2008-Implenia-Presentation-EBK-Findings-100308-e

EBK Investigation Against Laxey –Key Findings and Legal Consequences

Media and Analysts Conference11 March 2008

© Implenia | 11.03. 2008 | Page 2

Agenda

1. EBK Investigation – Background & Key Findings

2. EBK Investigation – Stakebuilding

3. EBK Investigation – Legal Consequences

4. Conclusion

5. Annex

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27.3.2007

It is impossible that Laxey built up its stake in this timeframethrough share purchases on- and off-market

EBK starts its investigation, i.e. immediately after Laxey disclosed its 22.89% stake18.4.2007

Laxey successively discloses a stake of 12.226% (per 4.4.07) and of 22.89% (per 16.4.07)17.4.2007

EBK releases its ruling, finding Laxey guilty of breaching disclosure rules10.3.2008

EBK Investigation – BackgroundReview on steps since end of March 2007

Laxey holds 4.922% stake according to its requests for registration

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Laxey crossed first disclosure threshold (5%) at the latest on January 1, 20074.41% directly owned shares4.81% parked via CFDs

Laxey increased clandestinely – through parking of shares with banks –its position until end of March 2007 to > 20%

All Implenia shareholders who sold their shares during this period were deceived

EBK qualified Laxey‘s indirect purchase of shares (parking via CFDs) to build up their stake as a clear violation of disclosure obligations required by Swiss law

EBK Investigation – Key Findings

9.22%

© Implenia | 11.03. 2008 | Page 5

2

EBK Investigation – How did Laxey build up its stake?

Phase 1: Laxey gave brokers direct orders to buy shares on the market

BanksCFD-Counterparties

LAXEYdf

1

Brokers

2

Order to buy shares

Parking of shares

Signing of CFDs („Parking-Tickets“)

Retrieving of parked shares

1

3

Phase 2: Laxey gave orders to its brokers to transfer the shares to the banks and to park them there; simultaneously, Laxey signed CFD agreements with these banks

Phase 3: Laxey retrieved its parked shares through unwinding of its CFD positions

2

3

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EBK Investigation – Which institutions were involved?

LAXEY

BanksCFD-Counterparties

Brokers1)

Keijser

KBC Securities

Instinet

Bank am Bellevue

Credit Suisse

City Index

Man Financial

Bear Stearns

Cantor Fitzgerald

Laxey orchestrated their stake building through a complex network of Swiss and international financial institutions

1) The four mentioned brokers received direct orders from Laxey; a few more brokers were indirectly involved in the transactions

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Agenda




4. Conclusion

5. Annex

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Simultaneously:Laxey bought Implenia shares and transferred them to the banks (via brokers)

When receiving the shares the banks signed CFDs (each < 5%) with Laxey

Shares were not required by the banks to hedge existing CFDs; on the contrary, CFDs were emit-ted by the banks only after / because they received shares

CFDs solely used as “parking tickets”!

Definition / Use of CFDs(when applied to equities) Laxey‘s Misuse of CFDs

CFDs are derivative financial instruments which allow investors to speculate (with little investment) on share price movements without having to own the underlying shares

Banks emitting CFDs usually hedge their CFD position through the partial purchase of shares (dynamic hedging)

Laxey didn‘t use CFDs to speculate on share price movements but to clandestinely park and to indirectly purchase Implenia shares

Contract for Difference (CFD) – Definition / Laxey’s misuse

Later:Laxey unwound CFD positions and retrieved the parked shares from the banks

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Extract from Value Catalyst Fund’s (Laxey investment vehicle) Annual Report 2007, published on October 22, 2007:

“All CFDs and equity swaps should be treated as though they were ordinary shares. We think all exchanges should adopt this immediately […] The market will be better informed about stakes being taken in companies and transparency will improve”

Laxey adds:

“[…]the hedge fund can trade away happily without declaring his position but has a poor relationship with the company in which he’s invested. One that can very easily lead to a hostile relationship.”

EBK Investigation – Laxey’s own statement on CFDs

Ironically, Laxey itself criticized the use of CFDs as indirect and non-transparent stake building mechanism

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LAXEY Execution Broker Broker

City Index

Keijser Neonet8.1-10.1.2007:Purchase order

8.1-10.1.2007:Purchase order

8.1-10.1.2007:Delivery of shares1

10.1.2007:Parking / CFD Signing

Dozen of such transactions were executed by Laxey between November 2006 and April 2007 to clandestinely build up its stake

1) On „warehouse account“ for Laxey

4./5.4.2007:Retrieving shares

LAXEY

LAXEY 10.1.2007:Laxey orders to transfer shares

2

2

1

1

1

2

3

3

Parking of shares during ca. 3 months

1

3

EBK Investigation – Example of Laxey‘s Stake BuildingTransaction in 131‘211 Implenia shares (simplified description)

CFD Counterparty

„Share level“

„CFD level“

Stake buildingParking of sharesRetrieving shares

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Laxey purchased at least 4.41% on their own and gave 4 brokers direct orders to buy shares on the market and to warehouse them on its behalf

PHASE 1: Purchase of shares (Nov. 2006 – End of March 2007)

Quote, EBK investigation:

“Ab Ende 2006 bis Anfang April 2007 erteilte Laxey einerseits diverse Aufträge an Keijser zum Erwerb von Implenia-Aktien. Diese Aktien wurden bei Keijser auf ein “warehouse account” für Laxey eingeliefert”.

EBK Investigation – Phases of Laxey‘s Stake Building (1/4)

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Laxey signed CFD / SWAP agreements with 5 banks and simultaneously gave orders to its brokers to transfer the shares to the CFD counterparties (as hedge for their CFD/SWAP positions)

PHASE 2: Parking of shares via CFDs (Nov. 2006 – End of March 2007)

Quote by CFD partner Cantor:

“On instructions from Laxey Partners, Keijser Capital [Broker] contacted Cantor Fitzgerald CFD desk and requested that they give up trades to Cantor Fitzgerald. These Equity trades were hedges for Contracts for Difference. The contracts for Difference were entered into with Cantor Fitzgerald CFD desk by Laxey Partners“


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PHASE 2: continued


Laxey built up its position in a way that none of the 5 CFD counterparties individually crosses the 5%-threshold

Per 31.3.2007 the banks were holding the following CFDs / stakes in Implenia

City Index 904‘793 (4.90%)Man Financial 906‘022 (4.90%)Credit Suisse 867‘697 (4.70%)Bear Stearns 740‘000 (4.01%)Cantor 210‘400 (1.14%)

3‘628‘912 (19.65%)

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PHASE 3: Closing of CFD positions and transfer of shares to Laxey (3-5 + 16 April 2007)


Laxey (partially)1 unwound its CFD positions and retrieved (on 4 days) their parked Implenia shares

3. 4 659‘411 (Credit Suisse)4. 4 652‘146 (City Index)5. 4 210‘400 (Cantor) / 901‘022 (Man) /

252‘647 (City Index)16. 4 423‘512 (Bear Stearns) + their own stake of 4.41% 2

3‘099‘138 (16.76%)

(1) Remaining CFD positions (difference between 19.65% and 16.76%) probably closed later and shares transferred to Laxey / not included in scope of EBK‘s investigations(2) Laxey’s directly owned stake per 1.1.07 (Laxey disclosed a 22.89% stake per 16.4.07, i.e. they had to own 1.72% more directly)

21.17%

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Banks

Man Financial4.50% per 1.1.074.90% per 12.3.07

Credit Suisse4.70% per 30.3.07

City Index4.90% per 26.1.07

Cantor Fitzgerald 1.14% per 23.3.07

Bear Stearns4.01% per 1.3.07

Laxey

19.65% shares parkedper 31.03.07

16.76% shares retrieved per 16.04.07 +

4.41%1 directly owned

EBK Investigation – Overview on Laxey‘s Stake Building

(1) Laxey owned 4.41% directly per 1.1.07

Remaining 2.89% probably retrieved later by Laxey

4.70% shares parked (2.2.07 3.4.07)

3.56% shares retrieved on 3.4.07

4.9% shares parked (End 06 4./5.4.07)

4.9% shares retrieved on 4. and 5.4.07

1.14% shares parked since (Start 07 5.4.07)


4.9% shares parked (10.11.06 5.4.07)


4.01% shares parked (1.3.07 16.4.07)


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Laxey started building up its position in Implenia already at the end of 2006 (Laxeyheld 4.41% in Implenia per January 1, 2007)

Laxey crossed first disclosure threshold (5%) at the latest on January 1, 2007

- 4.41% directly owned shares- 4.81% via CFDs1

Laxey clandestinely increased its position until end of March 2007 to > 20%

Laxey orchestrated their stake building through a complex network of financial institutions

All Implenia shareholders who soldtheir shares during this period weredeceived

Laxey’s use of CFDs to build up itsstake has been revealed by EBK asclear violation of disclosingobligations provided by Swiss law

EBK Investigation – Key Findings

(1) CFDs signed with 2 counterparties per 1.1.07: 4.50% with Man Financial and 0.31% with City Index

9.22%

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Agenda




4. Conclusion

5. Annex

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File a charge with the Federal Department of Finance(Fine of CHF 230-250m)

File a lawsuit with the competent court based on Art. 20 Para. 4bis BEHG, entered into force on Dec 1, 2007 (suspension of voting rights for up to 5 years in case of breaching disclosure rules)

As a consequence of Laxey‘s violation of disclosure rules, EBK will:

EBK Ruling – EBK‘s Measures

In addition, EBK could:

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EBK Ruling – What can Implenia do? (1/2)

Seek a ruling to impose fines on the persons responsible for the breaches and on the beneficial owners of the various Laxey vehicles

Maximum fines based on Swiss law amount to approx. CHF 230-250m1

Petition the authorities to seize part of Laxey‘s shareholding in Implenia to capture Laxey’s illicit gains during its stake building2

Legal possibilities for Implenia

File a criminal charge with the competent cantonal criminal prosecution authorities to charge Laxey and its acting directors with deliberate market manipulation

Maximum sentence is a 3 year prison termSuch an investigation and procedure also allows a seizure of Laxey’s shares

3

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EBK Ruling – What can Implenia do? (2/2)

Intervene with the FSA to issue sanctions against Laxey and its directors for having engaged into criminal activity in Switzerland5

Legal possibilities for Implenia, continued

Ask shareholders having sold their shares between 01.01.07 and 04.04.07 to transfer their damage claims against Laxey because of failure to notify and market manipulation

Implenia will off-set these claims with dividend payments to Laxey6

Seek the suspension of all voting rights of Laxey by the competent court Petition EBK to join these procedures (or file a claim on its own)

4

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EBK Ruling – Implenia‘s Measures (1/2)

Seek a ruling to impose fines on the persons responsible for thebreaches and on the beneficial owners of the various Laxey vehicles1

Petition to seize part of Laxey‘s shareholding in Implenia2

Implenia‘s BoD considers the implementation of the following legal measures

File a criminal charge against Laxey and its acting directors for deliberate market manipulation3 ?

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EBK Ruling – Implenia‘s Measures (2/2)

Intervene with the FSA5

Ask shareholders to transfer their damage claims against Laxey; setting-off these claims with dividend payments to Laxey6

Seek the suspension of all voting rights of Laxey4

?

Implenia‘s BoD considers the implementation of the following legal measures

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Agenda




4. Conclusion

5. Annex

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1) Laxey has broken Swiss laws and stock market rules

2) Shareholders of Implenia have been massively deceived and have lost money selling their shares on wrong information

3) Laxey facing the suspension of ALL their voting rights for 5 years

4) Laxey and their directors facing fines (CHF 230-250m)

5) We expect Laxey to come under scrutiny from the UK regulators (FSA)

Conclusion

Implenia BoD feels “fortified” to continue its battle against Laxey and will use ALL legal means to enforce/reinstate the rights of its shareholders and the company

© Implenia | 11.03. 2008 | Page 25

Agenda




4. Conclusion

5. Annex

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Laxey holds 4.922% stake according to its requests for registration27.3.2007

Laxey discloses 12.226% stake (per 4.4.07)11.4.2007

It is impossible that Laxey built up its stake in this timeframethrough share purchases on- and off-market

EBK starts its investigation, i.e. immediately after Laxey disclosed its 22.89% stake18.4.2007

Laxey discloses 22.89% stake (per 16.4.07)17.4.2007

EBK Investigation – Background (1/3)Detailed review on steps since end of March 2007

Laxey informs Implenia’s CEO that it holds more than 12% of Implenia’s shares04.4.2007

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Implenia sends the results of its analysis on Laxey’s clandestine stake building to EBK and asks EBK to start an investigation14.5.2007

EBK conducts a thorough investigation on

Transactions in Implenia shares (on- and off-market) from January 1, 2007 to April 30, 2007Details on Laxey‘s (1) relationships with various financial institutions, (2) transactions executed in Implenia shares, (3) transactions in CFD positionsTransactions of Swiss and European financial institutions in Impleniashares and their relationship/contracts with Laxey

EBK confirms that an investigation is ongoing7.12.2007

EBK Investigation – Background (2/3)

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EBK decrees that Laxey has to disclose the crossing of a threshold through Contracts for Difference12.12.2007

EBK decides to open a formal administrative procedure

EBK sends the results of its investigations to Implenia and Laxey for comments

EBK Investigation – Background (3/3)

24.1.2008

31.1.2008

EBK releases its ruling, finding Laxey guilty of breaching disclosure rules10.3.2008

© Implenia | 11.03. 2008 | Page 29

LAXEY CFD Counterparty Execution Broker Broker

„CFD level“ Bear Stearns

Bank am Bellevue

28.2.2007:Purchase order (via Instinet as clearing bank)

1.3.2007:Delivery of shares


(1) Only a portion of the 740‘000 shares (423‘512) have been retrieved by Laxey on 16.4.2007

„Share level“16.4.2007:Retrieving shares1

LAXEY


2

Transaction in 740‘000 Implenia shares (simplified description)

1

1

2

3

Parking of sharesStake building

Retrieving shares

3

3

Instinet

2

Annex – Examples of Laxey‘s Stake Building (1/4)

1

© Implenia | 11.03. 2008 | Page 30


City Index

17.1.2007:Purchase order


4./5.4.2007:Retrieving shares

LAXEY


2

1

1

2

3

3

3

Instinet

2


CFD Counterparty

„CFD level“

„Share level“

Parking of shares


Retrieving shares

Stake building

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Cantor

23.3.2007:Purchase order


5.4.2007:Retrieving shares

LAXEY


2

1

1

2

3

3

3

Keijser

2

Neonet23.3.2007:Purchase order 1

1 23.3.2007:Delivery of shares

Parking of shares


„CFD level“

„Share level“

CFD Counterparty


Retrieving shares

Stake building

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Man Financial

21-23.2.2007:Purchase order


5.4.2007:Retrieving shares

LAXEY


2

1

1

2

3

3

3

Keijser

2

Neonet21-23.2.2007:Purchase order

1

1 21-23.2.2007:Delivery of shares

Parking of shares

„CFD level“

„Share level“


CFD Counterparty


Retrieving shares

Stake building

2008-Implenia-Presentation-EBK-Findings-100308-e

Documents

cfds laxey

implenia shares

laxey key findings

annex implenia

registration implenia

transactions implenia

implenia shareholders

cfd positions23 implenia