American Depositary Receipt

Depositary Receipt the document certifying that securities are placed on storage in bank-kastodiane (custody) in the country of the emitter of actions addressed to bank-depositary, and granting the right to its owner to use benefits from these securities. Except for a difference because of a course change of currency the price for these receipts changes point in point with change of the price for base securities, except those cases when in the local market participation of foreign investors is limited.

The most known kinds depositary receipts — American depositary receipts (ADR — American Depositary Receipt) and global dep* receipts (GDR — Global Depositary Receipt). ADR are issued for the reference in the markets of the USA (though address and on European), GDR — for the reference in the European markets.

In 2007 in the Russian legislation there was a concept «Russian depositary the receipt» (RDR). According to FE «About a securities market» RDR is the nominal issue security which does not have a face-value, certifying the property right to certain quantity of actions or bonds of the foreign emitter and fixing the right of its owner to demand from emitter RDR of reception in exchange RDR corresponding quantity of represented securities and rendering of the services connected with realization by owner RDR of the rights, fixed by represented securities. According to information letter FSFR it is necessary to conduct the isolated account dep. receipts by principles dep. account

Global depositary receipts take place outside of the company-emitter country in the markets of two and more countries.

American Depositary Receipt

ADR — derivative security freely addressing in the American stock market on the actions of the foreign company deposited in the American bank-depositary . 95 % of releases АDR are necessary on a share of three banks — Bank of New York, Citibank, J. P. Morgan Chase . АДР are nominated in US dollars and address both at the American stock exchanges, and in the American off-exchange trading systems.

Prior to the beginning of release АDR the company-emitter should define, what exactly she wants from it to receive and that it is ready to make for this purpose. In this connection there are some various kinds of programs from which the company can choose the approaching.

Not sponsored receipts

Not sponsored ADR exhaust for sale in markets OCM (over-the-counter market). At not sponsored program ADR between dep. bank and the foreign company there is no official agreement. The companies which actions are issued under this program, have the right not to declare the financial information under the American standards. The prices of such receipts are rather low because of low liquidity and a high risk.

АDR

The first level АDR is low level of sponsored receipts. Also it is the idle time for the company a mode to receive АDR. In this case level of the reporting of the company is not obliged to correspond to standards GAAP, and the reporting under standards SEC should be minimum. From the company it is not required the quarterly or annual reports prepared according to standards GAAP. АDR I is initial level АDР. Greatest quantity АДR — АDR the first level. After reception АDR I company can raise level of the receipt to the second and the third.However access on large exchange markets ADR of the given level is limited. АDR 1 address in markets OTS, but can't address at the New York stock exchange (NYSE), the American stock exchange (АМЕХ) and NASDAQ.

АDR II

If the company wants to get access to such large stock exchanges as NYSE, АМЕХ and NASDAQ it is necessary for it to obtain the permit on АDR the second level. For this purpose it is necessary for it to pass full registration in SEC. Besides from the company annual reports under form Form 20-F at which filling the company should follow standards GAAP are required.

АDR III

АDR the third level it is used for possibility of attraction of the new capital. Emitters ADR of the third level should register both dep. receipts, and initial shares of company in SEC and to fill Form F-1, 20-F, to correspond to standards GAAP. Release ADR of the third level is actually equivalent to the public offer of actions at a stock exchange and demands the same level of disclosing of the financial information. Also the emitter should correspond to listing requirements at that stock exchange where trade ADR will be carried out.

The limited programs

The companies which don't want to exhaust the action on the open market and to sell to their concrete foreign investors (which, as a rule, large private investment funds are) can use following programs.

144 (a)

Private seating АDR of category Rule 144А. According to rule SEC Rule 144A, the companies can involve the capital in the USA by means of private seating sponsored АDR among the qualified institutional investors (the institutes which capital makes not less than 100 million US dollar). Registration in АДР In this case isn't required. The company shouldn't give the financial reporting.

Regulation S

One more mode to limit trade in receipts is to place private АDR categories Regulation S. The American investors can't hold or trade in receipts of this category. Receipts are registered and issued among not American residents and aren't registered the regulating organizations of the USA.

АDR categories Regulation S can be transformed in АDR I after the restriction period will end.