Disclosure of Interests Under the SFO in Hong Kong

7/26/2019 Disclosure of Interests Under the SFO in Hong Kong

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____________________________________________________________________

Disclosure of Interests under

the Securities and Futures Ordinance

_________________________________________________________________________________

Hong Kong Shanghai Beijing Yangon

www.charltonslaw.com
http://www.charltonslaw.com/http://www.charltonslaw.com/


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TB!"OF#O$T"$TS

. DIS#!OS%&" BY S%BST$TI! SH&"HO!D"&S........................................................... ...

'. S%BST$TI! SH&"HO!DI$( TH&"SHO!D.............................................................). *H"$ IS $OTIFI#TIO$ &"+%I&"D,............................................................................-. DIS#!OS%&" OF I$T"&"STS I$ "+%ITY D"&ITI"S...........................................

/. DIS#!OS%&" OF SHO&T 0OSITIO$S...............................................................................1. HO* 2$Y SH&"S IS 0"&SO$ TK"$ TO B" I$T"&"ST"D I$ I$ TH"

#S" OF "+%ITY D"&ITI"S,......................................................................................3. #!#%!TIO$ OF 0"&SO$4S I$T"&"ST....................................................................5. $OTIFI#TIO$ OF #H$("S I$ TH" $T%&" OF I$T"&"STS..............................6. *HT #O$STIT%T"S $ I$T"&"ST I$ SH&"S,.......................................................7. D""2"D I$T"&"STS............................................................................................................

'8. DIS#!OS%&" OB!I(TIO$S &"S%!TI$( F&O2 SH&" &"0%HS"S $D0!#"2"$TS.........................................................................................................................

''. #"SSTIO$ OF I$T"&"STS 9S"#TIO$ -))9'8::.............................................................

'). ";"20TIO$S..........................................................................................................................'-. I$FO&2TIO$ TO B" DIS#!OS"D 9S"#TIO$ -)3:....................................................'/'/. TI2I$( OF $OTI#"............................................................................................................'1'1. FO&2S TO B" %S"D............................................................................................................'1'3. 0"$!TI"S FO& FI!%&" TO DIS#!OS" 9S"#TIO$ -)6:........................................'1

B. DI&"#TO&S $D #HI"F ";"#%TI"S................................................................................. .'3

'. DIS#!OS"B!" I$T"&"STS.............................................................................................'3). *H"$ IS $OTIFI#TIO$ &"+%I&"D,..........................................................................'3-. I$T"&"STS I$ SH&"S %$D"& "+%ITY D"&ITI"S..........................................'5/. SHO&T 0OSITIO$S...............................................................................................................'5

1. #!#%!TIO$ OF 0""$T(" FI(%&" OF DI&"#TO&S4 I$T"&"STS..........'63. #H$("S I$ TH" $T%&" OF I$T"&"STS.................................................................'6

5. D""2"D I$T"&"STS 9S"#TIO$ -//:.............................................................................'66. ";"20TIO$S........................................................................................................................'77. I$FO&2TIO$ TO B" DIS#!OS"D 9S"#TIO$ -/7:....................................................'7'8. 0"$!TI"S FO& FI!%&" TO DIS#!OS".....................................................................'7

#. &"(IST&TIO$ OF TH" I$T"&"STS $D SHO&T 0OSITIO$S OF S%BST$TI!SH&"HO!D"&S< #HI"F ";"#%TI"S$D DI&"#TO&S...............................................'7

D. I$"STI(TIO$S OF SH&"HO!D"&S BY !IST"D #O20$Y........................ .........)'

S#H"D%!" ' = ";20!"S OF *HT #O$STIT%T"S $ >I$T"&"ST? I$ SH&"S........))

Please note that this memorandum is for general information purposes only. Specific legal adviceshould be sought in relation to any particular situation.


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I$T&OD%#TIO$

Hong Kongs disclosure of interests regime is set out in Part XV of the Securitiesand Futures Ordinance (Cap. !"# (SFO# and re$uires directors% chief e&ecuti'esand sustantial shareholders of companies listed in Hong Kong to disclose their

interests in the shares and deentures of such companies. Failure to ma)e adisclosure re$uired under Part XV is a criminal offence. Part XV also entitles listedcompanies to in'estigate o*nership of their shares.

+he regime is e&tremel, comple&. Ho*e'er% the conclusions reached follo*ing a- SFC consultation" on re'isions to the regime *ere ne'er implemented. /ostrecentl,% the Financial Ser'ices 0e'elopment Council has recommendedsimplif,ing the regime in a paper pulished in 0ecemer -"1.-

+he follo*ing is a summar, of the current regime as it affects sustantialshareholders% and directors and chief e&ecuti'es of companies listed in Hong Kong.

+he SFCs outline of Part XV (the SF# Outline#% gi'es detailed e&amples of itsapplication and is a'ailale on the SFCs *esite.2

. DIS#!OS%&"BYS%BST$TI!SH&"HO!D"&S

+he SFO re$uires disclosure *hen a person ac$uires or ceases to ha'e a notifialeinterest and *hen there is a change in the percentage level(i.e. the figure roundeddo*n to the ne&t *hole numer# of his interest.

'. S%BST$TI! SH&"HO!DI$( TH&"SHO!D

+he SFO threshold for disclosure is 3 of a Hong Kong listed compan,4s issued'oting share capital. 5here there are more than one class of listed shares% the

percentage of each class is ta)en separatel,.

). *H"$ IS $OTIFI#TIO$ &"+%I&"D,

).' Notifications Shortening of Notification Period

Section 2"("# re$uires notification to e made on the occurrence of the rele'ante'ents set out in Section 2"2 *hich can e summarised as follo*s6

(i# *hen a person first ecomes interested in 3 or more of the shares of a listed

compan, (ie. *hen he first ac$uires a notifiale interest# (Section 2"2("#(a##7

(ii# *hen a person4s interest drops elo* 3 (i.e. he ceases to ha'e a notifialeinterest# (Section 2"2("#(##7

(iii# *hen there is an increase or decrease in the percentage level(i.e. the figurerounded do*n to the ne&t *hole numer# of a person4s holding ao'e 3

"+he SFCs /a, - 8Consultation Conclusions on the 9e'ie* of the 0isclosure of :nterests9egime under Part XV of the Securities and Futures Ordinance;


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(e.g. his interest increases from D.E3 to !."3 so the percentage levelincreases from D3 to !3# (Section 2"2("#(c##7

(i'# *hen a person has a notifiale interest (i.e. 3# and the nature of his interestin the shares changes (e.g. on e&ercise of an option# (Section 2"2("#(d##7

('# *hen a person has a notifiale interest and he comes to ha'e% or ceases toha'e% a short position of more than "3 (e.g. he is alread, interested in D.3of the shares of a listed compan, and ta)es a short position of ".!3#(Sections 2"2(1#(a# and (##7 and

('i# *hen a person has a notifiale interest and there is an increase or decrease inthe percentage levelof his short position (e.g. he is alread, interested in D.E3of the shares of a listed compan, and increases his short position from ".!3to -.-3# (Section 2"2(1#(c##.

+he notification period for such e'ents is 2 usiness da,s after the date of therele'ant e'ent. :f a person is not a*are of the rele'ant e'ent *hen it occurs% the2 da, limit runs from the date on *hich he is a*are of its occurrence (i.e. the date on*hich he is a*are of the facts *hich constitute the rele'ant e'ent (e.g. a u,@ac) ofshares# and not the date he realises he has a notifiale interest#. > 8@usiness daA; isa da, other than a Saturda, or Sunda,% a pulic holida, or a da, on *hich a gale or

lac) rain storm *arning is in force.

).) Initial Notifications

>n 8:nitial =otification; does not refer to a notice gi'en on initiall, crossing the 3threshold. :nstead it refers to a notice re$uired to e gi'en in the follo*ingcircumstances6

(i# *here a person has 3 or more of the shares of a compan, *hich is einglisted (Section 2"(-#(a##7

(ii# *here a person has 3 or more of shares of a class *hich is eing listed orgi'en full 'oting rights (Section 2"(-#(##7 and

(iii# if a person has a notifiale interest on either the 3 threshold or "3threshold for short positions eing reduced (Section 2"(2##.

Gnder Section 2-(-# the time limit for :nitial =otifications onl, is " usiness da,safter the rele'ant e'ent or% if later% the date on *hich the person concerned is a*areof the rele'ant e'ent (i.e. is a*are of the facts *hich constitute the e'ent#.

-. DIS#!OS%&" OF I$T"&"STS I$ "+%ITY D"&ITI"S

0isclosure oligations of sustantial shareholders co'er interests in the unissuedshares of listed companies *hich% if issued% *ould carr, the right to 'ote and also tocash settled deri'ati'es. Hence% interests in the 8underl,ing shares; of all e$uit,deri'ati'es (*hether issued or unissued# are discloseale% including interests inoptions% suscription *arrants% con'ertile onds% >09s and stoc) futures.

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> holder% *riter or issuer of e$uit, deri'ati'es *ill e ta)en to ha'e a long positionin the underl,ing shares and must add these to his other interests in determining hisdisclosure oligations if6

(i# he has a right to ta)e the underl,ing shares7

(ii# he has an oligation to ta)e the underl,ing shares7 or

(iii# he has a right to recei'e mone, or to a'oid or reduce a loss% if the price of theunderl,ing shares increases%

efore or on a certain date or *ithin a certain period (*hether the right or oligationis conditional or asolute# (Section 2--(E##.

/. DIS#!OS%&" OF SHO&T 0OSITIO$S

+he SFO disclosure oligations of sustantial shareholders also co'er 8shortpositions;. Gnder Section 2E a person is regarded as ha'ing a short position inshares if he6

(i# holds% *rites or issues financial instruments under *hich6

(a# he can re$uire another person to ta)e the underl,ing shares7

(# he is oliged to deli'er the underl,ing shares7 or

(c# he has a right to recei'e mone, or to a'oid or reduce a loss if theprice of the underl,ing shares declines%

efore or on a certain date or *ithin a certain period (*hether the right oroligation is conditional or asolute#7 or

(ii# he orro*s shares under a securities orro*ing and lending agreement.

Hence the *riting of a call option% holding of a put option and stoc) orro*ings *ille discloseale. Ho*e'er a person (not eing a director# *ith a short position *illonl, e re$uired to disclose it if he alread, has a 3 interest in a class of a listedcompan,4s 'oting share capital ie. he must e a sustantial shareholder efore he hasa dut, to disclose a short position (Section 2"2(1##. Further the short position must

e at least "3. +hereafter% as *ith long positions% a change in the short position *illonl, re$uire disclosure if it results in the short position crossing a percentage le'elor in the person ceasing to ha'e a short position of at least "3 (Sections 2"2(1#(#and (c##.

Short positions cannot e netted off against long positions and the percentage figuresfor short and long positions must e calculated and notified separatel,.

/.' Options

+he SFC Outline confirms that the SFC ta)es the 'ie* that *hen a listed compan,

allots shares or issues an instrument under *hich it agrees to allot shares% or grantsan option o'er its ownshares% it is not ta)ing a position in its o*n shares% short or

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long% ut is simpl, issuing or agreeing to issue the shares. Hence there is nodisclosure oligation for the compan,. i)e*ise% since the listed compan, is notta)en to ha'e a short position% a controller of the compan, *ill not e deemed toha'e a short position under the deeming pro'isions of the SFO and no disclosure isre$uired. +his 'ie* *ould appear to e at odds *ith a strict interpretation of the

legislation and its *ide definition of the term 8short position;. :t therefore seemsli)el, that this 'ie* has een adopted more on the asis of the spirit of thelegislation *hose focus is primaril, on the disclosure of positions held in other listedcompanies.

+he holder of an option or other right to recei'e shares *ill ho*e'er ac$uire a longposition in the shares *hich must e disclosed.

5here a compan, grants an option o'er the shares of another listed compan,% then itis ta)ing a short position *hich must e disclosed if the former compan, alread,holds a 3 interest and the short position amounts to "3 or more.

=ote also that *here a listed compan, grants an option o'er its o*n shares ordeentures to a chief e&ecuti'e or director of that compan,% it is re$uired to recorddetails of the grant in its register of the interests of directors and chief e&ecuti'es (asdescried under Section C elo*#.

1. HO* 2$Y SH&"S IS 0"&SO$ TK"$ TO B" I$T"&"ST"DI$ I$ TH" #S" OF "+%ITY D"&ITI"S,

Holders% *riters and issuers of e$uit, deri'ati'es are ta)en to e interested in% orha'e a short position in% the numer of shares to e deli'ered% or , reference to*hich the amount pa,ale is deri'ed or (in the case of stoc) futures onl,# therele'ant contract multiplier (Section 2--("-##.

3. #!#%!TIO$ OF 0"&SO$4S I$T"&"ST

Long Positions

+he percentage figure of an interest in shares should e determined using thefollo*ing formula6

nominal 'alue of shares in *hich a person is interested & "

nominal 'alue of the issued shares of the listed compan, of the same class

Short Positions

+o calculate *hether a short position constitutes "3 or more% a similar formula cane used6

nominal 'alue of shares in *hich a person has a short position & "

nominal 'alue of the issued shares of the listed compan, of the same class

=ote that this *ill include all issued shares and shares underl,ing e$uit, deri'ati'es *hether issuedor unissued.

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+he forms re$uire the percentagefigureto e rounded to - decimal places. +o findthepercentage levelof the interest the percentagefigureis rounded do*n to the ne&t*hole numer.

+he date for calculating the rele'ant percentage is the date of occurrence of the

rele'ant e'ent and the numer of shares in *hich a person is interested and the totalnumer of issued shares should e determined on that da,.

5. $OTIFI#TIO$ OF #H$("S I$ TH" $T%&" OF I$T"&"STS

>n, change in the nature of an interest alread, notified is re$uired to e disclosedunder Section 2"2(d#. +he situations in *hich there is considered to e such achange are e&tensi'e and include a change in the nature of a person4s title to shares%an, of the person4s interest *hether legal or e$uitale or an, of the person4s interestin the underl,ing shares of e$uit, deri'ati'es on the e&ercise of rights thereunder(*hether , or against him#.

Common situations re$uiring notification of a change in interest *ill include6

(i# the e&ercise of rights (, or against a person# under options and otherderi'ati'es7

(ii# the lending of shares under a securities orro*ing and lending agreement(unless the Securities Iorro*ing and ending A&emption applies see

paragraph "-.J elo*#7 and

(iii# the gi'ing of shares as securit, to another person.

+here is not considered to e a change in the nature of an interest underSection 2"2("2# and Section of the Securities and Futures (0isclosure of :nterests

A&clusions# 9egulation6

(i# *here a purchaser ta)es deli'er, of shares% if he has pre'iousl, disclosed hise$uitale interest arising on contracting to u, the shares7

(ii# *here a 'endor of shares enters into a contract for sale% if the sale is re$uiredto e completed *ithin 1 da,s on *hich the Stoc) A&change is open for

usiness7

(iii# *here there is a change in the terms on *hich rights under e$uit, deri'ati'esma, e e&ercised *hich results from a change in the numer of underl,ingshares in issue7

(i'# on the e&ercise of rights to suscrie for or on deli'er, of shares under arights issue7

('# *here a 8$ualified lender; comes to ha'e a securit, interest in a person4sshares (see paragraph "-.1 elo*#7 and

('i# *here the person is a holding compan, and the transfer is of shares from one

*holl, o*ned susidiar, to another (see paragraph "-. elo*#.

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6. *HT #O$STIT%T"S $ I$T"&"ST I$ SH&"S,

+he definition of an 8interest in shares; is e&tremel, road and includes thesituations set out in Schedule " hereto.

6.' Buying and Selling Shares

> u,er of shares ac$uires an interest in shares at the time *hen he contracts to u,and therefore is re$uired to gi'e notification *ithin 2 usiness da,s of the contract.

=o further notice is re$uired *hen the u,er ta)es deli'er, of the shares.

> seller of shares *ill normall, onl, cease to ha'e an interest *hen he actuall,transfers the shares to the u,er and is therefore re$uired to notif, the cessation ofhis interest *ithin 2 usiness da,s after the settlement date (i.e. the date of the actualtransfer#. :f the contract for sale of the shares pro'ides for settlement *ithin 1 da,son *hich the Stoc) A&change is open for usiness% notification , the seller is not

re$uired on the entering into of the contract.

:f in fact a seller ceases to e interested in the shares on the date of the contract forsale (e.g. due to the operation of the clearing s,stem#% then notice should e filed*ithin 2 usiness da,s of the contract for sale.

:f a contract for sale specifies a settlement date *hich is or more da,s on *hich theStoc) A&change is open for usiness after the date of the contract% then - notices arere$uired6 first% a notice of change in nature of the interest *hich must e filed *ithin2 usiness da,s of the contract and second% a notice of cessation of interest to efiled *ithin 2 usiness da,s of deli'er, of the shares.

7. D""2"D I$T"&"STS

+here are a numer of circumstances *here the interests and deri'ati'e interests(including short positions# of others in a listed compan,4s shares must e added to a

person4s o*n interest in calculating the numer of shares in *hich the, areinterested.

7.' Family and Controlled Company Interests (Section 3!"

:nterests of a person4s spouse and children under "E are attriutale to him.

>lso% a person *ill e deemed to e interested in the interests of an, compan, *hichhe 8controls; (i.e. a compan, of *hich he controls% either directl, or indirectl,% onethird or more of the 'oting po*er at general meetings or if the compan, or itsdirectors are accustomed to act in accordance *ith that person4s directions#.

7.) Limited Lia#ility Partnerships

+he SFC Outline confirms that the SFC regards a limited liailit, partnership as acompan, for the purposes of Part XV. Hence interests in shares held , a limitedliailit, partnership should e disclosed , the general partner as interests in sharesof a controlled corporation (rather than as oint interests of each partner#.

7.- $rusts

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+he interests of a trust of *hich a person is a trustee must also e aggregated *ithhis o*n interests (*ith the e&ception of a trust of *hich he is a are trustee (i.e. hisonl, po*ers or duties are to transfer the underl,ing shares according to thedirections of the eneficial o*ner see paragraph "-.! elo*#.

> eneficiar, of a trust must include the interests of the trust in calculating his o*ninterest (Section 2--(1#(a##. +he interest of a eneficiar, under a discretionar, trustis ho*e'er disregarded (Section 2-2("#(a#(iii# pro'ided that he is not also a directorof the rele'ant listed compan, or a 8founder; of the trust (see paragraph J.1 elo*#.

7./ %Founders& of 'iscretionary $rusts

+he interests of a 8discretionar, trust; are attriuted to the 8founder; of such trust(Section 2--(1#(##. +he term 8founder; is 'er, *idel, defined and essentiall, *illcatch an,one *ho has procured the creation of the trust and (i# *hose consent is a

condition of a trustee4s e&ercise of his discretion or (ii# in accordance *ith *hose*ishes a trustee is accustomed or e&pected to act (*hether% in either case% legall,enforceale or not#.

7.1 Concert Party greements (Section 3)"

:n essence% the pro'isions appl, *here t*o or more persons agree to ac$uire sharesin a target compan, and the agreement dictates the manner in *hich an, one or moreof the parties ma, e&ercise the rights attached to those shares or dispose of them.Aach part, to the agreement must include the interests of all other parties to theagreement in determining *hether the, together hold 3 or more of the listedcompan,. :f so% each part, *ill e considered to e a sustantial shareholder *hoseinterests must e disclosed.

+he pro'isions also co'er an, arrangement *here, a 8controlling person; ordirector of a listed compan, ma)es a loan to a person on the understanding that themone, *ill e used to ac$uire interests in shares in that compan, and shares are infact ac$uired. > 8controlling person; for these purposes is an, person *ho% eitheralone or *ith associates% controls at least 23 of the 'oting po*er at generalmeetings% can nominate an, of its directors or 'eto or modif, an, resolution of ageneral meeting.

+he effect of this is to create an irreutale presumption that the loan or funding *ill

e pro'ided pursuant to an agreement dictating ho* the orro*er ma, deal *ith hisshares.

+here is an e&emption *here a 8controlling person; or director ma)es the loan in theordinar, course of his usiness as a 8$ualified lender; (as defined under

paragraph "-.1 elo*#.

5here - or more persons are interested in the same shares the, must each ma)eseparate disclosure of their interests. Hence if X controls L td. *hich holds D3 ofa listed compan, and L imited ac$uires a further "3% then X% his spouse and Limited must each file a separate notice.

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'8. DIS#!OS%&" OB!I(TIO$S &"S%!TI$( F&O2 SH&"&"0%HS"S $D 0!#"2"$TS

0isclosure oligations ma, also arise from actions ta)en , others. For e&ample% ifa listed compan, u,s ac) shares there, reducing the numer of shares in issue%

an increase in the percentage le'el of the interests of the remaining shareholders *ille discloseale.

Con'ersel,% in the case of a placement and top@up% *here ne* shares are issued to amaor shareholder to replace the shares he has placed *ith a third part,% the numerof shares in issue increases. +he conse$uent reduction in the percentage le'el of theinterests of the other shareholders *ill then e discloseale.

:n oth cases% the 2 usiness da, time limit for disclosure runs onl, from the date theperson concerned ecame a*are of the facts that led to the change in the le'el of hisinterest i.e. the date on *hich he ecame a*are that the numer of issued shares had

reduced?increased.

''. #"SSTIO$ OF I$T"&"STS 9S"#TIO$ -))9'8::

> person is regarded as ha'ing ceased to e interested in shares if6

(i# he deli'ers them to another person (or to his order# pursuant to a contract forsale% in fulfilment of his oligations under a call option% or on e&ercising hisrights under a put option7

(ii# his right to suscrie for or call for the deli'er, of shares lapses or he assignssuch right to another7

(iii# his oligation to ta)e shares lapses or he assigns that oligation to another7

(i'# he recei'es an amount from another person% or a'oids or reduces a loss% onthe assignment or settlement of an, cash settled e$uit, deri'ati'es.

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+here are a numer of e&emptions and interests *hich ma, e disregarded. +heseare 'er, detailed% hence the follo*ing is limited to a rief outline onl, of the

principal e&emptions and disregards.

').' Bas*et 'eri+ati+es

Ias)et deri'ati'es o'er the shares of at least companies listed on a 8specified;stoc) e&change are disregarded pro'ided that no one share accounts for o'er 23 ofthe 'alue of the total as)et. +he percentage figure is calculated at the time of issueof the deri'ati'es.

').) 'e ,inimis Change -.emption on Change in Long or Short Positions(Sections 33()" and (/""

+he e&emption applies so that an increase or decrease in a persons holding or shortposition *hich results in his interest crossing o'er a percentage le'el ao'e 3 (in

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the case of a holding# or "3 (in the case of a short position# *ill not e disclosealeif6

(i# the percentage levelof his interest is the same as% or less than% the percentagelevelof his interest stated in the 8ast =otification; gi'en , him7 and

(ii# the difference et*een the percentagefigureof his interest disclosed in his8ast =otification; and the percentagefigureof his interest at all times aftersuch notification% is less than .3.

8Percentage level; in (i# ao'e means the percentage figure rounded do*n (if not a*hole numer# to the ne&t *hole numer. 8Percentage figure; in (ii# ao'e%ho*e'er% means the actual (unrounded# percentage figure.

+he 8ast =otification; must% in the case of a holding% e a notice gi'en underSection 2"2("#(c# that is notice of a change in the percentage le'el of a person4s

interest ao'e 3. Hence a notification gi'en on commencement of the SFO% onfirst crossing the 3 threshold or of a change in the nature of an interest *ill not$ualif, as a 8ast =otification;. :n the case of a short position% the 8ast

=otification; must e a notice gi'en under Section 2"2(1#(c#% that is notice of achange in the percentage le'el of a person4s short position ao'e "3.

+his e&emption *ill not therefore appl, if the percentage le'el of a person4s interesthas increased since his ast =otification or if at an, time after such notification his

percentage interest differed , .3 or more from the percentage figure of hisinterest stated in that notification.

').- 'e ,inimis Change -.emption on Change in the Nature of Interests(Section 33(0""

+here is no dut, of disclosure *here6

(i# the 8percentage le'el; (i.e. the rounded do*n figure as e&plained ao'e# of aperson4s unchanged interest (i.e. disregarding the part in *hich his interesthas changed# is the same as the percentage le'el of his interest in the lastnotice (this notice is not restricted to notices of change in the percentagele'el of an interest# gi'en , him7 or

(ii# the percentage le'el of a person4s unchanged interest has crossed o'er a

percentage le'el if6

(a# the percentage le'el of his unchanged interest is the same as or lessthan the percentage le'el of his interest gi'en in the 8ast

=otification; , him (i.e. a notice under Section 2"2(c# of a changein the le'el of a person4s interest ao'e 3#7 and

(# the difference et*een the percentage figure (i.e. the actualunrounded figure as noted ao'e# of his unchanged interest and the

percentage figure disclosed in the ast =otification has een less than.3 at all times since the gi'ing of that notification.

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+he SFC4s Outline of Part XV contains detailed e&amples illustrating the *or)ingsof the de minimis e&emptions.

')./ -.empt Security Interests (Section 313(!""

>n interest in shares is not re$uired to e disclosed if it $ualifies as an 8e&emptsecurit, interest; i.e. if it is held , a 8$ualified lender , *a, of securit, onl,; for atransaction entered into in the ordinar, course of his usiness (Section 2-2(D##.Further% the creation of the securit, interest in fa'our of a 8$ualified lender; *ill notresult in a change in the nature of the holder4s interest in those shares(Section 2"2("2##.

> 8$ualified lender; is defined under Section 2E to include an authorised financialinstitution% an authorised insurance compan,% an e&change participant of arecognised e&change compan, and an intermediar, licensed to deal in securities ormargin financing. +he term also no* includes o'erseas institutions authorised to

carr, on usiness as a an)% insurance compan, or acti'ities *hich% in the opinion ofthe SFC% are e$ui'alent to the regulated acti'ities of intermediaries in countriesrecognised , the SFC.

>s to *hen a $ualified lender is ta)en to hold an interest in shares 8, *a, ofsecurit, onl,;% a distinction is dra*n et*een the creation of a securit, interest in%and a transfer of title to% shares. :f a person has a right to return e$ui'alent sharesand ma, deal *ith the shares transferred to him as if the, are his o*n in themeantime% this is a transfer of title and not the creation of a securit, interest.

Gnder Section 2-2(!# an interest *ill no longer $ualif, as an 8e&empt securit,interest; if the $ualified lender ecomes entitled to e&ercise 'oting rights of therele'ant shares due to default , the person *ho ga'e the securit,% and sho*s anintention or ta)es an, step to e&ercise or control the e&ercise of those 'oting rights.Similarl,% an interest *ill cease to e an 8e&empt securit, interest; if the po*er ofsale ecomes e&ercisale and the $ualified lender or its agent offers for sale all oran, of the shares. :n either case% the $ualified lender is regarded as ha'ing ac$uiredan interest in the shares and is oliged to disclose his interest.

').1 2holly Oned 4roup -.emption (Section 33(5""

> *holl, o*ned susidiar, is not re$uired to notif, an interest in certaincircumstancesif its ultimate holding compan, has gi'en notice of its interest in the

rele'ant shares. +he certain circumstances in *hich *holl, o*ned susidiaries aree&empted are those *here the disclosure oligation arises under Sections 2"2("#or (1# (as set out in paragraph -." ao'e#. Significantl,% the *holl, o*ned groupe&emption is not a'ailale on the ma)ing of an 8:nitial =otification; underSections 2"(-# and (2# (i.e. notice gi'en *hen the SFO came into force% *hen aninterest is held in shares in a compan, *hich is eing listed or *hen a notifialeinterest is ac$uired on a reduction of the 3 threshold or "3 threshold for short

positions is reduced (see paragraph -.- ao'e#. Hence% if a *holl, o*ned susidiar,holds an interest of 3 or more in the shares of another compan, at the time thatother compan, ecomes listed% it cannot rel, on the *holl, o*ned group e&emption6instead oth the *holl, o*ned susidiar, and its holding compan, *ill e oliged to

separatel, disclose the interest in the shares held , the susidiar,.

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Further% transactions et*een *holl, o*ned susidiaries of the same group do notgi'e rise to a dut, of disclosure since the numer of shares in *hich the ultimate

parent is interested or has a short position and the nature of its interest remains thesame. Hence transfers of shares of a listed compan,% the grant and ta)ing of optionso'er such shares and the issue of *arrants et*een *holl, o*ned susidiaries of the

same group do not gi'e rise to a dut, of disclosure.

> dut, of disclosure *ill arise if an, rele'ant susidiar, ceases to e *holl, o*ned%e'en if onl, "3 of its shares are sold to a third part,.

').3 Bonus and 6ights Issue -.emption

5hen there is a rights issue shareholders ecome interested in the unissued sharesco'ered , the issue. :n calculating their percentage interest the follo*ing formulashould e used (Section 2"1(-##6

nominal 'alue of shares (including unissued shares#in *hich the shareholder is interested

& "nominal 'alue of shares of the listed compan, of the same class in issue

M nominal 'alue of shares to e issued on completion of the onus?rights issue

+his is the onl, situation *here the denominator is increased to ta)e account of unissued shares.

Shareholders of listed companies *ho ta)e up rights under $ualif,ing onus andrights issues (and *hose percentage interest therefore remains unchanged# are notre$uired to ma)e an, disclosure *hereas shareholders *ho do not ta)e up theirrights (and *hose percentage interest therefore changes# *ill ha'e to ma)e

disclosure.

:f a shareholder sells his rights% oth he and the u,er must ma)e disclosure if theirinterests cross a percentage le'el.

> rights issue is defined to include the offer , a listed compan, of its shares toholders of its issued shares at a certain date (other than to shareholders *hoseaddress is in a place *here such an offer is not allo*ed under local la*# in

proportion to the numer of shares held , them at that date. > rights issue does notho*e'er co'er an offer or issue of shares in lieu of a cash di'idend.

+he under*riter of the rights issue *ill ac$uire an interest in all rights shares that heagrees to ta)e up if the, are not ta)en up , shareholders. +he under*riter *ill thenneed to file notice of cessation of his interest in the numer of rights shares ta)en up

, shareholders on completion of the rights issue.

').5 In+estment ,anagers7 Custodians and $rustees

+he e&emption pre'iousl, a'ailale to local SFC registered in'estment managersand trust companies is remo'ed. +he follo*ing e&emptions ma, ho*e'er e reliedon6

Bare Trustee Exemption

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> narro* e&emption is retained for are trustees i.e. a trustee *ho is onl, entitled todeal *ith the interest in accordance *ith the instructions of the eneficiar,.

Exempt Custodian Interest (Section !(""

+he interests of corporate custodians carr,ing on a usiness of holding securities incustod, for others need not e disclosed pro'ided that the custodian has no authorit,to e&ercise discretion in dealing in the shares or e&ercising the rights attached tothose shares.

').6 'isaggregated 4roup Interests (Section 3!(8""

/ore importantl,% the SFO remo'es the oligation of a holding compan, toaggregate the interests of controlled companies (see paragraph J." ao'e# *ho arein'estment managers% custodians or trustees *hose interest in the shares arises solel,from their oligation or entitlement to in'est in% manage% deal in or hold interests in

those shares on ehalf of customers in their ordinar, course of usiness as such. Forthe e&emption to appl, the controlled compan, must e&ercise an, rights to 'ote inrespect of the shares and an, po*er to in'est in% manage% deal in or hold the shares%independentl, of its controlling compan, and an, 8related corporations; (i.e.companies *ithin the same group or under the same maorit, control (Section 2 ofSchedule "##.

+his e&emption is a'ailale for the fund management industr, onl,. :t does notentitle famil, memers *hose interests in the shares of 8famil, controlled; listedcompanies are held , trustees to disaggregate such interests. > trustee of a trustdoes not ha'e 8customers; and *ill proal, not e 8carr,ing on a usiness; as anin'estment manager% custodian or trustee. +he terms 8in'estment manager; and8trustee; are specificall, defined in Section 2"D(!#.

').7 Securities Borroing and Lending -.emption

+he Securities and Futures (0isclosure of :nterests Securities Iorro*ing andending# 9ules (8SI 9ules;# simplif, the regime for disclosure of securities

orro*ing and lending for sustantial shareholders (other than sustantialshareholders *ho are also directors#% 8appro'ed lending agents; and 8regulated

persons;.

Substantial Shareholders

Sustantial Shareholders are e&empted from disclosing changes in the nature of theirinterest arising on the lending and return of shares pro'ided that the, lend sharesthrough an 8appro'ed lending agent; (see elo*# *ho holds the shares as their agentfor the sole purpose of lending shares and the shares are lent using a specified formof agreement. :n essence% this is an agreement pro'iding for the orro*er to pro'idecollateral e&ceeding the 'alue of the shares lent. +he 'alue of the collateral ismar)ed to mar)et and the lender can re$uire return of the shares at an, time.

#pproved $ending #gents

Companies appro'ed , the SFC as 8>ppro'ed ending >gents; (8>>s;# holding3 or more of the shares of a listed compan, *ill onl, e re$uired to disclose

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changes in the percentage le'el of its 8lending pool; of shares in that listedcompan,. Hence if shares are added to or remo'ed from the lending pool% adisclosure oligation *ill arise. >>4s are e&empted from an, disclosurere$uirements arising *hen shares are lent from or returned to their lending pool.

%egulated Persons

:nterests in shares orro*ed , 8regulated persons; (i.e. companies licensed to dealin securities and o'erseas ro)ers in recognised urisdictions#% that merel, act as aconduit (i.e. the, orro* and on@lend the shares *ithin usiness da,s# aredisregarded. On the return of shares to the regulated person% it ma, either returnthem to the ultimate lender or lend them to another orro*er. Pro'ided this is done*ithin usiness da,s% the regulated person4s interest is disregarded. 9egulated

persons can still rel, on this e&emption if it transfers shares to a related compan,pro'ided that the related compan, on@lends the shares *ithin usiness da,s afterthe, *ere ac$uired , the regulated person.

Ioth >>s and regulated persons are re$uired to )eep records of their transactionsin the shares.

').'8 Collecti+e In+estment Schemes (Section 313("(c""

+he interests of holders% trustees and custodians of collecti'e in'estment schemesauthorised , the SFC% certain pension and pro'ident funds schemes and $ualifiedo'erseas schemes are not re$uired to e disclosed.

> 8$ualified o'erseas scheme; means a collecti'e in'estment scheme% pensionscheme or pro'ident fund scheme estalished in a countr, recognised , the SFC. :t*ill not include a scheme *hich is not run as a usiness% has less than " holders or*here less than persons hold !3 or more of the interests in it (Section 2-2(##.

').'' Intermediary -.emption (Section 313("(i""

+he SFO pro'ides an e&emption for an intermediar, (e.g. a dealer or ro)er#licensed or registered for dealing in securities *ho ac$uires interests in shares asagent for his client. +he e&emption onl, applies if (i# the interest is ac$uired for(and from# someone *ho is not a related compan, of the intermediar, and (ii# theinterest is held , the intermediar, for not more than 2 usiness da,s.

> similar e&emption applies to intermediaries *hose interests arise under e&changetraded stoc) futures or stoc) options contracts.

').') Further -.emptions

(i# 0ual listings6 a compan, ma, appl, to the SFC for e&emption from thepro'isions of Part XV if it is listed on an o'erseas e&change and certain othercriteria are met.

(ii# Structured products6 the issuer of structured products ma, appl, to the SFCfor an e&emption from Part XV. +he main conditions to e satisfied are that

the compan,4s shares are not listed in Hong Kong% it does not intend to raisepulicl, traded e$uit, capital in Hong Kong and onl, the structured products

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*ill e listed in Hong Kong. :t is the sustantial shareholders and directorsof the issuer of the structured products *ho are ale to claim the e&emption.+he issuer and holders of the e$uit, deri'ati'es must still include interests inthe underl,ing shares of those deri'ati'es in determining their disclosureoligations.

'-. I$FO&2TIO$ TO B" DIS#!OS"D 9S"#TIO$ -)3:

+he SFO re$uires the filing of structured notification forms to facilitate disclosure.>mong the details to e disclosed , a sustantial shareholder are the follo*ing6

". :n the case of corporate sustantial shareholders% the name and address ofan, person in accordance *ith *hose directions it% or its directors areaccustomed or oliged to act% e&cept *here it is listed in Hong Kong or on aspecified stoc) e&change or is the *holl, o*ned susidiar, of an, suchlisted compan,.

-. :n the case of suse$uent disclosures of long positions in shares disclosure isre$uired of the highest price and a'erage price per share paid or recei'ed inan on@e&change transaction. :n off@e&change transactions the highest anda'erage consideration per share and nature of the consideration must edisclosed. :f no price or consideration has een paid or recei'ed% this should

e stated. +ransactions in e$uit, deri'ati'es do not re$uire details of price orconsideration.

2. :n the case of e$uit, deri'ati'es% details as to *hether the, are listed orunlisted% cash or ph,sicall, settled% and details of the underl,ing shares.

'/. TI2I$( OF $OTI#"

=otices should e filed *ith the Stoc) A&change and the rele'ant listed compan, atthe same time or one immediatel, follo*ing the other (Section 2-1(-##.

'1. FO&2S TO B" %S"D

+here are D separate forms to e used for notification of interests under the SFO.+hese are6

Form " :ndi'idual Sustantial Shareholder =otice

Form - Corporate Sustantial Shareholder =otice

Form 2> 0irector4s?Chief A&ecuti'e4s =otice of :nterests in Shares of a isted

Compan,

Form 2I 0irector4s?Chief A&ecuti'e4s =otice of :nterests in Shares of

>ssociated Corporation

Form 2C 0irector4s?Chief A&ecuti'e4s =otice of :nterests in 0eentures of

isted Compan,

Form 20 0irector4s?Chief A&ecuti'e4s =otice of :nterests in 0eentures of

>ssociated Compan,

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+he forms and notes thereto can e do*nloaded in Chinese and Anglish from theHong Kong A&change and Clearing imited *e@site or the SFC *esite.

+he forms can e printed out and completed manuall,. >lternati'el, the, area'ailale in /icrosoft A&cel format and can e completed offline using the A&cel

programme.

Directors who are also Su@stantial Shareholders must use Form - 9anneedhereto: instead of Form ' to disclose interests in shares of a listed comCanA ofwhich theA are directors.

:f an e'ent gi'es rise to separate disclosure oligations in each capacit, (as directorand sustantial shareholder#% oth oligations can e fulfilled , filing Form 2>.For e&ample% if a person has a .J3 interest in the shares of a listed compan, andac$uires a further .-3% he must file a notice as a director (*ho must disclose alltransactions# and as a sustantial shareholder ecause his interest has crossed a

percentage le'el.

'3. 0"$!TI"S FO& FI!%&" TO DIS#!OS" 9S"#TIO$ -)6:

Failure to ma)e disclosure *ithin the time limits re$uired , the SFO or the ma)ingof a statement *hich is false or misleading in an, material particular constitutes acriminal offence carr,ing a ma&imum fine of N"% or ma&imum prison sentenceof - ,ears for each offence. /emers and officers of a compan, can also e

personall, liale for the offences of a compan,. +he Financial Secretar, ma, furtherimpose restrictions on the transfer of the shares of an, person con'icted of anoffence.

B. DI&"#TO&S$D#HI"F";"#%TI"S

'. DIS#!OS"B!" I$T"&"STS

+he disclosure re$uirements for directors and chief e&ecuti'es (8directors;# of alisted compan, are roader than for sustantial shareholders re$uiring disclosure ofinterests in an, shares (not ust 'oting shares# or deentures of the listed compan, of*hich the, are a director and an, associated compan,. +here is no disclosurethreshold so that all interests must e disclosed ho*e'er small.

+he principal changes introduced , the SFO *ere to e&tend directors disclosure

oligations in respect of interests in e$uit, deri'ati'es% short positions and changesin the nature of interests in shares and deentures.

'.' 'efinition of ssociated Company

>n associated compan, is defined to include holding companies and susidiaries ofthe listed compan,% fello* susidiaries of the listed compan,s holding companiesand an, compan, in *hich the listed compan, has an interest of more than -3 ofthe nominal 'alue of the issued shares of an, class (Section 2E#.

> compan, *ill e a susidiar, of another if the other compan, controls the

composition of its oard of directors% controls half the 'oting po*er at generalmeetings% holds more than half of its issued share capital (e&cluding an, part

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carr,ing no right to participate e,ond a specified amount on a distriution of profitsor capital# or is a susidiar, of a compan, *hich is the other compan,s susidiar,.+his definition thus ma)es each compan, in a chain of companies a susidiar, of theultimate holding compan, (Section - of Schedule "#.

). *H"$ IS $OTIFI#TIO$ &"+%I&"D,

).' Notifications Shortening of Notification Period

Section 21" re$uires that a director of a listed compan, must disclose an, of thefollo*ing 8rele'ant e'ents;6

(i# *hen he ecomes interested in the shares or deentures of a listed compan,or an, associated compan,7

(ii# *hen he ceases to e interested in such shares or deentures7

(iii# *hen he enters into a contract to sell an, such shares or deentures7

(i'# *hen he assigns an, right granted to him , the listed compan, to suscriefor shares or deentures of the listed compan,7

('# *hen an associated compan, grants him rights to suscrie for shares ordeentures of that associated compan,% or if he e&ercises or assigns suchrights7

('i# *hen the nature of his interest in the shares or deentures of the listedcompan, or an, associated compan, changes7 and

('ii# *hen he comes to ha'e or ceases to ha'e a short position in the shares of alisted compan, or an, associated compan,.

>s for sustantial shareholders% the notification period is 2 usiness da,s.

).) Initial Notifications

>n 8:nitial =otification; is re$uired in the follo*ing circumstances6

(i# *here a director has an interest in shares and deentures at the time the

compan, ecomes listed (Section 21"(-#(a##7

(ii# *here a director has an interest in shares and deentures at the time heecomes a director of a listed compan, (Section 21"(-#(c##7 and

(iii# *here a director of a listed compan, has an interest in shares and deenturesin the shares of another compan, at the time that compan, ecomes anassociated compan, of the listed compan, (Section 21"(-#(d##.

+he period for notification in the case of an :nitial =otification is " usiness da,s.

-. I$T"&"STS I$ SH&"S %$D"& "+%ITY D"&ITI"S

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>s for sustantial shareholders% the disclosure oligations of directors under the SFOe&tend to interests in e$uit, deri'ati'es *hich are not ph,sicall, settled (i.e. interestsin unissued shares such as options and interests under cash settled deri'ati'es#. Fordirectors this includes interests in the shares of the listed compan, and its associatedcompanies.

+he circumstances in *hich a person *ill e ta)en to ha'e a long position in theunderl,ing shares of e$uit, deri'ati'es and the method of calculating the numer ofshares in *hich he is interested are the same as for sustantial shareholders.

/. SHO&T 0OSITIO$S

0irectors must disclose all short positions under e$uit, deri'ati'es. > person *ill eta)en to ha'e a short position in the same situations as for sustantial shareholders(see paragraph 1 under Sustantial Shareholders# and the method of calculating thenumer of shares in *hich he is interested is the same. Similarl,% the SFO does not

permit the netting off of long and short positions and re$uires each to e disclosedseparatel,.

1. #!#%!TIO$ OF 0""$T(" FI(%&" OF DI&"#TO&S4I$T"&"STS

>lthough the oligation of directors to disclose interests in shares is not determined, crossing a percentage le'el% directors are still re$uired to state the percentagefigure of their interests.

3. #H$("S I$ TH" $T%&" OF I$T"&"STS

0irectors are further re$uired to disclose an, change in the nature of an interest*hich has pre'iousl, een disclosed. +he situations in *hich there *ill e such achange are *ide and include a change in a person4s title to shares or deentures% an,of his legal or e$uitale interest in shares or deentures and an, interest in theunderl,ing shares of e$uit, deri'ati'es on the e&ercise (, or against him# undersuch deri'ati'es.

+he e&ercise of rights under options and other deri'ati'es and the gi'ing of shares assecurit, (other than to a $ualified lender see paragraph "-.1 for the definition of$ualified lender# *ill% among other things% re$uire notification of a change in natureof a director4s interest.

+here are onl, 2 circumstances under Section 21"(# in *hich there is ta)en to e nochange in the nature of a director4s interest6

(i# on the deli'er, of shares or deentures to him% if he has pre'iousl, notifiedhis ac$uisition of an e$uitale interest7

(ii# *here there is a change in the terms on *hich underl,ing shares are held dueto a change in the numer of underl,ing shares7 and

(iii# *here a $ualified lender (see ao'e# comes to ha'e a securit, interest in the

shares or deentures.

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Hence% in contrast to the position for sustantial shareholders% there *ill e anotifiale change in the nature of a director4s interest in shares on his e&ercise ofrights to suscrie for and on deli'er, of shares under a rights issue.

5. D""2"D I$T"&"STS 9S"#TIO$ -//:

> director is ta)en to e interested in the interests of his spouse and minor children(not eing themsel'es directors of the listed compan,#% an, compan, *hich hecontrols (i.e. a compan, of *hich he controls the e&ercise of one third or more of the'oting po*er at general meetings or *hose directors are accustomed or oliged toact in accordance *ith his directions or instructions# and trusts. > director must alsodisclose his interest under a discretionar, trust.

>lthough directors are not re$uired to include the interests of a spouse or minorchildren *ho are themsel'es directors and chief e&ecuti'es of the listed compan,*hen disclosing their interests as a director or chief e&ecuti'e% if the, are also a

8sustantial shareholder; the, must also disclose their interests held as such *hichmust include interests held , a spouse or minor children irrespecti'e of *hetherthe, are also directors of the compan,.

+he pro'isions relating to cessation of interests are the same as for sustantialshareholders.

6. ";"20TIO$S

+he e&emptions a'ailale to directors are limited to those in respect of as)etderi'ati'es% are trustees and collecti'e in'estment schemes% all as outlined underSection > ao'e.

:n particular% the e&emptions a'ailale to sustantial shareholders in respect ofde minimis changes% lending shares under the SI 9ules and onus and rights issuesare not a'ailale to directors.

7. I$FO&2TIO$ TO B" DIS#!OS"D 9S"#TIO$ -/7:

5here a director ma)es an 8:nitial =otification; he is re$uired% in the case of anon@e&change transaction% to disclose the highest price and the a'erage price paid forthe interest in the 1 months preceding the date of the rele'ant e'ent promptingnotification. :n an off@e&change transaction he must disclose the nature of the

consideration and the highest and a'erage amounts of considerations paid for theinterest *ithin the same 1 month period (Section 21J(1##.

Suse$uent notifications of ac$uisitions or disposals of interests must state% inon@e&change transactions% the highest and a'erage price paid or recei'ed (or if no

price is paid% that fact# and in off@e&change transactions the nature of theconsideration and the highest and a'erage price paid or recei'ed (or if no price is

paid% that fact#.

+he amount and nature of consideration need not e stated in the case of 8e$uit,deri'ati'es;. +his does not appl, to the grant to a director of e$uit, deri'ati'es , a

listed compan, or an, associated compan, or to the assignment of such rights in*hich case the price or consideration paid or recei'ed must e disclosed.

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'8. 0"$!TI"S FO& FI!%&" TO DIS#!OS"

Failure to ma)e disclosure *ithin the re$uired time frame or the ma)ing of false ormisleading statements constitute a criminal offence liale to the same fines and

periods of imprisonment as for sustantial shareholders (Section 2"#.

#. &"(IST&TIO$OFTH"I$T"&"STS$DSHO&T0OSITIO$SOFS%BST$TI!SH&"HO!D"&S< #HI"F";"#%TI"S$DDI&"#TO&S

isted companies are re$uired to maintain registers of interests and short positionsdisclosed to them (Sections 22D and 2-#. 0etails must e entered on the register*ithin 2 usiness da,s follo*ing the da, of receipt of information , the listedcompan, and the inde& must e updated *ithin " usiness da,s of a name eingentered on the register. :n addition% the register must disclose details of an, part,holding shares pursuant to a concert part, agreement (see paragraph J. ao'e#.

:f the register is not )ept at the compan,4s registered office% a listed compan, mustinform the 9egistrar of Companies of its *hereaouts using the prescried form ofnotice no* a'ailale on the SFC *esite. 0irectors and chief e&ecuti'es *ho arealso sustantial shareholders *ill gi'e notice of their interests using Form 2>. +heinformation gi'en in these notices must e registered on oth the register of interestsand short positions of directors and chief e&ecuti'es and also the register of interestsof sustantial shareholders.

:n addition% under Section 2-(2# a listed compan, is re$uired to record certaininformation *hen it grants to a director or chief e&ecuti'e a right to suscrie forshares or deentures of the compan,. +he information re$uired to e recordedagainst the person4s name is as follo*s6 the date on *hich the right is granted7 the

period during *hich% or the time at *hich% it is e&ercisale7 the consideration for thegrant (or if none% that fact#7 and a description of the shares or deentures in'ol'ed%the numer of shares or the amount of deentures and the price to e paid (orconsideration to e gi'en% if not in mone,#. 5hen an, such right is e&ercised , adirector or chief e&ecuti'e% the listed compan, is re$uired to record specifiedinformation aout that e&ercise in the register (Section 2-(1##. +he time limit forrecording information relating to the grant and e&ercise of such rights is 2 usinessda,s from the date the oligation to record arises.

Further% under Section 2-(1# *hen an, such right is e&ercised , a director or chief

e&ecuti'e% the listed compan, must record the follo*ing information against hisname in the register6

(a# the fact of the e&ercise (identif,ing the right#7

(# the numer of shares or amount of deentures in respect of *hich it has eene&ercised7 and

(c# if

(i# the, *ere registered in his name% that fact7 or

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(ii# the, *ere not registered in his name% the name or names in *hichthe, *ere registered and the numer of shares or amount ofdeentures registered in each name% if applicale.

+he time limits for the listed compan, to record the ao'e information in the register

are 2 usiness da,s after the date of the grant of the right to suscrie for shares ordeentures and 2 usiness da,s after the e&ercise of an, such right.

D. I$"STI(TIO$S OF SH&"HO!D"&S BY !IST"D #O20$Y

Gnder Section 2-J a listed compan, has the po*er to in'estigate the identit, ofholders of interests and short positions in its shares and also the o*nership of e$uit,deri'ati'es *here the underl,ing shares of such deri'ati'es are shares in that listedcompan,. >s under the pre'ious legislation% a listed compan, ma, e re$uired toe&ercise its po*ers of in'estigation on the re$uest of memers.

+he listed compan, is then under a dut, to inform the Stoc) A&change% the SFC and%in the case of authorised financial institutions onl,% the Hong Kong /onetar,>uthorit, of an, information recei'ed. +his notification must e gi'en efore theend of the usiness da, after the da, on *hich the dut, arises. +he listed compan,must prepare a report of the information recei'ed pursuant to an, such in'estigationand ma)e that report a'ailale at its registered office *ithin " usiness da,s of theend of the in'estigation and must deli'er a cop, of the report to the SFC and theStoc) A&change. :nformation recei'ed follo*ing an in'estigation must also erecorded in its register of interests and short positions.

Offences (Section 339"

:t is an offence for an,one to fail% *ithout reasonale e&cuse% to compl, *ith anin'estigation made , a listed compan, or to ma)e a false or misleading statementin response to such in'estigation.

Further% a listed compan, and e'er, officer *ho is in default commit an offence ifthe, fail to prepare a report and deli'er it to the SFC and the Stoc) A&change *ithinthe specified periods.

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$%&Y )8'1

This note is provided for information purposes only and does not constitute legal advice.Specific advice should be sought in relation to any particular situation. This note has been

prepared based on the la&s and regulations in force at the date of this note &hich may besubse'uently amended modified re)enacted restated or replaced.

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S#H"D%!" '

";20!"S OF *HT #O$STIT%T"S $ >I$T"&"ST? I$ SH&"S

(i# :f a person4s name is listed in the register of memers maintained , a listed

compan,.

(ii# :f the shares are held for a person , another person such as his stoc)ro)er%a custodian% a trustee or a nominee (e.g. in the Central Clearing andSettlement S,stem (8CC>SS;# or *ith HKSCC =ominees imited% theCC>SS depositor,#.

(iii# :f a person is deemed , Part XV to e interested in the shares.

(i'# :f a person enters into a contract (for e&ample if he holds% *rites or issuesfinancial instruments including e$uit, deri'ati'es# that gi'e him a right to

shares% or to a pa,ment in the e'ent of a change in the price of shares.

('# :f a person holds shares as securit,.

('i# :f a person is entitled to e&ercise rights attaching to the shares or control theire&ercise e.g. 'oting rights.

Disclosure of Interests Under the SFO in Hong Kong

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