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Raising Fund from Domestic Market in the Form of Qualified Institutions Placements by a Company

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					BSX Mezzanine Market


    Development-
For Development-stage Companies

The BSX Mezzanine Market offers growing E-commerce, high tech and development
stage companies the opportunity to list on a recognized international stock exchange at a
much earlier stage than is currently possible in any other jurisdiction.

This is due in large part to the fact that the BSX restricts Mezzanine Market investment
to “Qualified Investors” This means that access is limited to sophisticated investors only
and that the BSX can rely more on full disclosure than prescriptive regulations for
investor protection purposes.

A “Qualified Investor” is deemed to be, “an investor who has truthfully completed an
investor suitability declaration in the form prescribed by the Exchange from time to time
or in such other form as the Exchange may approve and either; (1) whose investment is
not less than $100,000; or (2) who otherwise meets one of the suitability tests set out in
the declaration.”

Subject to this restriction a company does not have to have any minimum track record,
market capitalization, free float or profitability in order to qualify for a full public listing
on the BSX’s Mezzanine Market. However, once it is listed on the BSX the company has
all the profile and prestige of being a publicly-listed entity, without having to conduct a
retail IPO.

In effect, the Mezzanine Market provides a form of “listed private equity” with greater
visibility and marketability for the security, while at the same time exposing management
to the process of complying with listing regulations.


The Mezzanine Market thus sits perfectly -- and bridges the gap -- between a company’s
private placements to raise venture/angel capital and a full public offering -- hence the
term Mezzanine Market.
Going Public Without Doing an IPO

•   A listing on a recognized stock exchange is widely regarded as a prestigious mark of advancement
    for any company and adds significant marketability to its securities.

•   “Listed” securities are more attractive to institutional investors outside of the USA (who often limit
    the amount they can invest in “unlisted” securities).

•   The BSX provides an open market facility for Qualified Investors. Whilst it is unlikely that a highly-
    liquid secondary market in these securities will exist, the BSX listing does create the mechanism for
    trading -- representing an important “exit strategy” for institutional investors.

•   The company’s visibility is significantly enhanced, including full exposure on Bloomberg (with over
    100,000 terminals worldwide), Reuters and Bridge/Telerate -- without the disadvantages of having to
    distract management’s attention preparing for a premature retail IPO.

•   All press releases from the company are disseminated by the BSX and -- together with the trading
    and pricing information of its securities -- will develop an invaluable historical profile on the
    financial news networks in preparation for the ultimate IPO.


General

Young, innovative companies with high growth potential, such as E-commerce and Technology stocks,
require stock markets geared to their specific needs - markets which are easily accessible, where equity
finance is readily available, and which attract international as well as domestic, institutional as well as
private investor interest. Such markets must be efficient and well-regulated, providing investor
confidence through demonstrable fairness and transparency, and should be structured to maximize
liquidity.

Small and medium-sized companies with high growth potential aim to achieve the following objectives
through a listing on a recognized exchange:

•   increase market recognition
•   expand market share
•   diversify their financing and shareholder base
•   raise the capital to develop their product, start production, increase sales and recruit personnel
•   expand abroad
•   realize a high market value based on future growth prospects


The BSX Mezzanine Market is specifically designed to meet these criteria in the following ways…
Increased market recognition
A listing on the BSX can create worldwide recognition for a company. All listed securities are added to
Bloomberg, Reuters and, in the near future, the Bridge/Telerate information systems. In addition, the
BSX web site at www.bsx.com carries details on all listed securities. The BSX also formally announces
all new listings and can tie this publicity in with a larger PR campaign organized by the Issuer.

Expanded market share
Although a Mezzanine Market listing is restricted to Qualified Investors, it represents a full public listing
on a recognized stock exchange. As a result the company achieves an enhanced status as a “listed” and
“publicly traded security”. This adds considerably to the prestige of the firm when dealing with
customers and suppliers and helps the company to expand its market sharing.

Diversification of financing and shareholder base
A listing on the Mezzanine Market can be associated with a private placement fund raising. Raising
public capital can assist the company to diversify its financing options beyond bank debt and pure
venture capital funds. However, marketing is restricted to institutional investors and high net worth
individuals so that the company does not introduce a retail shareholder base.

Raising capital to develop product, start production, increase sales and recruit
personnel
Many institutional investors – especially in Europe and Asia, where venture capital firms are not so well
established – prefer to invest in “listed” securities. In fact many institutions outside of the US will limit
the amount of their assets that they may invest in unlisted securities to 10% or below. Thus, listing a
company on a recognized stock exchange like the BSX ensures that the securities of the company are
much more attractive and “marketable” to such institutions because they are listed securities. For this
reason, many companies combine the Mezzanine Market listing on the BSX with a private placement
fund raising round.

Overseas expansion
A large number of E-commerce and Technology companies are drawn to Bermuda in order to incorporate
a holding company or an overseas sales organization. Two of the main attractions of Bermuda are its
neutral corporate tax regime - with no profits, income or capital gains taxes – and its new unique E-
Commerce legislation. Putting a Bermuda company into the corporate structure thus enables the
company to start its worldwide expansion. Having incorporated in Bermuda the company is attracted by
the opportunity to list on the Bermuda Stock Exchange – its “home” exchange - and thus raise its profile
in Bermuda and reinforce its choice of Bermuda as its corporate domicile.

Higher market value based on future growth prospects
Listing on the BSX creates a publicly tradable security. Securities with a public market place are
generally worth more than private equity that is not publicly tradable. In this way, a Mezzanine Market
listing on the BSX assists a company to realize a higher market value for its securities.
The New “Silk Route” for the 21st Century

In summary, the BSX aims to establish the Mezzanine Market as a logical first step for issuers who wish
to eventually list on another international market and create a clear “Roadmap” for that listing. Private
companies can then list on the Mezzanine Market at the earliest stage. Once they reach the minimum
standards required they can move up to this special section and thus prepare themselves properly for a
full IPO.

The BSX plans to further develop this special market to “groom” high-potential early-stage E-commerce
and Technology so that they can eventually meet the full international listing standards of the exchange
they choose for their ultimate IPO (e.g. adopting a big six accounting firm and a proper Board of
Directors).


Accordingly, the BSX will become part of a new “Silk Route” for entrepreneurs into the 21st Century.
New start-up companies will incorporate in Bermuda – attracted by its tax neutral environment and
offshore E-Commerce credentials – raise venture capital from global investors and list on the BSX’s
Mezzanine Market – on their way to a full IPO.

Building a Public Profile

Any company which contemplates a full public listing within the next five years is strongly
recommended to consider obtaining a Mezzanine Market listing on the BSX.

The public profile created by the Mezzanine Market listing will prepare the institutional market for the
subsequent IPO and create a public profile in advance of a full public listing. The BSX’s publications,
information systems and Internet capabilities, as well as our frequent road shows extend the company’s
reach into the institutional investor community.

Listing Requirements

All listing applications for the Mezzanine Market must be sponsored by one of the BSX’s Trading
Members. The sponsor will guide the way through the listing process and submit the formal application
on behalf of the company. The costs of obtaining a Mezzanine Market listing are minimal and comprise:

•   BSX listing fees;
•   Sponsorship fees;
•   Production of a full prospectus. (The prospectus may be the same document as the private placement
    offering document.)

Subject to the restriction to Qualified Investors and the obligation to make full disclosure, there are no
other onerous qualifications for listing on the Mezzanine Market.




cont…
Listing Fees

The BSX listing fee is dependent on the market capitalization of the company, as follows:

Market Capitalization                 $                  Initial Fee                Annual Fee
Not exceeding                       10m                    $ 5,000                    $ 5,000
                                    50m                      10,000                      7,500
                                   100m                      15,000                     12,500
                                   200m                      25,000                     15,000
                                   500m                      30,000                     17,500
                                 1,000m                      35,000                     20,000
Exceeding                        1,000m                      40,000                     25,000

In the first year, the Initial and Annual Fee are both payable upon application for listing. In subsequent
years only the Annual Fee is payable on each anniversary of the listing.


BSX Members

Trading Members
BSX trading members may trade on the local market, as well as use the crossing facility. Trading
Members may also sponsor applications to list on the BSX.

•   Barrington Investments Ltd.
•   BCB Securities Ltd.
•   Bermuda International Securities Ltd.
•   Brooke Securities (Bermuda) Limited
•   Butterfield Securities Ltd.
•   First Bermuda Securities Ltd.
•   Capital G BSX Services Ltd.
•   Instinet (Bermuda) Ltd.
•   Lines Overseas Management (Bermuda) Ltd.
•   Nomura Securities (Bermuda) Ltd.
•   Trafalgar Securities Ltd.

Listing Sponsors:

•   Argonaut Financial Services Ltd.
•   Continental Sponsors Ltd.
•   Harbour Financial Services Ltd.
•   Reid Services Ltd.


Representative Mezzanine Market Listings
There are currently a number of companies listed on the Mezzanine Market; the following is a small
sampling:
Shui Sing Holdings Limited
Shui Sing Holdings Limited operates as an investment holding company, the principal assets of which
comprise significant interests in Great Eagle and Sun Fook Kong. Great Eagle’s shares are listed on the
Hong Kong Stock Exchange and the Great Eagle Group is involved primarily in property development
and investment, principally in Hong Kong as well as the investment in and the operation of hotels, both
in Hong Kong and internationally. Sun Fook Kong is a private company that is involved in construction,
civil engineering, building maintenance and construction management services in Hong Kong.

Nordica Life (Bermuda) Ltd.
Nordica provides single premium unit-linked life insurance policies primarily, but not exclusively, to
clients in Europe. The principal target market, however, is high net worth individuals resident in Sweden.
The policies have been developed to provide the policyholders with flexibility in the determination of
their insurance needs, whether for retirement or for the financial security of the beneficiary of the policy
in the event of death of the life insured.


BSX Members
Applications to list on the Mezzanine Market must be submitted by a BSX Trading Member, the
following is a list of those companies currently offering this service:

First Bermuda Group
Contact: Michael Schroter
Tele: 441 295 1330
schroter@fbs.bm

LOM Group
Contact: Scott Lines
Tele: 441 294 7003

				
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