Due Diligence Guidelines –
Provision of Information to Analysts
Addendum 4: Standard Form Research Report Guidelinesi
These guidelines incorporate the amendments to paragraph 16 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission of Hong Kong (“SFC”) and to paragraph 5 of the Code of Conduct for Corporate Finance Advisers. These amendments are applicable to research reports produced by investment firms regulated by the SFC, for initial public offerings where the Form A1 is submitted on or after 31 October 2011.
To: Prospective syndicate members
Re: Project [•] – Syndicate Analysts’ research reports
Guidelines and procedures
The distribution or use of research reports by prospective syndicate members and their affiliated analysts (“Syndicate Analysts”) in advance of an equity offering is a well established practice in many markets outside the United States (the “US”). The Hong Kong and US legal considerations relating to such dissemination of research reports have been enumerated by counsel on a number of occasions. The purpose of this memorandum is not to reiterate these legal considerations in detail, but to set forth the procedures (the “Procedures”) to be followed by all prospective syndicate members wishing to distribute research reports about [•] (the “Company”) (including industry sector reports that contain any analysis of the Company) in advance of the anticipated offering of the Company’s equity securities (the “Offering”). The Procedures are set forth in Annex A.
The Procedures are designed:
(a) to establish that the research is independently produced by the report’s author(s), reflects the author(s)’ own independent views, and does not reflect the views of the Company, the Global Coordinator(s), the Sponsor or any other syndicate member;
(b) to ensure that the distribution of the reports complies with the securities laws of Hong Kong, the US[, and] the United Kingdom (the “UK”) [, the People’s Republic of China (the “PRC”), Japan and Canada];ii and
(c) to facilitate compliance with applicable statutory and regulatory requirements, including the requirements of paragraph 16 (“Paragraph 16”) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “SFC”), including the requirement for a regulated firm to maintain procedures and policies to prevent investment analysts from being provided with any material information including forward-looking information (whether qualitative or quantitative) concerning the new listing applicant that is not reasonably expected to be included in the prospectus and is not publicly available, as well as the prohibition against analysts seeking such information from the listing applicant or its directors, employees or substantial shareholders, or any of their respective advisers.
Each prospective syndicate member should note that:
(a) failure to comply with the Procedures could result in its removal from the syndicate as well as regulatory scrutiny and sanction;
(b) there should be no discussion or disclosure of any price or valuation estimates or other information to be included in any pre-offer research reports with or to potential investors or sales and trading personnel until distribution of the research reports in accordance with these research guidelines; and
(c) any syndicate member wishing to distribute research in jurisdictions other than Hong Kong, the US, the UK [and the PRC],iii is responsible for ascertaining and complying with the legal requirements in such jurisdictions.
The following is a summary of certain key datesiv for the distribution of research reports in advance of the Offering:
[To consider if written submissions should be a pre-requisite to attending the AP meeting.]
[Submission of written questions in advance of meeting with the Company by Syndicate Analysts encouraged]
Syndicate Analysts’ meeting with the Company
Draft research reports to be submitted to [name of counsel to the Underwriters] for review
Draft research reports to be submitted to [name of counsel to the Underwriters] for review
Comments from [name of underwriters’ counsel] to be sent to syndicate members
Listing Committee hearing date
Publication date for research reports
Blackout Period begins
No research reports may be distributed to investors after this date until the later of (i) 40 days after the pricing of the Offering and (ii) such later date as the Global Coordinator(s) may indicate in writing; the Global Coordinator(s) will confirm the Blackout Period end date upon completion of the Offering
Deemed agreement by syndicate members
By accepting an invitation to the Syndicate Analysts’ meeting with the Company (“Analysts’ Presentation”), a syndicate member (or its associated analyst) is deemed to have:
(a) agreed to submit its research report to [name of counsel to the Underwriters] for legal and regulatory review, including for verification of the accuracy of the legends and for consistency of disclosure between the prospectus and the research report, provided that counsel may discuss with such syndicate member any issues arising from such review and may, if required, raise the same afterwards with the Sponsor(s) and/or Global Coordinator(s);
(b) warranted and represented to the Sponsor(s) and the Global Coordinator(s) that it has not sought or received, and will not seek, from the Company or its directors, employees or substantial shareholders, or any of their respective advisers any material information, including forward-looking information (whether qualitative or quantitative) concerning the Company, excluding information that is reasonably expected to be included in the prospectus or publicly available; and
(c) agreed and represented to the Sponsor(s) and the Global Coordinator(s) that it (i) has received a copy of, (ii) has read and understands, and (iii) will comply with the matters set out in this memorandum, including but not limited to the Procedures.
Hong Kong legal and regulatory background
While there are no express legal prohibitions under Hong Kong laws that prevent the publication of research reports, there are various legal risks involved. Where research material directly relevant to the Company is published close in time to the Offering, the risk is that such material may be treated as part of the documents by which the Offering is made. If any statements are found, with the benefit of hindsight, to be false or misleading, and a subscriber for securities in the Company successfully argues that he or she has relied on such material in the investment decision and consequently suffered loss, this could result in contractual, tortious and/or statutory (possibly even criminal) liabilities under Hong Kong law.
The issue of research reports in certain circumstances may also be taken as being calculated to invite offers by the public to subscribe for the Company’s securities. If so, the report itself might be treated as an invitation to the public to enter into an agreement to acquire securities, which is prohibited unless one of the safe harbours apply. The report may also fall within the definition of a prospectus, triggering a number of legal requirements relating to registration, translation and disclosure, the non-compliance with which may result in criminal and civil liabilities.
Research reports produced by firms regulated by the SFC, to which Paragraph 16 applies, are subject to a number of restrictions in relation to the preparation and distribution of such reports.
Under the SFC regulations, regulated firms must have policies and control procedures to ensure that analysts are not provided by the firm with any material information, including forward-looking information (whether qualitative or quantitative) concerning the listing applicant, if such information is not reasonably expected to be included in the prospectus or publicly available. In addition, research analysts must refrain from seeking to obtain any such information from the listing applicant or its directors, employees or substantial shareholders, or any of their respective advisers.
In determining whether a piece of information is “material”, the SFC will consider whether the information is material to an investor in forming the valid and justifiable opinion of the listing applicant and its financial condition and profitability.
Generally, the SFC expects that an analyst should only use information that is reasonably expected to be included in the prospectus or that is publicly available.
Given the legal considerations associated with the publication of pre-offer research, each prospective syndicate member must make its own determination regarding whether to publish research in advance of the Offering, whether any research produced is complete, accurate and not misleading, and whether compliance with the Procedures is sufficient to avoid liability under applicable securities laws and regulations. Neither the Global Coordinator(s) nor the Sponsor(s) accept(s) any liability in connection with the matters discussed in this memorandum.
If any potential syndicate member requires an explanation of the legal reasons behind the Procedures or wishes to discuss the legal considerations related to pre-offer research, they should contact [•] at [name of counsel to the Underwriters], [telephone number and email address], or a firm in the relevant jurisdiction with a recognised international securities practice with questions relating to the relevant requirements under local laws and regulations.
[Name of Sender]
[Name of Firm]
1. Research reports should comply with the following general principles:
(a) the report must be, and should present itself as, an independent outsider’s view of the Company which has been independently produced and has not been verified or authorised by the Company or any syndicate members acting as underwriters of the Offering;
(b) the source of the information should be made clear. In particular, where statements are matters of opinion or conjecture of the authors this should be brought out;
(c) to the extent that statements and their implications can be substantiated against appropriate independent third party sources, this should be done by way of references and/or footnotes to such sources. To the extent that they cannot be substantiated, this should be made clear. Statements should not be misleading by omission;
(d) to the extent that information is based on published or historical information, and particularly if this information has not been updated, this should be made clear;
(e) it should be made clear that the research report does not, and does not attempt to contain everything material relating to the Company, and the report must not appear to be a definitive description of the Company, its financial condition or its prospects;
(f) the report should not discuss nor make reference to the Offering;
(g) a firm that has an investment banking relationship with the Company (including involvement in an initial public offering as sponsor, or otherwise acting as corporate finance adviser, or as an underwriter) is required to disclose that fact as a disclaimer in the research report under the requirements of the SFC. The disclaimer should state clearly (i) the nature of the bank’s relationship with the Company and the specific role(s) being undertaken or contemplated (e.g., sponsor, underwriter, manager, co-manager, lead manager, etc.) and (ii) whether the firm or its affiliate(s) has been appointed or is seeking to be appointed. It is not sufficient simply to state that a firm “may be appointed”;
(h) the report should not contain any material information, including forward-looking information (whether qualitative or quantitative) concerning the Company that is not reasonably expected to be included in the prospectus or publicly available (or is derived from such information). In addition, the author of any research report must observe the restrictions imposed by the SFC on seeking to obtain from the Company or its directors, employees, or any of their respective advisers any such information;
(i) because research reports are not an offer to sell or an invitation to buy securities, and to reduce the risk of any such characterisation, research reports must not contain any “buy”, “sell” or other recommendation with respect to, or price targets for, the securities covered by the Offering;
(j) [projections and forecasts relating to the Company may be included if prepared by the authors of the research report independently of the Company and complying with paragraphs 13 and 14 below]; and
(k) during the preparation of research reports, Syndicate Analysts must comply with all applicable legal and regulatory requirements, including but not limited to Paragraph 16 in connection with the content and issue of the research reports.
For the purposes of these Procedures, “research reports” include both newly-issued and, to the extent republished or redistributed, previously-issued reports and circulars as well as reports disseminated electronically, and includes single-company reports, any industry or other report containing any analysis of the Company, and any other form of written opinion or recommendation concerning the Company.
2. Each member of the syndicate is responsible for its and its associates’ compliance with all applicable laws and regulations in the course of producing any research report, including but not limited to any requirements imposed from time to time by the SFC and any procedures set out by the Sponsor(s). [Optional wording: Research analysts may only participate in analyst briefings, question-and-answer sessions and/or any other means of communication with the Company under the supervision of a representative from each of the Sponsors.]
3. Unless otherwise notified in writing by the Global Coordinator(s), research reports must not be published or distributed anywhere in the world during a blackout period (the “Blackout Period”) expected to commence on [•] [Consider providing guidance in a footnote on commencement of Blackout Period] and to end on the later of (a) 40 days after the pricing of the Offeringv and (b) such later date as the Global Coordinator(s) may indicate in writing. The Global Coordinator(s) will confirm the Blackout Period end date upon completion of the Offering.
4. Research reports may not be distributed or transmitted, directly or indirectly, by or on behalf of any prospective syndicate member into the US [or to US persons (as defined in Regulation S under the US Securities Act of 1933 (the “Securities Act”))]vi at any time during the Restricted Period or at any time during the Blackout Period. The “Restricted Period” has already begun and will end at the commencement of the Blackout Period. During the Restricted Period, research reports should be prepared and delivered only in physical form and should not be included in any electronic retrieval system.
5. During the Restricted Period, research reports may be distributed only outside the US by non-US syndicate members [to non-US persons who appear on a list prepared by such syndicate member as described in this paragraph].vii Except as provided in this paragraph, the list should consist only of persons who (a) are institutional investors on the syndicate member’s research mailing list and (b) have addresses outside the US, Japan and Canada [and are not US persons].viii Each such syndicate member must screen its list to ensure that all recipients meet these criteria. If any reasonable doubt exists regarding whether a recipient is in the US [or is a US person],ix the syndicate member must refrain from sending a research report. Subject to the paragraphs below, research reports may be distributed only to persons who the syndicate member distributing such report has no reason to believe will, directly or indirectly, further distribute such research reports into any jurisdictionx [or to a US person].xi
In Hong Kong, research reports should be distributed only to, and attendees at pre-marketing meetings and roadshows should only be, “professional investors” (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules promulgated thereunder). Under no circumstances may research reports be distributed to the general public. Distribution of the research reports in Hong Kong is only permitted during the period after the Listing Committee of The Stock Exchange Hong Kong Limited has considered and approved the proposed listing of the Company and before the Blackout Period has commenced. Syndicate members will be notified by the Global Coordinator(s) when such approval has been obtained. If the research report is distributed to persons outside of Hong Kong, the securities laws of the jurisdiction into which the research reports are sent will apply. However, care should be taken to ensure that the research report or its contents do not “flow back” into Hong Kong (electronically or otherwise).
In the PRC, syndicate members may only distribute research reports to persons in the PRC in full compliance with applicable laws and regulations.
Research reports may only be distributed in the UK to:
(a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”);
(b) high net worth entities falling within Article 49(2)(a) to (d) of the Order; or
(c) persons who are intermediate customers under Chapter 4 of the FSA Conduct of Business Rules; provided that the research report is prepared and distributed, or approved, by a person authorised under the Financial Services and Markets Act 2000.
If there is any doubt as to whether the intended recipient falls into any of these categories, UK counsel should be consulted in advance. However, in no circumstances should a research report be distributed to a member of the general public in the UK.
6. Research reports must not be sent to the general public nor to the press (including information vendors and wire services) or other media and must not be distributed at, or with any invitation to, any roadshow presentations or other investor meetings.
Research reports may only be circulated to a limited number of persons to whom the relevant syndicate member (or its associate analyst) customarily gives research reports. This list of recipients must be carefully scrutinised and restricted to include only institutional investors whom its sales and/or equity capital markets departments deem may potentially have an interest in the Company’s shares or in the Offering. The syndicate member is required to maintain a list of all recipients of its research reports and to assign persons with relevant knowledge and experience to review the list to ensure that it does not contain recipients who are members of the press or media, and the syndicate member (or its associate analyst) must not distribute the research reports to anyone whom it has reasonable grounds to suspect may have violated the conditions of receiving research reports in the past.
All syndicate members who distribute research reports should issue only such number of research reports as is consistent with their past practice.
Each syndicate member should ensure that any person to whom a research report is sent also receives a copy of the preliminary offering circular. Research must not be distributed to anyone who is restricted from receiving a copy of the offering circular or prospectus under applicable laws or regulations or otherwise.
7. A syndicate member involved in corporate finance/underwriting or general advisory work for any member of the listing applicant’s group or any of their advisers may receive information, such as internal budgets and projections, that is not appropriate for publication. Each syndicate member must ensure that appropriate “Chinese walls” (or information barriers) exist within its organisation to ensure separation between its investment banking department, corporate finance department, underwriting department and research department such that the form and content of research reports will be prepared independently by its analysts in its research department. In particular, syndicate members are reminded of the SFC’s recommendations regarding the establishment and maintenance of internal policies that:
(a) ensure that research analysts responsible for producing research on a new listing applicant are not provided by the firm with any material information, including forward-looking information (whether quantitative or qualitative) about the Company that is not (i) reasonably expected to be included in the prospectus or (ii) publicly available; and
(b) require analysts to disclose to the Sponsor and the Companyxiii instances where they have been provided with information not contained in the prospectus, that may compromise their integrity and ethics.
Each member of the syndicate should ensure its investment banking department does not pre-approve analyst reports, except in circumstances, subject to oversight by its compliance or legal department, where its investment banking department reviews a research report for factual accuracy before publication.
8. There should be no discussion or disclosure of any estimates or other information to be included in any pre-deal research reports with or to potential investors or sales and trading personnel until publication of the research reports in accordance with these research guidelines.
9. All research reports must contain legends substantially in the form set forth in [Part A and, if the research report contains any forecast or projection, substantially in the form set out in Part B of]xiv Annex B in prominent type on the front, inside front or inside back cover and on the bottom of each page, if relevant. If the legends are put on the inside front or back cover, then there should be a prominent cross-reference to the legends on the front cover.xv
10. [All research reports must be submitted in draft form to [individual] of [name of counsel to the Underwriters] at [email address] on or before [date]. [Name of counsel to the Underwriters] will conduct a legal and regulatory review for verification of the accuracy of the legends and for consistency between the disclosures in the prospectus and the research report. Counsel may discuss with the relevant syndicate member any issues arising from such review and may, if required, raise the same afterwards with the Sponsor(s) and/or Global Coordinator(s).
Review by [name of counsel to the Underwriters] will be limited to a reasonable number (not usually expected to exceed three) of substantially final or very advanced draft(s) of each research report submitted. As far as practicable, Syndicate Analysts should employ redlining or other customary methods to indicate changes between drafts. Each Syndicate Analyst should specify whether it wants reviewers’ comments to be directed or copied to its compliance or legal departments.
Notwithstanding such review, the research reports will remain the sole responsibility of the author(s) thereof. Neither the Global Coordinator(s), the Sponsor(s), [name of counsel to the Underwriters] nor [name of counsel drafting the prospectus] will accept any responsibility or liability for the research reports. The research reports may not be published until the review procedure is complete.]
The Company will not review any research reports produced by syndicate members.
11. Any syndicate member issuing a research report whose employees or partners responsible for preparing and issuing research reports are in possession of any information concerning the Company which is not known to the market and which, if known, would be likely to have a material effect on the price or trading volume of any of its securities should discuss such matter with [name of counsel to the Underwriters] prior to issuing such report.
12. Each syndicate member’s research report should be precisely dated with a date prior to the commencement of the Blackout Period and numbered. The date must appear in a prominent position. Each research report must have a specific number assigned to it and such number must appear on the front cover of the research report. Each syndicate member should maintain records of the identity of persons to whom it distributes research reports.
13. If projections or valuation methodologies are included in a research report, detailed and complete assumptions underlying such projections or valuation methodologies must be stated. Only valuation ranges (which should be as wide as possible), discussion of valuation methodology and comparable analyses may be included. Inclusion of valuations (e.g., per share valuations) other than in the form of a range is not permitted.xvi Dividend projections are also not permitted.
[The legends relevant to forecasts and projections, substantially in the form set out in Part B of Annex B, must be included in any research report containing such forecasts or projections.]
14. [The Company’s prospectus will contain a profit [forecast] [estimate] for [up to] the year ending [•].xvii] Research reports may include forecasts, projections and valuations of the Company covering a period on the basis set out below. Syndicate members must ensure that they comply with the following when including forecasts, projections or valuations in their research reports:
(a) Forecasts, projections and valuations included in research reports must be prepared independently of the Company and not based on, or derived from, any material information, including forward-looking information (whether qualitative or quantitative) concerning the Company that is not reasonably to be expected to be included in the prospectus or publicly available. Any forecast, projection, valuation or other forward-looking statement relating to the Company in research reports must be limited to a period of time not extending beyond [•]xviii and where appropriate, must be stated in terms of a range. To the extent a discounted cash flow model is discussed as a valuation methodology, forecasts and projections customarily used to substantiate the discounted cash flow model may go out further. However, inclusion of forecasts, projections or valuations may lead to increased liability with respect to such research report and a high standard of care should be taken in their preparation. No Syndicate Analyst should discuss with the Company any forecasts, projections or valuations not to be included in the prospectus.
(b) If forecasts, projections or valuations are to be included in research reports, in order to minimise the potential risk:
• they must comply with the requirements of local law;
• they must be fairly based;
• the report must make clear that they represent the opinion of the authors alone and must be accompanied by appropriate cautionary language indicating that such forecasts, projections or valuations may or may not occur, as well as any other applicable risk factors;
• detailed and complete assumptions on which they are based must be clearly stated, the sources used must be identified and the sensitivity of the projections to any exogenous factors must be estimated; and
• the report must make it clear that they represent the analyst’s own analysis and is not derived from any material information, including forward-looking information (whether qualitative or quantitative) concerning the Company that is not reasonably to be expected to be included in the prospectus or publicly available.
15. Any information disclosed to a syndicate member (or its associate analyst) at the Analysts’ Presentation must be kept confidential save for the distribution of the research reports in accordance with these Procedures.
Legends and Disclaimers
Additional legends to be used in research reports
This document has been prepared by its authors independently of [•] (the “Company”). [Name of syndicate member] has no authority whatsoever to give any information or make any representation or warranty on behalf of the Company, its shareholders, [name of Sponsor(s)], the advisors to [name of syndicate member], the Company, its shareholders or [name of Sponsor(s)], or any other person in connection therewith. In particular, the opinions, estimates and projections expressed in it are entirely those of the authors hereof and are not given as an agent of the Company, its shareholders, [name of Sponsor(s)], the advisors to [Name of syndicate member], the Company, its shareholders or [name of Sponsor(s)] or any other person or in its capacity as a manager or underwriter of any offering.
[Subject to compliance with relevant firm’s internal policies: [Name of syndicate member] and/or one or more of its affiliates is acting as [state role] in [a forthcoming equity fund-raising exercise by the Company]]. This document does not constitute or form part of any offer, solicitation or invitation to subscribe or purchase any securities nor shall it or any part of it form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any decision to purchase or subscribe for securities in any offering must be made solely on the basis of the information contained in the prospectus or other offering circular issued by the Company in connection with such offering.
This document is based upon information that we consider reliable, but [Name of syndicate member] has not independently verified the contents hereof. The facts described in this report, as well as the opinions, estimates, forecasts and projections expressed in it, are as of the date hereof and are subject to change without notice. No representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or reasonableness of the information, opinions, estimates, forecasts and projections contained in this document, and none of [Name of syndicate member], the Company, its shareholders, [name of Sponsor(s)] the advisors to [Name of syndicate member], the Company, its shareholders or [name of Sponsor(s)] nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith.
THIS DOCUMENT IS STRICTLY CONFIDENTIAL TO THE RECIPIENT. IT IS BEING SUPPLIED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED, REDISTRIBUTED OR PASSED ON, DIRECTLY OR INDIRECTLY, TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. NEITHER THIS DOCUMENT NOR ANY COPY OF IT MAY BE TAKEN OR TRANSMITTED INTO THE UNITED STATES, CANADA OR JAPAN, OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, CANADA OR JAPAN [OR PROVIDED OR TRANSMITTED TO ANY U.S. PERSON (WITHIN THE MEANING OF REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED)].xix THE DISTRIBUTION OF THIS DOCUMENT IN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW, AND PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. BY ACCEPTING THIS REPORT YOU AGREE TO BE BOUND BY THE FOREGOING INSTRUCTIONS.
THIS DOCUMENT IS FOR DISTRIBUTION IN HONG KONG ONLY TO PROFESSIONAL INVESTORS (AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CHAPTER 571 OF THE LAWS OF HONG KONG) AND ANY RULES PROMULGATED THEREUNDER).
[THIS DOCUMENT IS FOR DISTRIBUTION IN THE PEOPLE’S REPUBLIC OF CHINA (THE “PRC”, FOR THE PURPOSE OF THIS DOCUMENT, EXCLUDING HONG KONG SPECIAL ADMINISTRATIVE REGION, MACAU SPECIAL ADMINISTRATIVE REGION AND TAIWAN) ONLY TO SPECIFIC QUALIFIED DOMESTIC INVESTORS. OTHER PERSONS SHOULD NOT ACT OR RELY ON THIS DOCUMENT OR ANY OF ITS CONTENTS. NO PUBLIC MEDIA OR OTHER MEANS OF PUBLIC DISTRIBUTION OR ANNOUNCEMENT WILL BE USED WITHIN THE PRC IN CONNECTION WITH THE DELIVERY OR DISTRIBUTION OF THIS DOCUMENT. NEITHER THIS DOCUMENT NOR ANY PART OF IT IS INTENDED AS, OR CONSTITUTE PROVISION OF ANY CONSULTANCY OR ADVISORY SERVICE OF SECURITIES INVESTMENT. SUBJECT TO THE FOREGOING, THE DISTRIBUTION OF THIS DOCUMENT DOES NOT CONSTITUTE A PUBLIC OFFER OF THE SHARES UNDER THE SECURITIES LAW OF THE PRC, AND ARE NOT INTENDED AS, AND DO NOT CONSTITUTE, PROVIDING CONSULTING OR ADVISORY SERVICE OF SECURITIES INVESTMENT AS DEFINED UNDER PRC LAWS.
IN THE UNITED KINGDOM, THIS DOCUMENT IS FOR DISTRIBUTION ONLY TO (I) PERSONS WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE “ORDER”) OR (II) HIGH NET WORTH ENTITIES FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER OR (III) PERSONS WHO ARE INTERMEDIATE CUSTOMERS UNDER CHAPTER 4 OF THE FSA CONDUCT OF BUSINESS RULES (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”). IN THE UNITED KINGDOM, THIS DOCUMENT IS DIRECTED ONLY AT RELEVANT PERSONS, AND OTHER PERSONS SHOULD NOT ACT OR RELY ON THIS DOCUMENT OR ANY OF ITS CONTENTS.
(1) To the extent that the disclaimers appear in the firm’s “standard disclaimer” these may be omitted from the legends. The legends should be reviewed by [name of counsel to the Underwriters] and other relevant legal advisers prior to publication.
(2) The following statement shall be included in large type on the bottom of each page of the research report: “THIS DOCUMENT MAY NOT BE DISTRIBUTED IN THE UNITED STATES, CANADA[, THE PEOPLE’S REPUBLIC OF CHINA (THE “PRC”) (EXCEPT IN COMPLIANCE WITH THE APPLICABLE LAWS AND REGULATIONS OF PRC)] OR JAPAN. THIS DOCUMENT HAS BEEN FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON.”
Legends to be inserted where the research report contains any forecast or projectionxx
Opinions, estimates, forecasts and projections, if any, contained in this report are our current opinions as of the date appearing on this report only, based on information that may not be accurate or complete. Before acting on any opinion in this report, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice.
Forecasts, projections and valuations are inherently speculative in nature and may be based on a number of contingencies. Clients should not regard the inclusion of any forecasts, projections and valuations in this report as a representation or warranty by any person that these forecasts, projections or valuations or their underlying assumptions will be achieved.
i This form is applicable only to a single listing on the Hong Kong Stock Exchange and should be used for transactions where the earliest expected date of submission of the Form A1 falls on or after 31 October 2011
ii See paragraph 5 of the Procedures.
iii The JGC(s)/Sponsor(s) may retain or remove the PRC as required. Some firms may be comfortable with distribution into the PRC provided the relevant legal requirements are met, while other firms note the difficulty in practice of monitoring such compliance. References to the PRC in these due diligence guidelines should be read on the basis that (a) it is the relevant JGC(s)/Sponsor(s)’ decision whether distribution in the PRC is permissible and (b) the relevant disclaimers and legends must be signed off by PRC legal counsel on the relevant transaction.
iv If the transaction falls under Category 2 of Regulation S, the Blackout Period should be revised to end on the later of “(a) 40 days after the closing of the Offering; (b) the date on which all of the securities have been sold; and (c) such later date as the Global Coordinator(s) may indicate in writing.”
v If the transaction falls under Category 2 of Regulation S, the Blackout Period should be revised to end on the later of “(a) 40 days after the closing of the Offering; (b) the date on which all of the securities have been sold; and (c) such later date as the Global Coordinator(s) may indicate in writing.”
vi Include the restriction on distribution to US persons if the transaction falls under Category 2 of Regulation S.
x This drafting assumes prohibition of any onward distribution. An alternative formulation is prohibiting onward distribution into any jurisdiction other than those permitted under these guidelines or specifically with the prior consent of the JGC(s) / Sponsor(s).
xi See footnote iii.
xii See footnote ii. Any wording with respect to the PRC included in the research guidelines must be vetted by the PRC counsel to the Underwriters acting on the transaction
xiii See paragraph 50 of the Consultation Conclusions on the Regulatory Framework for Pre-deal Research.
xiv Remove reference to Parts A and B if Part B is not applicable and removed from these guidelines.
xv Although there are stylistic differences in the market (e.g., some firms put the majority of their legends on the inside front cover), as a matter of best practice legends and disclaimers should appear, or be referred to, on the front cover.
xvi Research reports must not contain any specific target price or a specific valuation of the company (either on a per share basis or whole company basis) that would enable the reader to work out a target share price. In practice, however, where the analyst presents balance sheet or income statement items (e.g., profit or revenue) for a forecast year, these items cannot and need not be in a range.
xvii The JGC(s)’s and Sponsor(s)’ transaction teams should confirm this date with their respective legal and compliance functions.
xix Include the restriction on distribution to U.S. persons if the transaction falls under Category 2 of Regulation S.
xx Remove this section if not relevant.
HKCFEF Limited and the contributing law firms, accountants and sponsors are not offering these due diligence guidelines as legal, financial or professional advice or services and they should not be relied upon as such. These due diligence guidelines should not be used as a sole basis for any decision, action or inaction and are not meant to serve as a substitute for the advice of qualified professionals. See here for the full terms and conditions.