Financial Institutions in Hong Kong Group 9

Growth Enterprise Market (GEM)

Group Member William Choi Siu Ming 033161 Faith Lai Yuet Fai 033181 Mark Cheung Sun Hei 033214 Kennix Ngan Yan Yu 033230 Aurora Wong Wun Ting 033233

Agenda Introduction of GEM The Difficulties of GEM Solutions GEM vs NASDAQ Value of GEM Conclusion & Suggestion

Introduction What is GEM? The Growth Enterprise Market (GEM) started operations on 15thNovember1999 The requirements of listing on the GEM are not as strict as Main Board of exchange It is a bridge for potential company to grow to gradually obtain a listing on Main Board of exchange At the end of February 2005, there were 205 companies listed on the GEM Board, with a total market capital of HK$65 billion

GEM VS MB Main Board GEM Board Operation Records 3 years 2 years Profit requirement 30 million HKD for first two years 20 million HKD for the latest year No lowest profit requirement Profit Prediction Not necessary, however, companies are encouraged to do so. Not necessary

GEM VS MB Disclosure of information Not allowed to disclose through web pages or any channel for instant message Through the web pages provided by the HKEx Minimum Public Float 50 million HKD or 25% of the issued shares At least 30 million HKD and 20% of the issued shares Underwriting Must be underwritten Not necessary

Problems of GEM Board Decreasing amount of Initial Public Offering Year Number of IPO 1999 7 2000 47 2001 57 2002 2003 27 2004 21 October 2005 8

Problems of GEM Board The total amount of fund raised by IPO through GEM is also in a decreasing trend

Problems of GEM Board Decreasing amount of turnover

Problems of GEM Board Low quality stocks Some of these companies have moved to the Main Board already. They are high quality stocks, and can pass the barriers of listing in the Main Board. e.g. tom.com and SUNevision

Solutions Suggested by HKEx Market maker Higher standard for entering the Main Board Improve the internal management and performance of companies

GEM vs NASDAQ What is NASDAQ? The largest U.S. electronic stock market with approximately 3,200 companies The world’s first electronic stock market Many leading companies are listed on NASDAQ E.g. Microsoft, Starbucks, Cisco, Intel

GEM vs NASDAQ Main difference between NASDAQ and GEM board NASDAQ is an independent operation system whereas GEM is a subsidiary of the Main Board of Hong Kong Independent operation means that NASDAQ has its own trading system, monitory system and list requirement GEM is only a subsidiary which means it shares the same trading system, monitory system, standard and force. The difference is only the list requirement

GEM vs NASDAQ NASDAQ GEM Objective   NASDAQ GEM Objective Companies related to technology and new established companies For growing companies to raise money Profit requirement Income from continuing operation before tax over US$1M in the latest fiscal year or 2 of last fiscal years No lowest profit requirement Least Market Value Not less than HK$46million when listed US$50million Sponsor Requirements Recognized by Hong Kong Exchange N/A

GEM vs NASDAQ NASDAQ GEM Financial Report   NASDAQ GEM Financial Report Quarter, interim and annual report Disclosure of price-sensitive events Minimum Public Float 110 million shares with market not less then US$8 million 25% subject to a minimum of HK$30 million

Value of GEM Offers growth enterprises an avenue to raise capital Offers investors an alternative of investing in "high growth, high risk" businesses Foster the development of technology industries in Hong Kong and the region Promotes the development of venture capital investments

Tom Online Also known as Tom.com Business including Internet portal website Wireless internet Online advertising SMS, MMS and WAP IVR VoIP

Tom Online

Tom Online Top three ranking in every wireless value added service segment

TongRenTong Technology Co. Ltd. Over 300-years-history traditional Chinese pharmacy Modernized reform of traditional Chinese medicines Promote modern Chinese medicine into the mainstream international pharmaceutical

TongRenTong Technology Co. Ltd. Division distributed in USA, Canada, British, Australia and all across the South-East-Asia

Conclusion Investing in the GEM has high risk & low return The investors are not willing to venture There is a decrease in investment in the GEM, because of insufficient monitoring system the economic cycle

Conclusion The GEM board deserves to be kept, because it provides companies a way to raise capital a stepping-stone to be listed on the Main Board The GEM should increase its variety of industries attract more investors reduce the market risk the HKEx should introduce a more comprehensive member system tighter regulatory framework and rule

Conclusion the GEM Board to operate more efficiently differentiate from the Main Board increase the competitiveness of the GEM set up a comprehensive system increase the variety of industries

The End Thank You

Q&A At least how much does a company need in Market capitalization at the time of listing on GEM HK$20 million HK$200 million HK$200 billion HK$200 trillion

The Growth Enterprise Market (GEM) started operations on Q&A The Growth Enterprise Market (GEM) started operations on 15thNovember1997 15thNovember1998 15thNovember1999 15thNovember2000

The turnover of GEM is Q&A Increased then decreasing now Decreased then increasing now Remain unchanged all the time Decreased then remain unchanged