Conference Co-Chair Peter Spratt Pricewaterhouse Coopers Government

Conference Co-Chair Peter Spratt Pricewaterhouse. Coopers

Government intervention or interference? : State aid to financially troubled companies

Government intervention or interference? : State aid to financially troubled companies Chair: Sijmen de Ranitz, RESOR N. V. Ross Leckow, International Monetary Fund Alan Rodgers, Hadef & Partners Derek Sach, Royal Bank of Scotland Lina Zheng, Li & Partners

Government intervention or interference? : State aid to financially troubled companies Derek Sach Royal Bank of Scotland

Government measures in the UK • February 2008: Northern Rock nationalised first bank in more than a century. • September 2008: Bradford and Bingley nationalised*. • October 2008: The Government took substantial equity stakes in Royal Bank of Scotland (‘RBS’) and HBOS-Lloyds TSB (now Lloyds Banking Group). - £ 20 billion committed to RBS, £ 17 billion to the newly merged HBOS-Lloyds TSB. *(with the exception of the savings and book and branch network which was sold to Abbey (part of Grupo Santander).

Government measures in the UK • December 2009: RBS received a further £ 25. 5 bn of state aid on agreement of entering into the Government’s Asset Protection Scheme (insurance against ‘toxic’ asset losses). • 70% of RBS and 43% of Lloyds Banking Group consequently owned by the UK taxpayer. • A reaction to ‘exceptional, extraordinary times’ – description of the Government intervention in October 2008 by the Chancellor, Alistair Darling.

Approach of government as shareholder and investor UK Financial Investments Ltd – ‘UKFI’ • Set up November 2008 – manages the Government’s investments in RBS, Lloyds Banking Group, Northern Rock Asset Management and Bradford and Bingley. • Wholly owned by the Government. • Purpose to develop and execute an investment strategy for disposing of the Government’s bank investments in an orderly and active way through sale, redemption, buy-back or other means. • Overriding objective - ‘to protect and create value for the taxpayer as shareholder with due regard to the maintenance of financial stability and to act in a way that promotes competition’.

Approach of government as shareholder and investor Asset Protection Agency (‘APA’) – and the Asset Protection Scheme (‘APS’) • Asset Protection Agency (‘APA’) manages the APS on behalf of Her Majesty’s Treasury (‘HMT’). • Operates at arms length from HMT, except where interventions could have a particularly significant implication for the taxpayer or wider sensitivities when HMT approval must be sought. • RBS is the only bank in the APS.

Approach of government as shareholder and investor Details of APS: • Signed November 2009 - insures a pool of £ 282 bn of ‘toxic’ assets. • First loss of £ 60 billion. HMT is responsible for 90% of losses net of recoveries thereafter. • HMT subscribed to £ 25. 5 bn of B shares, increasing their total economic interest to 84% (ordinary share ownership remains at 70%).

Approach of government as shareholder and investor • The Government also provided a contingent capital commitment of £ 8 bn, only to be drawn down if RBS’s capital position deteriorates to a specified level (Core Tier 1 ratio less than 5%). Non-exec Board Members: • Three new non-executive directors to the RBS Board, and two to the Lloyds Banking Group Board, appointed in 2009 in consultation with UKFI.

Impact on RBS • New majority shareholder. • Need to get approval for certain previously privately determined matters. E. g. bonuses • Committed to work towards lending commitment of £ 25 bn for 2010, similar level is expected to be committed to for 2011. • APS - improved capital position through £ 25. 5 bn cash injection and lower capital requirements of insured assets.

Impact on RBS • The APS pool remains on RBS balance sheet continues to be managed and administered by RBS, subject to extensive reporting, information and governance processes. However, HMT has the right to intervene in how covered assets are managed under certain circumstances. • To meet EC State Aid requirements, RBS must carry out a number of restructuring measures, including the divestment of 318 branches (14% of the Group’s UK network), its insurance businesses, its global merchant services business and its interest in RBS Sempra Commodities, a commodities-trading operation.

Impact on RBS • Timing of orderly disposals to maximise value over a 4 year period to December 2013. • Culture Change? RBS has undergone farreaching management and cultural change, but will continue to work for the best returns for its shareholders, managing risk and lending appropriately. The government aid has come with additional reporting and compliance requirements, but the overall goal to maximise return for all shareholders remains the same.

Government intervention or interference? : State aid to financially troubled companies Chair: Sijmen de Ranitz, RESOR N. V. Ross Leckow, International Monetary Fund Alan Rodgers, Hadef & Partners Derek Sach, Royal Bank of Scotland Lina Zheng, Li & Partners

The Impact of China’s Economic-Stimulus Program and Loose Monetary Policy on State-Owned and Private Enterprises During the Economic Downturn LI & PARTNERS Attorneys at Law Shenzhen, China LI & PARTNERS, Attorneys at Law

China’s US$585 Billion Economic. Stimulus Spending Package and 1. 4 Trillion Bank Loans • Chinese banks are in better shape thanks to recapitalization before the financial crisis • How, where and to whom the money flows? • The credit boom leading to a large surge in nonperforming loans in the future?

Winners and Losers During the Economic Downturn • The collective rise of China’s state-owned enterprises (SOEs) during the economic downturn • Private enterprises in China: “second-class citizens”? • Protection of private enterprises and property in China - in theory and in practice

Government intervention or interference? : State aid to financially troubled companies Chair: Sijmen de Ranitz, RESOR N. V. Ross Leckow, International Monetary Fund Alan Rodgers, Hadef & Partners Derek Sach, Royal Bank of Scotland Lina Zheng, Li & Partners

A sector in turmoil: The automotive industry 3. 45 pm – 5. 00 pm

Conference Co-Chair Dr. Nasser H. Saidi DIFC and Hawkamah

A sector in turmoil: The automotive industry

A sector in turmoil: The automotive industry Chair: Peter Wiegand, KPMG AG WPG James L. Bromley, Cleary Gottlieb Steen & Hamilton LLP Paolo Castagna, Uni. Creditbank AG Stephen Taylor, Alix. Partners Ltd

Conference Co-Chair Peter Spratt Pricewaterhouse. Coopers