Alternatives to Listing on a U.S. Stock Exchange

Tod AckerlySeptember 30, 2009

or

What “Globalization” Can Do For You

Globalization of International Securities Markets

• Investors (especially Institutional Investors) have Easy Access to Markets Worldwide

• Brokerage Level: Consolidation, Correspondent Relationships, Global Electronic Trading Systems

• Market Level: Consolidation, Alliances• “Plumbing” Level: Consolidation, Inter-Connectivity• Information Level: Internet, Multiple News Services• As a Result:

– Investors are able to Learn about “Foreign” companies; Place trades in their securities; and Complete the transactions, all with increasing ease and decreasing cost.

– Companies are able to list on Foreign exchanges and obtain favorable results in secondary trading.

Good Reasons Not to do IPO in U.S.

• The SEC Registration Process– Is Time-Consuming and Expensive– Difficult to Plan Offering Schedule, Money Availability

• The SEC On-Going Requirements– Reporting, e.g., 8-Ks, Reg. S-K Disclosure Items– Sarbanes-Oxley

• Listing Standards can be Tough– Need to be Checked Carefully– Possibility of Being De-Listed

• Easy to Get Lost in the Crowd

Considerations in Choosing an Offshore Market

• Each Company’s Circumstances are Different– One Size Does Not Fit All

• Regulatory Requirements in Local Market– E.g., “Nomads” on AIM in London– Is a full-blown EU Prospectus required?

• Access to Potential Investors• Will Analysts Follow your Stock? • Secondary Market Liquidity

U.S. Regulatory Requirements -- Regulation S

• General Requirements -- Offer and Sale Must be Made “Outside” the U.S.– No “Directed Selling Efforts” in the U.S.– “Offshore Transaction”

• Three Levels (“Categories”) of Requirements, Based Generally on Likely U.S. Market Interest

• Equities of U.S. Companies in “Category 3” -- the Most Onerous Requirements

U.S. Regulatory Requirements -- Regulation S

• The “Category 3” Requirements– Securities Must contain a Legend.– Bylaws Must Contain Provision Refusing

Registration of any Transfer Not Made per U.S. Securities Laws.

– Securities Remain “Restricted” for One Year.– Each Purchaser during First Year Must (a)

Certify that it is Not a “U.S. Person”, and (b) Agree to Resell only in accordance with U.S. Securities Laws.

Difficulty of Complying with the Certify/Agree Requirement

• How is it Possible to Comply with this Requirement When Securities are Listed on a Modern, Electronic Market?

• Some Markets Are Trying to Establish Compliant Systems.

• Few Have Succeeded, but “Reg. S Friendly” Markets do Exist.

“Going Public” without SEC Registration

• It is Possible for a U.S. Company to “Go Public” without ever Registering with the SEC.

• Dual Tranche Offering: Offering to QIBs in US under Rule 144A, plus an Offshore Offering under Reg. S.

• A Single Pool of Liquidity can be Created, IF the “Plumbing” is in place so that U.S. QIBs can Buy and Sell Easily on the Offshore Market – In the Past this Capability has been Difficult.

• After One Year, the Reg. S Restrictions come off, and all Investors, including all U.S. Persons, can buy and sell the securities freely.

• The Only Limitation: Trading must be on an Offshore Market that is “Reg. S Friendly.”

Alternatives to Listing on a U.S. Stock Exchange

Tod AckerlySeptember 30, 2009

Greg Wojciechowski - President & CEO

2009

Introduction to The BSX

BSX Snapshot

• BSX founded in 1971

• Over 650 listings

• 16 Trading Members and Listing Sponsors

• Daily trading

• Rolling T + 3 Settlement

• Market Cap over $ 200 Billion

The BSX’s Mission

To Develop an efficient, electronic domestic capital market

To develop a listing service for investment funds and other international securities

To develop a platform to assist in the convergence of the capital and insurance markets

To build the infrastructure to make Bermuda the world’s first truly offshore, international capital market

Sound Legal Framework

• Bermuda Stock Exchange Private Act - 1992, 1996, 1997, 2002

• Financial Institution under Schedule 3 of BMA Act 1969

• Power to Make Regulations - subject to prior consent of BMA

International Recognitions

• Full Member of World Federation of Exchanges

• “DOSM” status from US-SEC

• “Registered Organisation” - LSE

• Designated Investment Exchange - UK Financial Services Authority

• Approved Stock Exchange – Australian tax authorities

• Recognised Investment Exchange – The BMA

• Affiliate Member – IOSCO

• Recognised Stock Exchange – UK’s HM Revenue & Customs

• Member – America’s Central Securities Depository Association

Regulatory Objectives

Integral part of the domestic capital market infrastructure – National stock exchange

Investor Protection – full disclosure and transparency

A level playing field - equal access to all investors

Regulatory Philosophy

SuitabilityTransparencyDisclosureEqualityCorporate Governance

Domicile Demographic

Securities Type

New Approved Listings

Trading Volumes by Year

Trading History by Value

Trading & Settlement

• Fully Electronic

– BEST - Trading System,

CLOB based

– BSD - Fully integrated

settlement and Depository

system

The Bermuda Securities Depository

The Bermuda Securities Depository (BSD) is wholly owned, controlled and operated by the BSX

BSD operates a clearing, settlement and depository service for the Bermuda market

It operate in basically the same way as other electronic central depository systems although adapted to the Bermuda environment.

Source of BSX Information

•www.bsx.com

Maxwell R. Roberts Building, 1 Church Street, Hamilton HM 11, Bermuda | P.O. Box HM 136, Hamilton HM AX, Bermuda

Phone: (441) 295-1330 | Fax: (441) 292-9471 | Email : fbg@fbg.bm | Website: www.fbg.bm

First Bermuda Group Ltd. is licensed by the Bermuda Monetary Authority to conduct business under The Banks & Deposit Companies Act 1999, Investment Business Act 2003 and The Insurance Act 1978.

Jeffrey ConyersJeffrey ConyersChief Executive Chief Executive Officer/DirectorOfficer/Director

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Trading MemberTrading Member

The following is a concise overview of the BSX Membership process, complete information on the Trading Member role may be found in the BSX Trading Membership Regulations, which includes the full form of application, Trading and Settlement Regulations (and Practice Notes made there under), and the Code of Conduct.

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IntroductionIntroduction The BSX was established in 1971 by the three Bermuda banks in operation at the

time and was formally incorporated as a for profit, limited liability company under the Bermuda Stock Exchange Act 1992.

Today the BSX is the world’s leading fully electronic securities market. Domestic and international trading is executed on a daily basis, Monday to Friday on BEST, the Exchange's custom-designed fully electronic trading system.

Trading Members are granted non-transferable licenses to trade on the Exchange and membership is open to both international and domestic brokers that meet the requirements of the BSX, without limitation on numbers.

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Trading Membership RequirementsTrading Membership Requirements

The BSX invites applications for Trading Membership from any company that meets the requirements as set out in the BSX Trading Membership Regulations, including:

A business plan setting out the company’s plans to be actively engaged in trading securities on a

full time basis;

Be a limited liability company incorporated in Bermuda (local 80/20 or 60/40 or exempted) i.e. no

individual members or permit companies will be admitted

Meet the Minimum Net Capital (MNC) requirements, both at the time of admission and on a

continuous basis thereafter;

Have appointed an independent auditor;

Satisfy the BSX’s requirements for relevant experience;

Install and use terminals for the BSX’s BEST trading system;

Pay an admission fee, an annual membership fee and an ad valorem transaction levy;

Make annual contributions to the BSX, as prescribed by the BSX and approved by the Bermuda

Monetary Authority (BMA) from time to time.

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Categories of Trading MembersCategories of Trading Members

Trading Members may choose to join the BSX as Brokers, Broker/dealers, or Market-makers.

A Broker may only act in an agency capacity (i.e. execute trades on behalf of clients) and may not trade on a principal basis

A Broker/dealer may act in an agency capacity and trade as principal (subject to prior notification of the client if he/she is dealing with a client). A broker/dealer is subject to a higher Minimum Net Capital (MNC) requirement than a broker to reflect the higher risk involved in such business.

A Market-maker is a Trading Member who agrees to provide continuous two way quotes, as principal in one or more specified securities.

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Membership FeesMembership FeesThe membership fees and MNC requirements for Trading Members are as follows:

Local and Exempted Companies

(All figures in $)

Joining Annual Eligible to

Category Fee Fee MNC Sponsor

Broker 20,000 5,000 25,000 Yes

Broker/dealer 30,000 5,000 100,000 Yes

Market-maker 30,000 5,000 100,000 Yes

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SponsorshipSponsorship

Trading Members may sponsor all forms of application to list on the BSX in addition to their trading privileges. Listing Sponsors, by comparison, do not have trading privileges and may not sponsor primary equity listings.