Notifiable Transactions

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

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

I. General

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

Purposes of NT Rules
Assess the impact of a transaction: Shareholders are informed Shareholders can vote on significant transactions Reinforce the general disclosure principle of price-sensitive information

Who are subject to NT Rules? (1)

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

Who are subject to NT Rules? (2)

Are transactions conducted via a jointly controlled entity (JCE) subject to NT Rules?
Example 1

Example 2
Listco A Company Y

Listco A

Company X

50% * JCE 1

50%

51% * JCE 2

49%

* Listco A does not have control over JCE 1 and 2

Note: See FAQ Series 7 No. 1

7

Who are subject to NT Rules? (3)

Are transactions conducted via an associated company subject to NT Rules?
Example
Listco A

Company Z

30% Associated Co.

70%

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

II. Definition of transaction

10

Definition of transaction Examples

11

Definition of transaction
The Rules set out a non-exhaustive list.
They are principally outside the issuers ordinary and usual course of business and/or have an impact on the issuers operation, e.g. a) b) c) d) Acquisition or disposal of assets An option to subscribe for shares or buy or sell assets Entering into or terminating a finance lease Entering into or terminating operating leases with significant impact on the companys operation

e)
f)

Providing financial assistance

Formation of JV

Exclude some transactions of a revenue nature in the ordinary and usual course of business
12

Example 1 Acquisition of properties

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

Example 2 Placing & top-up subscription (Listing Decision 75-3)

Before placing & subscription After placing, but before subscription After placing & subscription

Listco A
46 shares (46%)

Listco A
36 shares (36%)

Listco A
46 shares (42%)

Listco B
Fact:

Listco B

Listco B

Listco B conducts a standard top-up placing and subscription exercise. Whether the placing and top-up subscription constitute a transaction for Listco A?

14

Example 3 Placing deposits to a non-banking company

>50%

Parent Co.

>50%

Listco A (PRC issuer)

Company X
Place deposits (a non banking finance company)

Does placing of deposits by Listco A to Company X constitute a transaction?

15

Example 4 Treasury activities (Listing Decision 53-2)

Listco A

Appoint a fund manager to manage and invest surplus cash

Whether the above investment activities constitute a transaction?

16

Example 5 Self construction of a factory

Listco
(Car manufacturer)

Land
Construct into

Car manufacturing factory

Building Materials

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 businesswhere the sole basis for aggregation is rule 14.23(3)*
* Form parts of one asset
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III. Classification of transactions and size tests computation

18

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

19

Classification of NT
NT category Share transaction Size test results Acquisition of assets and the consideration involves securities for which listing is sought All percentage ratios are less than 5%

Discloseable transaction Major transaction

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)

Very substantial disposal (VSD) Very substantial acquisition (VSA) Reverse takeover (RTO)

A transaction involving both an acquisition and a disposal will be classified by reference to the larger of the acquisition or disposal.
20

5 size tests (1)

Assets 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

Profits ratio

Revenue ratio

Revenue** attributable to the subject of the transaction Revenue** of the issuer

** means revenue arising from the principal activities of the entity

21

5 size tests (2)

Consideration ratio Consideration Issuers total market capitalisation***
*** means the average closing price of the issuers securities for the 5 business days immediately before the transaction date

Equity capital ratio

Nominal value of the issuers equity capital issued as consideration Nominal value of the issuers existing equity capital

22

General principles (1)

1. The source of issuers figures is its published information. 2. The source of targets figures is its audited accounts or other acceptable accounts.

23

General principles (2)

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

Specific circumstances: Deemed disposal (1)

Assets, profits and revenue ratios
Results in de-consolidation from issuers account 100% of the target

Remain consolidated/ deconsolidated

% 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

Specific circumstances: Deemed disposal (2)

Example: Computation of consideration ratio
Before Listco A
90% (90 shares)

After Mr. X
10% (10 shares)

Listco A
82% (90 shares)

Mr. X
18% (20 shares)

Subsidiary B

Subsidiary B

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

Specific circumstances: Financial assistance

How should the percentage ratios apply to provision of financial assistance by an issuer?

Assets ratio & Consideration ratio

Value of the financial assistance + any monetary advantage

Revenue ratio & Profits ratio

Equity capital ratio

Annual interest income (if any)

NA

27

Specific circumstances: Formation of JV (Listing Decision 2-1)

Listco B 60% JV Company JV partner

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

40%

Which percentage ratios are applicable?

What should be the numerator of the percentage ratios?

28

Specific circumstances: When the consideration differs from the asset value (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

Specific circumstances: When the consideration cannot be determined (FAQ Series 7- No. 8)
Listco D
Under the agreement, Listco D has to pay: Target 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

Specific circumstances: Option arrangements (1)

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

Specific circumstances: Option arrangements (2)

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

Alternative size tests

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

Example 1 Acquisition of listed securities as investment (FAQ Series 7- No. 12)

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

Example 2 Group restructuring (Listing Decision 62-2)

Before
Listco B
100%

After
Listco B
70%
100%

70%

Subsidiary X
100%

Subsidiary Y

Subsidiary X

Subsidiary Y
100%

Target

Target

Facts: Disposal of 100% in Target by Listco B (through Subsidiary X) Acquisition of 100% in Target by Listco B (through Subsidiary Y)

35

Aggregation of transactions
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

Points to note (1)

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 Discloseable Discloseable If aggregated Will aggregation result in a higher classification? No Yes Second Transaction Discloseable VSA

Major VSA

New classification only applies to current transaction.

37

Points to note (2)

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

Example 1 Acquisition of machinery from related suppliers (Listing Decision 64-1)

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

Example 2 Acquisition of adjacent lands (Listing Decision 64-2)

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

IV. Announcement, circular and shareholder approval requirements

41

 Overview Suspension

Announcement
Shareholder approval Circular Documentary requirements for listing applications by listed issuers

42

Overview
Transaction Type Share transaction Notify Exchange Yes Suspension Publish Announcement Yes Shareholders approval No if shares are issued under general mandate No Publish Circular No Accountants report No Treated as new listing No

Yes

Discloseable

Yes

No, unless PSI

Yes

No

No

No

Major VSD VSA RTO

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

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Suspension
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

Announcement (1)
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

Announcement (2)
When required?

Further announcements (contd)

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

Announcement (3)
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

Announcement (4)
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

Announcement (5)
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

Example Waiver from disclosure requirements

Facts Listco A proposes a major acquisition involving issuance of consideration shares change in control

Listco A must disclose the Targets 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

Shareholder approval (1)

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

Shareholder approval (2)

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

Example 1 Material interest in a transaction (Listing Decision 73-1)

Vendor

Mr. X (Director)

2%+CEO 0.5%

Subject matter of

>10% Listco A Target

60%

the VSA

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 As executive committee

Does Mr. X have material interest in the VSA?

53

Example 2 Material interest in a transaction (Listing Decision 73-2)

Company X
Mr. Y
Director & shareholder of Listco A

>10%
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 Bs issued share capital)

Do Company X and Mr. Y have material interest in the major transaction?

54

Written shareholder approval (1)

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

Written shareholder approval (2)

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

Subsequent change of terms of a transaction

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

Circular (1)
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

Circular (2)
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

Historical financial information of the target (1)

NT category Where the target is a business/ company Not required Accountants report on the target* Accountants report on the group# Accountants report on the target* Where the target is a revenuegenerating asset with an identifiable income stream or asset valuation Not required Profit/ loss statement and (where available) valuation of the target Profit/ loss statement and (where available) valuation of the target Profit/ loss statement and (where available) valuation of the target

Major disposal Major acquisition VSD VSA and RTO

# 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

Historical financial information of the target (2)

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

Historical financial information of the target (3)

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 issuers subsidiary

non-public information related to a target company (which is listed and will become the issuers subsidiary) is unavailable

62

Example - Waiver from accountants report requirements (Listing Decision 74-1)

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 vendors auditors in accordance with US auditing standard

GAAP reconciliation reviewed by Listco As auditor

63

Pro forma financial information (1)

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
Major acquisition

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 income statement, balance sheet and cashflow statement of the enlarged group

Not required
Pro forma statement of assets and liabilities of the enlarged group

VSD

Pro forma profit and loss statement and net assets statement on the remaining group Pro forma profit and loss statement and net assets statement on the enlarged group

VSA/ RTO

64

Pro forma financial information (2)

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

Pro forma financial information (3)

The issuers 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

Other expert reports (1)

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

Other expert reports (2)

Report on profit forecast (contd) 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

Other expert reports (3)

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 and working capital sufficiency statements

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

Documentary requirements for listing applications by listed issuers

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

V. Special considerations for transactions

72

 Reverse takeovers Spin-off

Distribution in specie
Cash companies Sufficiency of operations

73

Reverse takeovers (1)

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

Reverse takeovers (2)

MB R14.06(6)/ GEM R19.06(6) (contd) 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

Reverse takeovers (3)

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

Example Change in control (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.
Before After

Example

Company X
100% 100% 100%

Company X
100%

Vendor
>50%

Holding Co
>50%

Vendor
>50%

Holding Co
20%

Target

Listco A

Listco A
>50%

Target

77

Disposal of existing business after change in control (1)

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

Disposal of business after change in control (2)

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

Spin-off
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 Spin-off proposals are subject to the Exchanges approval Shareholder approval is only required for major or above transactions

80

Example Spin- off via acquisition of a shell company

Before Disposal Listco A
(Listed on Main Board)

After Disposal Listco A 80% Company B 100%

Disposed Group (Listed on Main Board)

100%
Disposed Group

(Listed in Singapore)

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

Distribution in specie
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

Example - Distribution in specie (Listing Decision 75-4)

Before
Minority shareholders

After

Parent Company

Parent Company Distribution of all Subsidiary Xs shares to Listco As shareholders ( Distribution) Listco A

Minority shareholders

Listco A

Subsidiary X (unlisted)

Parent Company will make a cash offer to acquire all Subsidiary Xs shares * (Subsidiary Offer)

Subsidiary X (unlisted)

Parent Shareholder proposes the Distribution to facilitate the disposal of its controlling interest in the Listco A.

83

Cash companies
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 issuers 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

Sufficiency of operation
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

Compliance reminders

86

I. Reminders

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

Reminders (1)
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

Reminders (2)
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

Reminders (3)
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

Reminders (4)
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

Reminders (5)
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

Reminders (6)
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

Reminders (7)
Board meeting notification 10. Announce at least 7 clear business days before the meeting date

95

Reminders (8)
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

Reminders (9)
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 No. of shares cancelled during the month 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

6.Repurchase of shares

Class of share repurchased Cancellation date : (dd/mm/yyyy)

Ordinary (15/11/2009) (30/11/2009) (100,000) (200,000) N/A (26/06/2009) N/A N/A (200,000)

Date of general meeting (e.g. AGM date) approving the share repurchases
EGM approval date: (dd/mm/yyyy)

No. of shares repurchased (but yet to be cancelled) as at the end of the month

97

Reminders (10)
Disclosure in Next Day Disclosure Return 14. Closing market price and allotment/repurchase on multiple dates
Issues of shares (Notes 6 and 7)
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)

No. of shares

Opening balance as at (Note 2) 31 October 2009 (Note 3) Placing of new shares - 20 November 2009 Exercise of options - 3 November 2009 - 5 November 2009

1,000,000,000

50,000,000

5%

$0.70

$0.85 (9 Nov 2009)

17.65% discount

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

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II. Year end disclosures

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Year end disclosures (1)

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

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Year end disclosures (2)

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 auditors 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

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Year end disclosures (3)

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)

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Year end disclosures (4)

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

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Reference materials published on the HKEx website (1)

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
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Reference materials published on the HKEx website (2)

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)

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Other reference materials

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)

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Thank you

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