April 16, 2019
Calvin Choi
Chief Executive Officer
AMTD International Inc.
23/F Nexxus Building
41 Connaught Road Central
Hong Kong
Re: AMTD International Inc.
Draft Registration Statement on Form F-1
Submitted on March 19, 2019
CIK No. 0001769731
Dear Mr. Choi:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form F-1 Submitted on March 19, 2019
Cover Page
1. Please revise to disclose the Company's limited operating history.
Prospectus Summary, page 1
2. We note your disclosure of your assets under management (AUM) balance as
of
December 31, 2018 in US dollars. Please revise to disclose your AUM in
Hong Kong
dollars as well and make corresponding changes throughout the draft
registration
statement.
Calvin Choi
FirstName LastNameCalvin Choi
AMTD International Inc.
Comapany NameAMTD International Inc.
April 16, 2019
April 2 2019 Page 2
Page 16,
FirstName LastName
3. Please expand to discuss the implications of being a controlled
company.
Corporate History and Structure , page 4
4. With a view towards revised disclosure, please advise when you
anticipate the
restructuring to be complete.
5. Please revise to add a brief subsection for each entity on the diagram
that will be part of
the organization. For each entity, disclose the primary business, the
net income or loss for
the years ended 2017 and 2018 and the assets and equity at December
31, 2017 and 2018.
Risk Factors, page 13
6. We note you provide various services to China-based clients including
Chinese regional
banks. As a public company, your auditor is required by law to undergo
regular Public
Company Accounting Oversight Board (PCAOB) inspections to assess its
compliance
with U.S. law and professional standards in connection with its audits
of financial
statements filed with us. The PCAOB, however, is currently prevented
from inspecting the
U.S.-related audit work and practices of PCAOB-registered firms in
China, and, to the
extent their audit clients have operations in China, Hong Kong. Please
tell us whether the
investors in U.S. markets will face this obstacle and will be deprived
of the benefits of
PCAOB inspections of auditors with regards to your consolidated
financial statements. If
so, please state this fact under a separate risk factor heading and
explain that this lack of
inspection prevents the PCAOB from regularly evaluating your auditor's
audits and its
quality control procedures. If not, please tell us why you believe the
investors in U.S.
markets will not face such obstacle.
Risks Relating to Our Business and Industry
We are subject to extensive and evolving regulatory requirements,
non-compliance with which
may result in penalties...., page 19
7. Please disclose whether there have been any material findings of
non-compliance.
Our risk management and internal control systems, as well as the risk
management tools
available to us, may not fully protect us against...., page 23
8. Please disclose whether you have experienced any material deficiencies
or failures in your
risk management and internal controls.
Fraud or misconduct by our directors, officers, employees, agents, clients, or
other third parties
could harm our reputation and business..., page 25
9. Please disclose whether you have experienced any such material fraud
or misconduct.
Calvin Choi
FirstName LastNameCalvin Choi
AMTD International Inc.
Comapany NameAMTD International Inc.
April 16, 2019
April 3 2019 Page 3
Page 16,
FirstName LastName
We may be subject to litigation and regulatory investigations and proceedings
and may not
always be successful in defending...., page 25
10. Please disclose whether you have been subject to any such claims.
We may not be able to fully detect money laundering and other illegal or
improper activities in
our business operations on a timely basis..., page 25
11. Please revise to clarify whether you have failed to detect material
money laundering
activities in the past.
Risks Relating to Our ADSs and this Offering
We have not determined a specific use for a portion of the net proceeds from
this offering, and
we may use these proceeds in ways...., page 44
12. For clarity, please revise this risk factor to disclose your current
capital position as well as
your expected capital position after the offering.
Use of Proceeds, page 47
13. We note your disclosure of intended uses for proceeds are business
expansion and
potential acquisitions. Please revise to provide more meaningful and
specific disclosure of
the intended use of proceeds, to the extent known. This is required
even if management
will have broad discretion in allocating the proceeds. This section
does not require
disclosure of definitive plans and it is acceptable to provide a
quantitative discussion of
preliminary plans. You may also reserve the right to change the use of
proceeds as
indicated in Instruction 7 to Regulation S-K Item 504. Please note
Instruction 6 to Item
504 requires additional disclosure regarding proceeds that may be used
to finance
acquisitions of other businesses.
Selected Consolidated Financial Data, page 60
14. Please revise to disclose all required financial data such as earnings
per share, capital
stock, etc. Refer to Item 3.A.2 of Form 20-F. Make corresponding
revisions on pages 11
and 12.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017, page 69
15. Please revise to expand the results of operations disclosure for the
periods presented to
identify and quantify the various factors driving the material changes
to your results of
operations between the periods. For example, you state on page 14 that
your investment
banking revenue is directly related to the volume and the value of the
transactions;
however, you do not quantify the volume nor the average value of such
transactions
Calvin Choi
FirstName LastNameCalvin Choi
AMTD International Inc.
Comapany NameAMTD International Inc.
April 16, 2019
April 4 2019 Page 4
Page 16,
FirstName LastName
during the periods presented. Refer to Section III.D of Release
33-6835. In addition,
please revise to discuss the Company's financial condition and changes
in financial
condition for the periods covered by the financial statements
including the causes of
material changes from year to year in financial statement line items.
Refer to Item 5 of
Form 20-F.
16. We note from your disclosure in Note 13 that accounts receivable
increased from
HK$93,173 thousand at December 31, 2017 to HK$161,093 thousand at
December 31,
2018, including an increase in amounts past due over 3 months of
HK$61,501 thousand at
December 31, 2018 from HK $466 thousand at December 31, 2017. Please
revise to
discuss material trends within accounts receivable in your next
amendment.
17. Your revenues generated from asset management services represent 16.9%
and 20.3% of
your total revenues excluding the net changes in fair value on
financial assets at fair value
through profit or loss for the fiscal years ended December 31, 2018
and 2017 and the asset
management business is one of your three reportable segments. Given
the significance of
this revenue stream and of this business to your operations, please
revise to provide a
rollforward of assets under management (AUM) showing the beginning
balance, gross
inflows, gross outflows and market appreciation/depreciation to arrive
at an ending AUM
balance. In addition, please quantify the weighted average management
fee rate and, if
relevant, include a discussion of any significant trends in your
average fee rates that
attributed to the increase in fees during the period. To the extent
that fee levels vary
significantly by AUM product type (fixed income, equities, etc.),
please disaggregate the
AUM rollforwards by the different material products. Refer to Item 5.A
of Form 20-F.
Shares Eligible For Future Sale
Registration Rights , page 157
18. Please file the registration rights agreement as an exhibit to the
registration statement or
advise.
Audited Consolidated Financial Statements, page F-1
19. Please revise your consolidated financial statements to label
subtotals in accordance with
IAS 1, paragraphs 55A and 85A.
Consolidated Statements of Profit or Loss and Other Comprehensive Income, page
F-3
20. We note the line item titled 'Unrealized fair value gain' on the
Consolidated Statements of
Profit or Loss and Other Comprehensive Income. Please revise to better
describe the net
changes in fair value on financial assets at fair value through profit
or loss. Make
corresponding changes throughout the draft registration statement.
Consolidated Statements of Financial Position, page F-4
21. We note from the Consolidated Statements of Financial Position and
Note 19 on page F-
Calvin Choi
FirstName LastNameCalvin Choi
AMTD International Inc.
Comapany NameAMTD International Inc.
April 16, 2019
April 5 2019 Page 5
Page 16,
FirstName LastName
40 that the entire balance of contract liabilities - HK$55.1 million -
is classified as current
within the 'Other Payables and Accruals' line item. However, from the
table on page F-32,
we note that HK$17.9 million of the contract liabilities represent
outstanding performance
obligations that will not be satisfied within one year. Please revise
to disclose separately
the current and non-current portions of the contract liabilities on
the Consolidated
Statements of Financial Position and other relevant disclosures
throughout the draft
registration statement in accordance with IAS 1, paragraph 69.
Notes to the Consolidated Financial Statements
Note 2.3. Summary of Significant Accounting Policies
Revenue Recognition, page F-22
22. We understand from your disclosures throughout the draft registration
statement that you
provide a range of various products and services to your clients.
Please address the
following:
Tell us how frequently you provide multiple products/services in a
single contract and
related total revenue amount recognized for the periods presented,
if known;
Tell us whether you enter into two or more contracts (where you
provide a single
product/service in each contract) at or near the same time with
the same client (or
related parties of the client), how you account for such contracts
including your
consideration of IFRS 15, paragraph 17, and related total revenue
amount for the
periods presented, if known;
Tell us how you account for multiple products/services in a single
contract including
your consideration of IFRS 15, paragraph 27; and
Tell us how you allocate the transaction price to performance
obligations in a contract
with multiple products/services including your consideration of
IFRS 15, paragraph 73
and revise to disclose your accounting policies regarding the
allocation of the
transaction price.
Note 4. Operating Segment Information, page F-26
23. Please revise to include information about the profit or loss for each
segment in the
periods presented as required by the disclosure requirements of
paragraph 21 of IFRS 8.
24. We noted your disclosure on page F-30 that your revenue is derived
solely from your
operations in Hong Kong. However, we note from disclosures throughout
the draft
registration statement that you have clients based out of mainland
China. Please tell us
how your current disclosures comply with IFRS 8, paragraphs 31 and 33
which
require information regarding revenues from customers in different
geographical areas for
Calvin Choi
FirstName LastNameCalvin Choi
AMTD International Inc.
Comapany NameAMTD International Inc.
April 16, 2019
April 6 2019 Page 6
Page 16,
FirstName LastName
each reportable segment and revise your disclosures as necessary
including other relevant
disclosure in the draft registration statement (e.g. Note 5).
Note 6. Operating Expenses/Income, Net, page F-32
25. Please revise to include the complete breakdown of your operating
expenses for the
periods presented similar to the tabular disclosure on page 66.
Note 13. Accounts Receivable, page F-35
26. Please reconcile the gross carrying amount of accounts receivable at
December 31, 2018
in the table on page F-37 of HK$158,518 thousand to the accounts
receivable balance at
December 31, 2018 of HK$161,093 thousand throughout the document.
27. Please revise to include a rollforward of the allowance for loan
losses as required by
paragraph 35h of IFRS 7.
Note 15. Financial Assets at Fair Value Through Profit or Loss and Stock Loan,
page F-38
28. On page 16, you disclose that you make strategic investments in Asia
and are subject to
concentration risks. In addition, you disclose that your investment
portfolio may be
concentrated in certain sectors, geographic regions, individual
investments or types of
securities that may or may not be listed. We note that you hold
investments primarily in
four companies as of the date of this prospectus. Please revise to
include the following
disclosures concerning these investments in your next amendment:
All required disclosures in accordance with IFRS 7, paragraphs 31
and 32 for the
concentration risks related to your strategic investments;
All required disclosures in accordance with Item 11 of Form 20-F
related to equity
price risk in the Quantitative and Qualitative Disclosures about
Market Risk section;
Disclose the individual components of the 'Listed equity shares,
at quoted price'
included in Financial Assets at Fair Value Through Profit or Loss
in Note 15 and
reconcile to the strategic investments discussed on page 105-106;
Disclose the individual components of the 'Unlisted debt
securities' included in
Financial Assets at Fair Value Through Profit or Loss in Note 15
and reconcile to the
strategic investments discussed on page 105-106;
Disclose the individual components of the 'Unlisted equity shares'
included in
Financial Assets at Fair Value Through Profit or Loss in Note 15
and reconcile to the
strategic investments discussed on page 105-106;
Break out the unrealized fair value gain by listed equity shares,
unlisted equity shares,
and unlisted debt securities in the periods presented; and
For unlisted equity investments measured using significant
unobservable inputs (Level
3), please tell us, and revise to include additional information
regarding the observable
recent transactions with similar risk characteristics used to
estimate the fair value in
Calvin Choi
AMTD International Inc.
April 16, 2019
Page 7
the periods presented. Please be fulsome and detailed in your
response to allow a
potential reader of the financial statements to be able to
understand the process used to
fair value these investments. Refer to paragraphs 91-99 of IFRS13
for guidance.
29. Please revise your next amendment to include the additional details
concerning the stock
loan:
The specific equity shares lent (Bank of Qingdao or different equity
shares);
Any recognized unrealized gain on the stock loan in the periods
presented;
If you have a repayment schedule for the stock loan; and
If you have an allowance for credit risk related to the stock loan.
Note 23. Related Party Transactions, page F-43
30. We note you have certain outstanding balances with related parties as
of the periods
presented. Please revise to disclose any provisions for doubtful debts
related to the
amount of outstanding balances and any expenses recognized during the
periods in respect
of bad or doubtful debts due from related parties in accordance with
IAS 24, paragraphs
18(c) and (d).
31. You disclose on page F-44 that details of your accounts receivable
from your fellow
subsidiaries as of January 1, 2017 and December 31, 2018 are disclosed
in the Note 13.
Please tell us how this information is presented in the Note 13 as it
is unclear from the
current disclosures and how the Note 13 disclosures comply with IAS
24, paragraph 18
and IAS 1, paragraph 78(b).
General
32. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Jessica Livingston at 202-551-3448 or Michael Clampitt
at 202-551-
3434 if you have questions regarding comments on the financial statements and
related
matters. Please contact Stephen Kim at 202-551-3291or David Irving at
202-551-3321with any
other questions.
FirstName LastNameCalvin Choi Sincerely,
Comapany NameAMTD International Inc.
Division of
Corporation Finance
April 16, 2019 Page 7 Office of
Financial Services
FirstName LastName