Dear Members of the Board of China Motor Bus Company, Limited (“CMB”),
Questions regarding Madam Ngan’s disclosure of interest
We refer to the letter previously sent to you on January 31, 2018 (the “Previous Letter”). Unless otherwise defined herein, capitalised terms used in this letter shall have the same meanings as those used in the Previous Letter.
On February 8, 2018, Madam Ngan Kit-Ling (“Madam Ngan”) filed a disclosure of interests in CMB (the “Disclosure”) held by her through KM. We would like to draw your attention to the following facts and queries relating to the Disclosure.
Date of the Disclosure
The Disclosure sets out the “date of relevant event” as January 31, 2018. Is this accurate given that the “date of relevant event” is supposed to be, according to the Securities and Futures Ordinance (Cap. 571) (“SFO”) the date on which KM purchased the shares which we believe to be prior to January 31, 2018.
We believe that this is the case because it was stated in the list of shareholders of CMB (“List of Shareholders”) dated November 21, 2017, which we obtained from Computershare Hong Kong Investor Services Limited, that KM already owned at least some of these shares at that time. Is the “date of relevant event” really January 31, 2018?
Also, there was far less trading volume of CMB shares on January 31, 2018 than the number of shares disclosed in the Disclosure. Did KM really buy CMB shares on January 31, 2018? If not, when did KM buy those shares?
We are also curious as to why details of the consideration paid for the shares were undisclosed. Was the Disclosure inaccurately or incompletely filed? How much did KM pay for those shares?
In addition, Section 325 of the SFO states that the filing of a disclosure has to be done within three business days after the day on which the relevant event occurs. The disclosed “date of relevant event” was January 31, 2018, however Madam Ngan filed the Disclosure only on February 7, 2018. Did Madam Ngan file her Disclosure too late?
Section 328 of the SFO states that a failure to make disclosure within the time limits required by the SFO or the making of a statement which is false or misleading in any material particular constitutes a criminal offence carrying a maximum fine of $100,000 or maximum prison sentence of two years for each offence. Did Madam Ngan commit a crime?
We would also like to add that in 2002, Mr. Chan Kwan Shat and his wife, Ms. Wong Wai Gin Lydia, were fined $60,000 by the Securities and Futures Commission (“SFC”) for failing to disclose their interest in CMB as required under the SFO. Please refer to a press release by the SFC in the Appendix. Does Madam Ngan remember this unfortunate incident?
In 2016, Schroder Investment Management (Hong Kong) Limited (“Schroder”) was reprimanded and fined $1.8 million by the SFC for failing to disclose all notifiable interests in Hong Kong listed shares from 2005 to 2013. According to a press release by the SFC, Schroder reported itself to the SFC. Does Madam Ngan also need to report herself to the SFC, if there are indeed other violations?
Not only is Madam Ngan the managing director of CMB, she is also the sole proprietor of the law firm Ngan & Co and currently holds a practicing certificate with the Hong Kong Law Society. There is therefore no reason why she should not be well acquainted with the relevant disclosure obligations.
Based on the most recent annual return of KM, Dr. Henry Ngan and Dr. Ngan Kit-Keung also own shares in KM and by extension own additional shares in CMB through KM.
Why have they not made the relevant disclosure of their additional interest in CMB through KM?
Fiduciary duty of the Board
The disclosure requirement of KM should have been apparent to the Board had they referred to the List of Shareholders. If a journalist from Mingpao could uncover this so easily (please refer to the Previous Letter), there is certainly no excuse for the Board to have overlooked this. In any case, the Board was responsible for signing off on previous annual reports. Were there any inaccurate disclosures contained within these annual reports? If there are indeed such errors, is there a need to restate and republish those reports?
Dr. Chau Ming Tak (“Dr. Chau”), an Independent Non-Executive Director (“INED”) of CMB is a medical practitioner. Did Dr. Chau manage to spot the aforementioned issue and if so did he bring it to the attention of the Board? Also, did Dr. Chau receive sufficient training for him to perform his duties as an INED?
Mr. Anthony Grahame Stott (“Mr. Stott”), a former president of the Actuarial Association in Hong Kong has been an INED of CMB since 2002 and is the chairman of the audit committee. He is also an INED of Fidelity Asian Values PLC, a company listed on the Main Board of the London Stock Exchange and a prominent investor of listed stocks. Given his illustrious experience, we find the occurrence of the aforementioned issue to be most puzzling. Was this an oversight on Mr. Stott’s part or does he have any other reason explaining this.
CMB and KM share the same address
The Disclosure sets out the address of KM as Room F, Top Floor, 391 Chai Wan Road, Chai Wan, Hong Kong. This also happens to be the same address as that of CMB. A quick visit to CMB’s headquarters confirms KM’s physical presence.
Please clarify what business KM is engaged in, and if KM is paying rent to CMB for the use of its premises. Are there any other undisclosed related-party transactions? Are these transactions done on arms-length basis?
We are baffled as to the circumstances surrounding the Disclosures and would be grateful if you could clarify them as soon as possible as this is a serious matter not to be taken lightly.
Kindly contact me at +852 9835 4836 any time at your convenience. Again, we earnestly request you for an opportunity to meet.
Argyle Street Management Limited