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IDT Report on China Apollo inquiry


The Insider Dealing Tribunal has submitted to the Financial Secretary a report on its inquiry in relation to the listed securities of China Apollo Holding Limited.

Following is a summary of the Tribunal's Report:


By notice dated 30 June 2000, the Financial Secretary required the Insider Dealing Tribunal to institute an inquiry in relation to the listed securities of China Apollo Holdings Limited (hereafter known as China Apollo) to inquire into and determine -

(a) whether there has been insider dealing in relation to the company arising out of the dealings in the listed securities of the company by Messrs. Lau Chan Wing, Raymond and Zhang Tie Cheng during the period from 1st to 21st March 1996 (inclusive);

(b) in the event of there having been insider dealing as described in paragraph (a) above, the identity of each and every insider dealer; and

(c) the amount of any profit gained or loss avoided as a result of such insider dealing.

The Tribunal under the Chairmanship of Mr. Justice Lugar Mawson identified seven other persons as implicated persons in addition to the two persons named in the Financial Secretary's notice. They were Mr. Lok Fai, Mr. Tseung Wai Lok, Ms. Wang Hui Hui Huang, Ms. Arthine Chung Ming Chee, Mr. Jin Dong, Mr. Huang Mu Yan and Mr. Wang Feng Yi.

The Insider Dealing Tribunal has completed its inquiry in respect of liability; that is, to identify those persons who did or did not commit acts of insider dealing, and has submitted a report in that regard to the Financial Secretary on 1 February 2002.


China Apollo's main business is the manufacture and sale of tonic health drinks and soft drinks in the Mainland. The company was listed on the Stock Exchange of Hong Kong on 19 December 1995.

On 7 December 1995, before its listing, China Apollo published a prospectus. The prospectus stated that the directors forecasted that, on the basis and assumptions set out in the prospectus and in the absence of unforeseen circumstances, the combined profit after taxation and minority interests but before extraordinary items of the Group for the year ending 31 December 1995 would amount to not less than $190 million. It was also stated in the prospectus that the directors were not aware of any exceptional items having arisen, nor did they expect any that were likely to arise during the year ending 31 December 1995.

At the time of the issue of the prospectus (7 December 1995) only the directors of China Apollo were in possession of information relating to its business results up to and including October 1995. The investing public was not made aware of the actual business results after 30 June 1995, until the announcement of results.

China Apollo released its 1995 annual results in the evening of 21 May 1996. It was apparent from the results that sales deteriorated in the second half of 1995, resulting in a performance well below that achieved in 1994 and rendering the attainment of the profit forecast of 'not less than $190 million' contained in the prospectus impossible. Reacting to the results, on 22 May 1996, the price of China Apollo shares dropped from previous close of $2.10 to close at $1.53 (a drop of 27.14%) with 26.8 million shares traded.

It was alleged that the implicated persons dealt in China Apollo shares in March 1996 and committed insider dealing on the above occasions.


The Tribunal concluded in its report to the Financial Secretary that, by unanimous decision, it had found that Messrs. Raymond Lau Chan Wing, Zhang Tie Cheng, Lok Fai, Tseung Wai Lok and Ms. Arthine Chung Ming Chee had committed insider dealing. Also by unanimous decision, the Tribunal found that Messrs. Jin Dong and Wang Feng Yi did not engage in insider dealing in their sales of China Apollo shares between 18 and 21 March 1996 as there was insufficient evidence to conclude that they possessed the relevant information at the time they subscribed for and sold their China Apollo shares.

The Tribunal made no findings in respect of Ms Wang Hui Hui Huang and Mr. Huang Mu Yan as their whereabouts could not be ascertained and the Tribunal had been unable to service notice of the inquiry on them.

In respect of the requirement to determine the amount of profit gained or loss avoided and thereafter to make consequential orders and penalties, the Tribunal will proceed to hear representations on a date to be fixed.

End/Saturday, February 9, 2002


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