www.pwc.ru/capital-markets

Capital Markets

The process of selectingthe most appropriate exchange for yourbusiness to list its sharesis challenging andcomplex. Understandingthe differences among global exchangesand determining theexchange that best fitsthe unique needs of yourbusiness are key aspectsof a successful listing

Which market? An overview of London, New York and Hong Kong stock exchanges

In recent years, a number of factors have been driving an upward trend in global equity issuance. As markets and businesses become increasingly global, the decision of choosing the most appropriate exchange becomes more challenging. A number of factors must be considered in determining the best option, and planning early can help your company comply with listing and regulatory requirements.

To help you determine which option is best for your company, we have highlighted some of the factors to consider and explained some of the high-level differences among the largest stock exchanges located in London, New York and Hong Kong.

Where to list

Admission/eligibility criteria• Thiscriteriamaybedifficulttoachieveasthepre-listingregulatoryreviewrequirementsvary

bymarket.

• Costsoflistingvaryineachmarket.

Valuation• Certainindustriesandtypesofcompaniesmayachievefavorablevaluations

incertainmarkets,duetocompetitorsandotherrecentlistingsofpeercompanies.

Location of holding company and trading operations

• Thecompany’scorebusinesslocationsmayaffecttheappetiteforitsequity,oftendrivingadomesticlisting.

• Thestageofdevelopmentofyourbusinessmaymakeitmoresuitableforaparticularmarket.Acompanywishingtoenteranewmarketorgaingreaterrecognitioninthatmarketmaychoosetolistinthatmarketasawaytogetexposuretonewcustomers,vendorsandshareholders.

• Taxationconsiderationscanimpactthelocationoftheholdingcompany.

Market and stakeholder relations• Investorandanalystbriefings,aswellasinterestinthebusiness,canvary

indifferentlocations.

• Expectationsofotherstakeholders,suchasbankersandemployees,canbeafactor.

Continuing obligations

• Differencesexistinpost-listingcomplianceobligationsamongmarketsandmayhavevaryingcostimplications,forinstance,requirementsrelatedtoXBRL,semi-annualandotherinterimreportingandreportingoninternalcontrols.

• Markets’regulatoryframeworks,includingcorporategovernancerequirements,mayhavebusinessimplications.

Other factors

• Tradingvolumesandliquidityoftheunderlyingsharescanvaryindifferentlocations.

• Proceedsintheacquisitioncurrencymayberequiredforbusinessdevelopmentincertainlocations.

• Incertainlocationsthereismorethanonemarket.Whichoneismostsuitableforyourcompany?

• Ifinclusioninmarketindicesisimportant,thismayrestrictthemarketchoicesavailable.

• Employeesmaydesireoptionsinaparticularmarket.

Some factors to consider include:

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4 | Which market? AnoverviewofLondon,NewYorkandHongKongstockexchanges

Overview of key regulatory requirements

1. A number of advisors will be involved in helping you successfully list your company. The Sponsor is typically the appointed investment bank that co-ordinates the overall project management of the IPO process.

2. Company history refers to the length of time the company has been in existence.3. Free float is the number of company shares traded on a market that are held by investors likely to be willing to trade.

LSE (Premium Listing) NYSE NASDAQ (Global Select)5 HKEX (Main Board)

Initial listing criteria

Sponsor1 Required Notrequired Notrequired Required

Audited track record 3yearsauditedaccounts,nomorethan6monthsold 3yearsauditedaccounts,nomorethan9monthsold 3yearsauditedaccounts,nomorethan9monthsold 3yearsauditedaccounts,nomorethan6monthsold

Accounting standard

EUIFRSorequivalentfornon-EUissuers USGAAPorIFRS USGAAPorIFRS HKFRS,IFRS,CASBE(forPRCissuersonly),USGAAPorotheraccountingstandardsmaybeacceptedincertaincircumstances

Minimum revenues Atleast75%oftheentity’sbusinessmustbesupportedbyarevenueearningstrackrecordforthe3yearperiod(somedispensationforspecificindustries(e.g.mining))

i)≥US$75minrevenueinmostrecentyearandii)≥US$750mglobalmarketcap.

i)≥US$90mtotalrevenueinmostrecentyearandii)averagemarketcap.≥US$850m

i)≥HKD500mandii)≥HKD4bnglobalmarketcap.

Minimum asset / equity requirements

Norequirements i)Marketcap≥US$150mandii)atleastUS$75mintotalassetstogetherwithatleastUS$50minstockholders’equity.(Thistestdoesnotapplytointernationalissues)

i)Marketcap.≥US$160mandii)totalassets≥US$80mandstockholdersequity≥US$55m

Norequirements

Minimum profits Norequirements • Sumoflastthreeyears:≥US$10m• Eachoftwomostrecentyears:≥US$2m• Nolossesinpriorthreeyears

• Sumoflastthreeyears:≥US$11m• Eachoftwomostrecentyears:≥US$2.2m• Nolossesinpriorthreeyears

• Sumoflastthreeyears:≥HKD50m• Sumoflasttwoyears:≥HKD30m

• Mostrecentyear:≥HKD20m

Profit forecast Optional4 Norequirements Norequirements Optional4

Working capital statements

Covering12months Notrequired Notrequired Covering12months

Company history2 Atleastthreeyearfinancialhistoryoftheunderlyingbusinessistobeavailable,subjecttoexemptions

Anoperatinghistoryofthreeyearsisgenerallyrequired Atleasttwoyearfinancialhistory Tradingrecordofatleastthreeyears,subjecttoexemptions

Ownership of assets

Controloverthemajorityofassetsforthe3yearperiod Norequirements Norequirements Ownershipcontinuityforatleastthemostrecentauditedfinancialyear

Minimum number of shareholders

Norequirements 400roundlot*shareholders 450roundlot*shareholders 300

Minimum free float (or public float)3

25%ofclassofshareslisted 1,100thousandshares 1,250thousandshares 25%oratleastHKD50m;Ifmarketcap.≥HKD10bn,canbereducedto15%

Minimum market capitalisation requirements at admission

£700,000 US$40m US$45m HKD200m

Internal control certification

n/a Sarbanes-OxleyAct(SOX) Sarbanes-OxleyAct(SOX) n/a

Regulatory and ongoing obligation requirements

Special criteria for international issuers

• Onlyforeigncompanieswith>50%freefloatareeligibletoFTSEUKindicesinclusion

• If200ormoreshareholdersor10%ormoresharesheldbyUKshareholders,requiredtoappointaregistrarintheUK

ToqualifyasaForeignPrivateIssueraninternationalissuermustbe:

• aforeign(non-US),non-governmentissuer• 50%ofequityorlessheldbyUSresidents-ifmorethan50%,mustnot

- haveamajorityofitsdirectorswhoareUSresidents- havemorethan50%ofitsassetslocatedintheUS- administeritsbusinessprincipallyintheUS

Differentminimumdistributionrequirements,marketvaluerequirementandfinancialstandardsareapplied(5,000roundlotshareholders,atleast2.5mpubliclyheldsharesworldwidewithmarketvalueatleastUS$100m)

MustregistertheclassofsecuritiesitintendstolistwithSECbyfilingaregistrationstatement(Form20-F)

ToqualifyasaForeignPrivateIssueraninternationalissuermustbe:

• aforeign(non-US),non-governmentissuer• 50%ofequityorlessheldbyUSresidents-ifmorethan50%,

mustnot- haveamajorityofitsdirectorswhoareUSresidents- havemorethan50%ofitsassetslocatedintheUS- administeritsbusinessprincipallyintheUS

MustregistertheclassofsecuritiesitintendstolistwithSECbyfilingaregistrationstatement(Form20-F)

• Mustbeincorporatedinan“acceptablejurisdiction”• Must,whilstitislistedandoneyearthereafter,appointaprocessagentinHKto

acceptnotices• Mustappointatleastoneauthorizedrepresentativeastheprincipalchannelof

communicationbetweenforeignissuerandHKEX• MustkeeparegisterofholdersinHKfortransferstoberegisteredlocally• Mustberegisteredasanon-HKcompanyundertheHKCompaniesOrdinance

Financial reporting requirements

• Annual• Half-yearly• Interimmanagementstatement

• Annual• Quarterly

• Annual• Quarterly

• Annual• Half-yearly• Quarterly(recommended)

Lock-up requirements - period within which major shareholders are not allowed to sell shares

Typically6-18monthsdependingonnatureofIPO(marketpractice)

6months(marketpractice) 6months(marketpractice) 6monthsthenafurther6monthswherethecontrollingshareholdersareexpectedtoremainthecontrollingshareholders

Regulatory authority FSA/UKLA SEC SEC,FINRA HKEX,SecuritiesandFuturesCommission(SFC)

Major transaction pre-approval by the shareholders

Aspartofcontinuingobligations,approvalisrequiredforsignificantacquisitionsanddisposalsandmaterialrelatedpartytransactions

• Issuancesresultinginachangeofcontrol• Equitycompensationplans• Priortotheissuanceofsecuritiesinanytransactiontoadirector

ofthecompany,subsidiary,affiliateorothercloselyrelatedpersonofarelatedparty;oranycompanyorentityinwhicharelatedpartyhassubstantialinterest

• Priortotheissuanceofsecuritiesinanytransactionifthevotingpowerisequaltoorinexcessof20%ofthevotingpoweroutstandingbeforetheissuanceor5%ormoreofthepre-transactionoutstandingshares(therearecertainconditionswhenapprovalisnotrequired)

• Acquisitionswheretheissuanceequals20%ormoreofthepre-transactionoutstandingshares,or5%ormoreofthepre-transactionoutstandingshareswhenarelatedpartyhasa5%orgreaterinterestintheacquisitiontarget

• Issuancesresultinginachangeofcontrol• Equitycompensation• Privateplacementswheretheissuance(togetherwithsales

byofficers,directors,orsubstantialshareholders,ifany)equals20%ormoreofthepre-transactionoutstandingsharesatapricelessthanthegreaterofbookormarketvalue

Anyspin-offafterthreeyearsofthecompany’soriginallisting

PwC | 5

4. If the company chooses to include a profit forecast, the listing registration document must contain the principal assumptions upon which the company has based its forecast and be publicly reported upon by the independent accountant.

5. NASDAQ Global Select market has four alternative financial standards and liquidity requirements. This relate to the standard 3 requirements.* Round lot is the term used for a normal unit of trading, which is 100 shares.

LSE (Premium Listing) NYSE NASDAQ (Global Select)5 HKEX (Main Board)

Initial listing criteria

Sponsor1 Required Notrequired Notrequired Required

Audited track record 3yearsauditedaccounts,nomorethan6monthsold 3yearsauditedaccounts,nomorethan9monthsold 3yearsauditedaccounts,nomorethan9monthsold 3yearsauditedaccounts,nomorethan6monthsold

Accounting standard

EUIFRSorequivalentfornon-EUissuers USGAAPorIFRS USGAAPorIFRS HKFRS,IFRS,CASBE(forPRCissuersonly),USGAAPorotheraccountingstandardsmaybeacceptedincertaincircumstances

Minimum revenues Atleast75%oftheentity’sbusinessmustbesupportedbyarevenueearningstrackrecordforthe3yearperiod(somedispensationforspecificindustries(e.g.mining))

i)≥US$75minrevenueinmostrecentyearandii)≥US$750mglobalmarketcap.

i)≥US$90mtotalrevenueinmostrecentyearandii)averagemarketcap.≥US$850m

i)≥HKD500mandii)≥HKD4bnglobalmarketcap.

Minimum asset / equity requirements

Norequirements i)Marketcap≥US$150mandii)atleastUS$75mintotalassetstogetherwithatleastUS$50minstockholders’equity.(Thistestdoesnotapplytointernationalissues)

i)Marketcap.≥US$160mandii)totalassets≥US$80mandstockholdersequity≥US$55m

Norequirements

Minimum profits Norequirements • Sumoflastthreeyears:≥US$10m• Eachoftwomostrecentyears:≥US$2m• Nolossesinpriorthreeyears

• Sumoflastthreeyears:≥US$11m• Eachoftwomostrecentyears:≥US$2.2m• Nolossesinpriorthreeyears

• Sumoflastthreeyears:≥HKD50m• Sumoflasttwoyears:≥HKD30m

• Mostrecentyear:≥HKD20m

Profit forecast Optional4 Norequirements Norequirements Optional4

Working capital statements

Covering12months Notrequired Notrequired Covering12months

Company history2 Atleastthreeyearfinancialhistoryoftheunderlyingbusinessistobeavailable,subjecttoexemptions

Anoperatinghistoryofthreeyearsisgenerallyrequired Atleasttwoyearfinancialhistory Tradingrecordofatleastthreeyears,subjecttoexemptions

Ownership of assets

Controloverthemajorityofassetsforthe3yearperiod Norequirements Norequirements Ownershipcontinuityforatleastthemostrecentauditedfinancialyear

Minimum number of shareholders

Norequirements 400roundlot*shareholders 450roundlot*shareholders 300

Minimum free float (or public float)3

25%ofclassofshareslisted 1,100thousandshares 1,250thousandshares 25%oratleastHKD50m;Ifmarketcap.≥HKD10bn,canbereducedto15%

Minimum market capitalisation requirements at admission

£700,000 US$40m US$45m HKD200m

Internal control certification

n/a Sarbanes-OxleyAct(SOX) Sarbanes-OxleyAct(SOX) n/a

Regulatory and ongoing obligation requirements

Special criteria for international issuers

• Onlyforeigncompanieswith>50%freefloatareeligibletoFTSEUKindicesinclusion

• If200ormoreshareholdersor10%ormoresharesheldbyUKshareholders,requiredtoappointaregistrarintheUK

ToqualifyasaForeignPrivateIssueraninternationalissuermustbe:

• aforeign(non-US),non-governmentissuer• 50%ofequityorlessheldbyUSresidents-ifmorethan50%,mustnot

- haveamajorityofitsdirectorswhoareUSresidents- havemorethan50%ofitsassetslocatedintheUS- administeritsbusinessprincipallyintheUS

Differentminimumdistributionrequirements,marketvaluerequirementandfinancialstandardsareapplied(5,000roundlotshareholders,atleast2.5mpubliclyheldsharesworldwidewithmarketvalueatleastUS$100m)

MustregistertheclassofsecuritiesitintendstolistwithSECbyfilingaregistrationstatement(Form20-F)

ToqualifyasaForeignPrivateIssueraninternationalissuermustbe:

• aforeign(non-US),non-governmentissuer• 50%ofequityorlessheldbyUSresidents-ifmorethan50%,

mustnot- haveamajorityofitsdirectorswhoareUSresidents- havemorethan50%ofitsassetslocatedintheUS- administeritsbusinessprincipallyintheUS

MustregistertheclassofsecuritiesitintendstolistwithSECbyfilingaregistrationstatement(Form20-F)

• Mustbeincorporatedinan“acceptablejurisdiction”• Must,whilstitislistedandoneyearthereafter,appointaprocessagentinHKto

acceptnotices• Mustappointatleastoneauthorizedrepresentativeastheprincipalchannelof

communicationbetweenforeignissuerandHKEX• MustkeeparegisterofholdersinHKfortransferstoberegisteredlocally• Mustberegisteredasanon-HKcompanyundertheHKCompaniesOrdinance

Financial reporting requirements

• Annual• Half-yearly• Interimmanagementstatement

• Annual• Quarterly

• Annual• Quarterly

• Annual• Half-yearly• Quarterly(recommended)

Lock-up requirements - period within which major shareholders are not allowed to sell shares

Typically6-18monthsdependingonnatureofIPO(marketpractice)

6months(marketpractice) 6months(marketpractice) 6monthsthenafurther6monthswherethecontrollingshareholdersareexpectedtoremainthecontrollingshareholders

Regulatory authority FSA/UKLA SEC SEC,FINRA HKEX,SecuritiesandFuturesCommission(SFC)

Major transaction pre-approval by the shareholders

Aspartofcontinuingobligations,approvalisrequiredforsignificantacquisitionsanddisposalsandmaterialrelatedpartytransactions

• Issuancesresultinginachangeofcontrol• Equitycompensationplans• Priortotheissuanceofsecuritiesinanytransactiontoadirector

ofthecompany,subsidiary,affiliateorothercloselyrelatedpersonofarelatedparty;oranycompanyorentityinwhicharelatedpartyhassubstantialinterest

• Priortotheissuanceofsecuritiesinanytransactionifthevotingpowerisequaltoorinexcessof20%ofthevotingpoweroutstandingbeforetheissuanceor5%ormoreofthepre-transactionoutstandingshares(therearecertainconditionswhenapprovalisnotrequired)

• Acquisitionswheretheissuanceequals20%ormoreofthepre-transactionoutstandingshares,or5%ormoreofthepre-transactionoutstandingshareswhenarelatedpartyhasa5%orgreaterinterestintheacquisitiontarget

• Issuancesresultinginachangeofcontrol• Equitycompensation• Privateplacementswheretheissuance(togetherwithsales

byofficers,directors,orsubstantialshareholders,ifany)equals20%ormoreofthepre-transactionoutstandingsharesatapricelessthanthegreaterofbookormarketvalue

Anyspin-offafterthreeyearsofthecompany’soriginallisting

6 | Which market? AnoverviewofLondon,NewYorkandHongKongstockexchanges

Stock exchange

Overview Market Admitable securities

Main indices

LondonStockExchange(LSE)

TheLSE’sMainMarketistheprincipalmarketforUKandinternationallistedcompanies,fromallindustriesandsectorsinavarietyofsizes.TheMainMarketaccommodatestheadmissiontotradingofcompanieswitheitheraPremiumorStandardListing(equityorGlobalDepositaryReceipts(GDRs)).APremiumListingentailshighercomplianceanddisclosurerequirementsthantheEUminimumstandardsforStandardListings(equityorGDRs).

MainMarket • Equities• DRs

• FTSEseries–opentointernationalissuers

• FTSE100• FTSE250• FTSEAll-Share• FTSEtechMark• FTSERussiaIOB–

top15RussianGDRs

AIMistheLSE’sinternationalmarketforsmallergrowthcompanies.

AIM • Equities • TheFTSEAIMIndexSeriesincludestheFTSEAIMUL50Index,FTSEAIM100Index,FTSEAIMAll-ShareIndexandFTSEAIMAll-ShareSupersectorIndices

NYSEEuronext(US)

TheNYSEisownedandoperatedbyNYSEEuronextanditisthelargestcashequitiesmarketintheworld.

NYSE • Equities• DRs

• DowJonesIndustrial• NYSEComposite• NYSEEnergy• S&P500

NASDAQOMX

NASDAQiswellknownforattractinghighgrowthcompaniesinparticularinthetechnologysector,includingbio-technologyandbio-pharmaceuticals.

NASDAQ • Equities• DRs

• NASDAQ100• NASDAQOMX100• NASDAQGlobalSelectMarketcomposite• S&P500

HongKongExchange(HKEX)

TheHKEXMainBoardissuitableforestablishedcompaniesthatmeetaprofitorotherfinancialrequirementstoraisefundsinthemarket.

MainBoard • Equities• DRs

• HangSengIndex

TheGrowthEnterpriseMarket(GEM)isdesignedforgrowthcompaniesandisopentointernationalbusinesses.

GEM • Equities

Total market capitalisation as at 31 December 2011 (US$ bn)

Number of listed companies as at 31 December 2011

Average money raised at admission (US$ m)

Source: Exchange statistics, World Federation of Exchanges, PwC IPO WatchEurope data.

2,258

5,681

15,641

Hong Kong

London

New YorkNASDAQ(3,845)

NYSE(11,796)

24

537

817

1,472

1,982

4,083

Hong Kong

London

New York

DomesticNon-domestic

NYSE (1,700) NASDAQ (2,383)

NASDAQ(287)

NYSE(520)

150

345

444

481

New York (NASDAQ)

New York (NYSE)

London (Main Market)

Hong Kong (Main Board)

Stock exchanges overview and vital statistics

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Total number of IPOs and proceeds raised during the five years ended 31 December 2011

The number of non-domestic IPOs and total proceeds raised during the five years ended 31 December 2011

Sector split of listings by number of IPOs during the five years ended 31 December 2011

LondonNew York Hong Kong

724

647

395

New York

0

100

200

300

400

500

600

700

800

0

25

50

75

100

125

150

175

200

London Hong Kong

194

171

98

New York Hong Kong London

Num

ber

of IP

Os

Off

erin

g va

lue

(US$

bn)

26%

19%

13%

11%

11%

8%

7%4% 1%

41%

23%

11%

8%

6%

4%3% 3% 1%

26%

15%

15%

12%

10%

6%

6%

5%3%

Financial Services

Technology

Health

Energy

Business Services

Consumer

Industrials

Transportation

Other

48

4443

Hong Kong London New York

245

181

32

London New York Hong Kong

0

10

20

30

40

50

0255075

100125150175200225250

Num

ber

of IP

Os

Off

erin

g va

lue

(US$

bn)

Source: PwC US IPO Watch, PwC Europe IPO Watch, PwC Greater China IPO Watch

Source: PwC US IPO Watch, PwC Europe IPO Watch, PwC Greater China IPO Watch

Source: PwC US IPO Watch, PwC Europe IPO Watch, PwC Greater China IPO Watch

Other considerations

While the key considerations we have discussed in this document will be your primary decision factors when considering “which market,” there are other less tangible factors that may also play a role, such as:• Political environment• Commercial/business environment• Location of existing stakeholders• Domestic regulatory environment• Personal preferences of current shareholders• The equity story to be told/the “value proposition”• Longer term plans• Taxation implications• Listing currency considerations

Because of these many and varied factors, the decision as to which market to select can be complex. Engaging experienced advisors with a global presence and knowledge of the capital markets can help you determine the market that is best suited to your needs, anticipate issues, avoid delays and otherwise navigate successfully through the life cycle of your capital market transaction. Using an advisor who is experienced with the multiple elements of the transaction process, along with having the ability to advise on technical accounting and financial reporting complexities associated with the process of going public, will allow you to focus more time on the marketing phase of the deal and ongoing management of your business.

To talk more about your company’s capital market needs, please contact your PwC relationship partner or learn more at www.pwc.ru/capital-markets

©2012ZAOPricewaterhouseCoopersAudit.Allrightsreserved.

“PwC”and“PricewaterhouseCoopers”refertoZAOPricewaterhouseCoopersAuditor,asthecontextrequires,othermemberfirmsofPricewaterhouseCoopersInternationalLimited,eachofwhichisaseparateandindependentlegalentity.

25.04.2012