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Peggy Sito

LOCAL property tycoon Li Ka-shing says a decision to shift shares in the flagship firm Cheung Kong (Holdings) to a trust under his name is to avoid paying inheritance tax.

  He also dismissed speculation that the surprise move signalled a possible withdrawal of his empire from the territory.

  The Hong Kong Stock Exchange's Securities Daily Summaries reported on Monday that Mr Li had consolidated his companies, which owned 34.95 per cent of Cheung Kong, into a newly formed trust named Li Ka-shing Unity Holdings. The consolidation took place on Thursday.

  The move was announced shortly after company's setbacks in the development of Oriental Plaza in Beijing and caused some to speculate that Mr Li had lost confidence in Hong Kong and China.

  But Mr Li denied this yesterday.

  'There is only one reason for my doing so,' Mr Li said. 'I don't have to pay inheritance taxes after transferring assets to a trust.

  'It has nothing to do with politics or my confidence in Hong Kong's future.'   Without unveiling the location, Mr Li said the trust was registered overseas.

  'It is not an indirect domicile,' Mr Li said. 'Cheung Kong has no plans to leave Hong Kong.

  'I will be here after 1997.'   He said the move was nothing new in Hong Kong and he was just following other large companies.

  'I'm probably the last to make such arrangements,' Mr Li said.

  Mr Li said he and his family retained controlling interests in the trust.

  'Not a single share was added or sold after the arrangement,' he said.

  Mr Li and his sons Victor Li Tzar-kuoi and Richard Li Tzar-kai, are beneficiaries of the trust.

   As Richard Li is not a Cheung Kong director, he is not required to report his interests in Cheung Kong via the trust.

  Mr Li said that by setting up the trust fund under his name he had paid between $70 million to $80 million in taxes.

  Analysts and accounting experts said the move is not unusual for tax purposes.

  Legislator Chim Pui-chung said this could be seen as a way to diversify risk.

  But Mr Chim, a representative of the stock traders in Legco, does not feel Mr Li is losing confidence in Hong Kong.

  Another legislator Eric Li Ka-cheung said it was difficult to speculate on the reasons behind the decision.

  He said the most apparent reason would be tax exemption or to keep the block of shares and common control after Mr Li died.

    Teresa Tong, of Ernst & Young, said there are a number of factors why anyone would set up a trust for assets.

   'A trust could be utilised to enhance the distribution of an individual's assets after his death,' she said. 'If the tax planning is performed in an appropriate manner, holding assets via a trust could avoid Hong Kong estate duty.'   DBS Securities property analyst Winnie Chiu said she would like to see more information. 'But I expect the move is intended to better manage taxation.' Ms Chiu said.

  Salomon Brothers analyst Franklin Lam said: 'It is not uncommon.' 



Li maintains confidence in HK despite offshore share trust