Valinor Public Limited - Dom Maklerski BZ WBK SA

Dividends from Ukrainian SubsidiariesAll of the Company’s Ukrainian subsidiaries are held indirectly through the Company’ssubsidiary, Valars Agro Limited (“Valars Agro”), which is incorporated in Cyprus. In turn,Valars Agro is wholly-owned by Dilpar Trading Inc., (“Dilpar”), a 100% subsidiary of theCompany which is incorporated in the British Virgin Islands and is registered as a BVIbusiness company limited by shares. Thus, the ability of the Company to receive dividendsdepends on the ability of Valars Agro to receive dividends from its Ukrainian subsidiariesand transfer them to the Company through Dilpar. Dividends distributed to Valars Agro fromits Ukrainian subsidiaries may be exempt from withholding tax by virtue of the Cyprus-Ukraine Double Tax Treaty.The Ukrainian Tax Code also provides for the concept of a beneficial ownership ofUkrainian-sourced income. A legal entity or individual who acts in the capacity of an agent ornominee/nominee owner, or who is recognised as an intermediary, may not be regarded as thebeneficial owner of income, even if they are entitled to receive the income in question and,therefore, payments of dividends to it would be subject to withholding tax. There is virtuallyno guidance as to how the tax authorities will apply these rules. Were the tax authorities toview a Group company that makes an onward distribution of dividends/interest as not beingthe beneficial owner, 15% withholding tax would apply to the dividend and interest paymentsmade by that Group company to Valars Agro.There can be no assurance that the Cyprus-Ukraine Double Tax Treaty will not berenegotiated. On 16 January 2008, the CMU authorised the Ukrainian Ambassador in Cyprusto sign a new convention between the Government of Ukraine and the Government of Cyprusfor the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect toTaxes on Income. In contrast to the Cyprus-Ukraine Double Tax Treaty, which exemptsdividends, capital gains, interest payments, and royalty payments from Ukrainian withholdingtax, under the proposed convention, dividends paid by the Group’s operating companies tothe Company would be taxable at source in Ukraine at 5% of the gross amount of dividendspaid to the holders of more than 25% of equity and at 15% to other shareholders. Theproposed convention also provides for taxation at source in Ukraine of interest at 10% of thegross amount of the interest if the beneficial owner of the interest is a resident of Cyprus. Theproposed provisions incorporate the concept of beneficial ownership which means thatcompanies incorporated in Cyprus will require substance in order to prove they are thebeneficial owners of income received.Adverse changes in either of the applicable double tax treaties with Cyprus or a finding that asubsidiary of the Company that is incorporated in Cyprus does not qualify as a beneficialowner for tax treaty based benefits or is subject to tax in another jurisdiction or the inabilityof the Company to receive distributions from its Russian and Ukrainian subsidiaries due torestrictions in the Group’s financial arrangements or otherwise in a tax-efficient manner or atall may significantly increase the tax burden of the Russian or Ukrainian entities of the Group.For further information, see “Taxation – Ukrainian Tax Considerations – Dividends fromUkrainian Subsidiaries” and “Taxation – Ukrainian Tax Considerations – Dividends fromRussian Subsidiaries”. Any such changes could have a material adverse effect on the Group’sbusiness, results of operations and financial condition.- 38 -