Main Board Listing in Hong Kong

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Introduction

The Main Board of the Hong Kong Stock Exchange is a well established avenue for capital fund raising for companies with a good track record of operations in Hong Kong and/or the PRC.

Financial Criteria

The Main Board Listing Rules have been revised as of 31 March 2004 and as a result, alternative criteria to be met on a Main Board listing have been introduced. In summary, ONE of the following 3 initial listing criteria must be satisfied as a pre-requisite to the listing of securities on the Main Board :-

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Profit Test

1. An issuer must have a 3 year profit track record with the most recent year’s profit being not less than HK$20 million and the profits for the 2 preceding years being not less than HK$30 million in aggregate; OR

Market Capitalisation / Revenue Test

2. An issuer must have at the time of listing a market capitalisation of not less than HK$4 billion, revenue of not less than HK$500 million for the most recent audited financial year; OR

Market Capitalisation / Revenue / Cash Flow Test

3. An issuer must have at the time of listing a market capitalisation of not less than HK$2 billion, revenue of not less than HK$500 million for the most recent financial year and positive cashflow of at least HK$100 million in aggregate for the 3 financial years comprising the track record period.

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Public Float / Spread

For companies with market capitalisation of not exceeding HK$10 billion at the time of listing, at least 25% of the shares must be in the hands of the public, subject to a minimum of HK$50 million. Accordingly, a Main Board issuer is normally expected to have a market capitalisation of at least HK$200 million at the time of listing.

For companies with market capitalisation of over HK$10 billion at the time of listing, 10% to 25% of the shares must be in the hands of the public.

An issuer is also required to have an adequate spread of shareholders; the current minimum number is set at 300 (save in the case where an issuer elects to fulfil the market capitalisation / revenue test, the minimum number is 1,000.)

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Corporate Governance

To raise the standards of corporate governance for Hong Kong listed companies, the Exchange now requires all Main Board issuers to have 3 independent non-executive directors, one of whom must have appropriate professional qualifications or accounting or related financial management expertise.

The Main Board Listing Rules also require issuers to have two authorised representatives (either two directors or director and a company secretary) who will act as the issuer’s principal channel of communication with the Stock Exchange and a company secretary.

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Competing Interests

Any competing business of a controlling shareholder of a prospective listing candidate is not a bar to listing per se. However, appropriate disclosure about the competing business and the reasons for its exclusion from the issuer’s business is required to be made in the prospectus. Further, the controlling shareholder must also set out his intention regarding any injection of such business into the listed group following the listing.

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Moratorium

A moratorium on disposal of shares is imposed on a controlling shareholder for the first 6 months after the listing date. For the second 6 months after listing, a controlling shareholder shall not dispose of his shares if immediately following such disposal, he would cease to be a controlling shareholder.

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

Professionals involved and timing

A successful listing requires the concerted efforts of a number of professional parties. They normally include :

Sponsors / Underwriters

Accountants

Lawyers for Company and Sponsors

Valuers

Printers

Public Relations

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

It should be noted that a listing process typically takes about 6 months at the least. The actual timeframe will depend on the complexity of the issues involved and the extent of the restructuring required.

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓

This brief memorandum sets out the salient features for a listing on the Main Board and is not intended to be an exhaustive summary of all the requirements and prohibitions. If you have any questions or are contemplating a prospective listing on the Main Board, please contact :-

Anna Chong at 2180 8683 (e-mail : annachong@kcho-fong.com) or

Tennessy Hui at 2868 1030 (e-mail : tennessyhui@kcho-fong.com).

K.C. Ho & Fong

May 2004

K.C. HO & FONG何 君 柱、方 燕 翔 律 師 樓