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ADR

ADR represents the ownership in the sharesof a foreign company trading on US

financial markets.Stock of many non-US companies trades onUS exchanges through the use of ADRs

ADRs enable US investors to buy shares inforeign companies without undertakingcross-border transactions.

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ADR

ADRs carry prices in US dollars, paydividends in US dollars, and can be tradedlike the shares of US-based companies.

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W hy ADR?

Companies often find that the establishmentof a depositary receipt program bringsadditional benefits. The increased visibilityand investor base they gain by steppingoutside their home market can enhance their international reputation, increase their share

value, and heighten the profile of their company among the internationalinvestment community.

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A D R

An ADR is a Negotiable Instrumentthat represents the an ownershipinterest in securities of a non-U.Scompany

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US Investments in ForeignEquity

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ADR Each ADR is issued by a US depository

bank and can represent a fraction of a share,

a single share, or multiple shares of foreignstock.An owner of an ADR has the right to obtainthe foreign stock it represents, but USinvestors usually find it more convenientsimply to own the ADR.

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ADR The price of an ADR is often close to the

price of the foreign stock in its homemarket, adjusted for the ratio of ADRs toforeign company shares.

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Type of ADRs

Sponsored Sponsored ADR programs are initiated by the

Foreign Issuer based on its decision to make itsshares available for trading in U.S.

Un-sponsored

Created and offered to investors by one or moredepository bankers without the consent of theissuer

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Four type of Sponsored ADRs

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B enefits of organizing an ADR

Program - Issuer Creates, broadens or diversifies investor

base toinclude investors in other capital markets.Enhances visibility and global presence

among investors, consumers and customers.Increases liquidity by tapping newinvestors.

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B enefits of organizing an ADR Program - Issuer

Develops and increases research coverageof your company.Improves communication with shareholdersglobally.Enables price parity with global peers.

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B enefits of organizing an ADR Program - Issuer

Offers a new venue for raising equitycapital.Facilitates merger and acquisition activity

by creating a desirable stock-swapacquisition currency.

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Benefits of ADR - Investor

Easy to purchase and hold.Trades and settles in the same manner asany other security available in the investorshome market.Facilitates global / sector diversification by

providing access to new companies.

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Benefits of ADR - Investor

Enables comparison with other investmentsdue to accessible price information.Eliminates or reduces global custodysafekeeping charges.Pays dividends and delivers corporateaction notifications in the investors homecurrency and language .

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B enefits Investor If Listed

Conforms to disclosure and accountingrequirements.

Offers institutional investors (mutual funds, pension funds) the opportunity to holdinternational securities that might otherwise

not be permitted.If listed on a major US exchange, lowersdividend tax rate for individual and retailinvestors.

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Decision Factors for Sponsored ADRs

Level I

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Rule 144 A - ADRs

Rule 144 A ADRs are privately placedsecuritiesSEC Registration and US GAAP are notrequired

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GDR

Global Depository Receipts

Allows the issuers to raise capital in one or more

markets thus broadening the share holder base

Listed at London and Luxembourg Stock

Exchanges

Can also be traded in US Rule 144 A market and in

the U.S Public Market

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Regulation S - GDR Regulation S (Reg S) DRs allow issuers toraise capital in markets outside the UnitedStates. Reg S DRs are often listed on theLondon or Luxembourg stock exchanges

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EDR

European Depository Receipts

EDRs are securities of non E.M.U issuers

offered and traded in EuropeEDRs are Euro-denominated depositoryreceipts representing ownership of underlying

shares in a company domiciled outside theEMU

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EDRs are listed in stock exchanges such as

London, Luxembourg, Paris, Frankfurt,

B russels, Amsterdam and ViennaEDRs are available to institutional investors

only

Home market disclosure requirement is

sufficient

EDR

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ADR Ratio

Issuers must establish a ratio for the number of underlying shares that represent one ADR

The ADR Ratio allows the issuer to price theADR in a range similar to its US peers

Let us see the average prices of various listedUS Stocks Industry wise

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W hat is the correct ADR Ratio?

There is no single answer to this question

Issuer may want to create a ratio in which theADR is priced in a range similar to other USshares

The ratio has an impact on investorsissuance/cancellation and brokerage costs

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Principal responsibilities Depositary

Provide advice/perspective on type of program to

execute

Provide advice/perspective on exchange or

market to list

Advice on ratio of ADRs to local shares

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Appoint Custodian

Assist with SEC compliance, registration andreporting requirements

Announce and promote program to market:

brokers, traders, media, retail/institutionalinvestors via news releases, Internet ads.

Principal responsibilities Depositary

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Issuer Goals and Type of issues

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Prepares non-US issuers financial statement in

accordance with, or reconcile to, U.S. GAAP(Level II, Level III)

Prepare and review SEC disclosure filings and

offerings circulars

Principal responsibilities Accountants

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Advise on type of program to launchAdvise on Exchange or Market to listCover issue through research report/ promoteADR to Client baseAdvise on road shows, meetingsAdvise on Capital Market issues

Principal responsibilities

InvestmentB

ankers

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Prepare, File and manage approval from SEC for all

required forms, exemptions and registration

statementsPrepare offering circulars/prospectus

Complete requirement of trading and settlement

mechanism

Review road show and shareholder communication

material

Principal responsibilities Legal Counsel

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Investor relations advisor/firm

Develop long term plan to raise awareness of issuers program in U.S.

Develop communications plan and informationmaterials for launch activities (road show and

presentations to investors, launch day promotion,meetings with financial media)

Co-ordinate with issuers advertising and publicrelation teams on specific program plans tosupport and develop company image in U.S.

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Maintaining an ADR program

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Responsibilities of an Issuer

Provides depositary with notices of stockholder

meetings and corporate distributions.

Provides custodian and depositary with notices of

annual and special / extraordinary stockholder

meetings and corporate distributions including

dividends and rights offerings.

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Responsibilities of an Issuer Ongoing compliance with any applicable

stock exchange and SEC regulations,including disclosure and reporting, and

corporate governance requirements (in

coordination with legal counsel andaccountants).

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Responsibilities of an Issuer Executes US-focused investor relations

(non-US-focused in the case of Regulation

S GDRs) plan that may include

management visits to targeted

US investors, the development of sell-sideresearch, and ongoing shareholder

communications.

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ADR Mechanism

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ADR Trading Mechanism

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Investors Relations

Investors Relations (IR) is defined as a

strategic marketing activity combining thedisciplines of communication and finance that

provides present and potential investors with

an accurate portrayal of companys performance and prospects

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Role of Investors Relations

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Companys IR strategies

Analyst meetings and presentations by senior

management, in the form of large and small

groups (company and broker-sponsored), one-on-ones, and teleconferences

Shareholder disclosures such as annual, interim

reports, SEC filings and news releases

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Media relations, or soliciting favorable

editorial coverage by key financial and trade

journals

Corporate advertising, to define and reinforce

company messages to all constituents andstake holders

Companys IR strategies

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Influencers and opinion leaders

Sell side research analysts and equity marketstrategists

Equity sales professionals (Institutional andRetail brokers)

Rating agencies (S&P and Moodys)Financial Media (Print, B roadcast and Internet)

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IR Process - Measurement

Objective termsSubjective terms

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Objective Measures

Levels of U.S ownership (both ADR and

ordinary/underlying)

Trading liquidity

Analyst Recommendations

Stock Price Movement

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Subjective terms

Subjective terms are harder to measure

because they involve perception of the

soundness and attractiveness of the

companys potential

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IR Geared towards InstitutionalInvestors

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U S Securities Laws

The Securities Act of 1933

W arrants full and fair disclosure of facts

To make an informed investment decisionThe Securities Exchange Act of 1934

Designed to regulate secondary market of listed

and quoted securities On-going reporting regulations

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ADR Indices3 - Regional Indices 4 - Market Indices 3 -Sector Indices 8 -Select Indices

1. Europe

2. Asia

3. Latin America

1. Developed

2. Emerging

3. Euroland

4. Telebras

1. European

Telecom

2. Latin Telecom

3. European Oil andGas

1. International 100

2. Europe 100

3. Developed

Markets 1004. Asia 50

5. Emerging

Markets 50

6. Latin America 35

7. InternationalTelecom 35

8. BRIC Select