NOTE: THIS TRANSLATION IS INFORMATIVE, I.E. NOT LEGALLY BINDING! 190/2004 Coll. ACT. of 1 April on Bonds

Transcription

1 NOTE: THIS TRANSLATION IS INFORMATIVE, I.E. NOT LEGALLY BINDING! 190/2004 Coll. ACT of 1 April 2004 on Bonds Amendment: 378/2005 Coll. Amendment: 56/2006 Coll. Amendment: 57/2006 Coll. Amendment: 296/2007 Coll. Amendment: 230/2008 Coll. The Parliament has passed the following Act of the Czech Republic: PART ONE BASIC PROVISIONS Article 1 Scope of Regulation This Act regulates the issuing of bonds in the Czech Republic regardless of who the issuer of bonds (hereinafter issuer ) is, unless stipulated otherwise hereinafter (Article 3(3), Article 26(4)). Article 2 Bond (1) A bond is a substitutable security to which the right to receive payment of the owed amount and the obligation of the issuer to satisfy this right are attached. (2) A bond can be issued in physical or book-entry form.

2 (3) A bond issue is a group of bonds issued on the basis of the same issue conditions and having the same date of issue and the same maturity date. Bonds from the same issue shall be assigned the same identification designation according to the international numbering system for securities identification (ISIN), if it is assigned, or another designation identifying the bond. (4) A bond issued in the Czech Republic is a bond that was handed over in physical form to the first acquirer or entered in book-entry form in a register pursuant to a special legal rule governing business activities on the capital market in the account of the first acquirer within the territory of the Czech Republic. (5) Coupons are bearer securities that can be issued for the purposes of exercising the right to the yield on a bond. Physical coupons are issued in a coupon sheet. Article 3 Issuer (1) An issuer may be a legal person. An issuer may also be a natural person that is a bank with its place of business within the territory of a state of the European Union or another state included in the European Economic Area, and that carries on business activities within the territory of the Czech Republic on the basis of a single banking licence pursuant to a special legal rule governing the activities of banks. (2) An issuer may issue bonds if the Czech National Bank approves the issue conditions of the bonds (hereinafter issue conditions ), unless this Act stipulates otherwise (Article 25(8)). (3) An issuer with its registered office or place of residence in the Czech Republic that issues bonds abroad is obliged, no later than on the date of the bond issue, to notify the Czech National Bank of the place of issue, the volume of issue, the type and form of the bonds, their yield and maturity. (4) An issuer with its registered office or place of residence abroad that issues bonds in the Czech Republic is obliged, no later than on the date of the bond issue, to notify the Czech National Bank of the volume of issue and the type and form of the bonds, their yield and maturity. Article 4 List of Holders (1) An issuer shall maintain a list of holders of the physical bonds registered to name and issued thereby. The list of holders of book-entry bonds registered to name is a list maintained by a person that is authorised to maintain a register of book-entry securities pursuant to a special legal rule governing business activities on the capital market (hereinafter person authorised to maintain a register ). The rights attached to bonds registered to name may be exercised, in relation to the issuer, by a person included in such lists, unless a special legal rule governing

3 business activities on the capital market stipulates otherwise. (2) In order for the transfer of a physical bond registered to name to be effective with respect to the issuer, the entry of the change of the holder in the list pursuant to the first sentence of paragraph 1 is required; the issuer shall make this entry without delay after such change is proved to him. In order for the transfer of a book-entry bond registered to name to be effective with respect to the issuer, the entry of the change of the holder in the list pursuant to the second sentence of paragraph 1 is required. Article 5 Transferability of a Registered (i.e. Registered to Name) Physical Bond A registered physical bond is transferable by endorsement and handover. The endorsement shall include the commercial name or designation and the registered office of a legal person or the name and place of residence of a natural person to whom the bond is being transferred, and the date of transfer of the bond. Otherwise, a special legal rule governing bills of exchange and promissory notes shall apply mutatis mutandis to endorsement. The transferability of a registered bond may not be restricted by issue conditions. Article 6 Requisites of a Bond (1) A bond issued in physical form shall have the following requisites a) information on the issuer 1. for a legal person, the commercial name or designation, registered office and identification number, if assigned, 2. for a natural foreign person, the first name, surname, date of birth, place of residence in the Czech Republic, commercial name, place of business and identification number, if assigned, b) the title of the bond containing the word dluhopis or the designation of a special kind of bond, c) the identification designation according to the international numbering system for securities identification, if assigned, or another information identifying the bond, d) the nominal value, e) information on the approval of issue conditions, f) the yield on the bond or the method of its calculation, g) date of issue, h) the manner and place for the payout of the nominal value of the bond and its yield, i) the type of the bond, j) declaration of the issuer that he undertakes to repay the owed amount in the manner and at the place stated in the issue conditions, k) maturity dates of the bond and its yield, unless the yield is determined by the difference between the nominal value of the bond and its lower issue price, l) the bond number,

4 m) in the case of a registered bond, it must also contain the name and surname, commercial name or designation of its first holder, n) the signature or imprint of the signature of persons authorised to act on behalf of the issuer on the date of issue, or the signature or imprint of the signature of the issuer. (2) A book-entry bond shall have the requisites pursuant to paragraph 1 with the exception of the requisites given under letters (l), (m) and (n). Article 7 Issue Conditions (1) The issue conditions set out the rights and obligations of the issuer and the bondholder as well as detailed information on the bond issue, and always include a) the information stated in Article 6(1)(a) to (k), b) information on the bond form, c) the period for subscribing for the bond issue (hereinafter issue period ), d) the issue price or the method for its determination and, in cases where the issue price is determined by the price attained in an auction, the method of the auction, e) the expected total nominal value of the bond issue, f) the manner and place for subscribing for the bond and the manner and place for paying the issue price of the subscribed bond, g) the method for the potential calculation of the yield on the bond, h) information on the taxation of the bond yield, i) information on the persons participating in the organisation of the bond issue, in the redemption of the bond and in the payment of the yield on the bond, including the manner of their participation in these activities, j) information on the lapse of the rights attached to the bond, k) the manner of announcing the convening of a meeting of bondholders, as well as owners of shares in a collective bond (hereinafter meeting of holders ) (Article 21); the determination of the decisive date for participation in the meeting of holders of book-entry bonds, as well as owners of shares in a collective bond, which must not precede the date for the holding of the meeting of holders by more than seven calendar days, and the manner of publishing other information on the bond, l) information on who, when and with what result carried out the evaluation of financial fitness of the issuer (rating), or information that no rating has been carried out, m) the designation of the regulated market or multilateral trading facility on which the issuer intends to apply for the admission of the bonds to trading, or information that he does not intend to apply for such admission. (2) The issue conditions shall also stipulate other rights and obligations of the issuer and the bondholder, as well as more detailed information on the bond issue, if applicable in relation to the conditions of the issuance and the issuer s intentions, and these are a) the issuer s decision that the bond issue will be issued in stages (tranches) within the issue period, b) the issuer s right to increase the volume of issue (Article 11(1)(b)) and the possible extent of

5 this increase, or the issuer s right to issue bonds in the anticipated volume even after the expiry of issue period (Article 11(1)(c)), c) information that the redemption of the bond or the payout of its yield is secured by a third person, and information on where the contract on securing is accessible to the public, d) information on a right of pledge (lien) in relation to the bond whose redemption or yield payment is secured by a pledge and the manner in which the right of pledge will be exercised, e) the method of drawing lots in the case of a bond whose yield is connected to a bond that is drawn (Article 16(c)), f) information on further rights of the bondholders, if they are attached to the bond, g) in the case of book-entry bonds, information on who will maintain their register and any decision of the issuer that the right to the yield belongs to the person owning the bond on a date different from the maturity date of the bond yield (Article 17(1)), h) in the case of a collective bond, information on who will maintain the register of owners of shares in the collective bond, i) the impermissibility to separate the right to yield on the bond if the issuer excludes the separation of such right, j) the issuer s right to redeem the bond prior to maturity including the proportionate yield with the stipulation of the conditions and manner of the redemption prior to maturity and also the method for calculating the value of the non-redeemed, non-returned coupons (Article 19(4)), k) the bondholder s right to request redemption of the bond prior to maturity including the stipulation of conditions under which he is entitled to do so, l) the wording of the arbitration clause if disputes relating to the rights and obligations attached to the bond are to be settled in arbitration proceedings, m) in the case of a convertible bond (Article 33(1)), the method for announcing the date from which it is possible to exercise the right to an exchange for another bond or bonds or a share or shares, and the place and period for exercising such right. If the convertible bonds are issued in book-entry form, the date of the decisive day for the determination of the person entitled to exercise the rights attached to these bonds, n) in the case of a priority bond (Article 33(2)), the method of announcing the date from which it is possible to exercise the right to preferential share subscription, and the place and period for exercising this right. If the priority bonds are issued in book-entry form, the date of the decisive day for the determination of the person entitled to exercise the rights attached to these bonds, o) in the case of a subordinate bond (Article 34), the stipulation that the receivables of the holders of such bonds arising from the bonds will be satisfied after the satisfaction of all other receivables, with the exception of receivables that are bound by the same or similar condition of subordination, in the event of 1. commencement of the issuer s liquidation, 2. issuing a decision on insolvency of the issuer, 3. another similar measure, if the issuer is a foreign person. (3) The bond prospectus 1) (hereinafter prospectus ) and the issue conditions may constitute a single document and may be approved together. (4) The legal relationship between the issuer and the person entitled to exercise the rights attached to a bond shall be governed by the Commercial Code and the Securities Act, as regards

6 matters not governed by this Act. Approval of Issue Conditions Article 8 (1) Issue conditions shall be approved by the Czech National Bank at the request of the issuer. In the event of use of the procedure pursuant to Article 7(3), the provisions of Article 8(5) and Article 9(1) and (2) shall not apply and the Czech National Bank shall use the approval procedure laid down in a special legislative act regulating capital market undertakings for the approval of a prospectus. (2) The annex to the application for approval of issue conditions shall include a) the issue conditions, b) the contract on securing if the payment of the obligation arising from the bond is secured by a third person, c) if the bond issue is not organised by the issuer, a written declaration of the empowered person that such a person has undertaken to organise the bond issue for the issuer (Article 15), d) in the case of municipal bonds, the consent of the Ministry of Finance (hereinafter the Ministry ) pursuant to Article 27(2), e) in the case of mortgage bonds, the anticipated state of coverage of the mortgage bonds by receivables arising from mortgage loans (hereinafter anticipated state of coverage ) during the term to maturity of the new issue; if the term to maturity of already issued mortgage bond issues of the same issuer is longer than the term to maturity of the new issue, then the annex includes the anticipated state of coverage of all already issued issues, including the new issue. (3) During the approval of issue conditions, the Czech National Bank assesses whether the application contains all the annexes required by this Act, whether the issue conditions contain all the requisites stipulated by this Act and whether the security that is to be issued is a bond pursuant to this Act. (4) If the issue conditions do not contain the information stipulated by law or if the annexes required by law are not included, the Czech National Bank shall call on the applicant to remove the insufficiencies and stipulate a deadline for this. The Czech National Bank shall not approve the issue conditions if, after the call for their completion or the completion of the application, no correction is done or if the security in question is not a bond pursuant to this Act. (5) If any information that is to be included in the issue conditions is not known on the date of approval, the Czech National Bank shall approve the issue conditions provided that they contain information on the method that will be used to determine and complete such information. The information must be notified to the Czech National Bank prior to the date of making the issue conditions public, and the issue conditions shall be published (Article 10) including such information.

7 1 ) Act No. 256/2004 Coll., on Capital Market Undertakings, as amended. Article 9 (1) The Czech National Bank is obliged to decide on an application for the approval of issue conditions pursuant to Article 8(1) within 60 days of the date of its delivery or completion. If the Czech National Bank does not send a decision on the application to the applicant within this period, the issue conditions shall have been approved in the last wording that the issuer requested to be approved during the proceedings, and it is assumed that the decision has become legally effective. (2) It is possible to lodge an appeal (remonstrance) against the decision of the Czech National Bank. The Bank Board of the Czech National Bank is obliged to decide on the appeal within 60 days of the appeal s delivery or completion. If the Bank Board of the Czech National Bank does not send a decision on the appeal to the applicant within this period, the decision of the Czech National Bank shall have changed and the issue conditions shall have been approved in the last wording that the issuer requested to be approved during the proceedings, and it is assumed that the decision has become legally effective. (3) The Czech National Bank shall publish the information on the approval of issue conditions in the Bulletin of the Czech National Bank. (4) If the issuer does not commence the subscription for bonds within 6 months of the date on which the Czech National Bank s decision on the approval of issue conditions comes into force (becomes unappealable), then this decision loses legal effect. Article 10 Publication of Issue Conditions (1) The issue conditions must be published no later than on the date of issue; they may not, however, be published before the Czech National Bank s decision by which they were approved comes into force. The issue conditions shall be published in full wording in the form of an advertisement in at least one nation-wide daily newspaper or in the form of a brochure available free of charge at the issuer s registered office and at the issuer in a manner allowing remote access, unless this Act stipulates otherwise (Article 26(1) and (2)). The chosen manner and the place of publication must be published in the Commercial Bulletin. This procedure for publishing the issue conditions shall not be used in the case of bonds that are not publicly offered, however, the issue conditions must be always handed over to their first acquirer free of charge. The issuer of bonds that are not publicly offered is obliged to publish, in the Commercial Bulletin, information on the place where it is possible to become acquainted with the issue conditions. (2) The issue conditions must be published in the form of a brochure also at the registered office of a person administering the issue of bonds, the payout of the yield on bonds and the redemption of bonds and they must be published at this person in a manner allowing remote access. An interested person must be provided with the issue conditions at their request free of charge, whereas the costs of sending them shall be borne by the interested person.

8 (3) The issue conditions of bonds admitted to trading on a regulated market must also be available free of charge at the registered office of the operator of the relevant market or published at this person in a manner allowing remote access. (4) Should the issue conditions be approved together with the document, paragraphs (1) and (3) shall not apply and the issue conditions shall be published together with the prospectus in a manner laid down by a special legislative act regulating capital market undertakings for the publication of a prospectus. Article 11 Volume of Issue (1) An issuer is entitled to issue bonds a) in a smaller volume of issue if the anticipated volume of issue has not been subscribed for before the end of the issue period, or b) in a volume of issue greater than the anticipated total nominal value of the bond issue, even after the expiry of the issue period if this possibility is stated in the issue conditions, or c) up to the anticipated total nominal value of the bond issue even after the expiry of the issue period, if this possibility is stated in the issue conditions. (2) If the issuer proceeds pursuant to paragraph 1(b) or (c), he is obliged to stipulate an additional issue period, which ends no later than on the decisive day for the bond redemption, and publish it in the same manner as the issue conditions. (3) After the expiration of the issue period, the issuer is obliged to notify the Czech National Bank without undue delay, and in the case of book-entry bonds also the person authorised to maintain a register, of the fact pursuant to paragraph 1 and publish the fact in the same manner as he published the issue conditions. In the case of an issue of municipal bonds (Article 27), the issuer is also obliged to notify the Ministry of the fact pursuant to paragraph 1(a). (4) In the case of an issue of government bonds (Article 25) issued in book-entry form, the Ministry shall notify, without undue delay, the person authorised to maintain a register of the fact pursuant to paragraph 1(b) and (c) and shall publish it in the same manner as it published the issue conditions. Article 12 Amendment to Issue Conditions (1) The issuer may change (amend) the issue conditions, in cases other than those referred to in paragraph 6, with the prior consent of the meeting of holders (Article 21) and after the approval of the Czech National Bank only if there is a fundamental change to the conditions under which they were stipulated.

9 (2) An amendment to issue conditions shall be approved by the Czech National Bank at the issuer s request. Where the issue conditions are approved together with the prospectus, the provisions of Article 12(3) and (4) shall not apply and the Czech National Bank shall use the approval procedure laid down by a special legislative act regulating capital market undertakings for the approval of a supplement to a prospectus. (3) The Czech National Bank is obliged to decide on an application for approval of an amendment to issue conditions within 30 days of its delivery or completion. If the Czech National Bank does not send the applicant a decision on the application within this period, the amendment to the issue conditions shall have been approved in the last wording that the issuer requested to be approved during the proceedings and it is assumed that the decision has become legally effective. (4) It is possible to lodge an appeal (remonstrance) against the decision of the Czech National Bank. The Bank Board of the Czech National Bank is obliged to decide on the appeal within 60 days of the date of its delivery or completion. If the Bank Board of the Czech National Bank does not send a decision on the appeal to the applicant within this period, the decision of the Czech National Bank shall have been changed and the amendment to issue conditions shall have been approved in the last wording that the issuer requested to be approved during the proceedings, and it is assumed that the decision has become legally effective. (5) The issuer shall publish the amendment to issue conditions without delay in the same manner as the issue conditions were published and, at the same time, publish the amended issue conditions in full wording. However, the publication may not be carried out before the decision of the Czech National Bank approving the amendment comes into force. (6) The consent of the meeting of holders and the approval of the Czech National Bank is not required for a change in the information on the issuer, on the manner or place for the payout of the nominal value of the bond and the yield thereon, in the information on taxation of yield on the bond, information on persons participating in the organisation of the bond issue, its redemption and the payout of yield thereon and also information that expands the issue conditions and that is not information of the issue conditions pursuant to Article 7; they are also not required if the issuer decides to apply for admission of the bonds to trading on a regulated market or multilateral trading facility after the bonds have been issued; a change in such information must not cause harm to the bondholders. (7) If the consent of the meeting of holders and the approval of the Czech National Bank are not required by law for amendments to issue conditions, the issuer is obliged, without undue delay, to publish the information on amendments in the same manner as the issue conditions were published. (8) In the case of an issue of municipal bonds, the issuer shall also notify the Ministry of an amendment to issue conditions. Bond Programme

10 Article 13 (1) An issuer may apply for approval of joint issue conditions, which shall apply identically to a number of bond issues that is not determined beforehand (hereinafter bond programme ). In the application, the issuer is also obliged to specify the duration of the bond programme and the maximum volume of unredeemed bonds issued within the bond programme. (2) Individual bond issues issued within the framework of a bond programme are separate issues. (3) The maximum volume of unredeemed bonds issued within a bond programme must not be exceeded by the issuer at any time during the bond programme. (4) Prior to the issue of each individual bond issue within a bond programme, the issuer is obliged to draw up a supplement to the bond programme for this issue, which must contain the rest of the requisites of issue conditions pursuant to Article 7 that are not included in the bond programme, and a reference to the bond programme, and the supplement must also contain any other specific conditions of this issue. (5) The provisions of Articles 8 and 9 shall apply mutatis mutandis to the approval of a bond programme and its supplement. The bond programme and the base prospectus 1) may constitute a single document and may be approved together. Where the bond programme is approved together with the base prospectus, the provisions of Article 8 and 9, except for Article 8(5) and Article 9(1) and (2), shall apply mutatis mutandis and the Czech National Bank shall use the approval procedure laid down in a special legislative act regulating capital market undertakings 1) for the approval of a base prospectus. Should the new base prospectus be approved, this shall be without prejudice to the validity of the bond programme. Article 14 (1) The supplement to a bond programme and an amendment thereto are subject to approval by the Czech National Bank, unless this Act stipulates otherwise (Article 25(8)), at the issuer s request. The provisions of Article 12 shall apply mutatis mutandis to the amendment to the supplement to a bond program. Where the bond programme is approved together with the base prospectus, the provisions of Article 8 and 9, except for Article 8(5) and Article 9(1) and (2), shall apply mutatis mutandis to the approval of the supplement, and those of Article 12, except for Article 12(3) and (4), to the approval of an amendment to the supplement, and, when approving the supplement to a bond programme or an amendment thereto, the Czech National Bank shall use the approval procedure laid down in a special legislative act regulating capital market undertakings 1) for the approval of a supplement to a prospectus. (2) The Czech National Bank is obliged to decide on an application pursuant to paragraph 1 within 14 days of its delivery or completion. If the Czech National Bank does not send its decision on the application within this period, the supplement to the bond programme shall have been approved in the last wording that the issuer requested to be approved during the proceedings, and it is assumed that the decision has become legally effective.

11 (3) It is possible to lodge an appeal (remonstrance) against the decision of the Czech National Bank. The Bank Board of the Czech National Bank is obliged to decide on the appeal within 14 days of its delivery or completion. If the Bank Board of the Czech National Bank does not send a decision on the appeal to the applicant within this period, the decision of the Czech National Bank shall have changed and the supplement to the bond programme as well as the amendment thereto shall have been approved in the last wording that the issuer requested to be approved during the proceedings, and it is assumed that the decision has become legally effective. (4) A bond programme, a supplement to a bond programme and an amendment thereto are effective from the date of their publication by the issuer, which may not take place before the Czech National Bank s decision on their approval comes into force. The issuer shall publish them without delay in the same manner as required by law in respect of the publication of issue conditions (Article 10). Article 15 Bond Issue (1) A bond issue is organised by the issuer or by a person entrusted with it by the issuer, which person is authorised for such activity pursuant to a special legal rule governing business activities on the capital market and will take care of the issue or will undertake, in a contract, to become the first acquirer of the issue or a part thereof. (2) Within the issue period, a bond issue may also be issued in stages (tranches), if this possibility is stated in the issue conditions. (3) If the bond issue does not take place, the issuer is obliged, within 30 days of the date of the end of issue period, to return to the subscriber the amount subscribed and paid by him, including interest corresponding to the average discount rate of the Czech National Bank for the period beginning on the payment date. Yield on Bond Article 16 The yield on a bond may be determined, in particular, by a) a fixed interest rate, b) the difference between the nominal value of the bond and its lower issue price, c) a premium drawn by lot or a premium being dependent on the maturity of the bond, or d) a floating interest rate derived, for example, from other interest rates or yields, fluctuations in foreign exchange rates, indices or commodity prices. Article 17

12 (1) In the case of book-entry bonds, the issuer may decide that the person having the right to the yield is the person entitled to exercise rights attached to the bond on a date different from the maturity date of the bond yield, which, however, must not precede the yield maturity date by more than 1 month and may not follow the maturity date of the bond yield (hereinafter decisive day ). (2) A decision pursuant to paragraph 1 must be included in the issue conditions (Article 7(2)(g)). (3) A decision pursuant to paragraph 1 shall also apply mutatis mutandis to the right to redemption of individual parts of the nominal value of the bond or to the redemption of the nominal value of the bond. Article 18 Separation of the Right to Yield on a Bond (1) Unless the issue conditions exclude this, the right to yield on a bond may be separated from the bond and attached to the coupon being a separate security issued to exercise such right. (2) A coupon sheet of a physical bond must be issued (Article 2(5)) together with the bond issue in the form of a separate coupon for each individual yield; in relation to a book-entry bond, the provision of the first sentence applies mutatis mutandis to the entry in a register pursuant to a special legal rule governing business activities on the capital market. (3) Each of the coupons of a bond must indicate the right attached to it and, for a book-entry bond, the decisive day. (4) If a bond is assigned an identification designation according to the international numbering system for securities identification, such identification designation must be assigned separately to: a) a bond with coupons, b) a bond without coupons (hereinafter separated principal ), c) each bond coupon. (5) If a book-entry bond is not assigned an identification designation according to the international numbering system for securities identification, the person authorised to maintain a register ensures that another identification designation is assigned, to the same extent as in paragraph 4. (6) At the request of the person entitled to exercise rights attached to a bond, the person authorised to maintain a register shall carry out a) division of the bond into separated principal and coupons, or b) rejoining of the separated principal and coupons, if their holder is, at the same time, the holder of the separated principal. The joining may occur only if the holder of the principal owns all

13 coupons for which the decisive day has not come so far. Article 19 Redemption of a Bond and Payout of the Yield on a Bond (1) The bond maturity shall be determined by a lump sum at a specified date or by instalments whose amount is stipulated in the issue conditions. (2) The issuer is entitled to redeem individual bonds including the proportionate yield prior to their maturity date only if the issue conditions permit and set out such a manner of redemption. (3) A bondholder may request the redemption of the bond including the proportionate yield prior to the stipulated maturity date only if the issue conditions permit such a manner of redemption or if this Act so stipulates. (4) If a bond is redeemed prior to maturity, all the coupons that are not yet due must be returned together with the bond. If this obligation is not fulfilled, the value of the non-returned coupons, determined according to the issue conditions, shall be subtracted. (5) The right to yield on a bond attached to a coupon that was not returned to the issuer when the bond was redeemed prior to maturity shall remain preserved. (6) The redemption of a bond and the payout of the yield on a bond may be carried out by the issuer by itself or through a financial institution. Article 20 Own Bonds Acquired by the Issuer (1) Own bonds acquired by the issuer prior to their maturity date shall not expire unless the issuer decides otherwise. (2) The issuer is not entitled to exercise the right of exchange or priority right (Article 33) attached to own bonds. (3) The rights and obligations attached to own bonds that are held by the issuer expire on the date of their maturity unless these rights and obligations expire prior to this date in connection with a decision of the issuer pursuant to paragraph 1. Meeting of Holders Article 21 (1) The issuer is obliged to convene a meeting of holders without delay in the event

14 a) of a proposal for amendments to issue conditions or amendments to the supplement to a bond programme, with the exception of changes in information pursuant to Article 12(6), b) of a proposal for conversion of the issuer, 2) c) of a proposal for concluding a controlling agreement or an agreement on profit transfer 3) regardless of which contractual party the issuer is, d) of a proposal to conclude a contract on the sale of a business or a part thereof, a contract on the lease of a business or a part thereof 4) regardless of which contractual party the issuer is, provided that the due and timely repayment of receivables arising from the bonds might be endangered, e) that it is in arrears with the satisfaction of rights attached to bonds issued by it for more than 7 days after the date on which the right could have been exercised, f) of a proposal for submitting an application for exclusion of the bonds from trading on an regulated market, 1) or g) of other changes that may significantly impair its ability to fulfil obligations arising from the bonds issued by it (hereinafter changes of significant nature ). (2) A meeting of holders may also be convened by a bondholder or owner of a share in a collective bond (hereinafter bondholder ). (3) The issuer is obliged to participate in the meeting of holders and provide information necessary for taking decisions or adopting positions of the meeting of holders. (4) If the issuer issues more than one bond issue within the framework of a bond programme, the issuer is obliged to convene a joint meeting of holders of all the issued and unredeemed (outstanding) bonds (hereinafter joint meeting of holders ) for the purpose of changes of significant nature, with the exception of the case referred to in paragraph 1(a). (5) A person authorised to maintain a register provides the issuer, at his request, with an extract from the register of the issue of bonds in question for the purposes of convening and holding a meeting of holders. (6) If the issue conditions do not specify the decisive day for participation in the meeting of holders of book-entry bonds or owners of shares in a collective bond, the decisive day shall be the seventh calendar day before the day of holding the meeting of holders. Article 22 (1) The person convening a meeting of holders (hereinafter convener ) takes care of organisational and technical aspects of the meeting of holders and bears the expenses connected with it, unless the issuer violates its obligation pursuant to Article 21(1) and the meeting of holders is convened by a holder instead of the issuer. In such a case the expenses connected with the meeting of holders are borne by the issuer. The expenses connected with participation in the meeting of holders are borne by the bondholder.

15 (2) The place, date and time of the meeting of holders must be determined in a manner that avoids, to the maximum degree, limiting the ability of the bondholders to attend. (3) The convener is obliged to publish the announcement of the holding of the meeting of holders in a manner stipulated by the issue conditions and otherwise in at least two nation-wide daily newspapers, at least 15 days prior to the meeting. The announcement must include at least 2 ) Article 69 of Act No. 513/1991 Coll., the Commercial Code, as amended. 3 ) Articles 190a, 190b et seq. of Act No. 513/1991 Coll., as amended. 4) Article 488a et seq. of Act No. 513/1991 Coll., as amended. a) information on the issuer pursuant to Article 6(1)(a), b) title of the bond, date of issue and identification designation according to the international numbering system for securities identification, if assigned, or other information identifying the bond; in the case of a bond programme, this information on all the issued and so far outstanding issues, c) the place, date and time of the meeting of holders, d) the agenda, including any draft amendment to the issue conditions, e) the decisive day for participation in the meeting of holders of book-entry bonds or owners of shares in a collective bond. (4) If the meeting is held on the motion of a bondholder, the issuer is obliged to render the needed assistance in fulfilling obligations which arise from this Act in respect of the holder convening the meeting of holders. (5) The provisions of paragraphs 1 to 4 and the provisions of Article 21(1) to (3), (5) and (6) also apply to a joint meeting of holders. Article 23 (1) A meeting of holders is quorate if it is attended by holders of bonds whose nominal value represents, on the decisive day for participation in the meeting of holders, more than 30% of the nominal value of the outstanding part of the bond issue. A joint meeting of holders is quorate if it is attended by holders of bonds whose nominal value represents, on the decisive day, more than 30% of the nominal value of the outstanding part of each issue that has been issued so far. If a matter common to all issues within the framework of a bond programme is not dealt with, the participation of holders of 30% of the nominal value of the outstanding part of those issues that are concerned by the matter is necessary. The decisive day for participation of holders of bookentry bonds as well as owners of a share in a collective bond is the day stated in the issue conditions (Article 7(1)(l)) or the day stated in Article 21(6); the decisive day for participation of holders of physical bonds is the day the meeting of holders is held. (2) Before the meeting of holders begins, the convener is obliged to provide information on the number of all bonds entitling participation in the meeting for the purpose of control of participation in this meeting. Own bonds owned by the issuer on the decisive day are not counted for the purposes of paragraphs (1) and (3).

16 (3) The meeting of holders shall pass resolutions by a simple majority of votes of the bondholders present. The number of votes of each bondholder corresponds to his share in the total nominal value of the outstanding part of the bond issue. The consent of three quarters of votes of the bondholders present is necessary for an amendment to issue conditions, a supplement to a bond programme or for appointing and removing a joint representative of bondholders. (4) If the meeting of holders consents to changes of significant nature, a person that was a bondholder on the decisive day for participation in the meeting of holders and that, according to the minutes, voted at the meeting against the motion or did not attend the meeting may request that the nominal value of the bond be redeemed prior to maturity, including the proportionate yield. If the yield is determined by the difference between the nominal value of the bond and its lower issue price (Article 16(b)), the issuer is obliged to pay the bondholders the issue price and the proportionate yield. A request for redemption prior to maturity must be submitted within 30 days of the publication of the resolutions of the meeting of holders or joint meeting of holders pursuant to paragraph 6. After the expiry of this period the right to redemption lapses. The issuer is obliged to pay this amount within 30 days of delivery of the request in the manner and at the place stipulated by issue conditions for the bond redemption. (5) If the meeting of holders does not consent to changes of significant nature stated in Article 21(1)(b) to (g), it may, at the same time, decide that if the issuer proceeds in contravention of its resolution then it is obliged to pay the holders of the bonds that request it their nominal value along with the proportionate yield; if the yield is determined by the difference between the nominal value of the bond and its lower issue price (Article 16(b)), the issuer is obliged to pay the bondholders, at their request, the issue price and the proportionate yield. The issuer is obliged to do so in the manner and at the place stipulated by issue conditions for the bond redemption, within 30 days of delivery of the request for redemption prior to maturity. (6) The convener shall draw up the minutes of the meeting of holders within 30 days of the date it took place. If the meeting discusses any changes of a significant nature, a notarial deed of the meeting must be arranged. If the meeting of holders consents to any of such changes, the notarial deed shall include the names of the bondholders that consented to the change and the number of individual bonds that each of these holders owns on the decisive day for participation in the meeting of holders (paragraph 1). The issuer is obliged to publish all the decisions of the meeting of holders within 30 days of the date of holding the meeting in the same manner as it published the issue conditions. Article 24 Joint Representative of Bondholders (1) The meeting of holders may appoint, on the basis of its decision, a joint representative of all bondholders (hereinafter joint representative ). The joint representative is entitled to: a) exercise, on behalf of all holders, the rights attached to bonds to the extent set out by a decision of the meeting of holders, b) check the fulfilment of issue conditions on the issuer s part, c) perform further acts on behalf of all bondholders or otherwise protect their interests in the

17 manner and to the extent given by a decision of the meeting of holders. (2) To the extent the joint representative of holders exercises the rights attached to bonds, with the exception of voting rights, the bondholders may not exercise such rights separately. This shall be without prejudice to the right of the meeting of holders to remove the joint representative or appoint a different joint representative. (3) If the meeting of holders is deciding on the removal of a joint representative, the joint representative may not exercise the voting rights attached to bonds he owns and his voting rights are not included in the total number of votes necessary for the meeting to be quorate. (4) When discharging the office, the joint representative is obliged to act with due care and in accordance with the interests of all bondholders that are or must be known to him and he is bound by the instructions of the meeting of holders. This does not apply if such instructions contradict legal regulations or if they require action that is not in accordance with the common interests of all bondholders. PART TWO SPECIAL KINDS OF BONDS Government Bonds and Bonds of the Czech National Bank Article 25 (1) Bonds issued by the Czech Republic are government bonds. (2) Government bonds are issued on the basis of a) a special law concerning the government bond programme, or b) a special law that entrusts the Ministry with issuing government bonds or enables the Ministry to issue government bonds. (3) A special law referred to in paragraph 2 also stipulates the purpose, maximum extent and maximum term to maturity of a) all liabilities arising from the government bond programme pursuant to paragraph 2(a), or b) government bonds issued pursuant to paragraph 2(b). (4) Pursuant to a special law referred to in paragraph (2), it is possible to issue individual bond issues under various issue conditions. (5) The government of the Czech Republic is obliged to submit to the Chamber of Deputies of the Parliament of the Czech Republic the opinion of the Czech National Bank on the government draft act on the government bond programme and on the draft special law that entrusts the Ministry with issuing government bonds or enables it to issue government bonds. (6) Government bonds having a maturity of one year or less shall be designated as treasury bills. Bonds of the Czech National Bank issued pursuant to a special legal rule 4a) shall be

18 designated as Czech National Bank bills. (7) The provisions of paragraphs 2 to 5 also apply to government bonds issued abroad. (8) The provisions of Article 3(2), Article 6(1)(e), Article 7(1)(k) and (l), Articles 8 to 10, Article 11(3), Articles 12 to 14 and Articles 21 to 24 do not apply to government bonds and bonds issued by the Czech National Bank. 4a) Article 33 of Act No. 6/1993 Coll., on the Czech National Bank. Article 26 (1) The Ministry issues government bonds within the scope set out by a special legislative act and determines their issue conditions. The Ministry may issue joint issue conditions which are identical for an indefinite number of issues of treasury bills. The Ministry promulgates the issue conditions of government bonds and the joint issue conditions of treasury bills in the Collection of Laws, unless these are issue conditions of a government bond issued abroad. The joint issue conditions of treasury bills are supplemented for the specific issues with the data referred to in Article 6(1)(c), (d), (g) and (k) and Article 7(1)(e), which are not promulgated in the Collection of Laws but are published by the Ministry in a manner allowing remote access. (2) The issue conditions of bonds issued by the Czech National Bank are published in the Bulletin of the Czech National Bank and in a manner allowing remote access. The Czech National Bank may issue joint issue conditions which are identical for an indefinite number of issues of CNB bills. The joint issue conditions are published pursuant to the first sentence and are supplemented for the specific issues with the data referred to in Article 6(1)(c), (d), (g) and (k) and Article 7(1) (e), which are not published in the Bulletin of the Czech National Bank, but are published by the CNB in a manner allowing remote access. (3) The Ministry may not amend the issue conditions of government bonds. The Czech National Bank may not amend the issue conditions of bonds of the Czech National Bank. (4) In the Czech Republic, government bonds are sold through the Czech National Bank. Abroad, government bonds are placed through an investment firm that is authorised to perform such activity in the given country and with which the Ministry concludes an agreement on organising government bond placement. (5) The activity connected with management and redemption of the government debt arising from government bonds is carried out by the Ministry or by a person entrusted by the Ministry. Article 27 Municipal Bonds (1) Bonds issued by a territorial self-governing unit are municipal bonds. The designation komunální is a part of the title of this kind of bond. Other bonds may not bear such designation.

19 (2) Prior consent of the Ministry is necessary for issuing municipal bonds. (3) The application of a territorial self-governing unit for the consent to a municipal bond issue shall include reasons for the intention to issue municipal bonds, basic particulars of the future issue conditions, an economic analysis of the reasons for issuing municipal bonds and the impact on the economic and financial situation of the territorial self-governing unit, including facts fundamental from the perspective of its ability to fulfil obligations arising from the municipal bonds (information on the state of indebtedness). (4) The Ministry shall not grant the consent pursuant to paragraph 2 if, in the Ministry s opinion, the economic situation of the territorial self-governing unit does not allow the fulfilment of obligations associated with the issue of municipal bonds. (5) The provisions of Article 11(1)(b) do not apply to a municipal bond issue. (6) The provisions of paragraphs (2) to (4) apply also to municipal bonds issued abroad. Mortgage Bonds Article 28 (1) Mortgage bonds are bonds whose nominal value and proportionate yield (hereinafter obligations arising from mortgage bonds ) are fully covered (backed) by the receivables arising from mortgage loans or by a part of such receivables (proper coverage) and, in some cases, by an alternative method pursuant to this Act (alternative coverage). The designation hypoteční zástavní list is a part of the title of this bond. Other securities may not bear such designation. (2) Mortgage bonds may be issued only by a bank pursuant to a special legal rule governing the activity of banks with its registered office in the Czech Republic (hereinafter issuer of mortgage bonds ). (3) A mortgage loan is a loan whose redemption, including appurtenances (i.e. interest etc.), is secured by lien (right of pledge) over real estate (property), including property under construction, if the receivable from the loan does not exceed twice the amount of the mortgage value of the mortgaged real estate. A loan is considered to be a mortgage loan from the day when the right of pledge takes legal effect. For the purposes of coverage of mortgage bonds, the receivable arising from a mortgage loan or a part thereof may be first used on the day when the issuer of mortgage bonds learns of the legal effect of establishment of lien over the property. (4) The property referred to in paragraph 3 must be located within the territory of the Czech Republic, a Member State of the European Union or another state included in the European Economic Area. (5) An issuer of mortgage bonds shall ensure sufficient coverage of obligations arising from the mortgage bonds in circulation so that the sum of receivables arising from mortgage loans or parts thereof, serving as proper coverage, and the total alternative coverage does not fall below the total amount of obligations arising from all the mortgage bonds in circulation issued by the