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HKEx GUIDANCE LETTER

HKEx-GL51-13 (February 2013)

advice from qualified professional advisers. If there is any conflict or inconsistency between

this letter and the Listing Rules, the Listing Rules prevail. You may consult the Listing

Division on a confidential basis for an interpretation of the Listing Rules, or this letter.

1. Purpose

1.1 Some market participants have asked the Exchange to remind applicants that it does not

allow any direct or indirect benefits by side letter or otherwise, other than a guaranteed

allocation of shares at the IPO price, to be given to cornerstone investors to participate in

the placing tranche of a listing applicant’s share offering.

introduced to an IPO to signify that these investors have confidence in the applicant, and

the investment is worthwhile such that they are willing to take up shares at the IPO price.

These are preferential placings where the cornerstone investors are guaranteed to receive

allocation of shares irrespective of the final offer price.

2.2 Placings to cornerstone investors are generally permitted based on the following

principles:

(a) the placing must be at the IPO price;

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(d) details of the placing arrangement, including the identity and background of the

investors, are disclosed in the listing document; and

(e) notwithstanding the minimum six-month lock-up period, the shares will be part of

the public float under Main Board Rule 8.08 (GEM Rule 11.23) provided the

investor is a member of the public for the purpose of Main Board Rule 8.24 (Notes

2 and 3 to GEM Rule 11.23).

2.3 In 2012, among the 50 newly listed Main Board companies (excluding listing of

3.1 Main Board Rules 2.03(2) and (4) (GEM Rules 2.06(2) and (4)) require the issue and

marketing of securities to be conducted in a fair and orderly manner and that all holders

of listed securities be treated fairly and equally.

3.2 Main Board Rule 2.13 (GEM Rule 17.56) requires that information contained in the

prospectus must be accurate and complete in all material respects and not be misleading

or deceptive.

4. No Direct or Indirect Benefits to Cornerstone Investors other than Guaranteed

placings to the cornerstone investors will not violate the fair and equal treatment under

Main Board Rules 2.03(2) and (4) (GEM Rules 2.06(2) and (4)) if they follow the

principles set out in paragraph 2.2 above.

4.2 Because the existence of cornerstone investors is sometimes critical to the success of an

IPO, including when market sentiment is weak, some applicants and their controlling

shareholders, sponsors or other syndicate members may be willing to offer to some

cornerstone investors direct or indirect benefits by side letter or otherwise, other than a

guaranteed allocation at IPO price.

listing, sharing of underwriting commissions, an assurance that the applicant will

re-invest the IPO proceeds in funds managed by the cornerstone investor, an agreement

to allow allocation of shares in another IPO, or any other transaction or arrangement

entered into on non-arm’s length commercial terms in connection with the acquisition of

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the shares, these investors should be reclassified as pre-IPO investors and the

requirements under the Interim Guidance on Pre-IPO Investments issued in January

2012 (http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/Documents/gl29-12.pdf)

apply. Please also refer to Guidance Letters HKEx-GL43-12 and HKEx-GL44-12 for

the Exchange’s policies on pre-IPO investment.

4.4 In addition, the non-disclosure of any form of direct or indirect benefits by side letter or

otherwise, other than a guaranteed allocation, given to cornerstone investors violates the

principles under Main Board Rule 2.13 (GEM Rule 17.56). This guidance letter does

document.

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