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Reply:
(a)
(b)
(c)
(d)
Between 1 January 1993 and 31 May 1996, 156 companies were newly listed on the Stock Exchange of Hong Kong (SEHK) and 144 had included profits forecasts in their prospectuses. All were able to achieve the profits forecasts. However, one company could only achieve its profits forecasts by the inclusion of an exceptional item, i.e. activities not specifically mentioned in its prospectus. The company involved was Rich City Packaging Holdings Ltd., and its actual profits deviated from its forecast by 5.9%. In addition, a second case is still under investigation by SEHK. It is therefore inappropriate to divulge details at this stage.
Failure to meet a profits forecast does not in itself constitute a breach of the Listing Rules. However, failure to notify the market earlier of circumstances which the directors believe would render the forecast inappropriate contravenes the Listing Rules. The Rich City case had been considered by the Listing Committee of SEHK. Having considered the circumstances of the case, and in view of the fact that the company had made a statement clarifying its profit and loss account, the Listing Committee decided to take no disciplinary action against the company.
The time required by SEHK to investigate individual cases of inaccurate profits forecasts will depend on the circumstances of the case. In the Rich City case, the SEHK took about 2 months to complete its investigation. SEHK announces the result of its investigation and the sanction involved, unless the sanction involved is a private reprimand.
Under the Listing Rules, a company seeking listing must include in its prospectus a statement on the financial and trading prospects of the company for at least the current financial year. Companies and their sponsors may however include profits forecasts in the prospectuses as an additional reference for potential investors. We see no good reason to discourage such a practice.
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