Preliminary comparison between ChiNext and SME

ChiNext and SME listing targets

Similarities

i) Companies listed on China's ChiNext and SME shall be ones limited by shares and legally established with continuous operation for more than three years;

ii) China's ChiNext and SME have no limitation on forms of ownership, which means the state-owned enterprise, private enterprise and foreign-funded enterprise can apply for listing; and

iii) China's ChiNext and SME focus on the growth of enterprises.

Differences

i) SME is mainly for those enterprises that are mature or will soon be mature, while ChiNext is mainly intended for enterprises that are still in growth stage (especially early stages of growth);

ii) In addition to growth, ChiNext focuses more on innovation; and

iii) Although ChiNext and SME have no special limitations on industry, ChiNext prefers enterprises with the following features: high technology, fast growth, new economy, new service, new agriculture, new energy, new material, and new business mode.

ChiNext and SME listing conditions

In comparison with SME, ChiNext has the following differences with respect to issuing conditions:

Lower thresholds and financial requirements

a) Lower profitability requirements

SME requests that issuers must satisfy the following conditions: (i) net profits gained in the last three fiscal years shall be positive and more than Rmb30 million (US$4.4 million) in aggregate; (ii) net cash flow gained in the last three fiscal years shall be over Rmb50 million in aggregate, or (iii) business income gained in the last three fiscal years shall be more than Rmb300 million in aggregate.

ChiNext's profit requirements have been lowered to two alternative standards: (i) the issuer shall gain profits in the last two consecutive years, and its net profits for the last two years shall be no less than Rmb10 million and shall increase continuously; or (ii) the issuer shall gain profits in the last year, and the net profits shall be no less than Rmb5 million. Meanwhile, business income for the most recent year shall be over Rmb50 million and the growth rate thereof over 30% in the last two years.

b) Lower assets requirements

SME's requirements are that a proportion of the issuer's intangible assets (excluding its land use right, aquiculture right and mining right) in its net assets at the end of the last period shall be no more than 20% – and there is no uncovered loss.

ChiNext cancelled the requirements on a proportion of intangible assets and uses net assets instead i.e. the net assets at the end of the last period shall not be less than Rmb20 million, and without uncovered loss.

c) Lower share capital requirements

SME: The total share capital before issuance shall be no less than Rmb30 million.

ChiNext: The total share capital after issuance shall be no less than Rmb30 million.

Highlighting single business

SME: The funds raised by the issuer shall be used for its primary businesses in principle.

ChiNext: The issuer shall mainly operate one business.

Growth and innovation focus

i) With respect to the requirements on profitability, SME only requires the issuer to make profits for three consecutive years without any requirements for year-on-year increases. However, ChiNext's two alternative standards have requirements for an increase.

ii) In terms of requirements on the issuer's profitability, ChiNext pays more attention to influences brought by risks in connection with intellectual property.

iii) ChiNext requires that the issuer is fast growing and has a certain innovative capability, and that the sponsor shall issue special opinions – SME does not have such requirements.

Company governance higher requirements – strengthening controlling shareholder and actual controller responsibilities

a) In terms of company governance structure, the Interim Measures on Administration of Initial Public Offering and Listing on Growth Enterprise Board (Interim ChiNext Administration Measures) adds and emphasizes the establishment of an audit committee, which was not specified in SME's issuing conditions.

b) Adhering to the principle of strict requirements on the issuer's company governance, the Interim ChiNext Administration Measures adds regulatory requirements on the issuer's controlling shareholder and actual controller. SME only requests that the issuer shall not have any material violation of laws in the last three years. However, the Interim ChiNext Administration Measures extends such requirement to the issuers' controlling shareholder and actual controller.