Sammy Chau / Katherine Man
Assistant Vice President
Compliance and Monitoring Department
Listing Division, HKEx
1

I.
General
II.
Definition of transaction
III.
Classification of transactions and size tests computation
IV.
Announcement, circular and shareholder approval requirements
V.
Special considerations for transactions

3

• Purposes of NT Rules
• Who are subject to NT Rules?
• Points to note
4

• Assess the impact of a transaction:
– Shareholders are informed
– Shareholders can vote on significant transactions
• Reinforce the general disclosure principle of price-sensitive information
5

“Listed issuer” means:
- the listed issuer itself; and
- its subsidiaries.
“Subsidiary” includes:
(a) “subsidiary undertaking” under the Companies Ordinance;
(b) a consolidated subsidiary under HKFRS / IFRS; and
(c) an acquisition target to be consolidated in the next audited consolidated accounts.

Are transactions conducted via a jointly controlled entity (JCE) subject to
NT Rules?
Example 1
Example 2
Listco A Company X Listco A Company Y
50% * 50%
JCE 1
* Listco A does not have control over JCE 1 and 2
Note: See FAQ Series 7 – No. 1
51% *
JCE 2
49%

Are transactions conducted via an associated company subject to NT
Rules?
Example
Listco A
Company Z
30%
70%
Associated Co.

• A notifiable transaction may also be subject to other Rules, e.g.
 Disclosure of price-sensitive information
 Advances to entities
 Connected transactions
 Spin-offs
9

10

• Definition of “transaction”
• Examples
11

• The Rules set out a non-exhaustive list.
 They are principally outside the issuer’s ordinary and usual course of business and/or have an impact on the issuer’s operation, e.g. a) Acquisition or disposal of assets b) An option to subscribe for shares or buy or sell assets c) Entering into or terminating a finance lease d) Entering into or terminating operating leases with significant impact on the company’s operation e) Providing financial assistance f) Formation of JV
• Exclude some transactions of a revenue nature in the ordinary and usual course of business

Acquisition of a property
Listco A
Fact:
• Listco A is engaged in property development and property investment businesses .
Is the acquisition of a property by Listco A subject to NT Rules?
13

Before placing & subscription
Listco A
46 shares (46%)
After placing, but before subscription
Listco A
36 shares (36%)
Listco B Listco B
After placing & subscription
Listco A
46 shares (42%)
Listco B
Fact:
• Listco B conducts a standard top-up placing and subscription exercise.
Whether the placing and topup subscription constitute a “transaction” for
Listco A?
14

>50%
Parent Co.
>50%
Listco A
(PRC issuer)
Place deposits
Company X
(a non banking finance company)
Does placing of deposits by Listco A to Company X constitute a “transaction”?
15

Listco A
Appoint a fund manager to manage and invest surplus cash
Whether the above investment activities constitute a “transaction”?
16

Listco
(Car manufacturer)
Land
Building
Materials
Construct into
Car manufacturing factory
Whether the acquisitions of land and building materials will be treated as a “transaction”?
• Aggregation does not apply when:
– “an asset is being constructed, developed or refurbished by or on behalf of a listed issuer for its own use in its ordinary and usual course of business …where the sole basis for aggregation is rule
14.23(3)*
”
* Form parts of one asset
17

18

• Classification of NT
• 5 size tests
• General principles
• Specific circumstances
• Alternative size tests
• Aggregation of transactions
19

NT category
Share transaction
Discloseable transaction
Major transaction
Very substantial disposal (VSD)
Very substantial acquisition (VSA)
Reverse takeover (RTO)
Size test results
• Acquisition of assets and the consideration involves securities for which listing is sought
– All percentage ratios are less than 5%
5% or above, but all below 25%
25% or above, but all below 75% (for disposal) or 100% (for acquisition)
75% or above
100% or above
See definition in MB R14.06(6)/ GEM R19.06(6)
A transaction involving both an acquisition and a disposal will be classified by reference to the larger of the acquisition or disposal.
20

Assets ratio
Profits ratio
Revenue ratio
Total assets of the subject of the transaction
Total assets of the issuer
Profits* attributable to the subject of the transaction
Profits* of the issuer
* means net profit before taxation and minority interests
Revenue ** attributable to the subject of the transaction
Revenue** of the issuer
** means revenue arising from the principal activities of the entity
21

Consideration ratio Consideration
Issuer’s total market capitalisation***
*** means the average closing price of the issuer’s securities for the 5 business days immediately before the transaction date
Equity capital ratio Nominal value of the issuer’s equity capital issued as consideration
Nominal value of the issuer’s existing equity capital
22

1.
The source of issuer’s figures is its published information.
2.
The source of target’s figures is its audited accounts or other acceptable accounts.
23

3. Acquisition/ disposal of equity capital
 resulting in consolidation/ de-consolidation?
− Yes - 100%
− No - % bought or sold
4. Transaction via non wholly owned subsidiary
 Same size test computation as for transactions via wholly owned subsidiary
24

• Assets, profits and revenue ratios
Results in de-consolidation from issuer’s account
Remain consolidated/ deconsolidated
100% of the target
% of the equity interest decreased
• Consideration ratio:
= Value of the shares issued to allottees, excluding those issued for maintaining the allottees’ % interest in the subsidiary
25

Example: Computation of consideration ratio
Before
Listco A
90%
(90 shares)
Subsidiary B
Mr. X
10%
(10 shares)
After
Listco A
82%
(90 shares)
Subsidiary B
Mr. X
18%
(20 shares)
Numerator for the consideration ratio
• No. of shares required for Mr. X to maintain his interest in Subsidiary B
= 110 shares x 10% = 11 shares
• Numerator for the consideration ratio:
= (20 shares – 11 shares) x fair value of the shares
26

How should the percentage ratios apply to provision of financial assistance by an issuer?
Assets ratio &
Consideration ratio
Revenue ratio &
Profits ratio
Equity capital ratio
Value of the financial assistance + any monetary advantage
Annual interest income (if any)
NA
27

Listco B
60%
JV Company
JV partner
40%
Under the JV agreement:
• Total investment cost: RMB330 million
• Registered capital: RMB110 million
(contributed in cash)
• The difference will be funded by proceeds from property sales, bank loans or shareholders’ loan
Which percentage ratios are applicable?
What should be the numerator of the percentage ratios?
28

(R14.15(1))
Listco C
Acquisition of a property
Settled by consideration shares
• Consideration: $50 million
• Market price of the consideration shares: HK$70 million
• Fair value of the property: HK$100 million
What should be the numerator of the consideration ratio?
29

Listco D
Target
Under the agreement, Listco D has to pay:
• cash consideration: HK$1 million; plus
• future amount payable upon completion, which is based on the valuation of the
Target at the time of completion
How should Listco D calculate the consideration ratio?
30

• Issuers cannot exercise discretion:
 Grant of option  a transaction
 Exercise or transfer of option  not a transaction
• Issuers can exercise discretion:
 Grant of option  normally not a transaction unless there is a premium
 Exercise or transfer of option  a transaction
31

Prior approval for exercise of option
• At the time of entering into an option, issuer may seek shareholder approval for the exercise of the option.
• Shareholder approval is not required upon exercise of the option if:
 the relevant information is disclosed to shareholders; and
 no change of the relevant facts at the time of exercise
 No similar provision in the connected transaction Rules
32

• We may disregard a size test calculation if:
– it produces an anomalous result; or
– it is inappropriate to the sphere of activity of the issuer.
• Issuers must provide appropriate alternative tests for our consideration.
• We will consider:
 substance of transactions and not only their legal form
 whether size tests results vary significantly
33

Fact:
• Listco A proposes to acquire 5% interest in Target X as an investment which will be classified as available for sale financial assets.
How should Listco A compute the assets, profits and revenue ratios?
Our view:
Size tests
Assets ratio
Profits/ revenue ratio
Numerators of the alternative test
Fair value of shares being acquired
Dividend income
34

100%
Listco B
Subsidiary X
70%
Subsidiary Y
100%
Target
Before
After
Listco B
100%
Subsidiary X
70%
Subsidiary Y
Target
100%
Facts:
• Disposal of 100% in Target by Listco B (through Subsidiary X)
• Acquisition of 100% in Target by Listco B (through Subsidiary Y)
35

• Prevent circumvention of Rules by splitting a transaction
• Aggregation of a series of transactions:
 completed within 12 months or
 are otherwise related.
• Non-exhaustive factors we consider:
 with the same party or parties connected
 involve interests in one particular company or group of companies
 parts of one asset
 lead to substantial involvement in a new business
36

• Aggregation is not automatic only because one factor is triggered.
• We will also consider the effect of aggregation:
 whether aggregation would result in a higher transaction classification.
e.g.
First
Transaction
Major
Major
Second
Transaction
If aggregated Will aggregation result in a higher classification?
Discloseable Major No
Discloseable VSA Yes
Second
Transaction
Discloseable
VSA
• New classification only applies to current transaction.
37

• Prior consultation with the Exchange
Exceptions:
• The issuer has already decided to aggregate the proposed transaction with the previous transaction(s)
• The proposed transaction, even when aggregated with the previous transaction(s), will not be a NT
38

Facts:
• Listco A proposes to acquire different models of machinery from members of Group X (a major supplier) under different contracts.
• The machinery acquired under each contract is functional on its own and does not form part of an assembled machine.
• Each contract was negotiated independently.
Will the Exchange aggregate acquisitions of machinery?
39

Facts:
• Listco B acquired Land 1 in June.
• It acquires Land 2 one month later.
• Land 1 and 2 are adjacent to each other.
• They will be re-developed into a single residential property for sale.
• The 2 acquisitions are not inter-conditional.
Will the Exchange aggregate acquisitions of Land 1 and 2?
40

41

• Overview
• Suspension
• Announcement
• Shareholder approval
• Circular
• Documentary requirements for listing applications by listed issuers
42

Major
VSD
VSA
RTO
Transaction
Type
Share transaction
Discloseable
Notify
Exchange
Yes
Suspension
Yes
Publish
Announcement
Yes
Yes No, unless
PSI
Yes
Shareholders’ approval
Publish
Circular
Accountants’ report
Treated as new listing
No No No if shares are issued under general mandate
No
No
No No No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes for acquisition
Yes
Yes
Yes
No
No
No
Yes
43

When required?
• A short suspension is required for
 a share transaction, major transaction, VSA, VSD or RTO; or
 any discloseable transaction which is price sensitive, until publication of the announcement.
44

When required?
Initial announcement
• After finalisation of the terms of a NT
Further announcements
• Expert reports
− Exploration for natural resources activities
− Profit forecast
 within 21 days after discloseable transaction announcement
• Poll results
 after general meeting
45

When required?
Further announcements (cont’d)
• Changes after initial announcement:
– termination of a previously announced NT
– material change in terms of the NT
– material delay in completion of the agreement
• Option arrangements:
– expiry of the option
– option holder notifying the grantor of non-exercise of the option
– transfer of the option to a third party
46

Content requirements
• General principle
– Information must be clearly presented, and must be accurate and complete in all material respects and not be misleading or deceptive
• Specific disclosures e.g. - general nature of the transaction
- description of the target
- terms of the transaction (e.g. consideration)
- reasons for and impact of the transaction
47

Common pitfalls
Frequent omissions:
• Principal business activities of the counterparty
• Date of the transaction and independence of the counterparty
• Value of the subject asset
• Net profits of the target asset
• Gain or loss on disposal and the basis of calculation
Inadequate disclosures:
• Basis of consideration
• Reasons for entering into the transaction
48

Waivers from disclosure requirements
• Granted only in limited circumstances
•
We will consider:
 materiality of the information
 alternative disclosures proposed by the issuer
 sufficient information for shareholders/ investors to make an informed investment decision
 unduly burdensome/ impractical
49

Facts
• Listco A proposes a major acquisition involving issuance of consideration shares  change in control
• Listco A must disclose the Target’s financial information in the announcement.
• Takeovers Code: Disclosure of “unaudited” financial information will constitute profit forecasts, which must be reported by an auditor and/or a financial advisor.
Will the Exchange grant waiver?
50

When required?
• Major transaction, VSD, VSA and RTO
General principles
• Voting should be made on the terms of the subject transaction
• All voting at general meetings must be taken by poll
• Shareholder approval must be obtained before completion of the transaction
Can an issuer obtain a prior mandate from its shareholders for on-market disposal of its investments?
51

Material interest
• Any shareholder that has a material interest in the transaction shall abstain from voting
• Factors determining “material interest” include:
 a party to the transaction or his associate?
 any benefit confers upon the shareholder or his associate, which is not available to other shareholders
• No monetary / financial benchmarks for “material interest”
52

2%+CEO
Vendor
Mr. X
(Director)
0.5%
>10%
Target
60%
Listco A
Facts:
• Mr. X is not a party to the VSA
• Mr. X had abstained from voting at board meetings
• Mr. X is a member of Listco A’s executive committee
Subject matter of the VSA
Does Mr. X have material interest in the VSA?
53

Company X
>10%
Listco A
Mr. Y
Director & shareholder of Listco A
9%
Listco B
Facts:
• Listco A proposes to privatise Listco B.
 a major transaction for Listco A
Director & CEO of Listco B and holding a number of outstanding options (about
2% of Listco B’s issued share capital)
Do Company X and Mr. Y have material interest in the major transaction?
54

• Allowed for major transactions if:
 no shareholder needs to abstain from voting; and
 a “closely allied group of shareholders”, holding more than 50% voting interest, approves the transaction
• A “closely allied group of shareholders”:
 the number of persons in the group
 their relationship (e.g. past or present business association)
 how long have they been shareholders?
 are they parties “acting in concert” under Takeovers Code?
 voting pattern on past shareholders’ resolutions (other than routine resolutions at AGM)
55

• Not allowed for :
 VSA, VSD and RTO
 qualified opinion on the accountants’ report
 some natural resources acquisitions that become new ventures of the issuer
• Other Listing Rules may require shareholder meeting e.g. specific mandate for issue of consideration shares
56

• Material changes of the terms of a transaction after shareholder approval
 require shareholder re-approval?
Example:
• Listco A agreed to dispose of a property at a consideration of HK$20 million  VSD
• The VSD was approved by shareholders.
• The parties now proposes to reduce the consideration to HK$10 million before completion  major transaction
Does the change of consideration constitute a material change in terms?
Note: See also FAQ Series 7
– No. 16
57

When required?
•
Major transaction, VSD, VSA and RTO
• The circular must be despatched:
 within 21 days after publication of the announcement; and
 at the same time or before the issuer gives notice of the shareholder meeting (if any)
• Any supplementary circular containing material information
 at least 14 days before general meeting
58

Content requirements
• General principle
– Information must be clearly presented, and must be accurate and complete in all material respects and not be misleading or deceptive
– Sufficient information for shareholders to vote
• Specific disclosures e.g. - 3 year historical financial information of the target
- Pro forma financials of the enlarged/ remaining group
- Other expert reports (e.g. valuation report, mining report)
- Information on the target and the issuer e.g. indebtedness statement, working capital sufficiency statement, information on the financial and trading prospects of the issuer
59

NT category
Major disposal
VSA and RTO
Where the target is a business/ company
Not required
Where the target is a revenuegenerating asset with an identifiable income stream or asset valuation
Not required
Major acquisition Accountants’ report on the target* Profit/ loss statement and (where available) valuation of the target
VSD Accountants’ report on the group# Profit/ loss statement and (where available) valuation of the target
Accountants’ report on the target* Profit/ loss statement and (where available) valuation of the target
# with separate disclosure of financial information of the disposal target as a discontinuing operation
* No accountants’ report is required if the target itself is listed on the Exchange
60

Accountants’ report
• Prepared by qualified and independent CPA
• The accounts must:
 adopt accounting policies materially consistent with those of the issuer
 conform with HKFRS or IFRS
 contain financial statements of the target / group for 3 financial years before issue of circular
 relate to a financial period ended 6 months or less before issue of circular
61

Accountants’ report relief
• We will consider:
 Information differences
 Assurance differences
 Unduly burdensome/ impractical
• Specific relief in the Rules:
 the target has not or will not become the issuer’s subsidiary
 non-public information related to a target company (which is listed and will become the issuer’s subsidiary) is unavailable
62

Facts:
• Listco A proposes to acquire a business from a US listed company  VSA
• Listco A has practical difficulties in preparing an accountants’ report on the Target
Business.
• It proposes to include in its VSA circular:
 audited combined financial statements of the Target Business
− prepared in accordance with US GAAP, with a reconciliation to HKFRS
− audited by the vendor’s auditors in accordance with US auditing standard
− GAAP reconciliation reviewed by Listco A’s auditor
63

NT category Where the target is a business/ company
Where the target is a revenuegenerating asset with an identifiable income stream or asset valuation
Major disposal Not required
Major acquisition
Pro forma statement of assets and liabilities of the enlarged group
VSD
VSA/ RTO
Not required
Pro forma statement of assets and liabilities of the enlarged group
Pro forma income statement, balance sheet and cashflow statement of the remaining group
Pro forma profit and loss statement and net assets statement on the remaining group
Pro forma income statement, balance sheet and cashflow statement of the enlarged group
Pro forma profit and loss statement and net assets statement on the enlarged group
64

• Pro forma financials must:
 clearly state the purpose of their preparation
 include all appropriate adjustments
 adopt format and accounting policies consistent with those used by the issuer
• Pro forma financial information may only be published in respect of:
 the current financial period
 the most recently completed financial period
 the most recent interim period for which information has been published
Point to note:
 The pro forma income statement and balance sheet may be prepared for different accounting periods
65

• The issuer’s unadjusted information must be derived from the most recent :
 audited published accounts, published interim reports, published interim or annual results announcements;
 accountants’ report;
 previously published pro forma financials; or
 published profit forecast or estimate
66

Report on profit forecast
• Profit forecast is not mandatory
• A circular containing a profit forecast must include:
 reporting accountants’ or auditors’ report
− accounting policies
− calculations for the forecast
 financial advisers’ report
− forecast has been stated after directors’ due and careful enquiry
67

Report on profit forecast (cont’d)
• “Profit forecast” includes:
• any statement which quantifies the anticipated level of future profits or losses
• any profits/ losses estimate for a financial period which has expired but for which the results have not yet been published
• any valuation of assets (other than land and buildings) or businesses based on discounted cash flows or projections of profits, earnings or cash flows
68

Technical report for mining activities
• applicable to Main Board issuers proposing to explore for natural resources as a new venture
• must be prepared by a qualified technical adviser
• must include information e.g.
– estimated reserves
– evidence on which the estimate is based
– details of the technical advisers
• must be prepared not more than 6 months before issue of the circular
69

Indebtedness statement
• statement of “indebtedness” of the group as at the most recent practicable date
 “most recent practicable date” – normally NOT more than 8 weeks before
 “group” – include any company which will become a subsidiary of the issuer
Working capital sufficiency statement
• confirmation if the issuer has sufficient working capital
 normally cover the next 12 months
70

Recent Rule amendments (Effective 2 November 2009)
• simplify Rules for listing applications by listed issuers
• remove some existing documentary requirements
• revise timeframe for submission of documents
• reduce number of copies required for submission
71

72

• Reverse takeovers
• Spin-off
• Distribution in specie
• Cash companies
• Sufficiency of operations
73

MB R14.06(6)/ GEM R19.06(6)
“an acquisition or a series of acquisitions of assets by a listed issuer which, in the opinion of the Exchange, constitutes, or is part of a transaction or arrangement or series of transactions or arrangements which constitute, an attempt to achieve a listing of the assets to be acquired and a means to circumvent the requirements for new applicants set out in Chapter 8 of the
Exchange Listing Rules…”
74

MB R14.06(6)/ GEM R19.06(6) (cont’d)
“… A “reverse takeover” normally refers to:
(a) an acquisition or a series of acquisitions (aggregated under rules 14.22 and
14.23) of assets constituting a very substantial acquisition where there is or which will result in a change in control (as defined in the Takeovers Code) of the listed issuer (other than at the level of its subsidiaries); or
(b) acquisition(s) of assets from a person or a group of persons or any of his/their associates pursuant to an agreement, arrangement or understanding entered into by the listed issuer within 24 months of such person or group of persons gaining control (as defined in the Takeovers Code) of the listed issuer (other than at the level of its subsidiaries), where such gaining of control had not been regarded as a reverse takeover, which individually or together constitute(s) a very substantial acquisition …”
75

Application of RTO Rule
• What is a RTO? (LC Annual Report 2007)
• What is the 24 month restriction?
• How do we look at “change in control”?
76

(Listing Decision 75-2)
• We will look at the reason(s) for triggering the general offer obligation when determining whether the “change in control” test is met.
Example Before
100%
Vendor
>50%
Target
Company X
100%
Holding Co
>50%
Listco A
After
100%
Vendor
Company X
Holding Co
20%
>50%
100%
Listco A
>50%
Target
77

• To address circumvention of the RTO rules
• An issuer may not dispose of its existing business for a 24 month period after a change in control, unless
– assets acquired after the change in control meet the new listing requirement
 Otherwise, deemed as a new listing applicant
78

Listing Committee Annual Report 2008
• The Listing Committee endorsed a waiver:
 Disposal will be restricted if :
– assets injection by new controlling shareholder at the time of and/or after the change in control; and
– such asset injection would have resulted in a VSA, taking into account the disposal(s)
• We will consider whether the issuer structures its transactions to circumvent the RTO Rules.
79

• A proposal that “effects the separate listing on the Exchange or elsewhere of assets or businesses wholly or partly within its existing group”
• General principle
 one business should not support 2 listing status
• Clarifications:
 Spin-off can be conducted via acquisition of a listed shell
 Holding of interest in Newco after spin-off is not a pre-requisite
 Spinoff proposals are subject to the Exchange’s approval
 Shareholder approval is only required for major or above transactions
80

Before Disposal After Disposal
Listco A
100%
Disposed
Group
(Listed on Main Board)
Listco A (Listed on Main Board)
Company B
80%
(Listed in Singapore)
Disposed
Group
100%
Facts:
• Company B does not have material assets or operation.
• The disposal aims to consolidate majority of Listco A Singapore assets under one listed subsidiary (Company B).
Does the disposal constitute a spin-off?
Note: See also Listing Decision 3-2
81

• Distributions in specie to shareholders are normally not notifiable transactions.
• We may impose requirements if the distributions are in substance:
– circumvention of the Listing Rules
– disposal of assets by the issuer
– against the general principles of investor protection
82

(Listing Decision 75-4)
Before
Parent
Company
Listco A
Minority shareholders
Distribution of all Subsidiary X’s shares to Listco A’s shareholders ( Distribution)
After
Parent
Company
Minority shareholders
Subsidiary X
(unlisted)
Listco A
Subsidiary X
(unlisted)
Parent Company will make a cash offer to acquire all
Subsidiary X’s shares *
(Subsidiary Offer)
* Parent Shareholder proposes the Distribution to facilitate the disposal of its controlling interest in the Listco A.
83

• Where for any reason the assets of an issuer consist wholly or substantially of cash or short-dated securities, it will not be regarded as suitable for listing and trading in its securities will be suspended.
 Short-dated securities: securities such as bonds, bills or notes which have less than 1 year to maturity.
• We will treat the issuer’s application for lifting of the suspension as if it were a new listing applicant.
• Exclude:
 “investment companies” as defined in MB Chapter 21; or
 an issuer which is solely or mainly engaged in the securities brokerage business
84

• For continued listing of its securities, an issuer must demonstrate to the
Exchange that:
 it carries out, directly or indirectly, a sufficient level of operations
 it has tangible assets of sufficient value and/or
 it has intangible assets of sufficient potential value
85

86

87

• Trading suspension
• Black out period
• Shareholder meeting notice
• Continuing connected transactions
• Access to books and records of disposed companies
• Board meeting notification
• Book closure notification
• Disclosures in monthly returns and next day disclosure returns
88

Trading suspension
1. Authorised representatives and company secretary should be contactable to deal with suspension related matters:
− respond to our press/ price and trading movement / post-vetting enquiries
− inform us of the proposed suspension well in advance
− submit written suspension request well in advance
89

Black out period
2. The new black out period will commence:
– 60 days before publication of results or
– if shorter, the period from the financial year end up to the date of publication
 notify the Exchange about the commencement of “black out” period
•
•
31/12/2009
(year end date)
20/3/2010
(Date of publication of annual results)
30/4/2010
(Deadline for publication of annual results – MB issuers)
Commencement of black out period: 19 January 2010
Notification must be sent to the Exchange before 19 January 2010
90

Shareholder meeting notice
3. Code Provision: Notice of shareholder meeting should be sent
– at least 20 clear business days before AGM
– at least 10 clear business days before other general meeting
(Introduced on 1 January 2009)
91

Revised publication deadlines for results announcements (Main Board)
4. Annual results: 3 months after year end
- for financial year ending on or after 31 December 2010
5. Interim results: 2 months after period end
- for 6 months ending on or after 30 June 2010
92

Continuing connected transactions (CCTs)
6. Is there sufficient time for renewing an expiring CCT agreement?
 Plan for:
− renewal of the agreement
− publication of announcement, shareholder meeting, appointment of
IFA and establishment of IBC
7. Will the CCTs exceed the annual cap(s)?
 Plan for publication of announcement, shareholder meeting, appointment of IFA and establishment of IBC
8. Will there be adequate time for auditors and INEDs to review the CCT?
 Submit auditors’ confirmation within 10 business days before bulkprinting of the annual reports
93

Access to books and records of disposed companies
9. Ensure that the issuer itself and its auditors can have access to the disposed companies’ books and records for the year end audit
94

Board meeting notification
10. Announce at least 7 clear business days before the meeting date
95

Book closure notification
11. Announce the book closure date at least 14 days before the closure
12. Disclose the purpose of the book closure (e.g. for dividend entitlements, attendance at the AGM, etc)
96

Disclosures in Monthly Return – Share repurchase and cancellation of repurchased shares
13. Other Movements in Issued Share Capital:- 6. Repurchase of shares
Type of Issue
6.Repurchase of shares
No. of shares cancelled during the month
Class of share repurchased
Cancellation date : (dd/mm/yyyy)
Date of general meeting (e.g. AGM date) approving the share repurchases
EGM approval date : (dd/mm/yyyy)
No. of new shares of issuer issued during the month pursuant thereto
No. of new shares of issuer which may be issued pursuant thereto as at close of the month
Ordinary
(15/11/2009)
(30/11/2009)
(100,000)
(200,000)
N/A
N/A
N/A
(200,000)
(26/06/2009) No. of shares repurchased (but yet to be cancelled) as at the end of the month
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Disclosure in Next Day Disclosure Return
14. Closing market price and allotment/repurchase on multiple dates
Issues of shares
(Notes 6 and 7)
No. of shares
Issued shares as a % of existing issued share capital before relevant share issue
(Notes 4, 6 and 7)
Issue price per share
(Notes 1 and
7)
Closing market price per share of the immediately preceding business day
(Note 5)
% discount/ premium of issue price to market price
(Note 7)
Opening balance as at
(Note 2)
31 October 2009
1,000,000,000
(Note 3)
Placing of new shares
- 20 November 2009
50,000,000 5% $0.70
$0.85 (9 Nov 2009) 17.65% discount
Exercise of options
3 November 2009
5 November 2009
…
10,000
40,000
0.001%
0.004%
$0.50
$0.50
$0.65 (2 Nov 2009)
$0.75 (4 Nov 2009)
23.01% discount
33.33% discount
Where shares are allotted or redeemed on multiple dates, details must be disclosed separately.
The closing market price per share on the business day immediately before the occurrence of the reported item, e.g. issue of shares on exercise of options 98

99

Publication of management accounts
• Issuers failing to announce their preliminary results before the publication deadline must issue an announcement containing:
– a full explanation for its inability to publish a preliminary results
– the expected date of announcement of the financial results
– financial results (if available)
– any disagreement with the audit committee on accounting treatment adopted
100

Common pitfalls of disclosures in annual results announcements
Omission of information required under MB App 16/ GEM Chapter 18
• Ageing analysis and credit policy description
• Compliance statement on Corporate Governance (CG) Code
• A statement that the results had been reviewed by audit committee
• Details of the qualification or modification of the auditor’s report
• The explanatory notes to proposed dividend
Inadequate disclosure of information required under MB App 16/ GEM Chapter 18
• Significant balances / fluctuation
• Management discussion on the issuer's results
101

Common pitfalls of disclosures in annual reports
Omission of information
•
Disclosures in Corporate Governance Report
− e.g. terms of NED appointment, information on remuneration committee
• Details of connected transactions
•
A narrative statement on whether the auditors had reviewed and confirmed compliance with CCT annual review Rules
•
Continuing disclosures of advance to entities, financial assistance to affiliated companies, pledge of shares by controlling shareholders, etc
• Annual confirmation of INED independence
Inadequate disclosure
• Description of credit policy and ageing analysis
•
Analytical and in-depth discussion in MD&A section
•
Details of share option scheme
• Explanation for inconsistency of disclosure relating to auditors’ remuneration in financial statements and CG Report
•
Disclosure on financial instruments (their nature, valuation and risk exposure)
102

Dividend information
• Provide sufficient information on dividend proposals including the dividend payment date
• Notify shareholders of any withholding tax implication
103

• Frequently asked questions on notifiable transactions, connected transactions and issue of securities: ( http://www.hkex.com.hk/listing/suppmat/faq200811.doc
)
• Listing Decisions : (http://www.hkex.com.hk/listing/listdec/listdec2009.htm)
•
Consultation Conclusions on self-constructed asset:
( http://www.hkex.com.hk/consul/conclusion/cc200907.pdf
)
• Consultation paper on proposed changes to requirements for circulars and listing documents of listed issuer:
( http://www.hkex.com.hk/consul/paper/cp200909cr_e.pdf
)
•
Consultation paper on New Listing Rules for Mineral and Exploration Companies:
( http://www.hkex.com.hk/consul/paper/cp200909m_e.pdf
)
• Checklists and forms in relation to disclosure, documentary and other specific compliance requirements under the Listing Rules and related administrative procedures:
 Main Board http://www.hkex.com.hk/listing/epp/cft_mb.htm

GEM http://www.hkex.com.hk/listing/epp/cft_gem.htm
104

•
Proposed changes to filing and checklist requirements for listing of equity securities:
– Consultation conclusion http://www.hkex.com.hk/consul/conclusion/cp200906cc_e.pdf
–
Revised Rules: http://www.hkex.com.hk/rule/mbrule/mb_rupdate15_cover.htm
(MB) and http://www.hkex.com.hk/rule/gemrule/gem_rupdate15_cover.htm
(GEM)
•
Financial statements Review Programme Report 2009 published by HKEx
(http://www.hkex.com.hk/listing/staffint/FRM2-09.pdf)
105

•
Auditing guideline - Statement 3.340
– Prospectuses and the Reporting Accountant, issued by HKICPA
( http://app1.hkicpa.org.hk/ebook/HKSA_Members_Handbook_Master/volumeIII/3_340
.pdf
)
• Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars”, issued by HKICPA http://www.hkicpa.org.hk/ebook/HKSA_Members_Handbook_Master/volumeII/ag7.pdf
•
Hong Kong Standard on Investment Circular Reporting Engagements 300
“Accountants’ Reports on Pro forma Financial Information in Investment Circulars” , issued by HKICPA http://www.hkicpa.org.hk/ebook/HKSA_Members_Handbook_Master/volumeIII/hksir3
00.pdf
• Review report by the Professional Standards Monitoring Committee of the HKICPA
( http://www.hkicpa.org.hk/correspondence/2009-06-25/activities_report.pdf
)
106

107