Transcript UK Smaller Companies: AIM focused
NICK LANGFORD Head of Corporate Advisers, Equity Primary Markets February 2008
Supplying innovation – Specialist Fund Market
• • •
Driven by the need to supply market choice
– – – Main Market – widest audience including general retail AIM – ‘plain vanilla’ funds
Specialist Fund Market – larger, more sophisticated propositions and associated audience
Driven by the increasing demand for alternatives
– – – Global demographics – ageing investors Emerging investor wealth – China, India, etc..
Increasing allocations to alternatives – not going away!
Where can market participants meet?
– Quality venue required!
Specialist Fund Market – provides a London-based capital markets venue
Meeting the demand
The world’s first public equity market designed to meet the specific needs of sophisticated investment managers and sophisticated investors
NOTE: The Specialist Fund Market does not accept trading companies
Designed to accommodate
• Single-strategy hedge funds • Multi-strategy hedge funds • Fund of hedge funds • Private equity funds • Property investment funds • Infrastructure funds • Sophisticated legal structures and security types
Full list of features and benefits
Access to Europe’s deepest pool of capital Public capital market dedicated to your needs Cachet and profile of a London quotation Flexibility of an EU-regulated market No domicile restrictions Access to efficient trading - TradElect
Key benefits of the Specialist Fund Market
Regulated by the Financial Services Authority Regulated market for UCITS Directive Ability to tailor your prospectus to investor needs Accepts sophisticated structures and/or securities
Summary…
Permanent capital Wide & diversified investor base Liquidity Profile raising
• Supporting longer term investment strategies • Ability to target investors across the EU • Access to Europe’s deepest capital pool • Globally-based institutional investor base • ‘Mark to market’ valuation • An investor entrance/exit route • Enhanced credibility – building track record • Quotation on a regulated market in London
Suitable where..
• • • • • • • Complex structures and securities are involved, e.g. LPs, PCCs, non-voting shares The investment manager lacks a public track record There is limited risk diversification – single strategies, emerging market assets, feeder funds, etc.
There is an unusual governance structure in place There is no requirement to appoint a sponsor Flexibility to adapt the investment policy is required Straightforward financial disclosures suffice
Not suitable where..
• • • • A public offer to a wide investment audience in the UK including retail investors is sought Participation in the FTSE UK Series of indices is sought Index trackers and benchmarked fund exposure is sought Access to ISA and PEP portfolios is sought Consider…
NOTE: Specialist Fund Market is ONLY FOR INVESTMENT ENTITIES
Specialist Fund Market admission process
• • • Regulated Market – UKLA approve prospectus Admission to market is dependent on compliance with the London Stock Exchange’s Admission and Disclosure Standards Transferable securities must be freely negotiable
Regulatory overview – comparison of regimes
Listing Rules Proposed Unitary Listing Rules Chapter 15 (Effective 28/09/07) Listing Rules Chapter 14 Specialist Fund Market
Admission and ongoing obligations regulated by the FSA
Admission requirements
Transferable securities must be freely negotiable Production of a prospectus for approval by the UKLA Minimum market capitalisation of £700,000 for equity Admission to trading on the Main Market as a prerequisite of listing A minimum of 25% of shares must be in public hands 3 years’ audited accounts or satisfy the FSA that directors & managers have sufficient & satisfactory experience in managing investments proposed
Corporate Governance and ongoing obligations
Compliance with the London Stock Exchange’s Admission and Disclosure standards Annual report and accounts, interim management statement, half-yealry report. Stated to IFRS or equivalent standard for non-UK issuers FSAP FSAP As required by the Listing Rules - additional disclosures concerning the investment portfolio As required by the Listing Rules - additional disclosures concerning the investment portfolio FSAP FSAP FSAP FSAP FSAP FSAP FSAP FSAP Drawing up and maintaining an insider list, compliance with the Major Shareholder Notification Regime and publication of an Annual Information upsate PDMRs[1] will be required to disclose details of their personal deals in the shares of the issuer and any related derivatives to the market as soon as possible Compliance (or explanation of differences) with the Combined Code[2] Prior shareholder approval and/or notice required for certain transactions through pre-emption rights, ‘Class Tests’ and related party rules[3] Compliance with the Model Code restricting directors’ dealings and buybacks during a close period [2] A sponsor must be retained for certain transactions Board must have a majority (including the chairman) which is independent of the manager (i.e. not employed or retained by the manager or a director of another fund managed by it) No more than 10% of gross assets can be invested in other listed investment entities (n/a where the underlying investment entity itself has a limit of 15%) Shareholder consent required for a material change in investment policy Prohibition on significant trading activity Notification of investments FSAP FSAP FSAP FSAP Cross holdings, investments > 5%, Cross holdings, investments > 10% 10 largest holdings. Disclosure within 2 days of quarter end and their value as a percentage of the portfolio. Disclosure within 5 days of quarter end Feeder funds must control the investment policy of the underlying master fund Note: the FSA is currently consulting on its proposals to create a unitary regime for listing investment entities on the Main Market via Chapter 15 of the Listing Rules. The FSA expects the new regime to be effective from March ’08 at which time, Chapter 14 (currently open to non-UK domiciled investment entities) will be closed to new applicants
Trading
Specialist Fund Market securities will be admitted to specific segments on the SETS and SETSqx trading services. See below:
ANINVCO Segment Last trade Trade Hi Trade Lo Cum Vol Auto Vol Pub. Limit Mkt Cap PE Ratio Ex-div 3 SFM1 GBP Sector SFML 1091 1095 1090 14,800 10,000 10,000 $500.00m
N/A KLWT ABNV At: Trades Yield 25,000 ANINVCO NMS 14.22
Size 4 0% 1090 10,000 900 1105 Close 1106 ISIN LAT LAT Hi LAT Lo Mid WVAP A-VWAP C-VWAP 52Wk Hi 52Wk Lo GG00 123456 1024 1024 1024 1098 1094 1095 17.21
14.78
0(0%) 0(0%) 12-JUN 24-JAN GBX
Trading Service SETS SETSqx SETSqx SETSqx Segment code SFM1 SFM2 SFM3 SFM4 Sector code SFML SFQQ SFNC SFXN Description Liquid Less liquid Less liquid Less liquid Market Maker Yes (at least 1) Yes (at least 1) Yes (at least 1) None Central Counterparty Service Yes Yes No No SFM sectors will mirror the following segment-sector parameters as detailed in the trading service descriptions SSMU – SMEU SSQ3 – SQQ3 SSX3 – SQNC SSX4 – SXNC
Further details on trading systems and eligibility requirements can be accessed at: http://www.londonstockexchange.com/tradingmechanisms
Key timings
•
The Specialist Fund Market opened for new admissions from the 1
st
November 2007
•
The FSA is cuurently reviewing prospectuses for approval
•
For information please visit our dedicated website:
www.londonstockexchange.com/specialistfundmarket
….and why choose London?
• London: the world ’ s capital market: • • • • • • • The leading global financial centre 255 foreign banks based in London 3 out of 4 leading law firms based in London 42% of global foreign equity trading 36% of global derivatives turnover 32% of global turnover in foreign exchange A central time-zone
70 yrs ’ experience with investment entities 572 quoted funds capitalised at over £ 130bn ($264bn) c.80% European hedge funds managed here Institutional funds up 40% in London over last 10yrs Supported by an intelligent approach to regulation, a network of specialist advisers and one of the world ’ s most efficient, global public capital markets
Sources: London Stock Exchange statistics (July 2007) and The City – UK Financial Services (May 2007)