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Poland began 1997 by implementing a unique mass privatization programme (MPP) through special purpose investment funds. The legal basis of this programme is the Law on National Investment Funds and their Privatization (the Law), dated April 30 1993 (Dz U No 44, 202, 1993 as modified).

The main purpose of the MPP is to restructure and privatize some 500 companies, the capital of which is held by 15 national investment funds (NIFs). The NIFs themselves are stock companies that will soon be listed on the Warsaw Stock Exchange (WSE).

The MPP is based on the invited participation of all Polish citizens over 18 years old. This involved the distribution of 'participation certificates' from November 1995 to November 1996, which will be converted into shares of NIFs or companies participating in the programme.

Under the regulations every citizen was entitled to purchase one certificate at a symbolic price of Z20 (approximately US$7). About 26 million people took the opportunity to buy, representing a 95% participation rate at the first stage of the MPP. These certificates are already being traded on the WSE, where their price has risen to Z160. According to some banks their real value is about US$80.

The NIFs' role and purpose, according to Article 4.1 of the Law, is to "augment the value of their assets, in particular through an increase in the value of shares in those companies in which the Funds are shareholders". The NIFs are thus restructuring, restoring and even selling companies.

The NIFs are already looking for strategic investors or partners for companies in their portfolios to provide them with funds, new technologies, know-how and experience. The NIF can also prepare their companies for listing on the WSE. The more successful an NIF is, the more popular its shares will become. The MPP represents an important opportunity not only to enter the growing Polish market but also acquire companies or a substantial stake of shares in them.

However, the acquisition procedure is complicated and often takes time. This is because the shares of each company participating in the MPP are held by15 NIFs, one NIF being a majority shareholder with 33% of shares and 14 NIFs each holding about 1.93% (ie in total 27% of shares), employees (15% of shares), and finally the Treasury (25% of shares).

The potential investor has a choice of different ways of approaching the NIFs. Some first get in touch and negotiate with the majority NIF, while others prefer to acquire shares from the minority NIFs. The NIFs usually cooperate but spectacular mismatches can also take place where the majority NIF sells its shares to one investor, and the minority NIFs to another.

Nevertheless, the MPP deserves to be carefully looked at and does present an important opportunity to participate in the Polish Wirtschaftswunder. The importance of the MPP can also be gauged by the fact that last week SBC Warburg issued global depositary receipts listed on the London Stock Exchange relating to the already high-profile participation certificates.

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