Initial steps on the IPO journey

April 2016

123

Con

tent

s Initial steps on the IPO journeyListing requirements

About EY

3

16

19

Initial steps on the IPO journey

Page 4 Initial steps on the IPO journey

IPO readinessSelf-assessment

Do you recognize these challenges in your company?

QuestionSelf-assessment

Often Sometimes Never

Do you understand which capital raising option fits your organization? Do not know what organizational changes are required for IPO journey? Are there any issues that need resolving before the IPO? Do you have a lack of experience on selecting the right team? Are you struggling with the right story? Do you have doubts on the right timing and pricing?

Each of the above may indicate that your IPO readiness requires support.

Page 5 Initial steps on the IPO journey

Initial steps on the IPO journey

In 2015, Asia Pacific was the worlds leading region in terms of number of IPOs and capital raised. Inaddition, despite some economic uncertainty in China, the outlook for 2016 remains positive withinvestor sentiment strengthened by ongoing reforms on the mainland.

To execute an IPO successfully, you must be well-prepared. Successful IPO candidates approach theIPO as a transformational process rather than the end-game or just a financing event. It is essentialto begin to act and operate as a public company at least one year in advance of the IPO.

Every entrepreneur aspires to take ones company public. Business owners need advice forassessment for readiness of their organization for an IPO and sources for IPO funding. As you embarkon your IPO journey, find out how EY can help guide you through the first steps in the process.

Page 6 Initial steps on the IPO journey

The IPO value journeyOverview

The IPO should be: Structured A managed transformation of people, processes and culture of an organization A process that starts long before the transactionMarket leaders recognize the IPO event as one defining milestone in a complex transformation from a private to a publiccompany.

An IPO is a process, not an event.

Page 7 Initial steps on the IPO journey

What are typical IPO work streams atcompany level? The IPO value journey

IPO value journey

Evaluate IPO as strategicfunding in a readinessassessment workshop

Set up resources and aninternal IPO team

Start to build capitalmarket infrastructure andmake structuraladjustments to achieveIPO readiness

Prepare group systems,new functions and taxoptimization at companyand shareholder level

Day-one readinesspost-IPO

IPO design, concept and placement with external team3-12 months prior to IPO

Internal preparation1224 months prior to IPO

IPO planning IPO execution IPO realization

Active investor relations(IR) and ongoing roadshows based on the IRcalendar

Management of investorexpectations throughefficient forecasting anduse of issue proceeds

Ongoing transparentexternal reporting

Awareness of disclosuressuch as ad hoc, directorsdealings, corporategovernance and operategeneral meetings

IPO team selection (bank,lawyers, auditors andinvestor relations)

Set timetable, start duediligence and prepareoffering concept andprospectus

Fine-tune business plan,fact book and presentationmaterials for analysts, thepress and investors

Fine-tune the equity storyand valuation perceptionsbased on investorfeedback

Offering prospectus Approval by regulators and

securities admission to thestock exchange

Press conferenceand launch investor roadshow

Bookbuilding, order bookanalysis and determinationof the issue price andallocation

Listing on stock exchangewith an IPO ceremony andmedia attention

Page 8 Initial steps on the IPO journey

How to prepare and launch an IPO internallyOur approach: IPO-readiness assessment

IPO value journey

IPO planning IPO execution IPO realization

Prep

arin

gfo

rthe

IPO

jour

ney

1. Strategy IPO value journey IPO destination Issue concept

2. Structures Issuing company Group structure Maintaining

influence

3. Taxes Company level Shareholder level Transaction level

8. Timeline IPO windows Plan B options Multi-track process

7. Leadership C-suite Board of directors Work with media

PossibleIPO-readinessassessment

modules

6. Functions Investor relations Compliance officer Committees

4. Financials External reporting Forecasting Prospectus

5. Systems Internal controls Enterprise risk Compliance

management

Our IPO-readiness approachStart with an IPO-readiness workshop

1. Discuss strategic funding considerationsand a possible IPO base case

2. Hold an IPO-readiness assessmentworkshop, based on selected IPO-readiness assessment modules

3. Analyze gaps of current infrastructure usingIPO diagnostics to get the IPO-readytarget status

4. Agree on a road map to fill the gaps, basedon an IPO-readiness result report

Page 9 Initial steps on the IPO journey

IPO readiness assessmentThe benefits

A successfultransformation

from privateto public status

Save time Greater insight into your capital-raising options An IPO base case to meet your objectives and strategies

and build road map to enhanced value

Structured,integratedapproach

IPO-readiness

Reduce cost Transparency on how to get IPO-ready Map of organizational changes to execute an IPO or other

capital transaction in an integrated approach

Increase transaction certainty Reduced risks in unpredictable IPO markets Effective combination of team, story, timing and the pricing

Share knowledge Understanding of your IPO requirements to address

questions, share knowledge and train your team

Page 10 Initial steps on the IPO journey

Executing a seamless IPO

At EY, we work closely with IPO candidates, private equity funds and listed companiesthroughout the IPO journey.

EYs global footprints demonstrates that we have experience in working in many of thekey global capital markets and with a range of intermediaries.

EYs multidisciplinary team with market-specific experience helps you develop a clearconcise equity story built on your organizations activities, historic results and futurestrategy.

We recognize the need for enhanced corporate governance. We can help you assessthe nature and the robustness of the various (internal and external) information sourcesrequired to draw up a prospectus.

We assist you in implementation and improvement of relevant systems (e.g., riskmanagement, internal control and internal audit) and improve forecasting systems, tofacilitate analysts and investors have superior information.

Page 11 Initial steps on the IPO journey

Executing a seamless IPO

For a successful IPO or strategic transaction, you need to get the following right:

Points toconsider

Financials

Tax matters

Legal issues

Internal control

Risk management

Corporate governance

Information technology

Performance reporting

The equity story

The capital market strategy

Page 12 Initial steps on the IPO journey

Why EY

Global number one in IPO A market leader for past 10 years (by audit share) in guiding high-growth companies through an IPO Leverage our international credentials to provide the guidance needed to address the priorities and

mitigate risksOur global presence Outstanding network of contacts among leading capital market intermediaries A multidisciplinary team with market-specific experience, helping to facilitate cross-border IPOs and

overseas listings Global network gives the presence in each capital market and an external network of capital market

intermediaries, regulators and exchangesIPO leaders network Offer access to a deep pool of knowledge and experience from a network of dedicated teams

helping you to anticipate the risks of capital-raising and to navigate through the challenges ofoperating as a public company.

Extensive market resources and support Produce a range of research reports and other publications about rapidly changing IPO environment Provide events, workshops and briefings on IPO readiness

Page 13 Initial steps on the IPO journey

IPO journey services

1. Assessmentworkshop

3. Evaluatinglisting options

4. GAAPconversion

5. Communicationwith shareholders

6. IPO journeyservices

2. Diagnostics andgap analysis

7. IPO readinessresult

1 EY Global IPO Trends, 2015 Q4, EY, 2015

After the market correction in themiddle of 2015, which saw regulatorstemporarily shut mainland Chineseexchanges to new listings, the regionhas rebounded strongly in the fourthquarter. Despite ongoing concernsabout global and Chinese economicgrowth and the possiblerepercussions of a US interest raterise, the outlook for 2016 is positive.There is a strong pipeline of IPO-ready businesses and investorsentiment has been buoyed byreforms to Chinas IPO system whichwill see a shift to a market-orientedregistration process. We expect ahealthy appetite for new listings topersist in the coming year. 1

Terence HoEY Greater China Strategic Growth Marketsand IPO Leader

Page 14 Initial steps on the IPO journey

IPO journey services

Key stages in IPO journey:

Assessment workshop: The IPO readiness assessment workshop can include up to eight modules:strategy, structures, taxes, financials, internal systems, functions, leadership and the planned timeline. We work with you to identify and discuss any gaps that need closing on your IPO value journey. We

also discuss strategic funding considerations and develop an initial target structure and IPO basecase in line with your objectives.

Diagnostics and gap analysis: This analysis helps you design the corporate structure depending onfunding requirements and to identify any gaps with the current structure. These are analyzed in greater detail in individual follow-up workshops, and we help you clarify the

time, content and resources required to close them. These results are then used to develop the planfor the work leading up to the multitrack option and IPO.

IPO readiness result report: This report defines the strategy that lays the foundation for furtherdiscussions and multitrack readiness checkpoints. We help identify the gaps between your current status and IPO target-ready status, and recommend

work streams and a road map along with estimates, timelines and resources required to fill the gapsand achieve IPO readiness.

Page 15 Initial steps on the IPO journey

EYs services across the IPO journey

Support you in understanding of the movement and requirements of your chosen capitalmarkets and how that fits into your funding strategy and wider business operations

Assist you in analyzing and selecting the right listing location and stock exchange, basedon the strategic perspective of the company and stakeholders

Compare regulatory requirements while helping you select the appropriate stockexchange segment

Compare internal structures and processes with initial and ongoing requirements of thechosen capital market

Facilitate an IPO readiness assessment workshop designed to analyze the stepsrequired to reach your preferred IPO destination

Assist with cross-border project management by our global IPO leaders network

Certain of our services for an audit client and its affiliates may be more limited in order to comply withapplicable independence standards. Please reach out to your EY contact for further information.

Listing requirements

Page 17 Initial steps on the IPO journey

Listing requirementsMainland China

Listing is a complex and intensive exercise which requires a significant amount of time commitment fromsenior management to determine it is successful. The listing requirements are set out in various Chineselaws and regulations and their principal provisions are as follows.

ChiNext

Engage in one principal business; no material change inprincipal business, board of directors and managementin the last two years

No change in controlling shareholder in last two years Post-IPO share capital not less than RMB30 million At the end of the latest reporting period, net assets not

less than RMB20 million, and not in an accumulated lossposition

Profits for each of the last two years, and accumulativelynot less than RMB10 million; or profits for the recentpast year, and revenues in the recent past year not lessthan RMB50 million

No material change in principal business, board ofdirectors and management in the last three years

No change in controlling shareholder in the last threeyears

Pre-IPO share capital not less than RMB30 million At the end of latest reporting period, not in an

accumulated loss position, and the proportion ofintangible assets (after deducting land use right, use rightof waters for aquaculture, and mining right) in net assetsnot more than 20%

Profits for each of the last three years, andaccumulatively more than RMB30 million

Operating net cash flow accumulatively more thanRMB50 million in the last three years, or accumulativerevenues of more than RMB300 million

Main and SME board

Page 18 Initial steps on the IPO journey

Listing requirementsHong Kong

Listingrequirements

Profit test Market capitalization,revenueand cashflow test

Market capitalizationand revenue test

Place of incorporation(in acceptable jurisdictions)

Hong Kong, mainland China, Bermuda, Cayman Islands, or a jurisdiction where the standards of shareholder protection are at leastequivalent to those provided in Hong Kong

Trading record Not less than three financial years

Profit attributable to shareholders Aggregate profits of HK$50 million in thelast three years (with HK$20 million in themost recent year and an aggregate ofHK$30 million in the two preceding years)

No specific requirement No specific requirement

Revenue No specific requirement At least HK$500 million for the most recent audited financial year

Cashflow No specific requirement Positive cash flow from operating activitiesof at least HK$100 million in aggregate forthe three preceding financial years

No specific requirement

Minimum market capitalization At least HK$200 million at the time of listing At least HK$2 billion at the time of listing At least HK$4 billion at the time of listing

Management and ownership Management continuity for at least three preceding financial years; and ownership continuity and control for at least the most recentaudited financial year

Relaxation of trading record andmanagement requirement

The Hong Kong Stock Exchange (SEHK) may accept a shorter trading record period and may vary or waive the above profit or otherfinancial standards requirement for:1. Mineral companies (those that have at least discovered resources)2. Newly formed project companies3. Applicants applying under the market capitalizationand revenue test (given the new applicants directors and management have

sufficient and satisfactory experience of at least three years in the line of business and industry of the applicant; and the newapplicant has management continuity for the most recent audited financial year)

Minimum public float At least 25% of total issued share capital; for issuers with expected market capitalization of over HK$10 billion at the time of listing, theSEHK may accept a lower percentage of 15% to 25%

Spread of shareholders At the time of listing, it is not allowed to have less than 300 shareholders and no more than 50% of the securities in public hands can bebeneficially owned by the three largest public shareholders.

Main board

Page 19 Initial steps on the IPO journey

Listing requirementsHong Kong

Listingrequirements

Description

Place of incorporation(in acceptable jurisdictions)

Hong Kong, mainland China, Bermuda, Cayman Islands, or a jurisdiction where the standards of shareholder protection are at leastequivalent to those provided in Hong Kong

Trading record Not less than two financial years

Profit attributable to shareholders No specific requirement

Revenue No specific requirement

Cashflow A positive cash flow, generated from operating activities in the ordinary and usual course of business before changes in workingcapitaland taxes paid, at least HK$20 million in the aggregate for the two financial years immediately preceding the issue of the listingdocument

Minimum market capitalization At least HK$100 million at the time of listing

Management and ownership Management continuity for at least two preceding financial years; and ownership continuity and control for at least the most recentaudited financial year

Relaxation of tradingrecord and managementrequirement

The SEHK may accept a shorter trading record period and/or may vary or waive the above profit or other financial standardsrequirement for:1. Mineral companies (those that have at least discovered resources)2. Newly formed project companies

Where the SEHK accepts a trading record of less than two financial years, the applicant must nevertheless still meet the cash flowrequirement of HK$20 million for that shorter trading record period.

Minimum public float At least 25% of total issued share capital; for issuers with expected market capitalization of over HK$10 billion at the time of listing, theSEHK may accept a lower percentage of 15% to 25%

Spread of shareholders At the time of listing, it is not allowed to have less than 100 shareholders and no more than 50% of the securities in public hands at thetime of listing can be beneficially owned by the three largest public shareholders.

GEM Board

About EY

Page 21 Initial steps on the IPO journey

Regional EY network

ASEANBrunei, Cambodia,Guam, Indonesia, Laos,Malaysia, Maldives,Myanmar, NorthMariana Islands(Including Saipan),Philippines, Singapore,Sri Lanka, Thailand,Vietnam

Greater ChinaMainland China, HongKong SAR, MacauSAR, Taiwan, Mongolia

KoreaOceaniaAustralia, Fiji, NewZealand, Papua NewGuinea

Financial ServicesOfficeAustralia, China, Korea,Singapore, Vietnam

Offices worldwide in more than700+ 150 countriesEY Global

Employees worldwide as of 30 June 2015212,000Global revenue Financial Year '15,

ending 30 June 2015US$28.7 billion

Page 22 Initial steps on the IPO journey

Financial Accounting Advisory ServicesContacts

Lawrence LauGreater China and Central ChinaFAAS leader

lawrence.lau@cn.ey.com+86 21 2228 2816

Maggie SunNorth China FAAS leader

maggie.sun@cn.ey.com+86 10 5815 3370

Lionel LiSouth China and Hong Kong FAASleader

lionel.li@cn.ey.com+86 755 2502 8149

EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services wedeliver help build trust and confidence in the capital marketsand in economies the world over. We develop outstandingleaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in buildinga better working world for our people, for our clients and forour communities.

EY refers to the global organization, and may refer to one ormore, of the member firms of Ernst & Young Global Limited,each of which is a separate legal entity. Ernst & YoungGlobal Limited, a UK company limited by guarantee, doesnot provide services to clients. For more information aboutour organization, please visit ey.com.

2016 EYGM Limited.All Rights Reserved.

EYG no. 00503-163GBL

BMC AgencyGA_00004776

ED NoneIn line with EYs commitment to minimize its impact on theenvironment, this document has been printed on paper witha high recycled content.

This material has been prepared for general informational purposes onlyand is not intended to be relied upon as accounting, tax, or other professionaladvice. Please refer to your advisors for specific advice.

ey.com