Consultation Paper No. 5 of 2021 – Proposals for Broadening Participation in Private Capital Markets

CONSULTATION PAPER
NO. 5 OF 2021
PROPOSALS FOR BROADENING
PARTICIPATION IN PRIVATE
CAPITAL MARKETS
22 November 2021

Consultation Paper No. 5 of 2021
TABLE OF CONTENTS
Why are we issuing this paper?............................................................................................... 3
Who should read this paper?................................................................................................... 3
How to provide comments?..................................................................................................... 3
What happens next? ............................................................................................................... 3
Current Regulatory Framework ............................................................................................... 4
Proposed Regulatory Framework............................................................................................ 5
Product Summary Note......................................................................................................... 10
Other Considerations ............................................................................................................ 11
Proposed Amendments......................................................................................................... 12

Consultation Paper No. 5 of 2021
Why are we issuing this paper?

1. The Financial Services Regulatory Authority (“FSRA“) of Abu Dhabi Global Market
   (“ADGM“) has issued this Consultation Paper to seek views on a proposed regulatory framework for limited Retail Client participation in “private capital markets”, that refer to investments in Shares and investible strategies for investors who wish to invest in privately owned companies. Amendments are proposed to the FSRA’s Market Rules (“MKT”) and the Conduct of Business Rulebook (“COBS”). Upon the enactment of the proposed regulatory framework, the FSRA will publish an updated Guidance document – “Guidance – Regulatory Framework for Private Financing Platforms”. Who should read this paper?
2. This Consultation Paper should be of particular interest to operators of Private
   Financing Platforms and Multilateral Trading Facilities as well as investors, lenders, individuals and organisations active in the investment sector, private ventures and Issuers, and their respective professional advisors. How to provide comments?
3. All comments should be made in writing and sent to the address or the email
   address specified below. If sending your comments by email, please use the Consultation Paper number in the subject line. If relevant, please identify the organisation you represent when providing your comments. The FSRA reserves the right to publish, including on its website, any comments you provide, unless you expressly request otherwise at the time of submitting those comments. Comments supported by reasoning and evidence will be given more weight by the FSRA. What happens next?
4. The deadline for providing comments on the proposed framework is 6 January 2022.
   After receiving your comments, we shall consider whether any modifications are required to the proposals and the Board of ADGM and the FSRA will then proceed to enact the proposals in their final form. You should not act on these proposals until final rules and guidance are issued by the FSRA. We shall issue a notice on our website when that happens. Comments to be addressed to:
   Consultation Paper No. 5 of 2021
   Abu Dhabi Global Market
   ADGM Square
   Al Maryah Island
   PO Box 111999
   Abu Dhabi, UAE
   Email: consultation@adgm.com
   Introduction

Consultation Paper No. 5 of 2021

1. “Private markets” refers to investments in a broad range of asset classes and
   investible strategies for investors who wish to invest in privately-owned companies. The absence of a listing on a public exchange or market distinguishes private from public markets. “Private markets” has become an umbrella term to refer to assets that are not liquid, not traded on organised market exchanges and are spread across different segments such as private equity, real estate, private credit and infrastructure.
2. In the uncertain and low yield market environment of recent years, global investors
   have been looking at returns from alternative markets as a means to access new sources of income and seek greater portfolio efficiency and diversification. Many companies, especially early-stage companies in private markets tend to carry high business risks but also offer high potential growth and investment returns. This has led to increasing capital being allocated to private markets and increasing investment opportunities in them.
3. Within the GCC region, private markets are beginning to become an integral part
   of institutional investment portfolios and they are a crucial source of financing for private enterprises. Small and mid-size enterprises (“SMEs”) are a significant contributor to the economic growth of the UAE. Since 2019, SMEs have contributed over 60% of non-oil GDP and employed 86% of the private workforce of the UAE1. In recognition of their importance, the government of Abu Dhabi has made developing the SME sector a key pillar of its economic growth strategy. Accordingly, it has become a strategic priority to create more avenues to meet the financing needs of SMEs, include tapping private equity opportunities in the market.
4. Given the increasing importance and attractiveness of private markets to investors
   and SMEs, the FSRA is seeking to enhance its existing suite of regulatory offerings in this space. While being a uniquely attractive investment proposition for investors, private markets come with high inherent risks for Retail Clients, especially those that do not have prior knowledge or experience in investing in such markets. Current Regulatory Framework
5. In order to facilitate investment opportunities in private capital markets, the FSRA
   first introduced a regulatory framework for Private Financing Platform (“PFP”) Operators in September 2018 to enable start-ups and SMEs to seek funding from professional and institutional investors on a private placement basis (the “PFP 1 From research of the National Bank of Fujairah (“SME IN-DEPTH”, April 2019, https://nbf.ae/media/114007/sme-in-depth.pdf) Background

Consultation Paper No. 5 of 2021
Framework”). Under the PFP Framework, Issuers are permitted to raise capital in the form of Exempt Offers that are published on an online platform maintained by the PFP Operator and accessible only by PFP Clients.
6. Post offer, the PFP Operator may offer an incidental exit facility allowing Clients to
sell or transfer their investments only to other PFP Clients. Any such exit facility must not allow active trading by PFP Clients and is solely an ancillary service provided by the PFP Operator.
7. As with the conduct of any Regulated Activity that is to be offered to Retail Clients,
where a PFP Operator wishes to offer its services to Retail Clients, the FSRA would have to explicitly consider whether the PFP Operator possesses adequate systems and controls enabling it to serve Retail Clients before removing any restrictions included in the Financial Service Permission of the Operator.
8. Since its launch, the PFP Framework has gained good traction. Based on recent
industry engagement, there is increasing demand among PFP Operators to leverage technology to enable capital raising and secondary trading. In particular, the advent and adoption of digital assets has enabled greater accessibility and transferability of investments in the secondary market by Clients. Additionally, there is increasing appetite among appropriately knowledgeable and experienced Retail Clients to invest in promising start-ups and ventures.
9. The FSRA has identified a gap between the capital markets represented by a
Recognised Investment Exchange (‘RIE’), with its Prospectus requirement, admission to the Official List and access to primary and secondary public markets and the ability of an MTF to support trading in Securities offered by Exempt Offer.
10. The FSRA is thus proposing to create a robust and inclusive regime in a risk
appropriate and calibrated manner, in order to promote greater liquidity and limited Retail Client participation in private capital markets in support of companies seeking equity capital, by allowing certain Financial Instruments (Shares) offered by Exempt Offer to trade on MTFs with limited Retail Client participation. Proposed Regulatory Framework
11. We propose introducing a regulatory framework that allows, in addition to
Professional Clients, a capped number of Retail Clients to participate in PFPs and MTFs. Such a regulatory framework (hereinafter referred to the “Retail Private Market Framework” or “RPM Framework”) will allow PFPs and MTFs to facilitate Exempt Offers to Retail Clients and allow MTFs to permit trading of such Securities amongst qualifying Retail Clients, Professional Clients and Market Counterparties. The RPM Framework will require an MTF to have in place robust systems and controls to limit the number of participating Retail Clients in a secondary market. The key features of the RPM framework are further described below.

Consultation Paper No. 5 of 2021
KEY FEATURES OF THE RPM FRAMEWORK
Requirements for PFP and MTF
Operators Policy intent
Regulated
Activities
Securities Offers - a platform operator that wishes to conduct Securities Offers by Issuers must apply for the Regulated Activity of “Operating a Private Financing Platform” or “Operating a Multilateral Trading Facility”. Secondary Trading - to allow for secondary trading of the Securities that are offered by an Issuer by way of an Exempt Offer, a platform operator must apply for the Regulated Activity of “Operating a Multilateral Trading Facility”. Consequently, an Operator of a MTF may provide secondary trading of both Securities that are Admitted to the Official List and admitted to trading on a RIE, as well as Exempt Offer Securities. Consistent with existing policy and ensures that the governing regulations and rules apply to the relevant, underlying Regulated Activities. Number of Retail Clients Securities offered by way of Exempt Offer, either upon a PFP or an MTF, whether operated by the same Operator or two different Operators, must limit the number of Retail Clients participating in such an Exempt Offer to not more than 200. The RPM Framework is intended to expand participation in the private market to a limited number of Retail Clients, investing alongside Professional Clients. As such, to mitigate the market impact and conduct risks of limited Retail Client participation in private markets, the approach is to adapt from a baseline regime calibrated for Professional Clients but introduce additional safeguards in terms of allowing participation to a limited number of Retail Clients. To avoid the potential for conflicting duties between Issuers and PFP Clients, a PFP Operator is not required to assess the level of sophistication of Retail Clients (at the initial Client Onboarding Retail Clients participating in secondary trading on an MTF must be suitably assessed by that MTF to have relevant knowledge and experience. The MTF Operator will have to develop and implement appropriate rules, policies and procedures to demonstrate compliance with this requirement to the FSRA.

Consultation Paper No. 5 of 2021
KEY FEATURES OF THE RPM FRAMEWORK
Requirements for PFP and MTF
Operators Policy intent offer) that access its platform, rather, the PFP Operator is obligated to publish statements on the platform that identify the risks associated with investment. In contrast, COBS Rule
8.2.1 requires an MTF
Operator to ensure that its members/users are qualified to become a member/user of the MTF, in accordance with MIR
2.8.3. The Regulator
would expect the MTF
Operator to demonstrate systems and controls verifying that Retail Clients seeking to access its platform and subscribing to an Exempt Offer have a sufficient level of knowledge and experience to be aware of and understand the risks associated with the Securities which are offered via and traded on the MTF. Offer of Securities A Securities Offer will qualify as an Exempt Offer in ADGM if the Offer is directed at no more than 200 Retail Clients, where the Securities are offered by a platform operator holding an FSP for the Regulated Activity of “Operating a Private Financing Platform”, “Operating a Multilateral Trading Facility”, or both if appropriate. This amendment to the Markets Rules concerning an Exempt Offers contemplates a limit of 200 Retail Clients being able to participate in the Exempt Offer, through either an offering on via PFP or an MTF. The 200 Retail Client limit proposed in MKT Rule 4.3.1(13) must not be combined with the 50 Person limit contained in MKT Rule 4.3.1(2), i.e. thereby enabling offers directed at 250 Retail Clients. Offers to other persons through other exemptions contained in

Consultation Paper No. 5 of 2021
KEY FEATURES OF THE RPM FRAMEWORK
Requirements for PFP and MTF
Operators Policy intent the Market Rules, such as to Professional Clients, for example, remain unaffected. To accord further regulatory protection, the Offer is subject to minimum disclosure requirements in the form of a prescribed template set out by the FSRA. (See the section on Product Summary Note below.) Secondary Trading The platform operator that admits Exempt Offer Securities to trading as set out above must hold a Financial Services Permission for the Regulated Activity of “Operating a Multilateral Trading Facility” and must ensure that it has effective systems, controls and procedures in place to:
(i) admit only Securities of such
Exempt Offers that are made on its own platform; To manage the risk of regulatory arbitrage and market fragmentation across multiple trading venues. (ii) identify those Persons to whom the Exempt Offer was made; To validate that such Exempt Offers comply with the criteria for trading on the platform. (iii) comply with MIR Rule 3.9.1 (Admission to trading), as applicable in relation to the relevant Securities; To ensure a fair, orderly and efficient market. (iv) allow Clients of its market to obtain Inside Information, including any Offer documents relevant to the Securities; and To enable Clients to make informed decisions relevant to the Securities through ongoing disclosure. (v) ensure that no more than 200 Retail Clients hold the Securities relevant to the Exempt Offer at any time. To ensure a fair, orderly and efficient market.

Consultation Paper No. 5 of 2021
KEY FEATURES OF THE RPM FRAMEWORK
Requirements for PFP and MTF
Operators Policy intent
The platform operator is required to demonstrate compliance to the FSRA by implementing effective and appropriate rules, policies and procedures for its trading activities. Asset Class The platform operator is restricted to carry on Securities Offers and secondary trading of the relevant Securities in relation to Shares, unless otherwise approved by the FSRA. The market demand and appetite for investments in other, non-equity Securities (e.g. debt securities, hybrid instruments) in start-ups and scale-ups by Retail Clients in the region is nascent. Investments in non-equity securities may involve additional risks and complexities (e.g. maturity transformation) that require more study. The FSRA will continue to monitor market developments and review the RPM Framework accordingly. Disclosure Requirements As applicable, a platform operator is subject to ongoing disclosure requirements as set out in COBS, specifically Chapter 3, Chapter 6 and Rule 18.5, and a Product Summary Note (see relevant section below) as prescribed by the FSRA. This aims to enable Clients to make informed decisions on their investments through ongoing disclosure.

Consultation Paper No. 5 of 2021
Question 1:
Do you agree with the proposed Retail Private Markets Framework as set out in the table above? Question 2:
Do you agree with the approach of limiting the number of Retail Clients allowed to participate in private markets? Is the limit of 200 appropriate? Question 3:
Are there any other factors to be considered by an MTF Operator when evaluating the suitability of a Retail Client that wishes to participate in the MTF’s private market? Question 4:
Do you agree with the criteria for a Securities Offer under the RPM Framework to qualify as an Exempt Offer? Question 5:
Do you agree with the approach of restricting transactions under the proposed RPM Framework to Share-based transactions at this point? Question 6:
Do you agree with the proposed requirements in the areas of systems and controls in relation to Securities admitted for trading on an MTF? Question 7:
Do you agree with the view that the safeguards described above provide adequate protections to Retails Clients? Are there any other requirements that should be implemented to enhance protections accorded to Retail Clients under the proposed RPM Framework? Product Summary Note
12. In order to mitigate the risks of an Exempt Offer to a limited number of Retail Clients
under the RPM Framework, the Issuer would be required to prepare and provide a Product Summary Note (“PSN”) to investors. The PSN would be a simplified disclosure document that highlights the key features and risks of a Securities Offer in a clear and concise manner. The PSN would be given together with any accompanying Offer document by the Issuer to investors (e.g. term sheet, offer info memorandum, etc.) before they make their investment decisions. In line with an Exempt Offer, the PSN is not subject to the same obligations and statutory

Consultation Paper No. 5 of 2021 liabilities of a Prospectus as set out in MKT Rule 4.10. Nonetheless, the Issuer will be held accountable for any statement or information in the PSN that is false or misleading.
13. The PSN is subject to the following key requirements:
a) information must be clearly disclosed in the prescribed format (including specific questions, layout and font size); b) must not contain any information that is not included in the Offer document; c) must not contain any information that is false or misleading; and d) notified to the FSRA by the Issuer at least 10 business days prior to any Exempt Offer.
14. The detailed PSN template is set out in Appendix 1.
Question 8:
Do you agree with the FSRA’s proposal in relation to the PSN?
Other Considerations
15. The FSRA does not intend to impose limits on the total amount that an Issuer can
raise and, in order to manage the allocation process, Issuers may impose minimum subscriptions. Similarly, the FSRA does not intend to impose limits on the amount that Retail Clients can invest, as a proxy for limiting their risk exposure, as imposing an investment limit may distort market practices. In terms of risk and impact mitigation, we consider the proposed limits on the number of Retail Clients participating in private markets, the suitability assessments and enhanced disclosures for Retail Clients to be adequate. Question 9:
Do you agree that it is not necessary to impose investment limits for Retail Clients?
16. In order to enhance the safe custody of the Securities of the Issuer, we have
considered whether to apply the Central Securities Depository (CSD) requirements under COBS Chapter 10 on an MTF Operator that is undertaking the proposed private market activities. Issuers utilising these platforms may be incorporated in ADGM or in other jurisdictions, and therefore be subject to the companies regulations (or equivalent) of the jurisdiction in which they are incorporated. In line with industry practice in private capital markets, the FSRA recommends that reliance continue to be made on the Issuer satisfying itself against the obligations under its home jurisdiction’s companies regulations, including as they pertain to registry or CSD requirements. The FSRA also does not recommend requiring the platform operator to establish its own CSD, though it may choose to do so, taking

Consultation Paper No. 5 of 2021 into account its regulatory and commercial needs. The FSRA will continue to monitor developments and regulatory needs within this space. Question 10:
Do you agree with the FSRA’s proposal not to require RPM operators to establish their own CSD to cover Issuer share registration requirements?
17. Exempt Offers permitted under the Markets Rules do not trigger review and
approval by the FSRA, nor is liability imposed upon directors of an Issuer for any unintended misstatements contained in an offering document. As it is anticipated that Professional Clients will primarily invest in an Exempt Offer through either a PFP or an MTF, and that the objective of the PSN is to generate a concise and easy to understand form of offering document, the FSRA has not imposed Director’s liability for unintended misstatements contained in any PSN; the Issuer will remain liable for any losses in accordance with applicable law(s) within ADGM. Question 11:
Do you agree with the proposal not to impose liability upon directors of Issuers that include unintended misstatements within the PSN?
18. The detailed draft legislative amendments are set out in Appendices 1 and 2.
Question 12:
Do you agree with the proposed amendments to the MKT and COBS Rules in relation to the RPM Framework, as set out in the Appendices? Proposed Amendments

---

Appendix 1
Market Rules (MKT)
*In this attachment underlining indicates new text and striking through indicates deleted text.

4. OFFERS OF SECURITIES
   4.1 Application
   …
   4.3 Exempt Offers
   Guidance
   This section prescribes the type of Offer that is an Exempt Offer. The prohibition in section 58(1) of the FSMR does not apply to such Offers. Accordingly, a Person may make an Offer of Securities to the Public in the circumstances specified in this Rule without a Prospectus.
   4.3.1 For the purposes of section 61(3)(a) of the FSMR the Regulator hereby prescribes the
   circumstances in which an Offer is an Exempt Offer:
   (1) an Offer made to or directed at only Professional Clients other than natural Persons; (2) an Offer in or from the ADGM which is directed at fewer no more than 50 Persons in any 12-month period, excluding Professional Clients who are not natural persons; …. (11) an Offer where the Shares are offered, allotted or to be allotted to existing Shareholders free of charge or dividends paid out in the form of Shares of the same class as the Shares in respect of which the dividends are paid, and a document is made available containing information on the number and nature of the Shares and the reasons for and details of the Offer; or (12) an Offer where the Securities are offered, allotted or to be allotted to an existing or former Director or Employee, or any Close Relative of such a Director or Employee, of the Issuer or a member of the same Group as the Issuer and:
   (a) the Issuer or the member of the Group already has its Securities admitted to trading on a Regulated Exchange; and (b) a document is made available to the offerees containing information on the number and nature of the Securities and the reasons for and details of the Offer.; or (13) an Offer in or from the ADGM which is directed at no more than 200 Persons that are not Professional Clients or Market Counterparties, in circumstances where the Securities are, or have been, offered within a Private Financing Platform or via a Multilateral Trading Facility. ….
   4.3.3 (1) Subject to (2), Aan Offer of Securities remains an Exempt Offer even if the Offer
   falls in whole or part within more than one of the circumstances specified in Rule 4.3.1, as long as all of the Offer falls within at least one of those circumstances. (2) An Issuer must not aggregate the limits contained in Rule 4.3.1(2) and Rule 4.3.1(13) when making an Exempt Offer.

4.3.4 A Person making an Exempt Offer must ensure that an exempt offer statement is
included in the Exempt Offer Document. An exempt offer statement must contain the following statement displayed prominently on its front page:
….
4.3.5 Pursuant to an Exempt Offer under Rule 4.3.1(13), the Issuer must provide a Product
Summary Note to investors in accordance with the following requirements:
(1) The Product Summary Note must:
(a) highlight key information in the Offer document to investors; (b) clearly disclose required information in the format as set out in APP 7; (c) give a fair and balanced view of the nature, material benefits and material risks of the Securities offered; (d) not contain any statement or information that is false or misleading in the form and context in which it is included; (e) be given together with the Offer document to investors. If the Issuer makes the Offer document available online, the Product Summary Note must be made available online together with the Offer document; (f) not contain any information that is not contained in the Offer document; (g) not contain any Inside Information that differs in any material particular from that set out in the Offer document; and (h) not omit any information from any part of the Product Summary Note which would result in that part of the Product Summary Note being construed as false or misleading. (2) The Product Summary Note shall contain the prominent disclaimer set out in Rule
4.3.4 in bold, on its front.
(3) The Issuer must give notice the Regulator of its intention to provide a Product Summary Note at least ten Business Days prior to the Exempt Offer, in such form as the Regulator may prescribe. (4) When the Issuer makes any change to the Offer document, the Product Summary Note must be updated if the change has a material effect on the key information of the Securities offered. (5) Issuers must ensure there is clear naming of the Securities offered. The name of the Securities must be descriptive of the nature of the Securities offered. It must not give investors a misleading view of the true nature and risks of the Securities offered. Guidance Pursuant to Rule 4.3.5(1)(c), the Regulator considers a Product Summary Note as giving a fair and balanced view of the Securities offered if the Product Summary Note:
(a) gives:

(i) a balanced description of the risks and potential returns of the Securities; and (ii) a proportionate level of prominence to the warnings, disclaimers and qualifications in relation to the claims on potential returns to which they refer to; and (b) does not:
(i) give the impression that an investor can profit without risks; (ii) contain words or graphics that could convey an impression that is inaccurate or inconsistent with the nature or the risks of the Securities; or (iii) present information in footnotes in a way that would alter the meaning of the main text of the Product Summary Note or cause difficulty to an investor in understanding the Securities. …. APP 7 PRODUCT SUMMARY NOTE A7.1 General A7.1.1 This appendix sets out the template for the Product Summary Note for Exempt Offers of Securities pursuant to Rule 4.3.5. A7.1.2 The template serves as a minimum standard. Issuers shall adhere to the format (including the tabular structure), headings and sub-headings set out in the templates for their respective Securities. Additional sub-headings may be added if these are useful to enumerate points in a long section. Issuers shall include any additional key information that is important for investors to understand the Exempt Offer. A7.1.3 Information in the Product Summary Note (including footnotes and references) shall be clearly legible and in a font size of at least 10-points. A7.1.4 Subject to Rule 4.3.5, Issuers shall refrain from including disclaimers in relation to information disclosed in the Product Summary Note or in respect of the Product Summary Note. A7.1.5 Issuers shall avoid producing marketing material which resembles or may otherwise be confused with a Product Summary Note. Guidance

1. The Product Summary Note should ideally not exceed 12 pages in length based upon
   an A4 paper size format, including diagrams and illustrations.

2. Notes to guide Issuers in preparing their Product Summary Notes are presented as
   italicised statements in square brackets in the template. Some examples are presented for illustration. These notes and examples are not meant to be prescriptive or exhaustive. Issuers should consider and decide on the information to be disclosed in the Product Summary Note so as to highlight key information of their Exempt Offer to investors.

3. The use of diagrams and illustrations such as graphs, charts, flowcharts and tables
   to present information in the Product Summary Note is encouraged.

4. Issuers should set out information in the template in a clear and simple language that
   investors can easily understand (i.e. in plain English) and should avoid using technical terms or acronyms in the Product Summary Note. Where technical terms or acronyms are unavoidable, Issuers should explain these technical terms in the “Definitions” section of the template.

5. Issuers should include references to corresponding sections of the Exempt Offer
   document which set out additional information for investors in the right-hand column of the Product Summary Note. Issuers are encouraged to include links to online copies of the Exempt Offer document. However, key information should be clearly disclosed in the Product Summary Note and issuers should not merely make reference to information in other sources, such as the Offer document. A7.2 Template Prepared on: [DD/MM/YY] NAME OF OFFER (the “Securities”) EXAMPLE: OFFER OF [ORDINARY SHARES] IN [NAME OF ISSUER] (“the “Securities”) Prior to making a decision to purchase the Securities, you should consider all the information contained in the Offer document carefully and whether you understand what is described in the Offer document. This Product Summary Note should be read in conjunction with the Offer document. You will be subject to various risks and uncertainties, including the potential loss of your entire principal amount invested. You should also consider whether an investment in the Securities is suitable for you taking into account your investment objectives and risk appetite. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser. You are responsible for your own investment choices. This offer document is an Exempt Offer in accordance with the Market Rules of the ADGM Financial Services Regulatory Authority. This Exempt Offer document is intended for distribution only to Persons of a type specified in the Market Rules. It must not be delivered to, or relied on by, any other Person. The ADGM Financial Services Regulatory Authority has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The ADGM Financial Services Regulatory Authority has not approved this Exempt Offer document nor taken steps to verify the information set out in it, and has no responsibility for it. The Securities to which this Exempt Offer relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Securities offered should conduct their own due diligence on the Securities. If you do not understand the contents of this Exempt Offer document you should consult an authorised financial advisor. This Product Summary Note is an important document.

• It highlights the key information and risks relating to the offer of the Securities contained
  in the Exempt Offer document. It complements the Offer document.
• You should not purchase the Securities if you do not understand the nature of an
  investment in [type of securities], our business or are not comfortable with the accompanying risks.
• If you wish to purchase the Securities, you will need to make an application in the
  manner set out in the Offer document. If you do not have a copy of the Offer document, please contact us to ask for one.

Issuer /
Sponsor
(where applicable
[●]
[●]
Place of incorporation
[●]
Details of this offer
[●]
Example:
Total number of shares to be offered –
[●]
Total amount to be raised in this offer
[●]
Example:

• Gross proceeds – $[●] to $[●]
• Net proceeds – $[●] to $[●]
  Issue Price [●]
  Example:
  $[●] for each share
  Issue
  Manager(s)
  Underwriter(s)
  (where applicable)
  [●]
  [●]
  OVERVIEW
  WHO ARE WE AND WHAT DO WE DO?
  [Provide an overview of the Issuer and its subsidiaries (the “Group”), including the Group’s nature of operations and principal activities, principal markets the Group competes in, principal place of operations and operational history. Information should be presented using diagrams (e.g. tables, graphs and charts) where appropriate.] Example:
  We are engaged in the business of [principal business] in [country]. We were incorporated in [country] on [date] under the name of [name of company] (and together with our subsidiaries, referred to as the “Group”). On [date], we acquired all of the ordinary share capital of [name of subsidiaries]. Since our acquisition of [name of subsidiaries], we have been a major supplier of [principal business] in [country]. Our subsidiaries, [subsidiary X], [subsidiary Y] and [subsidiary Z] are responsible for design and manufacturing of our products in [country X], [country Y] and [country Z] respectively. The structure of our Group as at the date of this Offer document is as follows:
  Further Information
  Refer to the
  “[relevant section]” on page(s) [●] of the
  Offer document for more information on our background and business.
  WHO ARE OUR DIRECTORS AND KEY EXECUTIVES?
  [Provide brief information on the Issuer’s board of directors and key executives (i.e. CEO, CFO, COO).] Example:
  Our board of directors comprise the following directors:
  (a) Director A (executive, non-independent)
  (b) Director B (executive, non-independent)
  (c) Director C (non-executive, independent)
  (d) Director D (non-executive, independent)
  (e) Director E (non-executive, independent)
  Our key executives are [names and designations of executive officers]. [Name of chairman] has been our Company’s chairman since [date]. Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on our directors and management. [structure chart]

WHO ARE OUR CONTROLLING [SHAREHOLDERS/UNITHOLDERS] AND [SPONSORS (IF RELEVANT)]? [Identify the controlling shareholder(s)/controlling unitholder(s) and sponsors (if relevant) of the Issuer, and state the percentage of shares/units of each class in which each controlling shareholder/controlling unitholder and sponsors (if relevant) has an interest, whether direct or deemed, as of the latest practicable date and immediately after the offer.] Example:
Prior to the offer, [controlling shareholder] holds [●]% of our Company’s total issued share capital. He is expected to hold at least [●]% of our Company post-offer and to remain as a controlling shareholder. Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on our controlling [shareholders/ unitholders]. HOW WAS OUR HISTORICAL FINANCIAL PERFORMANCE AND WHAT IS OUR CURRENT FINANCIAL POSITION? [Provide key profit and loss data (including net sales or revenue, profit or loss before tax, net profit or loss, and earnings or loss per share before and after the offer) and cash flows data (cash flows from operating, financing and investing activities) of the Issuer in respect of each of the relevant number of most recent completed financial year(s) and any subsequent interim period for which financial information has been included in the Offer document. Briefly discuss the most significant factors, events or new developments which materially affected the Issuer’s sales or revenue, expenses and profit or loss before tax for each financial period. Provide also key balance sheet data (including total assets, total liabilities, net assets or liabilities and issued capital and reserves) as at the end of the most recent completed financial year or any subsequent interim period for which financial information has been included. In addition, include the profit forecast or profit estimate information if a profit forecast or profit estimate is disclosed in the Offer document. Key financial information should be presented using diagrams (e.g. tables, graphs and charts) where appropriate.] Example:
Key profit and loss information
Year ended 31 December Forecasted profit
[Year] [Year] [Year] [Year]
$(‘000) $(‘000) $(‘000) $(‘000)
Net revenue [●] [●] [●] [●]
Profit / (loss) before tax
[●] [●] [●] [●]
Profit / (loss) after tax
[●] [●] [●] [●]
Earnings / (loss) per share -
Basic
[●] [●] [●] [●]
Earnings / (loss) per share -
Diluted
[●] [●] [●] [●]
Key cash flows information
Year end 31 December
[Year] [Year]
$(‘000) $(‘000)
Net cash generated from operating activities
[●] [●]
Net cash used in investing activities
[●] [●]
Refer to the
“[relevant section]” on page(s) [●] of the
Offer document for more information on our financial performance and position.

Net cash generated from financing activities
[●] [●]
Net increase / (decrease) in cash and cash equivalents [●] [●] Cash and cash equivalents at end of year / period [●] [●] Key balance sheet information Year end 31 December [Year] [Year] $(‘000) $(‘000) Total assets [●] [●] Total liabilities [●] [●] Net assets / (liabilities) [●] [●] The most significant factors contributing to our financial performance over the last two completed financial years are as follows:

• Our revenue for [year] increased by $[●] million ([●]%) due to an increase in sales
  volume contributed by our introduction of our new product in [year].
• Our net profit from operations in [year] was $[●] million, which is [●]% higher than our
  net profit from operations of $[●] million in [year]. This was mainly attributable to lower finance costs of $[●] million due to lower interest rates and lower loan principals.
• Our net cash generated from operating activities decreased by $[●] million from $[●]
  million in [year] to $[●] million in [year] due to an increase in credit sales that contributed to an increase in trade receivables of $[●] million from $[●] million in [year] to $[●] million in [year].
• Our net assets increased by $[●] million from $[●] million in [year] to $[●] million in
  [year] mainly due to the $[●] million increase in inventories for our new product introduced in [year]. The above factors are not the only factors contributing to our financial performance in FY[●] and FY[●]. Please refer to the other factors set out in pages [●] to [●] of the Offer document. INVESTMENT HIGHLIGHTS WHAT ARE OUR BUSINESS STRATEGIES AND FUTURE PLANS? [Briefly describe the Issuer’s or the Group’s (as the case may be) key strategies and future plans for the development of its business] Example:
  Key Strategies and Future Plans
  We have a well-established brand name in [country] and we are recognised as the leading manufacturing company of [principal business] in [country]. We have a strong management team with over 20 years of experience in the industry and the management team has contributed significantly to our Company’s growth and expansion since our incorporation in [year]. We aim to strengthen our position in this industry and region by expanding our operations to [names of countries] in the next 3 years. We have also recently started a joint venture with [name of company] to enter into the [secondary business] market. We believe that there is a growing market for [secondary business] in [country] given the changing lifestyles of consumers in [country]. Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on our strategies and future plans.

WHAT ARE THE KEY TRENDS, UNCERTANTIES, DEMANDS, COMMITMENTS OR EVENTS WHICH ARE REASONABLY LIKELY TO HAVE A MATERIAL EFFECT ON US? [Where applicable, briefly discuss, for at least the current financial year, the Issuer’s or the Group’s (as the case may be) business and financial prospects, any significant recent trends in production, sales and inventory, and in the costs and selling prices of products and services, as well as any other known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the net sales or revenues, profitability, liquidity or capital resources, or that would cause financial information disclosed in the Offer document to be not necessarily indicative of the future operating results or financial condition of the Issuer or the Group (as the case may be). If there are no such trends, uncertainties, demands, commitments or events, provide an appropriate statement to that effect.] Example:
For the current financial year, our Directors have observed the following trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the net sales or revenues, profitability, liquidity or capital resources of the Group, or that would cause financial information disclosed in the Offer document to be not necessarily indicative of the future operating results or financial condition of the Group:
(a) the demand for [activity] has increased with the recent growth [country]’s economy. We expect our revenue from our [business segment] to increase in line with the increase in [activity]; and (b) we expect the upward trend in [activity] to have a positive impact on the demand for our [service]. Operating costs are also expected to increase together with the increase in the level of [activity]. The above are not the only trends, uncertainties, demands, commitments or events that could affect us. Please refer to the other factors set out in pages [●] to [●] of the Offer document. Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on our business and financial prospects. WHAT ARE THE KEY RISKS WHICH HAD MATERIALLY AFFECTED OR COULD MATERIALLY AFFECT US AND YOUR INVESTMENT IN OUR SECURITIES? [Discuss the key risks which the Issuer considers to be the most important for the investor when deciding whether or not he should invest in the shares/units being offered, taking into account the possibility of the risk occurring and/or whether the event will have a material adverse impact on the Issuer’s or the Group’s business operations, financial position and results, and the investor’s investment in the shares/units. The Issuer should not set out the entire list of risk factors found in the “Risk Factors” section of the Offer document.] Example:
KEY RISKS
We consider the following to be the most important key risks which had materially affected or could materially affect our business operations, financial position and results, and your investment in our shares.

• An economic downturn could negatively affect our profitability: Our industry is exposed
  to cyclical variations in the general economy and to uncertainty of future economic prospects. Economic downturns could have an adverse impact on overall demand. This would result in a decrease in our sales and earnings.
• Our industry is highly competitive: We compete against numerous businesses and our
  competitors may be larger and have greater financial resources. We compete for customers, Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on risk factors.

financing, employees and other resources. This creates both strong price and quality competition, which leads to increased costs in the form of marketing and customer services, in addition to price reductions. Our ability to compete effectively depends on several factors, including our market presence, our reputation, our competitors, and general trends in the industry and economy. There is no assurance that we can compete successfully.

• A substantial proportion of our revenues is derived from several major customers and
  loss of their business may seriously impact our financial results: Our five largest customers accounted for approximately [●]% of our revenues for the year ended [year], and our ten largest customers accounted for approximately [●]% of our revenues for the year ended [year]. Our revenues may significantly decrease if we lose any of these customers or if our customers reduce their volume of business with us.
• We face risks associated with our business being conducted in [country]: As most of
  our operations are conducted in [country], our business may be adversely affected if we cannot successfully manage inherent risks including: unexpected political or economic developments; fluctuations in foreign currency exchange rates; unfavourable tax consequences; adverse legal or regulatory changes; insufficient protection for intellectual property rights; and complexities relating to currency and capital transfers.
• The restrictions on our operating subsidiary’s ability to make payments to us could
  have a material adverse effect on our ability to fund and operate our business: We are a holding company and conduct substantially all of our business through our operating subsidiaries in [country]. Accordingly, we will rely on dividends paid by our subsidiaries for our cash needs, including the necessary funds to pay our operating expenses, service any debt we may incur, and pay any dividends that may be declared. The payment of dividends by [country] entities such as our subsidiaries is subject to limitations in accordance with the rules and regulations of [country], which may negatively affect our operations and profitability. The above are not the only risk factors that had a material effect or could have a material effect on our business operations, financial position and results, and your shares. Refer to “[relevant section]” on page(s) [●] of the Offer document for a discussion on other risk factors and for more information on the above risk factors. Prior to making a decision to invest in our [shares/units], you should consider all the information contained in the Offer document. WHAT ARE THE RIGHTS ATTACHED TO THE SECURITIES OFFERED? [Describe the type and class of shares/units being offered, including the rights attached to the shares/units and any restrictions on the free transferability of shares/units.] Example:
  Key Information on Shares Offered
  As of the date of this Offer document, our issued and paid up share capital was $[●] consisting of [●] shares. We have only one class of shares, and the shares offered will have the same rights as our other existing issued and paid-up shares, including voting rights. Shareholders will be entitled to all rights attached to their shares in proportion to their shareholding, such as any cash dividends declared by the Company and any distribution of assets upon liquidation of the Company. There are no restrictions on the transferability of our shares. Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information.

HOW WILL THE PROCEEDS OF THE OFFER BE USED?
[Provide information on the amount of proceeds raised from the offer will be allocated to each principal intended use. Information on the use of proceeds should be presented using diagrams (e.g. tables, graphs and charts) where appropriate.] Example:
Use of Proceeds
The net proceeds to be raised in the offer (after deducting estimated expenses to be borne by us) is $[●]. The following represents our estimate of the allocation of the gross proceeds expected to be raised from the offer, assuming the over-allotment option is not exercised. We will not receive any proceeds from the sale of shares by vendors. Details of utilisation $ (million) Allocation for each $1.00 gross proceeds raised (1) Net proceeds:
(a) Expansion of business
(b) Working capital and general corporate purposes [●] [●] [●] [●] (2) Other estimated expenses [●] [●] Total [●] 1.00 Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on our use of proceeds. WILL WE BE PAYING [DIVIDENDS/DISTRIBUTIONS] AFTER THE OFFER? [Describe (i) the dividends/distributions per share/unit, if any, paid by the Issuer for each of the 3 most recent completed financial years, and (ii) the Issuer’s dividend/distribution policy, or if it does not have a fixed policy, to state so. Provide clear and prominent disclosure of any existing or proposed arrangement that materially enhances short-term yields while potentially diluting long-term yields. The disclosure should include a computation of the forecast distribution yield assuming that the arrangements are not in place.] Example:
Over the last three financial years ended 31 December [year], [year] and [year], we have not declared and distributed dividends. We currently do not have a fixed dividend policy. Any future payment of dividends by us would depend on our earnings, financial condition and other business and economic factors. If we do not pay any dividends, any return on investment may be limited to the value of our shares, and our shares may be less valuable because return on investment will depend entirely on capital appreciation. Refer to the “[relevant section]” on page(s) [●] of the Offer document for more information on our [dividend / distribution] policy. DEFINITIONS [Provide definitions if necessary.]

CONTACT INFORMATION
WHO CAN YOU CONTACT IF YOU HAVE ENQUIRIES RELATING TO OUR OFFER?
HOW DO YOU CONTACT US?
[Provide contact details of Issuer, distributor(s)/underwriter(s) and/or issue manager(s) whom investors can contact if they have enquiries. Include a website address and email address, if appropriate.]

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Appendix 2
Conduct of Business Rulebook (COBS)
*In this attachment underlining indicates new text and striking through indicates deleted text.

Appendix 2
3. CORE RULES – INVESTMENT BUSINESS, ACCEPTING DEPOSITS, PROVIDING
CREDIT AND PROVIDING TRUST SERVICES
…
3.4 Suitability
3.4.1 Application
The Rules in this section do not apply where the Authorised Person:
(a) undertakes a Transaction with a Market Counterparty; (b) undertakes an Execution-Only Transaction; (c) undertakes the activities of Accepting Deposits, or Providing Credit, Operating a Private Financing Platform, Operating a Multilateral Trading Facility or Operating an Organised Trading Facility; or (d) carries on an activity of the kind described in section 67 of Chapter 14 of Schedule 1 of FSMR that constitutes marketing. …
8. ADDITIONAL RULES: OPERATING AN MTF OR OTF
…
8.2 Rules Applicable to MTF and OTF Operators – General
8.2.1 In addition to the general requirements applicable to Authorised Persons in COBS, GEN
and elsewhere in the Rules, an Authorised Person carrying on the Regulated Activity of Operating an MTF (an "MTF Operator") or an Authorised Person carrying on the Regulated Activity of Operating an OTF (an “OTF Operator”) must comply with the following requirements applicable to a Recognised Body or Recognised Investment Exchange set out in the MIR rulebook, reading references to Recognised Bodies or Recognised Investment Exchanges in the relevant rules as if they were references to the MTF Operator or OTF Operator:
(a) MIR 2.6 (Operational systems and controls); (b) MIR 2.7.1 and 2.7.2 (Transaction recording); (c) MIR 2.8 (Membership criteria and access); (d) MIR 2.9 (Financial crime and market abuse); (e) MIR 2.11 (Rules and consultation); (f) MIR 3.3 (Fair and orderly trading);

Appendix 2
(g) MIR 3.7 (Public disclosure);
(h) MIR 3.8 (Settlement and Clearing Services); (i) MIR 3.10 (Default Rules). Guidance In assessing whether an MTF Operator or OTF Operator complies with the requirements set out above, the Regulator will take into account the general principle that users of an MTF anticipate less comprehensive regulatory protections, and users of an OTF less again.
8.2.2 An MTF that admits to trading Securities that are offered by way of an Exempt Offer
under MKT Rule 4.3.1(13) shall ensure that it has effective systems and controls in place to:
(a) admit only Securities of such Exempt Offers that are made on its own platform; (b) identify those Persons to whom the Exempt Offer was made; (c) restrict trading of the Securities, to no more than 200 Persons who are not Professional Clients or Market Counterparties; (d) comply with MIR Rule 3.9.1 (Admission to trading), as applicable in relation to the relevant Securities; and (e) allow users of its market to obtain Inside Information, including any Offer documents pursuant to MKT Rule 4.3.5 relevant to the Securities. Guidance MKT Rule 4.3.1(13) provides for the specific circumstance where an Exempt Offer can be directed to no more than 200 Persons who do not qualify as Professional Clients or Market Counterparties, where the Securities are to be admitted to trading on a MTF. An Issuer seeking admission to trading of its Securities on an MTF in accordance with MKT Rule 4.3.1(13) may also, pursuant to MKT Rule 4.3.3, utilise an Exempt Offer that relies on one or more of the circumstances within MKT Rule 4.3.1, with the exception of MKT Rule 4.3.1(2). For example, an Issuer may make a simultaneous Exempt Offer to 200 Persons under MKT Rule 4.3.1(13), and an unlimited number of Professional Clients under MKT Rule 4.3.1(1). ….