9/2005: New rules for prospectuses in Chapter 5 of the Securities Trading Act and related regulations - implementation of the Prospectus Directive

1 Introduction/Summary

By Royal Decree dated 9 December 2005, the ‘Act of 10 June 2005 No. 42 on changes to the securities trading act etc. (implementation of the prospectus directive)’ comes into force on 1 January 2006. The Ministry of Finance also issued a number of supplementary regulations on 9 December 2005.

The changes to the Securities Trading Act (the “STA”) and the related regulations represent the implementation in Norwegian law of the EU prospectus directive (Directive 2003/71/EF) (the ”Prospectus Directive”) and commission regulation (EF) 809/2004 (the ”Commission Regulation”). The new legislation and regulations are intended to lead to greater harmonisation of the rules for securities prospectuses within the EU/EEA. This includes making it possible for a prospectus approved in any one EEA member state to be used in all other EEA member states.

The new prospectus rules represent a continuation of the main principles of the current legislation and regulations, but will cause changes on a number of points.

The most important changes from the current prospectus rules are as follows:

(i) The obligation to produce a prospectus basically arises in two situations:
(a) An offer of transferable securities for purchase or subscription (addressed to at least 100 persons/for at least EUR 100,000).
(b) Admission to listing on a stock exchange or authorised marketplace.
(ii) EEA prospectuses must be approved by Oslo Børs (including offers of un-listed securities). Other prospectuses (”Registration Prospectuses”) must be registered with Foretaksregisteret (the Register of Business Enterprises).
(iii) Euro-passport for EEA prospectuses.
(iv) New requirements for the content of EEA prospectuses.
(v) Prospectuses will now be valid for 12 months.
(vi) Opportunity to issue a prospectus as several documents (Registration Document, Securities Note and Summary Note).
(vii) The requirements for the content of the prospectus can be satisfied by reference to other documents (incorporation by reference).
(viii) For borrowing programmes etc., a base prospectus can be used subject to more detailed provisions as soon as the relevant regulation has been approved. Oslo Børs intends to publish a separate circular on base prospectuses as soon as the regulation is published.
(ix) Thresholds in respect of amounts and percentages are calculated on a 12-month basis.
(x) A new duty for a company with listed securities to provide Oslo Børs with an annual summary of the information it has published .

The following sections provide an overview of the main provisions that are significant for prospectuses produced in relation to securities listed on Oslo Børs. The circular concentrates on what are known as EEA prospectuses. This term applies in the first instance to prospectuses that must be produced in connection with any offer with total consideration of at least EUR 2,500,000 that is addressed to at least 100 persons in the Norwegian market, as well as prospectuses produced in connection with an admission to listing. Such prospectuses must be approved by Oslo Børs, and this includes offers of un-listed securities. The circular will therefore be relevant for such cases.

The overall responsibility for inspecting prospectuses has been assigned to Kredittilsynet, but operational responsibility has been delegated to Oslo Børs.

By issuing this Circular No. 9/2005, Oslo Børs hereby cancels the following Circulars: Nos. 10/97, 14/97, 16/97, 18/97, 3/98, 9/98, 5/2000 and 9/2000. Circular No. 4/2004 will continue to apply subject to the changes required by section 3.7 below. The Regulation of 15 December 1997 No. 1306 on registration as a professional investor is also cancelled.

Oslo Børs has produced a more detailed paper on the new prospectus rules as an appendix to this circular, New prospectus rules in Chapter 5 of the Securities Trading Act and related regultations.

In addition, Oslo Børs invites interested parties to a seminar on the practical application of the rules and prospectus inspection on 9 or 10 January 2006 (shares) and 13 or 16 January (bonds), see the attached invitations.

2 Transitional rules

In accordance with the ‘Regulation of 9 December 2005 on transitional rules’, prospectuses can be produced in accordance with the current rules until 1 March 2006, subject to inspection/registration of the prospectus being finally completed prior to this date and the actual offer/admission to listing being carried out before 1 April 2006.

However, Oslo Børs wishes to stress that the question of whether the obligation to produce a prospectus applies will be governed solely by the new rules from 1. January 2006.

Where prospectuses are submitted to Oslo Børs for inspection during the transitional period mentioned, the issuer must make it clear under which rules the inspection is to be carried out.

The risk that inspection of a prospectus will not be finally completed before 1 March 2006 lies solely with the party producing the prospectus. Moreover, prospectuses that are not submitted to Oslo Børs for inspection prior to 16:00 on 14 February 2006 will automatically be inspected and approved in accordance with the new rules. Oslo Børs wishes to stress that it will only accept that a draft prospectus has been submitted for inspection if it is sufficiently complete for this purpose.

Oslo Børs will not be able to approve any prospectus in accordance with the former rules after 1 March 2006, regardless of when the inspection commenced.

3 Common rules for offers of transferable securities and admission to listing

3.1 Obligation to produce a prospectus

The obligation to produce a prospectus applies to all transferable securities. The exemption for warrants is not maintained in the new rules, and this means that the warrants currently listed on Oslo Børs will be subject to an obligation to produce a prospectus. Transferable securities are divided into equity securities (shares, primary capital certificates, convertible bonds and rights to purchase/subscribe for securities issued by a company for its own securities, etc) and non-equity securities (bonds and rights to purchase/subscribe for securities issued by a party other than the issuer of the underlying securities). There are also some particular rules for certain groups of non-equity securities (exemption from the obligation to produce a prospectus, discretionary exemptions, choice of competent authority for approval, etc).

The basic principle of the new rules is that in principle two situations give rise to the obligation to produce a prospectus: An offer of transferable securities for purchase or subscription that is addressed to at least 100 persons and relates to an amount of at least EUR 100,000 (Section 5-2 of the STA) , and admission to listing of the company's securities on a stock exchange or authorised marketplace, including an increase in share capital where the number of shares to be issued represents at least 10% of the total number of shares in the same class that are already listed (Section 5-3 of the STA). The obligation to produce a prospectus for admission to listing arises regardless of whether the admission in question requires an application for admission.

If the offer relates to an amount of the least EUR 2,500,000 the prospectus must be what is known as an EEA prospectus, as described in more detailed below. For offers where the amount is between EUR 100,000 and EUR 2,500,000, the prospectus must be what is known as a registration prospectus (National prospectus). A registration prospectus is in principal subject to the same rules as an EEA prospectus, but the requirements for its content are far less comprehensive (cf. Section 2 of the Regulation of 9 December 2005 on information in a prospectus), the prospectus has to be registered with Foretaksregisteret and cannot be used cross-border within the EEA. For both EEA prospectuses and registration prospectuses, the obligation to produce a prospectus for an offer of securities for purchase or subscription applies regardless of whether or not the securities in question are listed.

The calculation of the threshold amount (EUR 100,000/2,500,000) and the threshold percentage (10%) takes place on a 12-month basis. The period is set on a rolling basis from the time of the latest offer/admission to listing.

The separate provisions formerly included in the Stock Exchange Regulations on the obligation to produce a prospectus for mergers, demergers, reverse takeovers etc. by listed companies no longer apply under the new rules. However, Oslo Børs will apply specific requirements for the information to be provided in such circumstances, cf. section 4 below.

3.2 Exemptions from the obligation to produce a prospectus

Section 5-4 and Section 5-5 of the STA provide certain specific exemptions from the obligation to produce a prospectus, including in the event of a merger, exchange of shares in the same company and the issue of shares to existing shareholders with no consideration paid (shares), the issue of securities on acquisition and offers of securities to employees or board members (all types of transferable securities) and securities issued or guaranteed by a state, central bank etc. (non-equity securities). In the case of mergers and issues of securities on acquisition, a document must be produced that provides ”equivalent information”, and the document must be submitted to Oslo Børs for review of this. When shares are issued to existing shareholders or employees, a more limited document is required, and it is not subject to such review as mentioned above. Listed companies will be expected to publish these documents by issuing a stock exchange announcement.

In addition, there is a specific exemption for offers directed at professional investors or made in unit amounts of EUR 50,000, cf. Section 5-4 nos. 8 and 10, of the STA. These exemptions, together with the exemption for offers directed at fewer than 100 persons or for a total amount under EUR 100,000, can be combined. An issuer can, for example, offer securities amounting to EUR 3 million to professional investors and simultaneously offer securities amounting to EUR 99,999 to non-professional investors without incurring the obligation to produce a prospectus.

In the case of admission to listing , there is an exemption for securities issued by exercising rights (typically shares issued by exercising convertible bonds) and for certain securities listed on another regulated market, cf. Section 5-5, nos. 10 and 11, of the STA.

Section 5-6 of the STA provides the basis for discretionary exemptions, including exemptions for short-term debt instruments and bond loans issued or guaranteed by municipalities and county authorities.

3.3 Annual summary of information published

Section 5-2, new fifth and sixth paragraphs, of the Stock Exchange Regulations, requires an issuer of securities to send an annual summary to Oslo Børs of all the information it has published as a result of the obligations imposed by stock exchange and securities legislation or company law.

This will typically apply to stock exchange announcements, financial information, prospectuses and corporate documents. The summary must be published no later than 20 business days after the publication of the company's annual report.

The summary must be made public in accordance with the same rules as apply to a prospectus. It will be sufficient for the summary to state where the documents in question can be found.

3.4 Format of a prospectus

Under the new rules, an approved prospectus is valid for 12 months, cf. Section 5-12, of the STA. A prospectus is made up of three parts: a Registration Document (description of the company), a Securities Note (description of the transaction) and a Summary Note. A prospectus can be produced as a single document or several documents cf. Section 5-14, first paragraph, of the STA. Regardless of this, a new prospectus produced within the 12-month period can be based on the Registration Document from the first prospectus with an updated Summary Note and Securities Note for the new transaction.

In addition to this, information provided in the annual summary (cf. section 3.3 above) can be incorporated into the prospectus by reference (incorporation by reference), cf. Section 5-14, second paragraph of the STA. This means that information contained in documents included in the Summary Note mentioned can be made part of a prospectus without the documents having to be appended to the prospectus. However, the prospectus must include a cross-reference list to show where the relevant information is available.

3.5 Content of a prospectus

The requirements for the content of a prospectus dictated by the general requirements set out in Section 5-13, of the STA, first paragraph, and the specific requirements set out in the annexes to the Commission Regulation, cf. Section 1 of the Regulation on information in a prospectus. The prospectus must start with a table of contents, a summary and statement of risk factors. If a prospectus is produced as several documents, (cf. section 3.4 above), the Registration Document and Securities Note must each start with a table of contents and statement of risk factors. Other than this, the sequence of the information provided is at the discretion of the issuer.

The various annexes to the Commission Regulation specify the requirements for the content of the Registration Document and Securities Note depending on the type of securities in question. The requirements are very largely equivalent to those currently imposed by the Stock Exchange Regulations.

A prospectus that is to be inspected by Oslo Børs may be produced in Norwegian, English, Swedish or Danish. The entire prospectus is expected to be in the same language, including the documents incorporated by reference. Oslo Børs can require a Norwegian translation of the Summary Note, cf. Section 5-17 of the STA, but would not normally expect to find this necessary.

In the case of securities issued by companies registered outside the EEA with a secondary listing on Oslo Børs, a prospectus approved in the company's home country can be used subject to certain conditions, cf. Section 5-7, fifth paragraph, of the STA.

3.6 Inspection of prospectuses by Oslo Børs

Oslo Børs is responsible for inspecting and approving EEA prospectuses in respect of securities issued by an issuer with a registered office in Norway, cf. Section 5-7 of the STA. This is the case regardless of whether the offer or admission to listing is to take place in Norway or another EEA member state.

In the case of shares, Oslo Børs will provide inspection arrangements with a timetable and procedures equivalent to its established practice. This means that a prospectus will normally be approved within 10 working days following receipt of a sufficiently complete first draft, subject to the draft being accompanied by a checklist of the required and actual content.

In the case of bond prospectuses, Oslo Børs will normally expect to give feedback on the first draft within three working days. Oslo Børs is considering the introduction of a checklist for the Registration Document but not for the Securities Document. The need for checklists will be reviewed once Oslo Børs has gained experience of inspecting prospectuses under the new rules.

The requirements for the checklist mentioned above does not apply if the content of the prospectus follows the sequence set out in the relevant annex to the Commission Regulation, cf. Article 25(4).

To submit a prospectus for inspection, it should be sent to prospekter@oslobors.no (shares etc.) or obligasjoner@oslobors.no (bonds etc.).

The new prospectus rules will not cause any change to the fees charged by Oslo Børs. Inspection of a Securities Note will incur the same fee as for a supplementary prospectus.

3.7 Publication of a prospectus and advertising

The prospectus must be published at the latest when the offer period starts or the securities are admitted to listing, cf. Section 5-19, first paragraph, of the STA. Oslo Børs recommends that, in accordance with well-established practice, prospectuses should be published the day before the start of the offer period or the first day of listing.

The party that produces the prospectus can choose whether to publish it in printed form or by electronic distribution in accordance with the provisions of Section 5-19, second paragraph, of the STA. However, the prospectus must be available in printed form on request, and an announcement must be made in a national newspaper of where the prospectus is available, cf. third and fourth paragraphs of the same section.

Advertising, announcements and the like in connection with an offer must be in accordance with the guidelines set out in Section 5-20 of the STA. There will no longer be any requirement to submit such advertising etc. to Oslo Børs in advance.

3.8 Cross-border recognition

EEA prospectuses approved by Oslo Børs can be used on a cross-border basis in all EEA member states, and similarly prospectuses approved in any other EEA member state can be used in Norway, cf. Section 5-9 of the STA.

It is a condition for prospectuses approved in Norway to be used in another EEA member state that the prospectus is produced in ”a language customary in the sphere of international finance” (English) or a language accepted by the member state in question. This notwithstanding, the member state in question may insist on a translation of the Summary Note. Even so, for the prospectus to be approved by Oslo Børs it must be produced in one of the four languages mentioned in section 3.5 above, and if necessary the party that has produced the prospectus can arrange for it to be translated into the relevant language.

Oslo Børs will not require a Norwegian translation of the Summary Note when an EEA prospectus from elsewhere is used in the Norwegian market on a cross-border basis.

Where a prospectus approved in another EEA member state is to be used on a cross-border basis in Norway, notification must be sent to the e-mail addresses given in section 3.6 above.

4 Information to be provided by companies with listed shares in the event of merger, demerger etc.

The Stock Exchange Regulations formerly imposed specific requirements to produce a prospectus when a listed company took part in a merger or demerger, or carried out a reverse takeover. These requirements have been cancelled by the entry into force of the new prospectus rules. However, such circumstances give rise to the obligation to produce a prospectus in accordance with the general prospectus rules if they result in new shares being admitted to listing.

Companies will in any case be required to produce an expanded stock exchange announcement including pro forma figures and transaction-specific information. Consideration is also being given to requiring updated information on the listed company in certain circumstances. The detailed requirements in this respect will be included in the Oslo Børs Rules - Rules for companies with stock exchange listed shares and primary capital certificates (‘Continuing Obligations’).

5 Fixed-income instruments - particular requirements for offers and admission to listing

Section 5-18 of the STA does not stipulate who should take responsibility for the prospectus for an offer of bonds and sign the statement of responsibility. If the prospectus is produced by the issuer, then the issuer’s management or board will take responsibility.

The duty to provide an annual summary as mentioned in section 3.3 does not apply to issuers of non-equity securities with nominal value of at least EUR 50,000, cf. Section 5-2, sixth paragraph, of the Stock Exchange Regulations.

The principle that Oslo Børs should approve all prospectuses in respect of securities issued by any issuer with its registered office in Norway (section 3.6 above) does not apply to all types of non-equity securities. Section 5-7, fourth paragraph, of the STA gives the issuer the right to elect that the competent authority in the EEA member state where the offer is made or where an application for listing is made should approve the prospectus subject to conditions including the securities having a nominal value of EUR 1,000 or more.

The rules on cross-border recognition described in section 3.8 do not apply to commercial paper and other money market instruments with maturity of less than 12 months, cf. Section 5-9, third paragraph of the STA.

6 Closing comments

Recipients of the circular are encouraged to contact Oslo Børs with any questions on the new rules. Further details can be found in the appendix to this circular, New prospectus rules in Chapter 5 of the Securities Trading Act and related regultations. Oslo Børs will provide a web site page for Frequently Asked Questions to publish information on the stance taken by Oslo Børs and bodies at the EU level on the practical interpretation of the new rules.

Recipients are asked to address any questions on registration prospectuses (National prospectuses) to Foretaksregisteret or Kredittilsynet.

This circular will be translated into English and published as soon as possible. All issuers and member firms will be advised by e-mail when the translation is available. In addition, Oslo Børs will send copies by post to issuers and member firms with addresses outside Norway.

Yours sincerely
OSLO BØRS ASA

Atle Degré, Senior Vice President Legal Affairs
Bjarne Rogdaberg, Attorney-at-Law