authority Issuer is more flexible to react quickly to market environment and developement Potentially unlimeted issues under one BP during the validity persiod of 12 months Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 25

26. Purpose of the Base Prospectus Regime (2) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 26 Base Prospectus Description of issuer + Generic/abstract description of the securities Final Terms for each single issue += Equivalent quality and quantity of information as a regular prospectus approved filed

27. Revamped Final Terms Regime (1) Before the amendment of the PD, BP Regime was perceived as valuable, however FT were filed in very different formats (consolidated v non-consolidated FT; FT including specific risk factors, etc.) Standardisation of FT was necessary, Clarification of the relationship between FT and supplements was needed Resulted in a new, standardised regime determining the format and content of FT: Directive 2010/73/EU of the European Parliament and of the Council of November 24, 2010 amending the PD Commission Delegated Regulation (EU) No 486/2012 of March, 30 2012 amending the PR Implementation since July 1 st, 2012 Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 27

28. Directive 2010/73/EU amending the PD (1) Recital (17): FT to a BP should contain only information relating to the securities note which is specific to the issue and which can be determined only at the time of the individual issue. Such information might, e.g. include -the international securities identification number (ISIN), -the issue price, -the date of maturity, -any coupon, -the exercise date, -the exercise price, -the redemption price and -other terms not known at the time of drawing up the prospectus. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 28

29. Directive 2010/73/EU amending the PD (2) Recital (17) (cont‘d): Other new information which is capable of affecting the assessment of the issuer and the securities should, in general, be included in a supplement to the prospectus. Furthermore, in order to fulfil the obligation to provide key information also under a BP, issuers should combine the summary with relevant parts of FT in a way that is easily accessible to investors. No separate approval should be required in those cases. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 29

30. Prospectus Directive (PD) (6) Article 5 (4): The prospectus For the following types of securities, the prospectus can consist of a BP containing all relevant information concerning the issuer and the securities offered to the public or to be admitted to trading on a regulated market: -non-equity securities, including warrants in any form, issued under an offering programme; -non-equity securities issued in a continuous or repeated manner by credit institutions that are covered by sufficient assets to meet the liability deriving form the securities until their maturity date and which are prioritised in the event of an insolvency The information given in the BP shall be supplemented, if necessary, in accordance with Article 16, with updated information. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 30

31. Prospectus Directive (PD) (7) Article 5 (4) (cont‘d): Where the FT of the offer are neither included in the BP nor in a supplement, the FT shall be made available -to investors, -filed with the competent authority of the home Member State and - communicated, by the issuer, to the competent authority of the host Member State(s) -when each public offer is made as soon as practicable and, if possible, in advance of the beginning of the public offer or admission to trading. The FT shall contain only information that relates to the securities note and shall not be used to supplement the BP. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 31

32. Commission Delegated Regulation (EU) No 486/2012 amending the PR (1) amending the PR Recital (5): In order to avoid that the FT of a BP contain information that needs to be approved by the competent authorities, the BP should contain all information which the issuer knew at the time of drawing up the prospectus. Recital (6): … the BP may contain options in relation to all information required for the relevant securities note schedules and building blocks. FT should then state which of those options are applicable to the individual issue by referring to the relevant sections of the BP or by reproducing such information. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 32

33. Commission Delegated Regulation (EU) No 486/2012 amending the PR (2) amending the PR Recital (6) (cont‘d): It should be allowed to include certain additional information which does not relate to the securities note in the FT, if it is considered useful for the investors. That additional information should be specified in this Regulation. Recital (7): FT are no supplements (no amendments/no replacements) Accordingly, the FT should not include any new description of any new payment conditions which was not included in the BP. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 33

34. Commission Delegated Regulation (EU) No 486/2012 amending the PR (3) amending the PR Recital (8): the summary specific to the individual issue should combine that information in the summary of the BP which is only relevant to the individual issue with the relevant parts of the FT. The summary of the individual issue should be annexed to the FT. Recital (9): For securities linked to or backed by an underlying asset, the BP should disclose all information about the type of underlying asset already known at the date of its approval. Therefore, only issue specific details in relation to this underlying asset should be included in the FT as the choice of the relevant underlying asset may be influenced by market conditions. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 34

35. Prospectus Regulation (PR) (4) Recital (21): A BP and its FT should contain the same information as a prospectus. All the general principles applicable to a prospectus are applicable also to the FT. Nevertheless, where the FT are not included in the BP they do not have to be approved by the competent authority. Recital (25): The enhanced flexibility in the articulation of the BP with its FT compared to a single issue prospectus should not hamper the easy access to material information for investors. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 35

36. Prospectus Regulation (PR) (5) Article 2a: Categories of information in the BP and the FT determine the degree of flexibility by which the information can be given in the BP or the FT: -‘Category A’ means the relevant information which shall be included in the BP and cannot be left in blank for later insertion in the FT; -‘Category B’ means that the BP shall include all the general principles related to the information required, and only the details which are unknown at the time of the approval of the BP can be left in blank for later insertion in the FT; -‘Category C’ means that the BP may contain a reserved space for later insertion for the information which was not known at the time of the approval of the BP. Such information shall be inserted in the FT. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 36

37. Prospectus Regulation (PR) (6) Article 22: Minimum information to be included in a BP and is related FT A BP shall be drawn up using one or a combination of schedules and building blocks provided for the PR according to the combinations for various types of securities set out in Annex XVIII. A BP shall contain the information items required in Annexes I to XVII, Annex XX and Annexes XXIII to XXIX depending on the type of issuer and securities involved. The BP may contain options with regard to information categorised as Category A, Category B and Category C, The FT shall determine which of these options is applicable to the individual issue, by referring to the relevant sections of the BP or by replicating such information. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 37

38. Prospectus Regulation (PR) (7) Article 22 (cont‘d): The FT attached to a BP shall only contain the following: -within the various securities notes schedules according to which the BP is drawn up, the information items in Categories B and C listed in Annex XX. When an item is not applicable to a prospectus, the item shall appear in the FT with the mention ‘not applicable’; -on a voluntary basis, any ‘additional information’ set out in Annex XXI; -any replication of, or reference to, options already provided for in the BP which are applicable to the individual issue. … the following information shall be included in a BP: -indication on the information that will be included in the FT; -a section containing a template, the ‘form of the FT’, which has to be filled out for each individual issue Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 38

39. Prospectus Regulation (PR) (8) Article 22 (cont‘d): the method of publication of the FT; if the issuer is not in a position to determine, at the time of the approval of the prospectus, the method of publication of the FT, an indication of how the public will be informed about which method will be used for the publication of the FT; in the case of issues of non equity securities issued under an offering programme, a general description of the programme. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 39

40. Prospectus Regulation (PR) (9) Only the following categories of securities may be contained in a BP and its related FT covering issues of various types of securities: -asset backed securities; -warrants falling under Article 17 PR (underlying: shares); -non-equity securities non-equity securities issued in a continuous or repeated manner by credit institutions that are covered by sufficient assets etc. … -all other non-equity securities including warrants with the exception ofwarrants falling under Article 17 PR (underlying: shares); Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 40

41. Prospectus Regulation (PR) (10) Article 24: Content of the summary of the prospectus, of the BP and of the individual issue The summary of the BP may contain the following information: -information included in the BP; -options for information required by the securities note schedule and its building block(s); -information required by the securities note schedule and its building block(s) left in blank for later insertion in the FT. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 41

42. Prospectus Regulation (PR) (11) Article 24 (cont‘d): The summary of the individual issue shall provide the key information of the summary of the BP combined with the relevant parts of the FT. The summary of the individual issue shall contain the following: -the information of the summary of the BP which is only relevant to the individual issue; -the options contained in the BP which are only relevant to the individual issue as determined in the FT; -the relevant information given in the FT which has been previously left in blank in the BP. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 42

43. Prospectus Regulation (PR) (12) Article 24 (cont‘d): Where the FT relate to several securities which differ only in some very limited details, such as the issue price or maturity date, one single summary of the individual issue may be attached for all those securities, provided the information referring to the different securities is clearly segregated. The summary of the individual issue shall be subject to the same requirements as the FT and shall be annexed to them. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 43

44. Prospectus Regulation (PR) (13) Article 26: Format of the BP and its related FT … the BP shall be composed of the following parts in the following order: -a clear and detailed table of contents; -the summary; -the risk factors linked to the issuer and the type of security or securities covered by the issue(s); -the other information items included in the schedules and building blocks according to which the prospectus is drawn up. Otherwise: cross reference list (identify the pages where each item can be found in the prospectus) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 44

45. Prospectus Regulation (PR) (14) Article 26 (cont‘d): The FT shall be presented in the form of a separate document or be included in the BP. The FT shall be prepared in an easily analysable and comprehensible form. The items of the relevant securities note schedule and its building blocks, which are included in the BP, shall not be reproduced in the FT. The issuer, the offeror or the person asking for admission to trading on a regulated market may include any of the additional information set out in Annex XXI in the FT. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 45

46. Prospectus Regulation (PR) (15) Article 26 (cont‘d): A clear and prominent statement shall be inserted in the FT indicating: -that the FT have been prepared for the purpose of Article 5(4) of the PD and must be read in conjunction with the BP and its supplement(s); -where the BP and its supplement(s) are published in accordance with Article 14 PD; -that in order to get the full information both the BP and the FT must be read in conjunction; -that a summary of the individual issue is annexed to the FT. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 46

47. Prospectus Regulation (PR) (16) Article 33: Publication of the FT of BPs The publication method for FT related to a BP does not have to be the same as the one used for the BP as long as the publication method used is one of the publication methods indicated in Article 14 PD. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 47

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51. Prospectus Regulation (PR) (20) Annex XXI: List of additional information in FT Example(s) of complex derivatives securities as referred to in recital (18) of the PD Additional provisions, not required by the relevant securities note, relating to the underlying Country(ies) where the offer(s) to the public takes place Country(ies) where admission to trading on the regulated market(s) is being sought Country(ies) into which the relevant BP has been notified Series Number Tranche Number Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 51

52. Agenda Q&As Day 1? Content of the Summary of Prospectus Base Prospectus (BP) Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 52