listing in hong kong

Listing in Hong Kong 28 May 2015

PwC

The Hong Kong Capital Market – a brief

overview

Slide 2

PwC

0

20

40

60

80

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120

140

0

10

20

30

40

50

60

70Funds Raised(USD billion)

No. of IPOs

IPO in Hong Kong: 2000 to Q1 2015

Slide 3

Fu

nd

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ais

ed

(U

SD

bill

ion

)

Num

be

r o

f IP

O

Year

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Total Equity Fund Raised in Hong Kong: 2000 to Q1 2015

Slide 4

Fu

nd

s R

ais

ed

(U

SD

bill

ion

)

Source: HKEx

0

20

40

60

80

100

120

140 Other Equity Funds Raised(USD billion)

IPO Funds Raised (USDbillion)

Year

60.0

8.3 14.2

27.6 36.2

42.2

68.6 76.2

55.1

82.8

110.6

64.6

39.3

48.9

121.3

10.7

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1

2015

Others 72% 60% 54% 72% 65% 41% 36% 50% 85% 61% 48% 46% 70% 55% 75% 76%

IPO 28% 40% 46% 28% 35% 59% 64% 50% 15% 39% 52% 54% 30% 45% 25% 24%

PwC

IPOs - Hong Kong vs. Other International Markets: 2010 to 2014

Slide 5

2011 2012 2013 2014

No. of

IPOs

IPO Funds

Raised (USD billion)

No. of

IPOs

IPO Funds


No. of

IPOs

IPO Funds


No. of

IPOs

IPO Funds


Hong Kong 102 35.1 64 11.6 112 22.1 122 30.0

Shanghai

Shenzhen

China A-share

39

243

282

16.7

28.7

45.4

26

129

155

6.1

11.3

17.4

-

-

-

-

-

-

43

82

125

5.5

7.2

12.7

NYSE 68 25.6 76 19.7 120 41.5 114 65.5

Nasdaq 66 9.8 70 23.2 118 15.3 187 21.5

London 101 18.3 73 6.8 103 19.8 137 22.9

Euronext 27 0.5 19 1.4 26 4.1 41 12.4

Europe (exclude

Euronext and London)

302 15.5 171 6.3 150 12.5 197 23.3

Australia 105 1.7 54 2.1 61 7.0 78 16.3

Japan 36 2.2 50 12.0 60 9.6 83 10.8

Singapore 23 7.2 21 3.7 26 3.5 28 2.5

Taiwan 48 0.5 22 0.4 32 0.5 21 0.7

PwC

IPO Funds Raised in Major Stock Exchanges

Slide 6

Source: World Federation of Exchanges.

Rank Stock Exchange Funds Raised (USD billion)

1 NYSE 73.3

2 Spain 61.7

3 Nasdaq 26.5

4 Euronext Amsterdam 26.4

5 Germany 23.3

6 Swiss 21.9

7 Hong Kong 16.9

8 London 14.5

9 Japan 12.8

10 Shanghai 11.0

11 Euronext Paris 10.6

14 Australia 5.9

15 Toronto 5.8

17 Shenzhen 2.9

23 Singapore 1.9

Year 2000

Rank Stock Exchange Funds Raised (USD billion)

1 NYSE 65.5

2 Hong Kong 30.0

3 London 22.9

4 Nasdaq 21.5

5 Australia 16.3

6 Euronext 12.4

7 Japan 10.8

8 Shenzhen 7.2

9 Shanghai 5.5

10 Nasdaq OMX 5.4

Year 2014

PwC

Top 10 IPOs in World’s History (up to 31 December 2014)

Slide 7

Rank Listing year Company Stock Exchange Country Fund Raised

(USD billion)

1 2014 Alibaba Group holding Ltd NYSE China 25.0

2 2010 Agricultural Bank of China Hong Kong & Shanghai China 22.4

3 2006 Industrial & Commercial

Bank

Hong Kong & Shanghai China 22.0

4 2010 AIA Group Hong Kong China/ Hong Kong

United States

20.5

5 2008 VISA NYSE United States 19.7

6 1998 NTT Mobile Communications

Network

Tokyo Japan 18.4

7 2010 General Motors Co NYSE United States 18.1

8 1999 Ente Nazionale per I’Energia

Electrica

Milan Italy 17.4

9 2012 Facebook Inc Nasdaq United States 16.0

10 1996 Deutsche Telekom Deutsche Boerse Germany 13.0

Source: Thomson Financial.

PwC

Top 10 IPOs in the World : 2014

Slide 8

Rank Listing

month

Company Stock Exchange Country Fund Raised

(USD billion)

1 September Alibaba Group Holding Ltd New York Stock

Exchange

China 25,032

2 November National Commercial Bank

SJSC

Saudi Arabia Stock

Exchange Saudi Arabia 6,000

3 November Medibank Private Ltd Australia Stock

Exchange

Australia 4,886

4 December Dalian Wanda Commercial

Properties Co Ltd

Hong Kong Stock

Exchange China 4,039

5 December CGN Power Co Ltd Hong Kong Stock

Exchange China 3,638

6 September Citizens Financial Group Inc New York Stock

Exchange

United States 3,462

7 March Japan Display Inc Tokyo Stock Exchange Japan 3,231

8 January HK Electric Investments Ltd Hong Kong Stock

Exchange

China 3,111

9 July Synchrony Financial New York Stock

Exchange

United States 2,955

10 October Pershing Square Holdings Ltd Euronext Amsterdam United States 2,747

Source: Thomson Financial.

PwC

P/E Ratio of Hong Kong IPOs: 2012, 2013 & 2014

Slide 9

9

19

13

10

3 2

1

7

4

25

22

15 15

8

4

19

3

25 25

21

17

6 6

19

0

5

10

15

20

25

30

2012

2013

2014

*

* Listing by introduction, transfer from GEM to Main Board, REITs or listing of loss-making companies.

Nu

mb

er

of

IPO

P/E Ratio

PwC

Market Capitalisation of Major Stock Exchanges

Slide 10 Source: World Federation of Exchanges.

Rank Stock Exchange Market

Capitalisation

(USD billion)

1 NYSE 11,534

2 Nasdaq 3,597

3 Tokyo 3,157

4 London 2,612

5 Euronext Paris 1,447

6 Germany 1,270

7 Switzerland 792

8 Toronto 770

9 Italy 768

10 Euronext Amsterdam 640

11 Hong Kong 623

13 Australia 373

15 Shanghai 325

17 Shenzhen 256

22 Singapore 153

Year 2000 Year 2014

Rank Stock Exchange Market

Capitalisation

(USD billion)

1 NYSE 19,445

2 Nasdaq 7,096

3 London 6,577

4 Tokyo 4,419

5 Euronext Europe 3,464

6 Hong Kong 3,288

7 Shanghai 3,275

8 Toronto 2,131

9 Shenzhen 2,060

10 Germany 1,798

20 Singapore 766

PwC

HK Main Board listed companies as at 31 December 2014 by sector (by number)

11

Consumer Products 26%

Consumer Staples (Food & Beverage)

5%

Energy 3%

Financials 21%

Healthcare 4%

Industrials 16%

Information Technology 11%

Materials 10%

Telecommunication Services

1%

Utilities 3%

PwC

HK Main Board listed companies as at 31 December 2014 by market capitalisation

12

Below US$0.5 billion 65%

Above US$0.5 billion but below US$1.0 billion

12%

Between US$1.0 billion to US$2.0 billion

9%

Above US$2.0 billion 14%

PwC

Foreign Company Listing in Hong Kong

PwC

Cross-Border

Slide 14

• The trend started 2 to 3 years ago. Hong Kong emerges as a key international capital market, together with US and London

• Cross-Border listing of companies from emerging countries

• Dual (Multiple) listings in domestic stock exchange as well as Hong Kong as a major international capital market

PwC

Cross border listings into Hong Kong : Some recent examples

Slide 15

AIA

USD20.4 bn

L’Occitane

USD0.7 bn

Vale

Introduction

Mongolian Mining

USD0.7 bn

Rusal

USD2.2 bn

Prudential

Introduction

Sands

USD2.5 bn

Wynn

USD1.9 bn

SBI

USD0.2 bn SouthGobi

USD0.4 bn

Glencore

USD10 bn

(HK:USD0.3 bn)

Samsonite

USD1.2 bn

Prada

USD2 bn

Kazakhmys

Introduction

Coach

Introduction

PwC

Why Hong Kong?

Slide 16

Infrastructure

An alternate capital market, other than US, London, etc

Hong Kong Government and HKEx welcome international companies to be listed in Hong Kong

The ‘Asia’ concept; the ‘China’ concept

Gateway to ‘China’

Established legal system (British based)

Excellent banking infrastructure

A well recognised international financial centre

Excellent telecommunication; Excellent transportation

Good supply of quality professionals

Market

A leading sizeable capital market / IPO centre in the world during recent years

Reasonably high P/E

Active secondary market (Liquidity)

Alternative investor base: Hong Kong market has 40% retail market investors, while US and London markets are dominated by institutional investors

Reasonably efficient and transparent IPO process

Good reputation of market integrity and governance

All major investment banks and market intermediates have substantial presence in Hong Kong

All major investment funds have substantial presence in or connection with Hong Kong

PwC

Hong Kong Listing Requirements

PwC

Hong Kong Main Board Listing Requirements

Slide 18

3 financial years trading records

Under substantially same management over the past 3 financial years

Ownership continuity and control for at least the most recent financial year

Minimum public float of at least 25%; or 15 to 25% if market capitalisation is over HK$10 billion (eq. US$1.3 billion)

Minimum of 300 shareholders

Three independent non-executive directors, including one with accounting or related financial management expertise

Audit committee

Competing businesses of controlling shareholders or directors may be allowed - full disclosure is required

Financial requirements:

Profit of at least HK$20 million (eq. US$2.6 million) for the most

recent financial year; and

Profit of at least HK$30 million (eq. US$3.8 million) for the 2 preceding financial years; and

Market cap of at least HK$200 million (eq. US$26 million)

Market cap of at least HK$2 billion (eq. US$256 million); and

Revenue of at least HK$500 million (eq. US$64 million) for the most recent financial year; and

Positive operating cash flows of at least HK$ 100 million (eq. US$13 million) in aggregate for 3 financial years

Market cap of at least HK$4 billion (eq. US$513 million); and

Revenue of at least HK$500 million (eq. US$64 million) for the most recent financial year

Key requirements for new listings:

Market cap / Revenue / Cash

flow

Market cap / Revenue

OR OR

Profit

Alternative rules for infrastructure/mining and investment companies

PwC

Hong Kong Growth Enterprise Market Listing Requirements

Slide 19


Under substantially same management over past 2 financial years

Ownership continuity and control for at least the most recent financial year and up until the date of listing

Market capitalisation of at least HK$100 million (eq. US$13 million) at the time of listing

Minimum pubic float of at least 25%; or 15 to 25% if market capitalisation is over HK$10 billion (eq. US$1.3 billion)

Three independent non-executive directors, including one with accounting or related financial management expertise

Audit committee

Competing businesses of controlling shareholders or directors may be allowed - full disclosure is required

May list by way of placing only

Generally accepted accounting principles in the United States of America (US GAAP) are acceptable if the company is listed, or will be simultaneously listed, on either the New York Stock Exchange or the NASDAQ National Market

Financial requirements:

No profit requirement

Positive cash flow generated from operating activities of at least HK$20 million (eq. US$2.6 million) in aggregate for the two preceding financial years

Key requirements for new listings:

Alternative rules for infrastructure/mineral companies

PwC

Hong Kong Main Board/GEM Listing Requirements for Mineral Companies (cont’d)

Slide 20

A Mineral Company is one whose principal activity involves exploration for or extraction of natural resources, including minerals, oil and gas or solid fuels. Principal activity refers to the activity which is more than 25% of the company's assets, gross revenue or operating expenses

Qualifications for listing is the same as other companies, except that the financial requirements (i.e. profit test, “Big Cap” tests) may be waived for Main Board applicants or the 2 financial years trading records may be waived for GEM applicants if HKEx is satisfied that the board and senior management, taken together, have sufficient experience relevant to the exploration and/or extraction activity that the company is pursuing. Individuals must have a minimum of 5 years relevant industry experience

Must have indicated resources or contingent resources of meaningful and sufficient substance identifiable under one of the acceptable internationally recognised reporting standards supported by a Competent Person Report

Sufficient working capital for 125% of its present requirements for the next 12 months

A Mineral Company that has not yet begun production must disclose plans to proceed to production with indicative dates and costs supported by at least a Scoping Study and substantiated by the opinion of a Competent Person

Disclose social and environment matters in prospectus, if material

For Competent Person’s Report on estimates of resources and reserves, the internationally recognised reporting standards are:

the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition)

the Canadian National Instrument 43-101

the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (2007 edition)

the Petroleum Resources Management System (PRMS)

For valuation of resources and reserves, the internationally recognised valuation standards are:

the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (2005

edition)

the South African Code for the Reporting of Mineral Asset Valuation (2008 edition)

the Standards and Guidelines for Valuation of Mineral Properties endorsed by the Canadian Institute of Mining, Metallurgy and Petroleum,

February 2003 (final version)

Key requirements of new listing of mineral companies:

PwC

Listing Modes for Overseas Companies

Slide 21

Primary Listing

• Full compliance with Listing Rules

• Can be in the form of Shares or Hong Kong Depositary Receipts (HDR)

• Shares are traded in Hong Kong Dollars; HDR can be traded in Hong Kong Dollars or US Dollars

• Financial statements (Accountant’s Report) be prepared in IFRS or HKFRS

• Financial statements (Accountant’s Report) be audited by Hong Kong Certified Public Accountants (“HKCPA”)

• Can be dual primary listing – Hong Kong and overseas

Secondary Listing

• Similar requirements like primary listings, but reasonable waivers may be granted

• Can be in the form of Shares or Hong Kong Depositary Receipts (HDR)

• Shares are traded in Hong Kong Dollars; HDR can be traded in Hong Kong Dollars or US Dollars

• Overseas companies should have a primary listing on an overseas exchange where the standards of shareholder protection are equivalent to those in Hong Kong

• US GAAP is allowed

• Presently, there are only a few secondary listings; there is an increasing trend, especially for foreign companies

• Financial statements may be audited by international and reputable CPA, subject to HKEx’s waiver

PwC

Jurisdiction of Incorporation for Primary Listing

Slide 22

Provide shareholder protection that are equivalent to companies incorporated in Hong Kong

Presently 25 acceptable jurisdictions……. more to be added to the list

Submit a detail paper benchmarking shareholder protection for applications of unprecedented jurisdictions: Companies Laws, Articles of Association, etc.

If insufficient, ratify through additional clauses in the Company’s Articles of Association

Presently Acceptable Jurisdictions:

Australia

Bermuda

Brazil

British Virgin Islands*

Canada – Alberta*

Canada – British Columbia*

Canada – Ontario

Cayman Islands

Cyprus*

France#

Germany*

Guernsey*

Hong Kong

Italy*^

Japan*

Jersey*

Labuan*

Luxembourg*

Singapore*

South Korea *

The State of Delaware*

The Isle of Man*

The People’s Republic of China

The State of California*

United Kingdom

* Have to revise constitutive documents # Only for joint stock company with a single-board structure that are subject to the requirements of Autorite des marches financiers ^ For a corporate type other than joint stock company, or with a management and control structure other than the default structure, will have to address

differences shareholders’ protection Except for Bermuda, Cayman Islands, HK and PRC, all have to demonstrate a reasonable nexus between the place of incorporation and the place of business operations.

PwC

Listing of Russian companies in Hong Kong

• On 16 February 2015, Russia signed the International Organisation of Securities Commissions’ Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (the IOSCO MMoU) which paves the way for Russian companies to list on Hong Kong’s Stock Exchange as this fulfils one of the requirements to be an acceptable jurisdiction of incorporation.

• Currently, only two Russian-based companies are listed in HK:

(i) United Company RUSAL Plc (0486), incorporated in Jersey and listed in January 2010; and

(ii) IRC Ltd (01029), incorporated in Hong Kong and listed in October 2010.

Slide 23

PwC

Listing Requirement HK vs. London vs.

New York

PwC

Listing Requirements: Hong Kong vs. London vs. New York

Slide 25

Requirements Hong Kong London

(Premium listing)

NYSE

(World-wide

criteria)


Similar Similar Similar

Under substantially same management over past 3 financial years

Similar Similar No particular requirement

Ownership continuity and control

Ownership continuity and control for at least the most recent audited financial year

Control over the majority of the entity’s assets for the three years period

No particular requirement

Minimum public float of at least 25%; or lower if ‘big’ market capitalisation

Similar Similar N/A; Minimum public shares is 2.5 million.

Three independent non-executive directors, including one with accounting and related financial management expertise


PwC

Listing Requirements: Hong Kong vs. London vs. New York (cont’d)

Slide 26


(Premium listing)

NYSE – World-

wide criteria

Audit Committee Similar Similar Similar

Competing business of controlling shareholders or directors may be allowed – full disclosure is required


Jurisdiction of incorporation

Presently 25 acceptable jurisdiction; more to be added

No particular requirement No particular requirement

Appointment of Sponsor

Required Required N/A

PwC

Hong Kong vs. London vs. New York: Reporting Requirements for IPO

Slide 27


(Premium listing)

NYSE

(World-wide criteria)

Accountant’s Report: 3

years + stub

GAAP

Similar

HKFRS or IFRS

Similar

IFRS as adopted by the

European Union or

equivalent standards for

non-UK issuers

Audited financial statements

for the two most recent

years

US GAAP or IFRS

Profit forecast: Optional.

Must be reported on by an

accountant if included in

the prospectus

Similar Similar Not applicable

Working capital forecast:

Generally required and

must be reported on by

an accountant

Less comprehensive than

London

Exemption for regulated

industries, e.g. banks and

insurance companies

A comprehensive report

(included in the long-form

report)

Not applicable

Pro forma financial

information

Required and must be

reported by an accountant

Required where there has

been a significant change in

the issuer’s business prior

to listing. Must be reported

on by an accountant.

Not applicable

PwC

Hong Kong vs. London vs. New York: Reporting Requirements for IPO (cont’d)

Slide 28


(Premium listing)

NYSE

(World-wide criteria)

Capitalisation and

indebtedness

A statement is required,

dated within 8 weeks prior

to the date of the

prospectus

A statement is required,

dated within 90 days prior to

the date of the prospectus


Long-form report No particular requirement Need to issue a long-form

report covering the due

diligence of the applicant


Internal controls PN 21. Generally require an

Agreed-Upon Procedures

(AUP) type of report to be

issued by an accountant

Market practice requires a

Financial Reporting

Procedures (FPR) report on

the internal reports system,

which may require negative

assurance opinion to be

issued by an accountant


PwC

Reporting Requirements of a Hong Kong Listing

PwC

Key financial deliverables by Reporting Accountants

• The key items that the listing candidate and the reporting accountants must produce during the listing process are set out below.

Deliverable Explanation

Accountant’s Report • 3 years (Main Board) plus stub period (financial period ended not more than 6 months before the date of the prospectus)

• Prepared under IFRS or HKFRS • ‘True and Fair’ opinion by Reporting Accountant

Statement of adjustments • Document to be prepared reconciling the previously published financial information of the listing business to the financial information as presented in the Prospectus

• Statement of adjustments is filed with the HKSE and available for public inspection

• Report from the Reporting Accountant has to be issued in respect of the statement of adjustments (a separate set of consolidated IFRS audited financial statements with the figures exactly same with the accountant's report could substitute for the statement of adjustments)

Working capital forecast for 12 months from date of prospectus

• Directors have to make a statement in the prospectus that the working capital available to the applicant (consolidated group) is sufficient for its present requirement (at least next 12 months from the date of the prospectus)

• Reporting Accountant is required to perform work and to issue a private comfort letter to the Directors of the applicant

Slide 30

PwC



Pro forma financial information showing impact of proceeds

• Pro forma adjusted net tangible asset statement to illustrate the effect of the IPO

• Reporting Accountant has to render a report on the compilation and appropriateness of the pro forma adjustment(s)

Indebtedness • Disclose in the prospectus the details of indebtedness (debt securities, borrowings, contingent liabilities, guarantees, etc; but excluding normal trade bills) at a date within 8 weeks before the date of the prospectus

• Reporting Accountant is required to perform work and to issue a private comfort letter to the directors of the applicant

Profit forecast • Optional • Covering the year of the IPO (total 12 months, with some actual results) • Only a statement that net profit will not be less than a certain amount • Report from Reporting Accountant covers only compilation and accounting

policies used; however, the professional standard has much wider requirements for the related work

Private Comfort Letter on Extraction of Financial Information in the Prospectus and Comfort on Subsequent Changes

• Sponsor’s due diligence obligation under Listing Rules, and Underwriters’ due diligence

• Up to 3 comfort letters for each offering tranche: (i) Hong Kong tranche; (ii) Reg S International offering; and (iii) US 144A

Slide 31

PwC



Internal Control Report

(PN 21)

• Listing Rules set out that the applicant shall have established procedures, systems and controls, which are adequate having regard to their (the applicant and its directors) obligations under listing rules, to make proper assessment of the financial position and prospects of the applicant (consolidated group)

• Sponsor has to provide a confirmation to HKEx whether the applicant has adequate internal control system in accordance with the requirements of the Listing Rules

• This is more on design effectiveness at one point in time

• Reporting accountant is required by the applicant and the sponsor to assist in reviewing the consolidated group’s internal controls relating to financial reporting and to provide them with a private report. Exact scope to be agreed among the applicant, the Sponsor(s) and the Reporting Accountant, which is primarily an Agreed-Upon-Procedures (AUP) type of report

Other Deliverables/Work from the Reporting Accountant

• Checklists under Sponsors Guidelines for New Listing Applications

• Attend essential meetings with Sponsor, solicitors, other professional parties, and if necessary Hong Kong Stock Exchange to discuss various financial and accounting matters relating to the listing application

• Work together with management and other professional parties to prepare answers to questions raised by Hong Kong Stock Exchange

Slide 32

PwC

A Typical Listing Process

Slide 33

Strategic Investors

Working Team:

• Management & IPO project team

• Sponsors

• Reporting Accountants

• Lawyers to the sponsors

• Lawyers to the Group

• Others

Application submitted to SFC/HKEx

and hearing by Listing Committee

Subscription by the public

Roadshow Listing

Cornerstone Investors

Decide on listing

Internal Preparation

• Reorganisation

• Strengthen management

• Prepare financial statements

• Enhance governance

Audit

Prospectus

Legal opinion

Placing

Private Investors

PwC

1 month Pre-listing preparation and

prepare prospectus- 1-3 months

Appoint professional parties

1-2 months 1 month

Application and vetting by HKEx

Listing division approval

Road show

Listing

Decision to list

Prospectus and other documents

Total ~ 5-8 months

1 month

Initial filing

The extent of the review process by the HKEx is variable.

A Typical Listing Timetable

Slide 34

PwC

A Typical Listing Timetable

Slide 35

Suggested milestones Indicative timelines

1. Formalise an IPO plan and establish a core project management team 15 April 201x

2. Appoint key professional parties, including Sponsor(s), Reporting Accountant, lawyers, etc 1 May 201x

3. Establish overall approach, detailed timetable and responsibilities 15 May 201x

4. Begin / Substantially complete the audit for the 3 years during the track record period, by

the Reporting Accountant

15 May 201x /

31 July 201x

5. Begin / Substantially complete prospectus drafting and preparation of other filing documents for A-1 submission to HKEx

15 May 201x /

31 July 201x

6. Finalise group restructuring plan 30 June 201x

7. Resolution of potential legal, tax, accounting and other issues 30 June 201x

8. Finalise preliminary draft of legal opinion(s) and valuation report(s) 15 July 201x

9. Complete preliminary due diligence by Sponsor(s) 31 July 201x

10. A-1 filing 1 August 201x

11. Substantially complete the audit for the stub period (e.g. 30 June 201x) 15 September 201x

12. Respond to questions raised by HKEx and SFC (may be 3 to 5 rounds) 1 September to

31 October 201x

13. Listing Committee hearing 15 November 201x

14. Issue prospectus; Public Offering 10 December 201x

15. Listing on HKEx 20 December 201x

For a target listing by the end of 201x, a typical milestone is as follows (now is early April 201x):

PwC

Listing of Debt Securities in

Hong Kong

PwC

Listing of Debt Securities in Hong Kong: 2010 to Q1 2015

Slide 37

Source: HKEx

0

50

100

150

200

250

300

2010 2011 2012 2013 2014 Q1 2015

No. of New Issues

Amount Raised (USD Billion)

Note: As at 31 March 2015, the nominal amount of debt securities issued amounted to USD306 billion for 665 issues

PwC

Debt securities – basic conditions for listing

Slide 38

• Guided by Chapter 23, 36 (overseas issuers) and 37 (issuance to professional investors) of the

Main Board Listing Rules

• The issuer and the guarantor, in the case of a guaranteed issue, must each be duly incorporated or otherwise established under the laws of the place where it is incorporated or otherwise established

• An issuer which is a Hong Kong company must not be a private company within the meaning of section 11 of the Companies Ordinance.

• If the shares of the issuer or the guarantor, in the case of a guaranteed issue, are not listed then

both the issuer and the guarantor, in the case of a guaranteed issue, and their respective businesses must, in the opinion of the Exchange, be suitable for listing.

• A new applicant or the guarantor, in the case of a guaranteed issue, must have produced audited accounts in accordance with its national law covering the three financial years preceding the application for listing. In very exceptional cases the Exchange may accept a shorter period of two years.

PwC

• In the case of a new applicant, the latest financial period reported on by the reporting accountants must not have ended more than nine months before the date of the listing document. If the shares of the issuer or the guarantor, in the case of a guaranteed issue, are not listed then the issuer or the guarantor, in the case of a guaranteed issue, must have total shareholders’ funds of at least HK$100,000,000, and the nominal amount of each class of debt securities for which listing is sought must be at least HK$50,000,000, or such other amount as the Exchange may from time to time prescribe. Further issues of debt securities which are or are to be uniform in all respects with debt securities of a class already listed are not subject to these limits.

• The debt securities for which listing is sought must be freely transferable.

• The debt securities for which listing is sought must be issued in conformity with the law of the place where the issuer is incorporated or otherwise.

• Debt securities to which options, warrants or similar rights to subscribe or purchase equity securities or debt securities are attached must also comply with the requirements applicable to such options, warrants or similar rights.

• The issuer must maintain a paying agent at an address in Hong Kong until the date on which no debt security is outstanding unless the issuer performs that function himself.

• Maintain a register of holders and transfers in Hong Kong.

Debt securities – basic conditions for listing

Slide 39

PwC

Critical success factors and challenges

PwC

Critical success factors

Existing banking facilities should be reviewed in order to ensure that the company has sufficient working capital to meet its obligations for at least twelve months after the flotation date.

Financial prospects

Investors will review your company’s accounting policies, contrasting them with other public companies in your company’s industry sector

Accounting policies

Structuring may be required prior to an offering which may impact on the tax position of the company and the owners. Choosing the right holding company structure is important

Tax and structuring aspects

Investors will be interested in the reputation and experience of the management team. A certain level of continuity of management will be regarded as important

Management team

During the offering process you will need to convince investment banks, investors and stock exchange regulators that your company has a coherent strategy with well thought out reasons for considering an offering. Careful consideration is required as to factors which will maximise valuation

Strategy

Any public offering needs careful planning, will take up significant management time and requires the appointment of external advisors

Managing the timetable

Management information systems and processes that are fit for purpose and for a public company will need to be embedded into the business

Building the systems

Investors will look at the historical record of the company’s business to make an assessment of how the business will develop. The trend in profits and cash flows will be a key factor. Can disclosure requirements be met across all 3 years? How might segmental presentation impact the presentation of the business? Is consolidated financial information available at level of issuer? Any changes in accounting policies?

Track record

Slide 41

PwC

Your challenges

Managing the process

Financial statements

Working capital model

Reorganisation

Building financial reporting

procedures

Corporate governance

Share schemes & incentive plans

Tax, capital structure,

distributable reserves Valuation

Jurisdiction of incorporation

Slide 42

Thank You!

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contained in this presentation without obtaining specific professional advice.

Hong Kong Listing Pricing Liquidity Investor Base China Concept Time Zone

Pauline Leung Partner PwC Hong Kong Capital Markets Tel: +852 2289 1809 [email protected]

listing in hong kong

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