London Stock Exchange

S100 Presentation – May 2010

IPOs in the current market

May 2010

3

Why the London Stock Exchange?

• Choice: two routes for commercial companies to raise equity capital which are designed to suit different types of companies and their needs:

• Capital: major global capital market with c. £600bn equity assets under management*

• Liquidity: one of the world’s most active and liquid markets with a daily average traded value of £4.8bn in the year-to-date

• Profile: premium brand to further enhance your credibility and profile

Note: * represents data sourced from Ipreo as at 31 December 2009

M a i n M a r k e t

4

Employee Commitment

Capital for acquisitions

Capital for growth

Higher profile

Valuation & Public market for company’s shares

Capital to pay debts

Hard reasonsSoft reasons

Why do companies go public/quote on a stock exchange?

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Choice of markets

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Choice of markets

Main Market

Supports the capital raising activities of earlier stage

companies

Supports the capital raising activities of more

established companies

Exchange regulated market with NOMAD required at

all times

Regulated by the UKLA with a listing sponsor

required

1,253 companies 1,453 companies

Note: figures sourced from London Stock Exchange statistics as at 30 April 2010

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AIM Companies

Nominated Advisers (NOMADs) – key roles:Assess suitability of a company

Pre-vet the admission documents Advise companies on the AIM Rules

AIM Regulation teamRegulate the Nomads and keep a close oversight of their operations

AIM – Unique Regulatory Framework

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AIM – Key requirements

• Key Admission Requirements– Produce an Admission Document, approved by the Nomad

– Nomad and Broker required at all times

– No trading history record requirement

– No minimum free float requirement

– IFRS required for UK issuers

• Ongoing Requirements– Compliance with ‘AIM Rules for Companies’

– Corporate Governance – best practice

• Eligibility for inclusion in the FTSE AIM Index Series

9

RegulationThe UK Listing Authority (UKLA) is responsible for admitting securities to the

Official List

AdmissionThe London Stock Exchange is responsible for admitting securities to trading

ListingSecurities become officially listed on the Main Market of the London Stock

Exchange

Main Market – Regulated by the UKLA

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Premium Listing (Shares)

Level o

f Disclo

sure

Potentially eligible for the FTSE UK Series

Main Market – Premium vs Standard

Standard Listing(Shares)

Standard Listing(GDRs)

• Sponsor required

• Unqualified 3 years of audited financials

• Control of assets

• Independent business

• Sufficient working capital

• Ongoing - Listing Rules & EU minimum

• No Sponsor required

• 3 years audited financials (or such shorter period since the issuer has been in operation and can be qualified)

• Working capital statement required, can be qualified

• Ongoing - EU minimum only

• Same as Standard (Shares) except:

o no working capital statement; and

o ongoing – more basic EU minimum,

Key differences

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Capital raising activity

12Note: figures sourced from London Stock Exchange statistics

Capital raising activity

Basic Materials Consumer Goods Consumer ServicesFinancial Health Care IndustrialMining Technology Telecommunications

Main Market - Small Cap & Fledgling - 2007 to 2010 YTD

Basic Industries Consumer Goods Consumer Services

Financial Health Care Industrial

Mining Oil & Gas Technology

Telecommunications Utilities

AIM - 2007 to 2010 YTD

Totay money raised on AIM and the Main Market (£bn)

0

5

10

15

20

25

30

35

40

45

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

New Issues - Main New Issues - AIM Further Issues - Main Further Issues - AIM

7766

Further issues – AIM and Main Market

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Main Market – capital raising activity

Sector distribution - new & further Issue 2010 YTD

Consumer Goods

Consumer Services

Financial

Health Care

Mining

Oil & Gas

Technology

Distribution of mkt capt - new companies 2010 YTD 8

1

2

0

3

0

1

5

1

2

0

1

2

3

4

5

6

7

8

9

0-2 2-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1000 1000+

Money Raised (£m)

No

. of

com

pan

ies

Index 02 Jan 2007 14 May 2010 Performance %

FTSE Small Cap 3925.8 2868.66 -26.93

FTSE Fledgling 4415.1 4219.37 -4.43

DJIA 12474.52 10590.83 -15.10

Hang Seng 20310.18 20145.43 -0.81

DAX 6691.32 6056.71 -9.48

Comparative Index Performance

40

60

80

100

120

140

160

2007 - 2010 YTD

FTSE SMALL CAP FTSE FLEDGLING DJIA Hang Seng DAX

• 2009 saw a record £77bn raised on the Main Market including £76bn through further issues including Lloyds (£13.5bn), HSBC (£12.9bn) & Rio Tinto (£7.3bn)

• Total funds raised 2010 YTD: £4.2bn, £2bn raised via further issues

• Prudential seeking to raise £14.5bn new record rights issue

Note: index performance figures sourced from Bloomberg, all other figures sourced from London Stock Exchange statistics

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AIM – capital raising activity

Sector distribution - new & further issues 2010 YTD

Basic Industries

Construction

Consumer Goods

Consumer Services

Financial

Health Care

Industrial

Mining

Oil & Gas

Technology

Telecommunications

Distribution of mkt cap - new companies 2010 YTD

0

1

4

7

5 5

2

1

0

1

2

3

4

5

6

7

8

0-2 2-5 5-10 10-25 25-50 50-100 100-150 150-200Money raised £m

No

. o

f co

mp

anie

s

Index 02 Jan 2007 14 May 2010 Performance %

FTSE AIM All Share 1060.7 707.8 -33.27

FTSE UK 50 5336.5 2712.19 -49.18

NYSE Alternext 1300.49 723.69 -44.35

FTSE SXG Catalist 154.12 127.45 -17.30

Deutsche Entry Standard 1105.41 620.19 -43.90

Comparative Index Performance

20

50

80

110

140

170

200

2007 - 2010 YTD

AIM 50 AIM All share NYSE Alternext Catalist Deutsche Entry Standard

• 2009 saw £5.6bn raised including £4.8bn including five over £100m

• Funds raised YTD 2010 £1.4bn, 753 further issues totalling £1.1bn including five over £50m

• Aim companies have operations across the globe in 95 countries

Note: index performance figures sourced from Bloomberg, all other figures sourced from London Stock Exchange statistics

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IPO activity – 2010 YTD

Date Company Market SectorMkt cap

(£m)Funds raised

(£m)

7- May-10 Essar Energy PLC Main Exploration & Production 5,472 1,272

7-May-10 Avangardco Investments Public Limited Main Food Producer and Processing 676 127

19-Apr-10 Fidelity China Special Situations PLC Main Equity Investment 460 460

30-Mar-10 EMIS Group plc AIM Healthcare 178 50

24-Mar-10 Metric Property Investments plc Main Property 175 175

24-Mar-10 CPP Group plc Main Nonlife Insurance 400 150

24-Mar-10 African Barrick Gold plc Main Gold Mining 2,325 581

24-Mar-10 SuperGroup Plc Main Fashion Retailers 395 125

22-Mar-10 CSF Group Plc AIM Software & Computer Services 88 28

17-Mar-10 Promethean World Plc Main General Retailers 400 114

09-Mar-10 Sherborne Investors Ltd AIM Equity Investment Instrument 105 105

04-Mar-10 Digital Barriers AIM Digital Security and Surveillance 25 20

26-Feb-10 Equatorial Palm Oil Plc AIM General Industrials 14 7

24-Feb-10 Scotgold Resources Limited AIM Gold Mining 5.4 0.7

15-Feb-10 Kea Petroleum AIM Oil & Gas 37 6

12-Feb-10 Oxford Nutrascience Group plc AIM Food Products 8.1 1.75

09-Feb-10 Horizon Acquisition Company plc Main Special Purpose Acquisition Company 400 400

Note: table highlights selected IPOs on the LSE 2010 YTD

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Capital markets & volatility

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mo

ney

rai

sed

on

AIM

& M

ain

Mar

ket

(£m

)

0

5

10

15

20

25

30

35

40

45

50

VIX

In

dex

(U

SD

) -

mea

sure

men

t o

f vo

lati

lity

New issues Further issues VIX

Money raised on AIM and Main Market compared with the VIX Index• There is a close historical correlation between IPOs and equity market volatility

• Equity market volatility has returned to levels which show support for IPOs based on historic trends

• Investors have recently shown appetite for strong growth stories where gearing is <2.5x and proceeds are not primarily being used for debt repayment

Note: money raised figures sourced from London Stock Exchange statistics & the VIX Index from Bloomberg

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UK IPO cycle next to revive

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

Full IPO AIM IPO Full 2nd AIM 2nd Y/E FTSE

IPO Market shut from H2 2008

2003 – 2007 Bull market

– Significant M+A boom funded predominantly by debt

– Equity issuance to also fund growth

2008 – 2009 New world order

– Massive balance sheet repair

Excluding mining and banks, 2008 -2009 issues at 2004/2005 levels

Issuance story

UK IPO cycle poised to revive ?

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Valuation

Market growth potential Business should operate in a market with good visible growth over the medium

term

Strong competitive positioning

Business should have a strong competitive position in order to capture at least its share of the market growth

Investors will also want comfort that this market position is sustainable and that the barriers to entry / competition are sufficiently high

Strong trading record and earnings visibility

Business should be able to demonstrate a track record of revenue and profit growth, as well as free cash flow generation and visibility of future profit growth

Proven business model There is a proven business model that generates attractive financial returns, as

well as a clear vision for the strategic development of the business through organic or acquisition-led growth

Credible management team and robust corporate governance

Proven, high quality management team with a track record of operational and strategic success

Appropriate framework of corporate governance and systems and controls

Clear rationale for IPO

Purpose of the IPO must be clear so as to identify the use of IPO proceeds and / or benefits of listing

Credible investment proposition at fair value for incoming investors

Market / free float

Index inclusion and weighting are driven by a combination of market cap and free float

A combination of the % of free float and absolute £ free float are important The choice of which market to list on is a variable

Valuation – What Institutions look for:

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Contacts

Mark Fahy

Senior Manager – UK Small & Mid Cap Companies, Primary Markets

London Stock Exchange

T: 0161 935 8301M: 07795 257 517E: mfahy@londonstockexchange.com

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Appendix

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Choice of Markets

We offer four different routes to raise funds from the capital markets:

• Premium product• Established 1698• Listed and EU regulated market• £3.7 trillion combined market capitalisation, 1,453 companies

• Growth market• Established 1995• Regulated by LSE, unlisted and non-EU regulated market • £64.5 billion combined market capitalisation, 1,253

companies

• Specialist investment fund market for non-retail investors• Established 2007• EU regulated and unlisted market• £750 million combined market capitalisation*, 6 companies

• Specialist market for non-equity securities, primarily debt• Established 2005• Listed, but non-EU regulated market• 497 securities admitted

M a i n M a r k e t

Note: all figures sourced from London Stock Exchange statistics, 30 April 2010

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Main Market – Premium Listing requirements

• Key Admission Requirements– Produce a prospectus for approval by UKLA

– Sponsor required (at admission only)

– 3yr trading record normally required, covering at least 75% of the business

– Clean annual report covering at least 3 yrs

– Min 25% of shares must be in public hands

• Ongoing Requirements– Compliance with the UKLA Listing Rules (e.g. class tests, related party rules,

Model & Combined Code)

– Compliance with EU Directives (e.g. financial reporting, disclosure of >3% shareholdings)

• Eligibility for inclusion in the FTSE UK Index Series