SGX Proposes Changes To Grow Quality Listings

Singapore Exchange Limited (SGX) today announced that it is inviting public comments on proposed new listing rules aimed at enhancing the competitiveness of its securities market. For the Mainboard, the focus will be on attracting larger companies and maintaining the quality of listed companies. For SESDAQ, SGX proposes to provide a conducive listing platform for growth companies by transforming it into a sponsor-supervised board (new board). The new board will target both local and foreign growth companies.

The proposed changes serve to promote investor confidence and attract more quality issuers and intermediaries. This will in turn foster the growth and development of the market.

"The global landscape is evolving and we have to continually review our value proposition to ensure we stay relevant and competitive. The focus for our Mainboard will be size and quality. As for SESDAQ, we are proposing a transformation – a sponsor-supervised board that will best cater to the growth market," said Mr Hsieh Fu Hua, CEO of SGX. "These changes will enable us to advance our Asian Gateway position, with clearly differentiated markets, focus on quality standards and a scalable model for growth."

The proposed changes to the Mainboard and SESDAQ include the following:

MAINBOARD

Review minimum entry size of companies to provide guidance to intermediaries and issuers.
Introduction of minimum continuing listing criteria based on financial performance and size. Having continuing standards will enhance the value of a listing and the premium that investors accord to listed companies.

SESDAQ

Transformation of the current regime into a sponsor-supervision model. Issuers must continue to comply with SGX rules, but the supervisory role will be undertaken by approved intermediaries (Sponsors). SGX will maintain market quality by regulating Sponsors directly via strict admission and continuing obligation rules. In addition, key issuer rules and safeguards will be retained.

The Sponsor will decide on the suitability of the company for listing on the new board and review IPO admission. There will be no prescribed financial entry criteria.

Listing applicants must produce an Offer Document instead of a prospectus. SGX will apply for an exemption from prospectus requirements under the law, such that the Offer Document will not need to be registered with the Monetary Authority of Singapore (MAS). However, we expect that prospectus liabilities will continue to apply. SGX will not review the admission, shortening the IPO application process.

The IPO market capitalisation of companies will be restricted to a maximum of S$150 million. This will delineate the two boards clearly at the start, while the market adapts to the new regime.

Companies on the new board must retain a Sponsor at all times. Sponsors are responsible for assisting the company's rule compliance, including the review of companies' circulars.

The annual limit on the issue of additional shares, and thresholds for acquisitions and disposals of assets that do not require shareholders' approval, will be raised. This is to facilitate the development of growth companies.

There will be no change to the current process for the trading and clearing of securities.

Please refer to Appendix 1 for a summary of the proposed changes.

SESDAQ companies will be given at least two years to engage Sponsors and comply with the new rules. To ease the transition, SGX will waive listing fees for three years from the time SESDAQ companies adopt the new rules.

"SESDAQ was introduced to meet the capital raising needs of local small to medium enterprises. While it has largely served its developmental role, to achieve further growth and sustained performance over the longer term, a transformation is required. The introduction of the new board is supported by findings from a survey of market participants and review of various second boards," said Mr Lawrence Wong, Executive Vice President and Head of Listings.

The proposed changes are set out in detail in the consultation papers and will be made available on SGX website at www.sgx.com from 23 May 2007 to 20 June 2007. Market participants and members of the public can forward their feedback by 20 June 2007 via email and either by post/courier or fax:

rules@sgx.com

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Issue date: 23 May 2007

APPENDIX 1

MAINBOARD RULES – PROPOSED WATCH-LIST CRITERIA

Proposed Watch-list Criteria

Current Initial Listing Criteria (quantitative)

Must maintain the following combined standards ("minimum standards"), if not it will be included in a "Watch-list" for 2 years:

Not more than 3 consecutive financial years of net losses; and
An average daily market capitalisation greater than S$40 million over a 6-month period.

An issuer may be removed from the Watch-list if:

It fulfils the minimum standards; or
It satisfies one of the profit tests under the initial listing criteria (see first 2 items under next column).

If not, it will face delisting. We propose that companies being delisted offer a reasonable exit alternative to their shareholders, in the same manner as companies who voluntarily seek to delist.

Must meet one of the following:

Cumulative consolidated pre-tax profit of at least $7.5 million for the last three years, and a minimum pre-tax profit of $1 million for each of those 3 years.
Cumulative consolidated pre-tax profit of at least $10 million for the last one or 2 years.
Market capitalisation of at least $80 million calculated based on the issue price and post-invitation issued share capital.

Note: To view the full details of the proposal, please refer to the consultation paper "Proposed Introduction Of A Watch-List And Listing Rule Amendment Relating To Exit Offer In A Directed Delisting" at www.sgx.com

SUMMARY OF DIFFERENCES BETWEEN NEW BOARD & SESDAQ

	Admission	Existing SESDAQ Requirements	New Board Requirements
1	IPO Document	Must produce a Prospectus Disclosure requirements & liabilities as stated in SFA/R. SGX reviews the admission.	Must produce an Offer Document Similar requirements. Sponsor will review admission and assess suitability to list. SGX will not normally review the admission. Includes statements from the directors and the Sponsor that the working capital available to the company will be sufficient for its present purposes and for at least 12 months from the date of listing.
2	Sponsor requirement	Issuer will be admitted through an issue manager. Post-IPO, issue manager will be "badged" to the issuer for 2 years.	Issuer will be admitted by a Sponsor. Post-IPO, issuer must retain a Sponsor at all times or else may face delisting. The Sponsor bringing the company to list must sponsor the issuer for at least 3 years post-listing.
3	Shareholding spread	Greater of 15% of post-invitation share capital or 500,000 shares must be in public hands. Quantitative distribution rules At least 500 shareholders at IPO. Post-IPO, 10% of shares must be in public hands.	No change. No quantitative requirements. At least 200 shareholders at IPO. No change.
4	Quantitative criteria	Should normally have positive cash flow from operating activities.	No minimum earnings or operational track record required. Issuer's market capitalization at the time of listing cannot exceed $150 million.
5	Directors	At least 2 independent directors. For foreign companies, at least 2 of these independent directors must be resident in Singapore.	No change. For foreign companies, at least 1 of these independent directors must be resident in Singapore.
6	Restriction on Promoters' Sale of Shares	No restriction.	Promoters must not sell vendor shares if (i) they collectively own less than 50% of issued capital at IPO; or (ii) such sale will cause their collective shareholding to fall below 50% of issued capital at the time of listing.
7	Lock-up periods	Promoters: 100% of shareholdings at IPO must be moratorised for at least 6 months after listing, and 50% of such shareholdings moratorised for the next 6 months. Pre-IPO investors with 5% shareholdings: 100% of profit portion (based on a cash formula) at IPO and for at least 6 months after listing.	No change. All pre-IPO investors: 100% of profit portion (based on a cash formula) at IPO and for at least 12 months after listing.
	Continuing	Existing SESDAQ Requirements	New Board Requirements
8	Disclosure & Reporting	Immediate disclosure of material information. Half-yearly/quarterly reporting. Code of Corporate Governance guidelines (comply or explain).	No change. No change. No change.
9	Changes in capital	Issuer can obtain shareholder mandate to issue up to 50% of the company's share capital (of which shares issued on non pro-rata basis must not exceed 20%).	Issuer can obtain shareholder mandate to issue up to 100% of the company's share capital (of which shares issued on non pro-rata basis must not exceed 50%). The 50% limit can be increased to 100% in the case where shareholders approve by special resolution on or after the first shareholders' meeting.
10	Interested Person Transactions	Disclosure and/or shareholder approvals for certain transactions involving interested persons.	No change.
11	Debt Securities	Companies can list local or foreign debt securities provided they meet the stipulated requirements.	Only existing Issuers with equity securities listed on New Board, can list debt securities.
12	Acquisitions and Realisations	Acquisitions or disposals of assets of more than 20% but less than 100% of the "relevant bases" i.e. group net assets, profits, market capitalization or equity securities issued, as the case may be, will require shareholder approval. Acquisitions above 100% of the relevant bases, or resulting in a change of control of the issuer, will be considered a very substantial acquisition or reverse takeover.	Acquisitions of assets of more than 75% but less than 100% of the relevant bases or where the acquisition will result in a fundamental change in the issuer's business, will require shareholder approval. Disposals of assets of more than 50% will require shareholder approval. No change.
13	Exchange approvals	Review of circulars.	No review of circulars.

Note: To view the full details of the proposal, please refer to the consultation paper "Listing Manual – Rules for New Board" at www.sgx.com