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LISTING IN HONG KONGLISTING IN HONG KONGLISTING IN HONG KONGLISTING IN HONG KONG

C O N F I D E N T I A L

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Hong KongHong KongHong KongHong Kong

LISTING IN HONG KONG

Overview, Process And Requirements

March 2011March 2011March 2011March 2011C O N F I D E N T I A LC O N F I D E N T I A LC O N F I D E N T I A LC O N F I D E N T I A L

P A L A Z ZA R I & T U R R I E S

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TABLE OF CONTENT

C O N F I D E N T I A LC O N F I D E N T I A LC O N F I D E N T I A LC O N F I D E N T I A L

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Foreword………………………………………………………………………………………………………………………

Introduction to Hong Kong ………………………….………………………………………………………………………...

The Hong Kong Stock Exchange ……………………………………………………………………………………………...

Overview of the most active investors on the Hong Kong capital market ….………….………………………….…………..

The listing process – Requirements, phases, obligations and estimated costs………………………………………………….

Main continuing obligations and annual fees of listed issuers …………...……………………………………………………

HKEx vs. Borsa Italiana – Average trading multiples………………………………………………………………………….

Case study 1: L’Occitane …………………………………………………………………………………………………….

Case study 2: Prada ………………..………………………………………………………………………………………….

Palazzari & Turries …………………...……………………………………………………………………………………….

Glossary ………………………………………………………………………………………………………………………..


FOREWORD (1/2)

6C O N F I D E N T I A LC O N F I D E N T I A LC O N F I D E N T I A LC O N F I D E N T I A L

An initial public offering ( IPO)* is the process through which a privately held company offers shares to the public for the first time, mainly

with the aim of raising funds for financing its expansion, repaying its debts and/or planning the future exit of the main shareholders.

Initial Public Offerings are often considered to be the ultimate goal for any entrepreneurial venture and represents a major stage in the growth of

many businesses, providing them with access to new public capital while increasing companies’ credibility and exposure.

When a company lists its securities on a public stockmarket, the money paid by investors for newly-issued shares goes directly to the company (in

contrast to a later trade of shares on the exchange, where the money passes between investors); an IPO, therefore, allows a company to tap a wide pool

of investors to raise capital for future growth.

Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for

expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is the reason many companies seek to go

public.

Listed companies can also decide to get listed on more than one market through a dual-listing (or even triple). Dual listings are usually aimed at

increasing shares liquidity, tapping in new investors and getting exposure to new markets in which the company has strategic interests. For these

reasons dual-listings are especially common for companies that started out in a certain market and grew into new markets.

Key in the IPO planning is also the identification of the entity to be listed. In fact, groups can decide to either list either the holding company or a

specific subsidiary so to finance the expansion in a specific region, or of a specific business line.

Hong Kong, Chinese territory maintaining its independency under the “one country two systems” policy, is consolidating its position as gateway to the

fastest growing economy and world’s largest market. In 2010 the Hong Kong Stock Exchangehosted 114 IPOs, raising a total of EUR 41,6 billions.

* The first time that terms explained in the glossary are presented in the document, they will be in italic



MAIN REASONS FOR GOING PUBLIC

� RAISING FUNDS FOR FINANCING BUSINESS EXPANSION

� REDUCING COMPANY’S INDEBTEDNESS

� INCREASING SHARES LIQUIDITY

� ENABLING CHEAPER ACCESS TO CAPITAL

� GAINING EXPOSURE, CREDIBILITY AND PRESTIGE

� FACILITATING EXISTING AND POTENTIAL ACQUISITIONS

� RETAINING AND ATTRACTING HUMAN CAPITAL

� MONITORING THE COMPANY’S MARKET VALUE

FOREWORD (2/2)

For the purpose of simpler navigation of this document, amounts in Hong Kong Dollars are converted in Euro as at the date of redaction of this document

(3 March 2011: 10 HKD = 0.926 Euro)

The charts below summarize the main rationales for private companies for considering an IPO and the reasons why Hong Kong can be an ideal trading

platform:

ADVANTAGES OF GOING PUBLIC IN HONG KONG

� HIGHER VALUATIONS AND IPO PREMIUM

� EXPOSURE IN ASIA, ESPECIALLY TO CHINA

� STRATEGIC SHIFTING OF BUSINESS GRAVITY

� LEVERAGING ON CHINA’S GROWTH

� STRONG LEGAL SYSTEM AND REGULATORY FRAMEWORK

� FREE FLOW OF CAPITAL AND INFORMATION

� ADVANCED CLEARING AND SETTLEMENT INFRASTRUCTURE

� LARGE AND DYNAMIC INVESTOR BASE


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Foreword .……………………………………………………………………………………………………………………..

Introduction to Hong Kong ………………………….……………………………………………………..……………….

The Hong Kong Stock Exchange ……………………………………………………………………………………………..

Overview of the most active investors on the Hong Kong capital market ….…………………………………….…………..





Case study 2: Prada ………………..…………………………………………………………………………………………


Glossary ………………………………………………………………………………………………………………………..


INTRODUCTION TO HONG KONG (1/2)

The Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) is Asia’s top financial city and ranked 3rd in the

world behind New York and London*.

As a leading business and financial platform Hong Kong assures:

� Location and transport links across Asia Pacific and internationally : Hong Kong is strategically located at the centre of Asia, all of the

region’s key markets are within 4 hours flight and half the world’s population is within 5 hours flight time. Hong Kong International Airport is

the busiest in Asia Pacific, with direct flights to over 155 international destinations.

� Gateway to China: close and unique proximity to Mainland China, the second largest economy and the largest single marketplace in the world,

has made Hong Kong the business gateway to China. Although in 1997 Hong Kong returned to the sovereignty of China, the country’s legal

system is separate from China’s and English common law prevails. English is also the conventional language of business.

� 3rd lowest tax in the world** : Hong Kong operates a low and simple tax system, with profit tax up to a maximum of 16.5%, and no taxes on

sales, capital gains and dividends. No VAT or GST.

According to the Index of Economic Freedom*** , Hong Kong is the freest economy in the world since the inception of the index in 1995.

In Greater China there are 3 independent stock exchanges, located in Hong Kong, Shanghai and Shenzhen. Unlike the Hong Kong Stock Exchange

(“HKEx”), where as at 31 January 2011 has listed 17 foreign companies, Shanghai and Shenzhen Stock Exchanges are still not available for foreign

companies. Chinese authorities are accelerating the international opening process and work on some structural issues such as the non convertibility of

the Renminbi. First foreign listings are expected not before 2012.

With its access to foreign capital providers and higher listing standards Hong Kong, besides international companies, is also attracting a large

number of Mainland companieslooking for the “seal of approval” implied by an HKEx listing. ** Source: InvestHK

*** Series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal


* Source: World Economic Forum


The following table shows the ranking of the top 15 world’s Stock Exchanges in terms of domestic market capitalizationas of 31 January 2011

(source: World Federation of Exchanges).

Ranking Stock Exchange RegionMarket Cap (EUR million)

% change vs. previous year

No. of

Listings

1 NYSE Euronext (US) North America 10,242 14.7% 2,316

2 NASDAQ OMX North America 2,886 28.4% 2,771

3 Tokyo SE Group Asia - Pacific 2,806 2.6% 2,291

4 London SE Group Europe 2,703 14.6% 2,954

5 NYSE Euronext (Europe) Europe 2,258 15.7% 1,133

6 Shanghai SE* Asia - Pacific 1,990 6.2% 899

7 Hong Kong Exchanges Asia - Pacific 1,989 27.3% 1,420

8 TSX Group North America 1,594 26.2% 3,743

9 BM&FBOVESPA South America 1,079 7.6% 373

10 Deutsche Börse Europe 1,077 24.6% 755

11 Bombay SE Asia - Pacific 1.049 11.3% 5,047

12 Australian SE Asia - Pacific 1.038 6.9% 2,007

13 National Stock Exchange India Asia - Pacific 1.025 11.4% 1,558

14 BME Spanish Exchanges Europe 907 1.3% 3,319

15 Shenzhen SE* Asia - Pacific 901 43.0% 1,195

* Stock Exchanges still not available for foreign companies.


INTRODUCTION TO HONG KONG (2/2)


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Foreword..……………………………………………………………………………………………………………………..

Introduction to Hong Kong ………………………….……………………………………………………………………….

The Hong Kong Stock Exchange ……………………………………………………………………………………………






Case study 2: Prada ………………..…………………………………………………………………………………………


Glossary ………………………………………………………………………………………………………………………..


THE HONG KONG STOCK EXCHANGE (1/2)

HKEx is a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Ltd., company resulting from the merger between The Stock Exchange

of Hong Kong Ltd., Hong Kong Futures Exchange Ltd. and Hong Kong Securities Clearing Company Ltd. in March 2000. Hong Kong Exchanges and

Clearing Ltd. is listed itself since June 2000and its 5 major shareholders include the Hong Kong Special Administrative Region of People’s

Republic of China (with 5.8% capital), JP Morgan Chase & Co. (4.9%), Thornburg Investment Management (2.6%), Oppenheimer Funds (1.7%) and

Blackrock Fund (1.4%).

On HKEx, securities are listed either on:

� Main Board: market which enables the listing of established companies that meet high profit and other financial standards requirement. At 31

December 2010 it was composed of 1,244 listed companies with a total market capitalization of HKD 20.1 trillion (EUR 1.86 trillion) .

� Growth Enterprise Market ( “GEM”): market available since 2008 and providing capital financing opportunities for smaller scaled companies

from a full spectrum of industries. At 31 December 2010 it was composed of 169 listed companies with a total market capitalization of HKD

134,674 billion (EUR 12.47 billion).

Apart from normal listed issuerson the HKEx, there are special issuers that can be defined in three categories as following:

� Blue chips: issuers with the highest status and quality for investment.

� Red chips: issuers incorporated outside Mainland China and either controlled directly or indirectly by Mainland Government entities or Chinese

private investors.

� H shares: issuers incorporated in Mainland China which are either controlled by Mainland Government entities or Chinese private investors.

The Hang Seng Index(hereinafter “HSI”) is the main indicator of the overall market performance of the HKEx, comprising 45 constituent stocks

which account for about 67% of the total market capitalization .

As of today, the overseas jurisdictions acceptable as an issuer’s place of incorporation include 17 countries: Australia, Bermuda, Brazil, British

Virgin Islands, Canada (States of British Columbia and Ontario), Cayman Islands, China, Cyprus, Germany, Isle of Man, Italy (officially included

since January 2011), Japan, Jersey, Luxembourg, Singapore, United Kingdom, United States (State of California).



THE HONG KONG STOCK EXCHANGE (2/2)

The following table indicates the foreign companies* listed on HKExas of 31 January 2011 (source: HKEx). In addition, at the same date, HKEx

received pre-IPO enquiries from 12 overseas companies.

Stock Exchange JurisdictionMarket Cap

(HKD million)Market Cap (EUR million)

Date of IPO Industry

HSBC Holdings Plc. UK 1,574,096 145,761 1991 Financials - Banks

Standard Chartered Plc. UK 496,407 45,967 31/10/02 Financials - Banks

Manulife Financial Corporation Canada (Ontario) 262,951 24,349 27/09/99** Financials -Insurance

Prudential Plc. UK 226,559 20,979 25/05/10 Financials - Insurance

United Company RUSAL Plc . Jersey 198,117 18,346 27/01/10 Materials - Metals

L’Occitane International S.A. Luxemburg 28,800 2,667 07/05/10 Consumer Goods

South Gobi Resources Ltd. Canada (British Columbia) 22,606 2,093 29/01/10** Energy - Coal

Winsway Coking Coal Holdings Ltd. BVI 16,289 1,508 11/10/10 Energy - Coal

China Gold International Resources Corp. Ltd. Canada (British Columbia) 15,995 1.481 01/12/10 Materials - Mining

West China Cement Ltd. Jersey 12,156 1,126 23/08/10 Properties & Constructions

Midas Holdings Ltd. Singapore 6,137 568 06/10/10** Materials - Metals

Sound Global Ltd. Singapore 5,805 538 30/09/10 Utilities

China XLX Fertiliser Ltd. Singapore 3,060 283 08/12/09 Materials - Basic Materials

China New Town Development Co. Ltd. BVI 2,765 256 22/10/10 Properties & Constructions

Hengxin Technology Ltd. Singapore 823 76 23/12/10 IT - IT hardware

Novo Group Ltd. Singapore 717 66 06/12/10 Materials - Metals

Schramm Holding AG Germany 541 50 29/12/09 Industrial Goods

** Secondary listings.


* Defined by the HKEx as companies incorporated overseas and performing

the bulk of their businesses outside Hong Kong or China.


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Foreword..………………………………………………………………………………………………………………………

Introduction to Hong Kong ………………………….…………………………………………………………………………


Overview of the most active investors on the Hong Kong capital market ….……………………………………………..





Case study 2: Prada ………………..………………………………………………………………………………………….


Glossary ………………………………………………………………………………………………………………………..

Singapore9.3%

Mainland China10.6%

Japan2.6%

Rest of Europe16.1%

US24.4%

UK28.7%

Australia1.6%

Rest of Asia3.1%

Others2.6%

Overseas retail investors

4,5%

Overseas institutional investors41,8%

Exchange Participants’ principal trading

9,9%

Local retail investors21,3%

Local institutional investors22,5%


OVERVIEW OF THE MOST ACTIVE INVESTORS ON THE HONG K ONG STOCK EXCHANGE

The following charts show thedistribution of HKEx securities market turnover by investor type from October 2009 to September 2010and the

breakdown of the overseas investors by country of origin (source: HKEx).

The contribution of local investors to total securities market turnover value decreased from 50% in 2008/09 to 44% in 2009/2010, the lowest level

ever registered, showing that Hong Kong is becoming increasingly internationally attractive and beneficial to both foreign institutional and private

investors.

Confirming that HKEx is becoming one of the most internationalized trading platforms, in 2010 overseas investors were for the first time the major

contributors with about 46% of the total trading value in the securitymarket.

UK is the most significant source of overseas investors in terms of trading volume and its contribution increased from 23% in 2008/09 to 29% in

2009/10. During the period considered, US investors have been surpassed for the first time since 2004/05 by UK investorsand their contribution

dropped intensively from 36% of overseas investor trading in 2008/09 to 24% in 2009/2010. In addition the contribution from Continental European

investors rebounded to a record level of 16% in 2009/2010 from 10% in 2008/09.


OVERSEAS INVESTORSHKEX INVESTORS


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Foreword..………………………………………………………………………………………………………………………



Overview of the most active investors on the Hong Kong capital market ….……………………………………..…………..

The listing process – Requirements, phases, obligations and estimated costs…………………………….……………….




Case study 2: Prada ………………..………………………………………………………………………………………….


Glossary ………………………………………………………………………………………………………………………..


THE LISTING PROCESS: MAIN REQUIREMENTS

Main Board GEM

Financial requirements

Applicantsmust fulfil one of three alternative financial criteria:

1. Profit test: profit attributable to shareholders of HKD 50 million (EUR 4.63 mil) in the last 3 years (with HKD 20 million (EUR 1.85 mil) in the most recent year and an aggregate of HKD 30 million (EUR 2.78 mil) in the 2 preceding years); Market Cap at least HKD 200 million (EUR 18.5 mil) at the time of listing.

2. Market Cap/Revenue test: Market Cap at least HKD 4 billion (EUR 370.4 mil) at the time of listing; revenues of HKD 500 million (EUR 46.3 mil) for the most recent audited financial year.

3. Market Cap/Revenue/Cash flow test: Market Cap of at least HKD 2 billion (EUR 185 mil) at the time of listing; revenues of at least HKD 500 million (EUR 46.3 mil) for the most recent audited financial year; positive cash flow for operating activities of at least HKD 100 million (EUR 9.26 mil) in aggregate for the 3 preceding financial years.

Applicants must fulfil the following cumulative financial criteria:

• Market Cap at least HKD 100 million (EUR 9.26 mil) at the time of listing;

• Positive cash flow for operating activities of at least HKD 20 million (EUR 1.85 mil) in aggregate for the 2 preceding financial years.

Management, ownership and

control

Management continuity for at least the 3 preceding years; and

Ownership continuity and control for at least the most recent audited financial year.

Management continuity throughout the 2 preceding years; and

Ownership continuity and control throughout the preceding full financial year.

Minimum

public float

• The higher of HKD 50 million (EUR 4.63 mil) or 25% of the issuer’s total issued share capital.

• A minimum of 300 shareholders (if qualifying under financial criteria 1 or 2) / 1,000 shareholders (if qualifying under financial criteria 3).

• The higher of HKD 30 million (EUR 2.78 mil)or 25% of the issuer’s total issued share capital.

• A minimum of 100 shareholders.

Minimum public float as determined above must be maintained at all times. For issuers with an expected market capitalization of over HKD 10 billion (EUR 926 mil) at the time of listing, the Stock Exchange may accept a lower percentage down to 15%.

Not more than 50% of the securities in public hands at the time of listing can be beneficially owned by the 3 largest public shareholders.

Independent non –executive directors

Issuers are required to appoint at least 3 independent non-executive directors. At least one of the independent non-executive directors must have appropriate professional qualifications or accounting or related financial management expertise.

Audit CommitteeIssuers must establish an audit committee comprising non-executive directors only, of whom the majority (Chairman included) must be independent.

The audit committee must have a minimum of three members, at least one of whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise.

Underwriting Public tranche must be fully underwritten. Fully underwriting is not compulsory.



THE LISTING PROCESS: LISTING PROSPECTUS

Main Board GEM

Statement of business objectives

Applicants must provide information on its general business trend, financial and trading prospects.

Applicants must explain all bases and assumptions and provide a detailed description of business objectives for each product and service, analysed by reference to each major business activity.

Use of proceeds Applicants must disclose details of its intended use of proceeds.Applicants must explain the use of proceeds in detail by reference to its business objectives.

Profit forecasts Not compulsory.

Accountants’ report

To cover 3 financial years (except for exempted companies).

• Can be prepared in accordance with either Hong Kong Financial Reporting Standards or International Financial Reporting Standards for primary listings on the HKEx.

• May also be prepared in accordance with generally accepted accounting principles in the United States of America or other acceptable accounting standards acceptable to the HKEx under certain circumstances.

To cover a period of at least 2 financial years.

• Can be prepared in accordance with either Hong Kong Financial Reporting Standards or International Financial Reporting Standards.

• Can be prepared in accordance with generally accepted accounting principles in the United States of America if the applicant is or will be simultaneously listed on either the New York Stock Exchange or the NASDAQ National Market.



THE LISTING PROCESS: ESTIMATED FEES AND EXPENSES

• Borsa Italiana MTA’s new applicants are

required to pay an initial listing fee, which is

calculated by reference to the market capitalization

(EUR 75,0 for every EUR 500,000 of expected

capitalization), ranging between a minimum of

EUR 25,000 (with an expected market cap lower

than EUR 1 billion) / 75,000 (with an expected

market cap greater than EUR 1 billion) and a maximum of EUR 500,000.

Assuming an HKD 5 billion-size IPO (EUR 463 million), total listing costs can be estimated as about 4-5% of the total funds raisedincluding

among others:

1. Underwriting commission, of about 3% of the gross proceeds,plus discretionary bonus.

2. Professional fees, of about 1-2% of the fund raised, related to sponsor, reporting accountants, company’s lawyers, underwriter’s lawyers,

property valuer, internal control auditor, public relation firm.

3. Fees to the Stock Exchange, as shown in the table reported below:

Monetary value of securities to be listed*

Initial listing fees

HKD million EUR million HKD EUR

< 100 < 9.3 150,000 13,890

200 18.5 175,000 16,205

300 27.8 200,000 18,520

400 37.0 225,000 20,835

500 46.3 250,000 23,150

750 69.5 300,000 27,780

1,000 92.6 350,000 32,410

1,500 138.9 400,000 37,040

2,000 185.2 450,000 41,670

2,500 231.5 500,000 46,300

3,000 277.8 550,000 50,930

4,000 370.4 600,000 55,560

> 5,000 > 463.0 650,000 60,190

< 100 < 9.3 100,000 9,260

1,000 92.6 150,000 13,890

> 1,000 > 92.6 200,000 18,520

MAIN

BOARD

GEM


* Estimated market capitalization of the company. In case the actual

market capitalization is higher than expected, the applicant should pay

the shortfall before getting listed. In case it is lower, the applicant has

the right to let the excess be deducted from the future annual listing fees.

• For secondary listings on the HKEx’s Main Board,

the initial listing fee is normally 25% of the fees

listed on the table, subject to a minimum payment

of HKD 150,000 (EUR 13,890).


THE LISTING PROCESS: FLOWCHARTS (1/2)

PHASE

1/2 months 3/4 months 1/ 2 months 1/2 months

6/10 months in total

Listing ApprovalRestructuring Preparation and FilingMarketing, Listing and

Price Stabilization

During this phase the issuer appoints sponsor, underwriters and other professional parties to study, prepare and finalize the

listing structure.

If the company’s structure is not ideal for listing, the issuer may need to reorganize the group structure (e.g. setting up an holding company) to adjust itself into a more favourable

listing structure.

If necessary, an internal listing execution team is established to

manage the listing process.

During this phase the issuer hires a full spectrum of

professional teams to conduct business, legal and financial due

diligence on the group.

All the documents requested by the HKEx are prepared.

Underwriting arrangement is also finalised in this phase.

During this phase the issuer submits all the relevant

documents to the HKEx.

Following the document submissions there is a Q&A

session with the HKEx aimed at clarifying all the pending

aspects of the listing.

Along with the document submission, the issuer is also

required to settle the listing fees.

As soon as the listing is approved by the HKEx the issuer usually finalize the underwriting syndicate

members.

This last phase includes the marketing, promotion,

allocation and initial public trading of the issuer’s shares.

Public relations firms are hired to prepare marketing materials aimed at strengthening issuer

attractiveness for the investors.

In addition, underwriters organize a roadshow and draft

company & sector research reports to promote equity offering to institutional

investors and boost market response.

Finally shares are issued and publicly traded.


ESTIMATED TIMING*


THE LISTING PROCESS: FLOWCHARTS (2/2)

PHASE

ESTIMATED TIMING*

1/2 months 3/4 months 1/ 2 months 1/2 months

STEPS

Answering queries from HKEx’s listing Division

Payment of the initial listing fee

Obtain Listing Division’s recommendation

Obtain Listing Committee’s approval

Selection of underwriting syndicate members

Preparation company & sector researches for roadshow

Issuance of prospectus and formal notice (IPO starts)

Pricing, allocation and closing

Official listing (trading starts)

Price stabilization (exercising over-allotment option)

Financial audit

Property valuation

Drafting of the listing documents

Drafting of the underwriting arrangement

6/10 months in total

Reorganization of the group structure

Set-up of an internal listing execution team

Listing ApprovalRestructuring Preparation and FilingMarketing, Listing and

Price Stabilization

Submission of the listing application to the HKEx

Preparation of marketing materials (PR firm)

Business, legal and financial due diligence

Appointment of the sponsor and other professional parties




THE LISTING PROCESS: THE ACTORS

GLOBAL COORDINATOR

BOOKRUNNER

UNDERWRITERS

Underwriting Syndicate

LISTING ENTITY

Underwriter’s lawyers

Preparation of listing prospectus in relation to business, industry, offering information, etc.

Company’s lawyers

Preparation of listing prospectus in relation to legal issues, connected transactions and risk factors.

Auditors

Carrying out financial and accounting due diligence. Audit under acceptable financial standards.

Is the lead manager of a public offering and is responsible for overseeing the entire issue, usually with the support of regional and national coordinators. Arranges and coordinates the underwriting syndicate.

Main underwriter or lead-manager in the listing process. It keeps the books of securities sold by the underwriters.

STOCK EXCHANGE

SPONSOR

Usually prepares the applicant for listing, lodging the formal application and all support documentation to the Exchange and deals with all matters arising in connection with the application. Usually Global Coordinator is also Sponsor.

ADVISOR

Advisory services on listing preparation and for the whole listing process.

INVESTORS

Public Relation firm

Marketing activities.

Listing application.

Are responsible for the allocation of the issuer’s shares to the investors. Usually there is more than one underwriter (underwriting syndicate).


TABLE OF CONTENT


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Foreword ..……………………………………………………………………………………………………………………..

Introduction to Hong Kong ………………………….………………………………………………………………………..

The Hong Kong Stock Exchange ………...……………………………………………………………………………………

Overview of the most active investors on the Hong Kong capital market ….…………………………………….…………...


Main continuing obligations and annual fees of listed issuers ……...……………………………………………………..



Case study 2: Prada ………………..………………………………………………………………………………………….


Glossary ………………………………………………………………………………………………………………………..


MAIN CONTINUING OBLIGATIONS AND ANNUAL FEES OF LIST ED ISSUERS (1/3)


Main Board GEM

Disclosure of Price Sensitive Information

Listed issuers are required to keep the Exchange and the investing public informed as soon as reasonably practicable of any information which might be reasonably expected to affect market activity in the price of their securities.

Fundamental change in the nature of

business

Within the first 12 months after listing, issuer may not effect any acquisition or disposal which would result in a fundamental change in its principal business activities as described in the prospectus. However, the HKEx may grant a waiver if the circumstances are exceptional and prior independent shareholders’ approval is obtained (controlling shareholders are not allowed to vote).

Other than with the prior approval of independent shareholders, issuer may not effect any fundamental change in its principal business activities or that of its group within the first 12 months after listing.

Financial Disclosure

Issuers are required to publish their financial results on a timely basis and all the information which is expected to be price-sensitive. The Exchange will normally require suspension of trading in a issuer's securities if it fails to publish periodic financial information.

Annual reports not later than 4 months and half-yearly reports not later than 3 months of the date on which the financial period ended.

Issuers are required to disclose in their annual report how they have applied the proceeds raised in the share offering and whether this was in accordance with that disclosed in their listing documents.

Annual reports not later than 3 months, half-yearly and quarterly reports not later than 45 days of the date on which the financial period ended.

Issuers are required for the 2 financial years after listing to publish in their annual and half-yearly accounts a statement as to their progress against the statement of business objectives as set out in their listing documents.

Restrictions on disposal of shares

Any person regarded as a Controlling Shareholder at the time of listing shall not:

a. dispose of his shares in the listed issuer in the period commencing on the date by reference to which disclosure of the shareholding of the Controlling Shareholder is made in the listing document and ending on the date which is 6 months from the beginning of dealings on the HKEx; or

b. dispose of his interest in the issuer if such disposal would result in him ceasing to be a Controlling Shareholder in the period of 6 months commencing on the date on which the period referred to above expires.

Controlling Shareholder of a new applicant must undertake to the issuer and the HKEx to disclose any pledge/charge of any securities beneficially owned by him/them in favour of an authorised institution that was made within the period commencing on the date by reference to which disclosure of the shareholding of the Controlling Shareholder is made in the listing document and ending on the date which is 12 months from the beginning of dealings on the.




Main Board GEM

NotifiableTransactions

HKEx rules set out various categories of notifiable transactions, the classification of which is determined by comparing the size of a transaction with the size of the issuer proposing to enter into the transaction. The thresholds for categorising notifiable transactions under the percentage ratios are listed on the HKEx listing rules.

Appointment of compliance advisor

Issuers must appoint a compliance advisor acceptable to the HKEx for the period commencing on its listing date and ending on publication of financial results for the first full financial year after listing.

Issuers must appoint a compliance adviser acceptable to the Exchange for the period commencing on its listing date and ending on publication of financial results for the second full financial year after listing.

Issuers will have to consult and, if necessary, seek advice from compliance advisers before publication of any regulatory announcement, circular or financial report.

Corporate Governance

HKEx advocates the adoption of high corporate governance standards and encourages and/or requires listed issuers to ensure they have adequate and effective systems of internal control covering financial and compliance matters.

Independent non Executive Directors

a.Issuers are required to appoint at least three independent non-executive directors.

b.At least one of the independent non-executive directors must have appropriate professional qualifications or accounting or related financial management expertise.

Audit Committee

a.Issuers must establish an audit committee comprising non-executive directors only.

b.The audit committee must have a minimum of three members, at least one of whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise.

c.The majority must be independent non-executive directors and chaired by an independent non-executive director.



Nominal value of listed securities

Annual listing fees

HKD million EUR million HKD EUR

< 200 < 18.5 145,000 13,427

300 27.8 172,000 15,927

400 37.0 198,000 18,335

500 46.3 224,000 20,782

750 69.5 290,000 26,854

1,000 92.6 356,000 32,966

1,500 139.9 449,000 41,577

2,000 185.2 541,000 50,097

2,500 231.5 634,000 58,708

3,000 277.8 726,000 67,228

4,000 370.4 898,000 83,155

5,000 463.0 1,069,000 98,989

> 5,000 > 463.0 1,188,000 110,009

MAIN

BOARD

• For secondary listings on the Main Board,

the annual listing fee is normally 25% of the

fees listed on the table.

• If an issuer has shares which have a nominal

value of less than HKD 0.25 (EUR 0.023),

then for the purpose of calculating the

annual listing fee, the nominal value of each

share is deemed to be HKD 0.25.(EUR

0.023)

• The annual listing fee (both for Main Board

and GEM issuers) is payable in advance in

one instalment.

< 100 < 9.3 100,000 9,260

2,000 185.2 150,000 13,890

> 2,000 > 185.2 200,000 18,520

GEM

HKEx listed issuers are required to pay an annual listing feewhich is calculated by reference to nominal value of the securities which are to be listed,

as shown in the table below.

Concerning Borsa Italiana, listed issuers are subjected every 6 months to the payment of an half-yearly fee, which is calculated by reference to

the market capitalization (up to 1 billion of market cap: EUR 10,7 for every EUR 500,000 of capitalization; over 1 billion of market cap: EUR 9,6 for

every EUR 500,000 of capitalization), ranging from a minimum of EUR 6,300 to a maximum of EUR 215,000 per semester.



TABLE OF CONTENT


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Foreword..………………………………………………………………………………………………………………………


The Hong Kong Stock Exchange ……………………………………………………………………………………..………




HKEx vs. Borsa Italiana – Average trading multiples……………………………………………………………………..


Case study 2: Prada ………………..………………………………………………………………………………………….


Glossary ………………………………………………………………………………………………………………………..


HKEx vs. BORSA ITALIANA – AVERAGE TRADING MULTIPLES

As of Dec 31, 2010 HKEx Borsa Italiana

Number of IPOs 114 10

Funds raised from IPOs EUR 41,6 billion EUR 2,5 billion

Once a company has decided to pursue an IPO it must choose the most suitable market on which to list its shares, considering – among other factors –

which is the Stock Exchange expected to deliver higher valuation multiples. Leading up to that, the following tables show the main trading

multiples (P/E, P/Book Value, EV/Salesand EV/Ebitda) as of December 31, 2010, with reference to HKEx and Borsa Italiana Consumer

Discretionary, Consumer staples, Energy, Health care and Utilities industries.

Source: Palazzari & Turries’ elaboration of Bloomberg data.

The following table shows the HKEx ability to attract new listings during 2010 in comparison with Borsa Italiana.

HKEx P/E P/Book EV/Sales EV/Ebitda

Consumer Discretionary

20.1x 3.1x 2.9x 10.7x

Consumer Staples

19.2x 2.9x 3.2x 12.9x

Energy 16.6x 2.2x 3.8x 15.9x

Health care 18.4x 2.8x 3.8x 14.8x

Utilities 18.3x 1.8x 5.4x 16.9x

Borsa Italiana P/E P/Book EV/Sales EV/Ebitda

Consumer Discretionary

19.2x 1.8x 1.3x 9.3x

Consumer Staples

14.2x 1.4x 1.1x 6.9x

Energy 15.0x 1.5x 1.6x 10.7x

Health care 19.6x 2.6x 1.5x 8.1x

Utilities 22.9x 1.3x 4.8x 10.9x


Charts above confirm that companies listed on the HKEx on average trade at higher multiples than companies listed on the Italian Stock

Exchange, involving that investors on the HKEx are willing to pay a premium. This is mainly due to the fact that companies listed on the HKEx are

usually exposed to China or other Asian fast growing markets and hence have a more promising growth outlook compared to Borsa Italiana listed

peers.


TABLE OF CONTENT


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Foreword..………………………………………………………………………………………………………………………


The Hong Kong Stock Exchange ………...……………………………………………………………………………………





Case study 1: L’Occitane ………………………………………………………………………………………………….

Case study 2: Prada ………………..………………………………………………………………………………………….


Glossary ………………………………………………………………………………………………………………………..


CASE STUDY 1: L’OCCITANE (1/3)


L’Occitane was listed in Hong Kong in May 2010. The company’s executives including Reinold Geiger, president of L'Occitane (first from the right in the lowest picture), attended the IPO press conference and celebrated for the listing success.



L’Occitane is a French group operating in the design, manufacturing and distribution of cosmetics and well-being products based on natural and

organic ingredients. The Luxembourg-based holding company L’Occitane International S.A. was listed on the HKEx on May 2010, with a floating

rate of 27%,allowing the group to raise EUR 625 million.

UBS AG, through the Hong Kong Branch, was appointed as Sole Global Coordinator and HSBC Holdings Plc and CLSA Ltd. (Credit Agricole

Group) as joint Lead Managers, joint Sponsors and joint Bookrunners.

In Hong Kong the offering was so successful that initially the shares planned to be subscribed by Hong Kong investors represented only 10% of the

total offering, but after an approximately 158 times over-subscriptionan additional 40% was re-allocated to the Hong Kong Public Offer from the

International Placing (source: group press release). The IPO, based on an offer price comprise between HKD12.88 (EUR1.92) and HKD15.08

(EUR1.40), has been set at the maximum of the range, implying a total Equity value of EUR 2.3 billion.

The following table reports L’Occitane multiples at the date of listing compared to L’Oreal S.A. and Estee Lauder Inc. trading multiples,

showing a premium price for L’Occitane’s IPO :

Company L’Occitane1 L’Oreal 2 Estee Lauder3

Stock Exchange Hong Kong Paris New York

EV/Sales 3.7x 2.7x 1.4x

EV/Ebitda 16.0x 14.1x 9.6x

P/E 27.8x 24.4x 19.1x

Current Market Cap 4 EUR 2.7 billion EUR 51.6 billion EUR 13.8 billion

Notes: 1) L’Occitane multiples are referred to fiscal year ended March 31, 2010. 2) L’Oreal trading multiples are

referred to fiscal year ended December 31, 2009 (source: Bloomberg). 3) Estee Lauder trading multiples are referred

to fiscal year ended June 30, 2010 (source: Bloomberg). 4) Source: Bloomberg, as of February 15, 2011.




The following chart shows L’Occitane S.A. share price and volumes since the IPO date, in comparison with the Hang Seng Index(source:

Bloomberg, as of 15 February 2011).

Performance

L’Occitane

29,0%

Performance

HSI

13,7%

HKD 13,0

HKD 15,0

HKD 17,0

HKD 19,0

HKD 21,0

HKD 23,0

HKD 25,0

06

/0

5/

10

20

/0

5/

10

03

/0

6/

10

17

/0

6/

10

01

/0

7/

10

15

/0

7/

10

29

/0

7/

10

12

/0

8/

10

26

/0

8/

10

09

/0

9/

10

23

/0

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10

07

/1

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10

21

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0/

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04

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10

18

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30

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10

13

/0

1/

11

27

/0

1/

11

10

/0

2/

11

0

20.000.000

40.000.000

60.000.000

80.000.000

100.000.000

120.000.000

140.000.000

160.000.000

Volumes L'Occitane S.A. Hang Seng Index



TABLE OF CONTENT


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Foreword………………………………………………………………………………………………………………………

Introduction to Hong Kong ………………………….……………………………………………………………………….

The Hong Kong Stock Exchange ………………..……………………………………………………………………………

Overview of the most active investors on the Hong Kong capital market ….….………………………………….…………..





Case study 2: Prada ……………..………………………………………………………………………………………….


Glossary ………………………………………………………………………………………………………………………..



CASE STUDY 2: PRADA

Prada is an Italian fashion company which manufactures, markets and retails clothing, shoes, handbags and other leather goods. The main brands

included in the portfolio of the company are Prada, Miu Miu, Church’s and Car Shoe.

During fiscal year ended January 31, 2010 the 38.3% of Prada’s consolidated net sales(48% for the MiuMiu brand, 38% for the Prada brand, 6% for

the Church’s brand and 1% for the Car Shoe brand)were generated in the Asia-Pacific region(including Japan).

Furthermore, Prada, with 155 of the 265 total group’s storeslocated in the APAC region, can be considered as an Asia-focused player.

On January 2011 the Board of Directors decided to start the process for listing Prada on the HKEx,with an expected floating rate around 30%.

Prada appointed Banca Imi S.p.A.(Intesa San Paolo Group), Unicredit Group, CLSA Ltd. (Credit Agricole Group) and Goldman Sachs Inc.as joint

Global Coordinators and joint Bookrunners in the institutional placement. Moreover, as reported by public sources, it seems that also ICBC and BoC

will be involved in the deal (source: Mergermarket).

According to public sources available, the Group generated revenues of EUR 2,05 billion and an Ebitda of EUR 370 million during fiscal year ended

January 31, 2011. From the IPO Prada could reach a 20% - 30% higher valuation by listing in Hong Kong than anywhere else in the world(source:

Mergermarket), aiming to raise EUR 1.5 billionwith an expected Enterprise Valueof EUR 5.0 billion (EV/Ebitda 13.5x).

In the past Prada already delayed three IPO attempts on the Milan Stock Exchange in 2001, 2004 and again in 2008.Each time the listing was

postponed due to deteriorating market conditions.

By listing in HKEx, besides an expected higher valuation, Prada will also benefit from i) the increasingly significant brand exposure to generate

consumption power in Greater China area,and ii) the fact that on the HKEx there are very few listed competitors within the fashion industry

further increasing Prada’s shares attractiveness for investors.


TABLE OF CONTENT


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Foreword………………………………………………………………………………………………………………………..


The Hong Kong Stock Exchange ………………………..……………………………………………………………………






Case study 2: Prada ………………..…………………………………………………………………………………………

Palazzari & Turries …………………..…………………………………………………………………………………….

Glossary ………………………………………………………………………………………………………………………..


PALAZZARI & TURRIES


Palazzari & Turries is an international M&A advisory firm based in Hong Kong and Milan, whose professionals possess over 15 years experience

in dealing with cross border transactions involving European and Chinese groups and entrepreneurs. The firm advises corporations, partnerships,

institutions and individuals on private mid-cap mergers & acquisitions and other strategic operations, capital structure, capital raising and

restructuring .

The roots of the firm date back to the 90's in Beijing, and over the years the professional of the firms have contributed to pave the way of the M&A

market in China for numerous European and Chinese groups, private equity firms and entrepreneurs, from origination to transaction completion

and post-completion, including identification and initial confidential approach, due diligence, valuation, deal structuring, negotiations.

In consideration of their local experience, the professionals of the firm are often called to sit as independent non-executive directors of local companies

invested by European groups.

Palazzari & Turries values excellency, comprehensive and custom-made advisory, based on technical know-how, professional skills acquired over years

of practical experience in situ and a special awareness of the local way of doing business, supported by a solid network of privileged local contacts

among prominent industrial groups, financial institutions and private equity firms, comforting clients in making quick-and-just decisions on investment

strategies and execution.

As part of its assistance to clients in their strategic and financial development in China, Palazzari & Turries is also involved in evaluating and advising –

hand in hand with prominent local investment banks – on listing and dual listing in Hong Kong and other Asian stock exchanges.

Founded and managed by Federico Palazzari in Milan and Fabrice Turries in Hong Kong, Palazzari & Turries is also participated

by Tamburi Investment Partners S.p.A. (‘TIP’) – independent leading investment merchant bank listed on the Italian Stock Exchange.


TABLE OF CONTENT


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Foreword………………………………………………………………………………………………………………………...


The Hong Kong Stock Exchange ………………………………………………………………………..……………………






Case study 2: Prada ………………..…………………………………………………………………………………………


Glossary ………………………………………………………………………………………………………………………..


GLOSSARY (1/2)


• Applicant : an issuer that is proposing to apply, or is applying, for admission to trading of any of its securities.

• Bookrunner: the managing or lead underwriter who maintains the books of securities sold for a new issue.

• Controlling Shareholder: any person (including a holder of depositary receipts) who is or group of persons who are together entitled to exercise or

control the exercise of 30% (or such other amount as may from time to time be specified in the Takeovers Code as being the level for triggering a

mandatory general offer) or more of the voting power at general meetings of the issuer or who is or are in a position to control the composition of a

majority of the board of directors of the issuer.

• Dual listing: when a company's securities are listed on more than one exchange for the purpose of adding liquidity to the shares and allowing

investors greater choice in where they can trade their shares.

• EV/Ebitda : ratio used to determine the value of a company using the comparables’ multiples method. Calculated dividing the Enterprise Value of a

company by its Ebitda.

• EV/Sales: ratio used to determine the value of a company using the comparables’ multiples method. Calculated dividing the Enterprise Value of a

company by its revenues.

• Enterprise value: a measure of a company's value and it is calculated as market capitalization plus net financial position, minority interest and

preferred shares, minus total cash and cash equivalents.

• Equity Value: the value of a company available to owners or shareholders. For listed companies the market cap is the main estimate of the Equity

Value.

• Stock exchange: a marketplace in which securities, commodities, derivatives and other financial instruments are traded.

• Global coordinator: responsible for the coordination and management of the IPO process and for the syndicate arrangement.

• IPO (Initial Public Offering) : the first sale of stock by a private company to the public.

• Issuer: any company of whose equity securities are the subject of an application for listing on the Exchange or are already listed.

• Market capitalization : the total market value of all of a company's outstanding shares, calculated by multiplying the number of a company's shares

outstanding by the current market price of one share.

• Outstanding shares: authorized shares in a company that are held by investors, including employees and executives of that company.

42


GLOSSARY (2/2)


• Public float: shares of a company that are freely available for purchase by investors on the secondary market.

• Price/Earnings ratio (P/E): a ratio used to determine the value of a company using the comparables’ multiples method, calculated by dividing the

share price by the annual earnings per share.

• Price/Book ratio (P/Book): a ratio used to compare a stock's market value to its book value, identifying if a company is under or overvalued.

• Security: an instrument representing ownership (stocks), a debt agreement (bonds) or the rights to ownership (derivatives).

• Secondary offering: a registered offering of a large block of a security which has been previously issued to the public, by a current shareholder. The

proceeds of the sale go to the holder, not the issuing company, and the number of shares outstanding does not change.

• Seasoned offering: stock issue by a listed entity. Proceeds of the issue go to the company.

• Syndicate: a group of investment banks who together underwrite and distribute a new issue of securities.

• Sponsor: authorised financial institution responsible for ensuring that a company is suitable for listing.

• Stock: a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

• Underwriter : a company that administers the public issuance and distribution of securities from a corporation, selling them to investors through its

distribution network.

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DISCLAIMER

All the information, estimates, assumptions contained in this document are based on elements publicly available which have not been independently verified by Palazzari & Turries. No guaranty can be given regarding their actual achievement.

Palazzari & Turries, its shareholders, directors, employees and representatives are not liable as to the accuracy, completeness and correctness of the data provided herein, although we have used all due attention and care in setting up and reporting such data.

This document does not constitute an offer or an incentive, an invitation to offer or a promotional message related to a sale or subscription of financial products.

This document has to be considered as strictly private and confidential, must not be distributed, disclosed or supplied to third parties (unless required under statutory provision in force) without the prior written consent of Palazzari & Turries.

PALAZZARI & TURRIES1105, 11/F Regent Centre88 Queen’s road Central

Hong KongTel : (852) 2525 9500 Alberto Pentimalli

[email protected] Giavini

[email protected]

Federico [email protected]

Fabrice [email protected]


pt - the hk listing process mar 22nd no draft · case study 1: l’occitane ... company resulting...

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