Glossary

Throughout these due diligence guidelines, the following terms, save where otherwise specified or the context otherwise requires, have the meanings set out below. Terms used in referring to the provisions of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited which are not otherwise defined have the meanings given in those rules.

AATB 1 or Technical Bulletin

Technical Bulletin AATB 1 – Assistance Options to New Applicants and Sponsors in connection with Due Diligence Obligations, including Internal Controls over Financial Reporting, published by the Hong Kong Institute of Certified Public Accountants

A1 or Form A1

listing application form (for equity securities and debt securities) (see Form M103)

Agricultural Activity

the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets. Such activity covers a diverse range of activities e.g., raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture and aqua culture (including fish farming) (see paragraphs 5 and 6 of HKAS 41)

Application Proof

an advanced proof of the listing document submitted with the listing application under the Listing Rules (see Paragraph 17.15(a) of the Code of Conduct)

AP-Publication

an Application Proof to be published on the Exchanges website (see paragraph 1.3 of Exchange Guidance Letter GL56-13)

AP-Vetting

an Application Proof for the Exchanges vetting (see paragraph 1.3 of Exchange Guidance Letter GL56-13)

Biological Assets

a living animal or plant (Examples of biological assets include sheep, trees in a plantation forest, plants, dairy cattle, pigs, bushes, vines and fruit trees) (see paragraph 5 of HKAS 41)

board

board of directors

Bribery Act

UK Bribery Act 2010

CASBE

China Accounting Standards for Business Enterprises

CEO

chief executive officer

CFA Code

Corporate Finance Adviser Code of Conduct

CFO

chief financial officer

CIMVAL

Standards and Guidelines for Valuation of Mineral Properties endorsed by the Canadian Institute of Mining, Metallurgy and Petroleum, February 2003 (final version) as amended from time to time (see Listing Rule 18.01(3))

Code of Conduct

Code of Conduct for Persons Licensed by or Registered with the SFC

Companies Ordinance

the Companies Ordinance (Cap. 622 of the laws of Hong Kong)

Companies (Winding Up and Miscellaneous Provisions) Ordinance

the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the laws of Hong Kong)

Competent Person

a person that satisfies Listing Rules 18.21 and 18.22 (see Listing Rule 18.01(3))

Competent Persons Report

the public report prepared by a Competent Person on Resources and/or Reserves, in compliance with Chapter 18 of the Listing Rules (Listing Rules 18.18 to 18.33) and the applicable Reporting Standard as modified by Chapter 18 of the Listing Rules (see Listing Rule 18.01(3))

Consultation Conclusions on the Regulation of Sponsors

Consultation Conclusions on the regulation of IPO sponsors issued by the SFC on 12 December 2012

Consultation Conclusions on the Regulatory Framework for Pre-deal Research

Consultation Conclusions on the Regulatory Framework for Pre-deal Research issued by the SFC in June 2011

Consultation Conclusions to the Consultation Paper on the Regulation of Sponsors and Compliance Advisers

Consultation Conclusions to the Consultation Paper on the Regulation of Sponsors and Compliance Advisers issued by the SFC in April 2006

Consultation Paper on the Regulation of Sponsors

Consultation Paper on the regulation of sponsors issued by the SFC in May 2012

Consultation Paper on the Regulatory Framework for Pre-deal Research

Consultation Paper on the Regulatory Framework for Pre-deal Research issued by the SFC in September 2010

Contingent Resources

those quantities of Petroleum estimated, at a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies (see Listing Rule 18.01(3))

CSRC

the China Securities Regulatory Commission

D&O Questionnaire

a directors and officers questionnaire which the sponsor should consider using to collect information from the directors and members of senior management (as identified in the listing document) of the listing applicant

Disclosure Requirement

the requirement in Paragraph 17.14 of the Code of Conduct that the sponsor take reasonable steps to ensure that all material information, including forward-looking information (whether quantitative or qualitative) concerning a listing applicant or listing application disclosed or provided to analysts is contained in the relevant listing document

Dual Filing Update

a dual filing update published by the SFC. References to a dual filing update in the due diligence guidelines refer to the month of publication (e.g., SFC Dual Filing Update of July 2012)

eIPO

electronic initial public offering

EPC

engineering, procurement, construction

EU

European Union

Exchange or Stock Exchange

The Stock Exchange of Hong Kong Limited

expert

includes an accountant, engineer, appraiser and any other person whose profession gives authority to a statement made by him (see Paragraph 17.15(c) of the Code of Conduct and Listing Rule 3A.01(2))

expert report or expert section

in relation to a listing document, any part of the listing document purporting to be made on the authority of an expert or purporting to be a copy of or extract from a report, opinion, statement or valuation of an expert where the expert gives consent for the inclusion in the listing document of the copy or extract and the listing document includes a statement that he has given and has not withdrawn such consent (see Paragraph 17.15(d) of the Code of Conduct and Listing Rule 3A.01(3))

FAQs

frequently asked questions published by the Stock Exchange. These are referred to in the due diligence guidelines by reference to the series number (e.g., FAQ Series 19)

FATF

Financial Action Task Force

FCPA

US Foreign Corrupt Practices Act of 1977

GAAP

Generally Accepted Accounting Principles

GL55-13

Exchange Guidance Letter HKEx-GL55-13

GL56-13

Exchange Guidance Letter HKEx-GL56-13

Group or group

the listing applicant and its subsidiaries, if any

Guidance Letter

a guidance letter published by the Stock Exchange. References to Guidance Letters in the due diligence guidelines refer to the guidance letter number (e.g., Exchange Guidance Letter GL46-12)

guidelines or due diligence guidelines

these Hong Kong sponsor due diligence guidelines, and a guideline or a due diligence guideline means a chapter of these Hong Kong sponsor due diligence guidelines

HKAS 41

Hong Kong Accounting Standard 41 Agriculture

HKEx-GL86-16 or Guidance Letter 86-16

HKEx Guidance Letter 86-16 on producing simplified listing documents relating to equity securities for new applications

HKFRS

Hong Kong Financial Reporting Standards

HK GAAP

Hong Kong Generally Accepted Accounting Principles

HKICPA

Hong Kong Institute of Certified Public Accountants

HKSIR 400

Hong Kong Standard on Investment Circular Reporting Engagements 400, published by the Hong Kong Institute of Certified Public Accountants, as amended from time to time

Hong Kong

Hong Kong Special Administrative Region of the Peoples Republic of China

IFRS

International Financial Reporting Standards

Indicated Resource

that part of a mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence (see Listing Rule 18.01(3))

INED

independent non-executive director

IPO

initial public offering

JORC Code

the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition), as published by the Joint Ore Reserves Committee, as amended from time to time (see Listing Rule 18.01(3))

JV

joint venture

listing applicant

an applicant applying for a listing of its securities on the Stock Exchange (see Paragraph 17.15(e) of the Code of Conduct)

listing application

an application submitted by a listing applicant in connection with the listing of its securities and all documents in support of or in connection with the application, including any replacement of, and amendment and supplement to, the application (see Paragraph 17.15(f) of the Code of Conduct)

Listing Committee

the listing sub-committee of the board of directors of the Exchange

listing decision

a listing decision of the listing committee of the Stock Exchange. References to listing decisions in the due diligence guidelines refer to the relevant listing decision number (e.g., Exchange Listing Decision LD47-2013)

Listing Division

the Listing Department of the Exchange (see Listing Rule 1.01)

listing document

a prospectus, a circular and any equivalent document (including a scheme of arrangement and introduction document) issued in connection with a listing application (see Paragraph 17.15(g) of the Code of Conduct)

Listing Qualifications

the basic conditions set out in Chapter 8 of the Listing Rules that must be met as a pre-requisite to the listing of equity securities

Listing Rules

The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Main Board Listing Rules); references to the Main Board Listing Rules should also be taken to refer to the equivalent GEM Listing Rules (see Paragraph 17.15(h) of the Code of Conduct)

Management

includes a sponsors board of directors, managing director, chief executive officer, responsible officers, executive officers and other senior management personnel (see Paragraph 17.15(i) of the Code of Conduct)

MD&A

Management Discussion and Analysis of Financial Information and Condition (see Paragraph 17.8 of the Code of Conduct)

Measured Resource

that part of a mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence (see Listing Rule 18.01(3))

Mineral Company

a new applicant whose Major Activity (as defined in Listing Rule 18.01(3)) (whether directly or through its subsidiaries) is the exploration for and/or extraction of Natural Resources, or a listed issuer that completes a Relevant Notifiable Transaction (as defined in Listing Rule 18.01(3)) involving the acquisition of Mineral or Petroleum Assets (as defined in Listing Rule 18.01(3)) (see Listing Rule 18.01(3))

Mineral or Petroleum Assets

mineral assets and/or Petroleum assets or the equivalent as defined in either CIMVAL, the SAMVAL Code, or the VALMIN Code (see Listing Rule 18.01(3))

Misrepresentation Ordinance

the Misrepresentation Ordinance (Cap. 284 of the laws of Hong Kong)

Natural Resources

mineral and/or Petroleum (see Listing Rule 18.01(3))

new applicant

an applicant applying for a listing of its equity securities on the Exchange none of whose equity securities are already listed

news checks

searches of proprietary databases (e.g., World-Check) or using public search engines such as Google and/or any relevant home-country equivalents such as Baidu and Sohu

NGO

non-governmental organisation

NI 43-101

National Instrument 43-101

NPV

net present values

non-expert sections

in relation to a listing document, any part of the listing document that is not part of any expert report or expert section (see Paragraph 17.15(j) of the Code of Conduct and Listing Rule 3A.01(8))

non-expert third party

a third party who (1) is equipped with expertise in a certain area or areas, (2) is engaged by the sponsor to undertake certain due diligence tasks in the listing process by applying such expertise, and (3) usually prepares a report, opinion or a work product in another form that the sponsor relies on, but such report, opinion or work product will not be reproduced or included in the listing document

OFAC

the Office of Foreign Assets Control in the US

OFAC countries

countries subject to OFAC sanctions programmes

Paragraph 17

paragraph 17 of the Code of Conduct

Patriot Act

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001

Petroleum

a naturally occurring mixture consisting of hydrocarbons in the gaseous, liquid or solid phase, as further defined in PRMS (see Listing Rule 18.01(3))

PN21 or Practice Note 21

Practice Note 21 to the Listing Rules

PN22 or Practice Note 22

Practice Note 22 to the Listing Rules

Post Hearing Information Pack or PHIP

a near-final draft listing document for the listing of equity securities published on the Exchanges website (see Listing Rule 1.01)

PRC or China

the Peoples Republic of China, other than the regions of Hong Kong and Macau

PRC Governmental Body

for purposes of Listing Rules 19A.14 and 19A.19, includes (but not limited to):

(a) PRC Central Government, including the State Council of the PRC
(?????), State Ministries and Commissions (????), Bureaus and Administrations directly under the State Council (???????), State Council Offices and Institutions (???????????????? ?), Bureaus supervised by State Ministries and Commissions (???????);

(b) PRC Provincial-level Governments, including Provincial Governments
(???), Municipalities directly under the Central Government (???) and Autonomous Regions (???), together with their respective administrative arms, agencies and institutions.

(c) PRC local governments immediately under the PRC Provincial-level Governments, including prefectures (?), municipalities (?) and counties (?), together with their respective administrative arms, agencies and institutions.

Note: For clarity, entities under the PRC Government that are engaging in commercial business or operating another commercial entity will be excluded from this definition. (see Listing Rule 19A.04)

PRC issuer

An issuer which is duly incorporated in the PRC as a joint stock limited company (??????) (see Listing Rule 19A.04)

Principal

an individual that meets the criteria stipulated under the Sponsor Guidelines appointed by a sponsor to act as a Principal; in respect of a listing assignment, a Principal is an individual appointed by a sponsor to supervise the Transaction Team (see Paragraph 17.15(l) of the Code of Conduct)

PRMS

the Petroleum Resources Management System published by the Society of Petroleum Engineers, American Association of Petroleum Geologists, World Petroleum Council, and Society of Petroleum Evaluation Engineers in March 2007 as amended from time to time (see Listing Rule 18.01(3))

Pro Forma Standard

the professional reporting standard governing the Reporting Accountants reporting work, usually Hong Kong Standard on Assurance Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus issued by the Hong Kong Institute of Certified Public Accountants

Probable Reserves

(1) with regard to minerals, the economically mineable part of an Indicated, and in some circumstances, a Measured Resource.

(2) with regard to Petroleum, those quantities of Petroleum which analysis of geoscience and engineering data show are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves (see Listing Rule 18.01(3))

Proceedings

unresolved claims, allegations, disputes, litigations, investigations or proceedings

prospectus

has the same meaning as in section 2(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Proved Reserves

(1) with regard to minerals, the economically mineable part of a Measured Resource

(2) with regard to Petroleum, those quantities of Petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations (see Listing Rule 18.01(3))

public offer

in relation to a listing application, an offer for subscription or an offer for sale of securities to the public (see Paragraph 17.15(m) of the Code of Conduct)

Qualifications Tests

the profit test, the market capitalisation/revenue/cash flow test, or the market capitalisation/revenue test as set out in Listing Rule 8.05

Recognised Professional Organisation

a self-regulatory organisation of professional individuals in the mining or Petroleum industry which admits individuals on the basis of their academic qualifications and experience, requires compliance with professional standards of competence and ethics established by the organisation and has disciplinary powers including the power to suspend or expel a member (see Listing Rule 18.01(3))

Recommended Addenda

the set of proposed standard form documentation developed by an industry group in relation to the preparation of pre-deal research for Hong Kong IPOs, which includes a standard form research report guidelines, riders for existing forms of documents and additional forms of documentation, all of which are intended to address issues of complying with the SFCs regulations and to develop consistency across the market. Sponsors may choose to adopt the Recommended Addenda either in part or in full. The Recommended Addenda are set out in Appendix I to Chapter 30 Due Diligence Guidelines – Provision of Information to Analysts

red flag

a warning of danger or a problem. Please see in particular Paragraph 17.6(c) of the Code of Conduct which refers to circumstances that may cast doubt on information provided or otherwise indicate a potential problem or risk and, in the context of financial due diligence, please see section 12 of Chapter 12 Due Diligence Guidelines – Financial Due Diligence

Regulators

the SFC and/or the Stock Exchange, as appropriate (see Paragraph 17.15(n) of the Code of Conduct)

REIT

Real Estate Investment Trust

Reporting Accountant

the professional accountant or practising accountant who is responsible for the preparation of the accountants report included in a listing document or circular (in accordance with Chapter 4 of the Listing Rules) (see Listing Rule 1.01)

Reporting Standards

a recognised standard acceptable to the Exchange, including:

(1) the JORC Code, NI 43-101, and the SAMREC Code, with regard to mineral Resources and Reserves;

(2) PRMS with regard to Petroleum Resources and Reserves; and

(3) CIMVAL, the SAMVAL Code, and the VALMIN Code, with regard to valuations (see Listing Rule 18.01(3))

Report on Sponsor Theme Inspection Findings

a report on sponsor theme inspection findings published by the SFC. References in the due diligence guidelines refer to the month of publication (e.g., SFC Report on Sponsor Theme Inspection Findings of July 2012)

Report on Thematic Examinations

a report on thematic examinations of sponsor activities published by the Hong Kong Monetary Authority. References in the due diligence guidelines refer to the month of publication (e.g., Report on Thematic Examinations of November 2012)

Reserve

(1) with regard to minerals, the economically mineable part of a Measured, and/or Indicated Resource, taking into account diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments to a minimum of a Pre-feasibility Study must have been carried out. Mineral Reserves are sub-divided in order of increasing confidence into Probable Reserves and Proved Reserves.

(2) with regard to Petroleum, those quantities of Petroleum anticipated to be commercially recoverable by the application of development projects to known accumulations from a given date forward under defined conditions (see Listing Rule 18.01(3))

Resource

(1) with regard to minerals, a concentration or occurrence of material of intrinsic economic interest in or on the Earths crust in such form, quality and quantity that there are reasonable prospects for their eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured Resources, as defined in the JORC Code.

(2) with regard to Petroleum, Contingent Resources and/or Prospective Resources (see Listing Rule 18.01(3))

SAMREC

South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (see Listing Rule 18.01(3))

Securities and Futures Ordinance or the SFO

the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong)

SFC or Commission

The Securities and Futures Commission of Hong Kong

shadow director

a person in accordance with whose directions or instructions the directors, or a majority of the directors, of a company are accustomed to act (see section 2(1) of the Companies Ordinance)

Share Buy-backs Code

the Code on Share Buy-backs approved by the SFC as amended from time to time

Sponsor Guidelines

Additional Fit and Proper Guidelines for Corporations and Authorized Financial Institutions applying for or continuing to act as Sponsors and Compliance Advisers (see Paragraph 17.15(q) of the Code of Conduct)

Sponsors Declaration

the sponsors declaration in Appendix 19 to the Listing Rules

subsidiary

includes:

(a)a subsidiary undertaking as defined in the twenty-third schedule to the Companies Ordinance;

(b)any entity which is accounted for and consolidated in the audited consolidated accounts of another entity as a subsidiary pursuant to applicable HKFRS or IFRS; and

(c)any entity which will, as a result of acquisition of its equity interest by another entity, be accounted for and consolidated in the next audited consolidated accounts of such other entity as a subsidiary pursuant to applicable HKRFS or IFRS (see Listing Rule 1.01)

Takeovers Code

the Code on Takeovers and Mergers approved by the SFC as amended from time to time

Tax Advisers

the listing applicants external taxation advisers

Theft Ordinance

The Theft Ordinance (Cap. 210 of the laws of Hong Kong)

Title Certificates

land use right certificates and/or building ownership certificates for properties located in the PRC (see paragraph 1.1 of Exchange Guidance Letter GL19-10)

Transaction Documents

documents to be entered into in connection with a listing

Transaction Team

the staff appointed by a sponsor to carry out a listing assignment (see Paragraph 17.15(s) of the Code of Conduct)

UK

United Kingdom

US

United States of America

VALMIN

the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports [2005 edition), as prepared by the VALMIN Committee, a joint committee of The Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral Industry Consultants Association as amended from time to time (see Listing Rule 18.01(3))

VIE

Variable Interest Entity