Vision Statement We are dedicated to adding value for customers, employees, shareholders and the community through the delivery of total quality finan

Transcription

1 With Haitong International, you can go anywhere! Stock Code:665

2 Vision Statement We are dedicated to adding value for customers, employees, shareholders and the community through the delivery of total quality financial services. Mission Statement We aim to be a global player in the financial services industry, and a leader in the Greater China region. To achieve this, we will always place the interests of our customers first; maintain the trust of our customers through our integrity, quality and professionalism; provide innovative solutions, using advanced technology, without losing sight of our traditional values; and develop a culture which fosters innovation, knowledge, communication and continuous improvement. ;

3 Contents 2 Corporate Information 6 Financial Highlights 7 Corporate Structure 9 Chairman s Statement 12 Managing Director s Review 17 Financial Review 22 Corporate Governance Report 34 Corporate Highlights In the endless sea of wealth opportunities from around the world, we always go on and beyond wholeheartedly to explore the best interest of our clients. Over the past 38 years, we have earned significant trust and confidence from our clients and received numerous accolades for quality service and innovation. Built on our solid foundation and unrivalled reputation, coupled with the strong support from our parent company, we are ready to spearhead towards the global financial arena, where enormous investment opportunities abound. With the rollout of our new brand, Haitong International, we are determined to pursue our ambitious goal of establishing a strong presence in the global financial market and becoming a leader in the Greater China region Board of Directors and Senior Management 77 Report of the Board of Directors 105 Independent Auditor s Report 108 Financial Statements 236 Ten Years Financial Summary Financial Calendar 16 March 2011 Announcement of the audited final results April 2011 by 4:30 p.m. Latest date for registration for entitlement to the final dividend 21 April to 29 April 2011 Book close dates April 2011 Record date for the final dividend May 2011 Payment date for the final dividend /2010 1

4 Corporate Information General Information Executive Directors WONG Shiu Hoi, Peter LI Jianguo LIN Yong LEE Yiu Wing, William CHAN Chi On, Derek POON Mo Yiu, Patrick Deputy Chairman and Managing Director Deputy Chairman Joint Managing Director Non-executive Directors LI Mingshan JI Yuguang WU Bin CHEN Chunqian CHENG Chi Ming, Brian Chairman Independent Non-executive Directors MAN Mo Leung TSUI Hing Chuen, William LAU Wai Piu, Bill Company Secretary LI Tung Wing, Mike Internal Auditor LAU Chi Keung, Sammy Place of Incorporation Incorporated in Bermuda with limited liability Registered Office Clarendon House Church Street, Hamilton HM 11 Bermuda Clarendon House Church Street, Hamilton HM 11 Bermuda Principal Place of Business 25th Floor, New World Tower Queen s Road Central Hong Kong Website Homepage: : 2 Haitong International Securities Group Limited Annual Report 2009/2010

5 Corporate Information External Auditors PricewaterhouseCoopers Legal Adviser in Hong Kong Woo, Kwan, Lee & Lo Legal Adviser on Bermuda Law Conyers Dill & Pearman Conyers Dill & Pearman Principal Share Registrars and Transfer Office HSBC Securities Services (Bermuda) Limited 6 Front Street, Hamilton HM 11 Bermuda HSBC Securities Services (Bermuda) Limited 6 Front Street, Hamilton HM 11 Bermuda Hong Kong Branch Share Registrars and Transfer Office Tricor Investor Services Limited 26th Floor, Tesbury Centre 28 Queen s Road East, Wanchai Hong Kong Principal Bankers Standard Chartered Bank (Hong Kong) Limited The Hongkong and Shanghai Banking Corporation Limited Bank of China (Hong Kong) Limited Hang Seng Bank Limited The Bank of East Asia, Limited China Construction Bank (Asia) Corporation Limited Industrial and Commercial Bank of China (Asia) Limited CITIC Bank International Limited Chong Hing Bank Limited Fubon Bank (Hong Kong) Limited Public Bank (Hong Kong) Limited Oversea-Chinese Banking Corporation Limited Wing Hang Bank, Limited DBS Bank (Hong Kong) Limited Dah Sing Bank, Limited Bank of Communications, Hong Kong Branch 2009/2010 3

6 Corporate Information Board Committees Audit Committee JI Yuguang MAN Mo Leung TSUI Hing Chuen, William LAU Wai Piu, Bill Credit Committee WONG Shiu Hoi, Peter LIN Yong LEE Yiu Wing, William POON Mo Yiu, Patrick HUI Yee, Wilson WU Kwok Leung, Edmond ZHANG Xinjun, Jeff SUN Tong, Tony LO Wai Ho, Kendy CHAN Wai Man, Cilla Executive Committee WONG Shiu Hoi, Peter LIN Yong LEE Yiu Wing, William CHAN Chi On, Derek POON Mo Yiu, Patrick HUI Yee, Wilson LAU Yiu Wai, Joseph YING Tak Sun, Nelson ZHANG Xinjun, Jeff SUN Jianfeng SUN Tong, Tony WU Kwok Leung, Edmond LO Wai Ho, Kendy Remuneration Committee LI Mingshan JI Yuguang MAN Mo Leung TSUI Hing Chuen, William LAU Wai Piu, Bill 4 Haitong International Securities Group Limited Annual Report 2009/2010

7 Corporate Information Strategic Development Committee LI Mingshan WONG Shiu Hoi, Peter JI Yuguang LI Jianguo LIN Yong LEE Yiu Wing, William CHENG Chi Ming, Brian Sub-committees Investment Committee WONG Shiu Hoi, Peter LEE Yiu Wing, William POON Mo Yiu, Patrick ZHANG Xinjun, Jeff LO Wai Ho, Kendy MAK Tak Kwong, Marco IT Steering Committee WONG Shiu Hoi, Peter LEE Yiu Wing, William POON Mo Yiu, Patrick YING Tak Sun, Nelson ZHANG Xinjun, Jeff WU Kwok Leung, Edmond LO Wai Ho, Kendy LO Yam Pui, Eric HUNG Kwok Ming, Adrian Operation Cost Committee LEE Yiu Wing, William POON Mo Yiu, Patrick YING Tak Sun, Nelson ZHANG Xinjun, Jeff WU Kwok Leung, Edmond LO Wai Ho, Kendy WONG Mei Lin, April Fiona HUI Chor Ho, Mixgo HUNG Kwok Ming, Adrian HUNG Chi Shuen, David 2009/2010 5

8 Financial Highlights 18 months ended 31 December months ended 30 June Percentage change increase For the period end Revenue (HK$ 000) 1,459,935 1,084, Net Profit (HK$ 000) 345, , At the period end Shareholders Funds (HK$ 000) 2,170,580 1,925, Total Assets (HK$ 000) 11,412,151 8,904, Number of Shares in Issue 715,032, ,448,228 1 Per share Basic Earnings Per Share (HK Cents) Diluted Earnings Per Share (HK Cents) Dividend Per Share (HK Cents) NAV Per Share (HK$) Share Price High (HK$) Low (HK$) Financial ratios Gearing Ratio Borrowing to Total Assets Borrowing to NAV Return on Total Assets (%) (%) Return on Shareholders Fund (%) (%) Haitong International Securities Group Limited Annual Report 2009/2010

9 Corporate Structure HAITONG INTERNATIONAL SECURITIES GROUP LTD. Major Subsidiaries Asset and Wealth Management Corporate Finance Financial Services Management and Consultancy Services Strategic and Other Investments Hai Tong Asset Management (HK) Ltd. Hai Tong Capital (HK) Ltd. Haitong International Bullion Ltd. Haitong International Information Systems Ltd. it Technology (Shenzhen) Co. Ltd. Haitong International Asset Management Ltd. Haitong International Capital Ltd. Haitong International Finance Co. Ltd. Taifook Investment Consultancy (Guangzhou) Co. Ltd. Prosper Ideal Ltd. Haitong International Consultants Ltd. Haitong International Futures Ltd. Taifook Investment Consultancy (Shanghai) Co. Ltd. Haitong International Immigration Consultants Ltd. Haitong International Investment Services Ltd. Haitong International Management Services Co. Ltd. Haitong International Investment Managers Ltd. Haitong International On-line Services Ltd. Haitong International Wealth Management Ltd. Haitong International Research Ltd. Haitong International Securities Co. Ltd. Haitong International Securities Nominees Ltd. Note: This chart is a simplified corporate structure chart, some intermediate companies are not shown. 2009/2010 7

10 2009/

11 , , , % , /2010

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20 ,740, ,740, ,223, ,246, / ,597, / ,032, , % 15,680,0004,843, () 10,026, ,920 34, % , , Haitong International (BVI) LimitedHaitong BVI Haitong BVI () 20,105, /

21 /2010

22 /

23 * # * 1 1/2 2 2/5 0/2 0/1 3 2/2 4 5/5 1/1 5 7/7 6/6 1/1 6/6 36/36 1/1 6 5/5 1/3 10/18 1/1 7/7 6/6 1/1 6/6 32/36 1/1 6/7 29/36 7/7 1/1 6/6 35/36 7 2/2 6/6 1/1 1/1 7 2/2 6/6 1/1 1/1 8 2/2 9 2/2 1/1 10 5/5 2/2 2/2 1/1 11 3/5 11 5/5 12 7/7 1/1 5/7 3/3 3/3 7/7 3/3 3/3 5/7 3/3 2/3 5/6 29/36 30/36 32/ /3 8/ / /0 4/5 5/6 33/36 6/6 35/ /11 6/6 17 1/1 89% 100% 100% 100% 92% 88% 80% 86% * # /2010

24 /

25 ( ): /2010

26 /

27 * 9 100% 17 98% * * ISO 25%1.2 25% /2010

28 30,000,000 30,000,000 60,000,000 10,000,000 20,000,000 30,000, , ,000 1,000, ,940 4, / /

29 /2010

30 2009/

31 /

32 / QFII QDII

33 / StarMine (CPT) (CIB)(CPD) ,308 12, % 164.4% % 243.8% 38 10

34 / (CUAAFA) QDII 17

35 / ACCA ACCA ISO ISO9001:2008 ISO27001:2005 CMMI

36 University of Guelph /

37 /2010

38 University College London Vision Values Holdings Limited Vision Values Holdings Limited /

39 Columbia Southern University University of Western Sydney 20 43Heriot- Watt University /2010

40 , /

41 ,717,000 57,203, ,472, % 5% /2010

42 /

43 XV 8,200, ,069, ,269, , , , , ,152, ,152, /2010

44 879, ,052, ,931, ,198, ,198, , , , , , , , , , , , , , , , , (i)2,071, (ii)1,998, /

45 (i)1,553, (ii)1,598, (i)1,553, (ii)1,498, XV /2010

46 % % 10% % 20021,687, % % % /

47 (i) (ii)5 (iii) * *** ** 2,073,242 (1,626) 1 2,071, ,000,000 (1,757) 2 1,998, ,000 (703) 2 799, ,000 (703) 2 799, ,554,931 (1,220) 1 1,553, ,600,000 (1,405) 2 1,598, ,554,931 (1,220) 1 1,553, ,500,000 (1,318) 2 1,498, ,200,000 (1,054) 2 1,198, ,000 (703) 2 799, ,000 (439) 2 499, ,000 (439) 2 499, /2010

48 * *** ** 500,000 (439) 2 499, ,000 (439) 2 499, ,000 (439) 2 499, ,000 (439) 2 499, ,000 (439) 2 499, ,183,104 12,200,000 (14,782) 17,368,322 21,509,884 (13,057) 1 (1,740,225) (2,980,071) 3 16,776, ,280,000 (18,165) 2 (600,000) 4 20,661, ,509,884 21,280,000 (31,222) (1,740,225) (3,580,071) 37,438,366 26,692,988 33,480,000 (46,004) (1,740,225) (3,580,071) 54,806,688 * 6 ** *** 2009/

49 (1) (2) (3) (4) ,726, ,791, % 8.5 (%) 5.61% (%) % /2010

50 (1) 433,249, ,249, ,249, ,249, Cheng Yu Tung Family (Holdings) Limited CYTF (2) 64,213,732 64,213, Centennial Success Limited CSL (2) 64,213,732 64,213, (2) 64,213,732 64,213, (2) 64,213,732 64,213, (2) 64,213,732 64,213, NWSSM (Cayman) (2) 64,213,732 64,213, /

51 NWS Service Management Limited NWSSM (BVI) (2) 64,213,732 64,213, NWS Financial Management Services LimitedNWSFM 64,213,732 64,213, (1) (2) CYTFCSL 51%CSL40.25% 59.16%NWSSM (Cayman) NWSSM (BVI)NWSSM (BVI)NWSFMCYTF CSL NWSSM (Cayman) NWSSM (BVI)NWSFM /2010

52 (i) 3 (ii) (iii) (iv) (v) (vi) (i)(ii) /

53 35 35(i) (ii)(iii) A % /2010

54 /

55 Consolidated Income Statement For the 18 months ended 31 December For the 18 months ended 31 December For the 18 months ended 30 June Note HK$ 000 HK$ 000 Revenue 5 1,459,935 1,084,604 Other income 5 55,018 66,369 1,514,953 1,150,973 Employee benefits costs: Salaries and allowances, bonuses 6 and pension scheme contributions (439,213) (349,099) Commission to accounts executives 6 (252,410) (223,347) Depreciation 13 (49,370) (42,295) Other operating expenses (339,962) (274,641) Gain/(loss) on re-measurement of assets/liabilities classified as held for sale 2,023 (24,132) (1,078,932) (913,514) Finance costs 6 (39,194) (35,401) Operating profit 396, ,058 Share of profit of an associate 18 1,718 6,324 Profit before taxation 6 398, ,382 Taxation expenses 9 (53,386) (20,054) Profit for the period 345, ,328 Attributable to: Equity holders of the Company , ,974 Non-controlling interests (636) (646) 345, ,328 Dividends 11 First interim dividend 70,896 34,818 Second interim dividend 42,538 Final dividend paid in respect of the previous year 388 Proposed final dividend 57,203 56, ,637 91,722 Earnings per share attributable to equity holders of the Company Basic HK48.80cents Diluted HK48.68cents HK27.61cents HK27.59cents The notes on pages 117 to 235 form an integral part of this consolidated financial information Haitong International Securities Group Limited Annual Report 2009/2010

56 Consolidated Statement of Comprehensive Income For the 18 months ended 31 December For the 18 months ended 31 December HK$ 000 For the 18 months ended 30 June HK$ 000 Profit for the period 345, ,328 Changes in fair value of available-for-sale investments Impairment loss of available-for-sale investments charged to income statement 5,731 (58,584) 5,922 Other comprehensive income for the period 5,731 (52,662) Total comprehensive income for the period 350, ,666 Attributable to: Equity holders of the Company 351, ,312 Non-controlling interests (636) (646) 350, ,666 The notes on pages 117 to 235 form an integral part of this consolidated financial information /

57 Consolidated Balance Sheet As at 31 December December June Note HK$ 000 HK$ 000 ASSETS Non-current assets Fixed assets , ,036 Goodwill 14 9,854 9,854 Other intangible assets 15 6,609 4,609 Other assets 16 43,513 7,025 Interest in an associate 18 9,119 Available-for-sale investments 19 32,018 33,075 Deferred tax assets 28 2,343 10, , ,316 Current assets Advances to customers 20 4,375,589 1,726,668 Accounts receivable ,946 2,745,969 Prepayments, deposits and other receivables ,600 40,510 Tax prepaid 21,725 29,019 Assets classified as held for sale 80,374 Financial investments at fair value through profit or loss 23 92,251 22,628 Cash held on behalf of customers 24 5,158,603 3,661,886 Cash and bank balances 417, ,790 11,166,394 8,710,844 Total assets 11,412,151 8,904,160 EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Issued capital 29 (71,503) (70,645) Reserves 31 (2,041,874) (1,798,303) Proposed final dividend 11 (57,203) (56,516) (2,170,580) (1,925,464) Non-controlling interests (6,758) (5,394) Total equity (2,177,338) (1,930,858) 110 Haitong International Securities Group Limited Annual Report 2009/2010

58 Consolidated Balance Sheet As at 31 December December June Note HK$ 000 HK$ 000 Liabilities Non-current liabilities Deferred tax liabilities 28 (19,832) (14,207) (19,832) (14,207) Current liabilities Accounts payable 24,25 (6,052,493) (4,694,069) Tax payable (51,429) (18,082) Other payables and accruals 26 (136,792) (52,933) Liabilities classified as held for sale (9,774) Loans and other borrowings 27 (2,974,267) (2,184,237) (9,214,981) (6,959,095) Total liabilities (9,234,813) (6,973,302) Total equity and liabilities (11,412,151) (8,904,160) Net current assets 1,951,413 1,751,749 Total assets less current liabilities 2,197,170 1,945,065 WONG Shiu Hoi, Peter Director LEE Yiu Wing, William Director The notes on pages 117 to 235 form an integral part of this consolidated financial information /

59 Balance Sheet As at 31 December December June Note HK$ 000 HK$ 000 ASSETS Non-current assets Fixed assets 13 15,120 16,769 Investment in subsidiaries , , , ,146 Current assets Amount due from subsidiaries 17 3,176,448 1,784,687 Prepayments, deposits and other receivables 22 5,994 2,985 Cash and bank balances 8,969 3,916 3,191,411 1,791,588 Total assets 3,311,908 1,913,734 EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Issued capital 29 (71,503) (70,645) Reserves 31 (991,459) (922,766) Proposed final dividend 11 (57,203) (56,516) Total equity (1,120,165) (1,049,927) Current liabilities Amounts due to subsidiaries 17 (756,097) (804,009) Tax payable (6,590) (52) Other payables and accruals 26 (39,681) (12,246) Loans and other borrowings 27 (1,389,375) (47,500) Total liabilities (2,191,743) (863,807) Total equity and liabilities (3,311,908) (1,913,734) Net current assets 999, ,781 Total assets less current liabilities 1,120,165 1,049,927 WONG Shiu Hoi, Peter Director LEE Yiu Wing, William Director The notes on pages 117 to 235 form an integral part of this consolidated financial information Haitong International Securities Group Limited Annual Report 2009/2010

60 Consolidated Statement of Changes in Equity For the 18 months ended 31 December Issued capital Share premium account Share option reserve Capital redemption reserve Attributable to equity holders of the Company Contributed surplus Capital reserve Investment revaluation reserve Exchange reserve Proposed cash/scrip dividend Retained profits Total Noncontrolling interests HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note 30) (note 31) (note 31) Total equity At 1 July , ,677 14,484 5, ,501 12,120 (30) 56, ,428 1,925,464 5,394 1,930,858 Profit for the period 345, ,795 (636) 345,159 Other comprehensive income for the period Changes in fair value of available-for-sale investments 5,731 5,731 5,731 Total comprehensive income 5, , ,526 (636) 350,890 Incorporation of a new subsidiary 2,000 2, final dividend declared and 2009 settled in shares and cash 124 5,599 (56,516) (50,793) (50,793) 2010 first and second interim dividend declared and settled in shares and cash ,243 (113,434) (78,631) (78,631) New share options granted to employees note ,791 12,791 12,791 Issue of new shares share option scheme note ,337 (1,288) 10,223 10,223 Share options lapsed 1,616 (1,616) Proposed 2010 final dividend note ,203 (57,203) At 31 December , , , , , ,851 1 (30) 1 57,203 1,001, ,170,580 6,758 2,177,338 1 These reserve accounts comprise the consolidated reserves of HK$2,041,874,000 (30 June 2009: HK$1,798,303,000) in the consolidated balance sheet. 1 2,041,874, ,798,303,000 The notes on pages 117 to 235 form an integral part of this consolidated financial information /

61 Consolidated Statement of Changes in Equity For the 18 months ended 31 December Issued capital Share premium account Share option reserve Capital redemption reserve Attributable to equity holders of the Company Contributed surplus Capital reserve Investment revaluation reserve Exchange reserve Proposed cash/scrip dividend Retained profits Total Noncontrolling interests HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note 30) (note 31) (note 31) Total equity At 1 January , ,078 2,903 3,705 1,418 45,501 64,782 (30) 163, ,176 1,856,490 8,660 1,865,150 Profit for the period 188, ,974 (646) 188,328 Other comprehensive income for the period Changes in fair value of available-for-sale investments (58,584) (58,584) (58,584) Impairment loss of availablefor-sale investments charge to consolidated income statement 5,922 5,922 5,922 Total comprehensive income (52,662) 188, ,312 (646) 135,666 Dividends paid to non-controlling interests (2,620) (2,620) 2007 final and 2008 interim dividend declared and settled in shares and cash , ,476 (163,562) (35,206) (69,835) (69,835) New share options granted to employees note ,425 13,425 13,425 Issue of new shares share option scheme note ,688 1,878 1,878 Share options lapsed 1,844 (1,844) Purchase of shares (1,397) (11,409) 1,397 (1,397) (12,806) (12,806) Proposed 2009 final dividend ,516 (56,516) At 30 June , , , , , ,120 1 (30) 1 56, , ,925,464 5,394 1,930,858 The notes on pages 117 to 235 form an integral part of this consolidated financial information Haitong International Securities Group Limited Annual Report 2009/2010

62 Consolidated Statement of Cash Flows For the 18 months ended 31 December For the 18 months ended 31 December For the 18 months ended 30 June Note HK$ 000 HK$ 000 Cash flows from operating activities Profit before taxation 398, ,382 Adjustments for: Gain on disposal of an associate (4,843) Share of profit of an associate (1,718) (6,324) Interest income 5 (326,754) (245,728) Finance costs 6 39,194 35,401 Dividend income from listed investments 5 (2,564) (3,784) Loss on disposal of fixed assets Depreciation 13 49,370 42,295 Gain on disposal of available-for-sale investments, net 5 (11,267) Impairment loss on available-for-sale investments 5 5,922 (Gain)/Loss on re-measurement of assets/ liabilities classified as held for sale (2,023) 24,132 Equity-settled share option expense 12,791 13,425 Gain on disposal of assets/liabilities classified as held for sale 5 (2,950) (Increase)/decrease in advances to customers (2,648,921) 1,089,588 Decrease/(Increase) in accounts receivable 1,799,560 (2,071,329) (Increase)/decrease in prepayments, deposits and other receivables (73,820) 6,530 (Increase)/decrease in financial investments at fair value through profit or loss (69,623) 111,657 Increase in cash held on behalf of customers (1,496,717) (299,989) Increase in accounts payable 1,356, ,736 Increase/(decrease) in other payables and accruals 81,006 (96,418) Increase in loans and other borrowings (excluding bank overdraft) 807, ,740 Interest received 308, ,695 Finance costs paid (39,194) (35,401) Tax paid, net (219) (103,996) Dividends received from listed investments 2,564 3,784 Net cash inflow from operating activities 175, ,802 The notes on pages 117 to 235 form an integral part of this consolidated financial information /

63 Consolidated Statement of Cash Flows For the 18 months ended 31 December For the 18 months ended 31 December For the 18 months ended 30 June Note HK$ 000 HK$ 000 Net cash inflow from operating activities 175, ,802 Cash flows from investing activities Purchases of items of fixed assets 13 (80,228) (84,809) Proceeds from disposal of fixed assets Acquisition of subsidiaries 32 (369) Investment in other intangible assets 15 (2,000) (Increase)/decrease in other assets (36,488) 4,304 Dividend from an associate/ a jointly-controlled entity 450 Proceeds from disposal of available-for-sale investments 18,054 Proceeds from disposal of assets/liabilities classified as held for sale 59,157 9,769 Proceeds from disposal of an associate 18 15,680 Net cash outflow from investing activities (26,143) (69,838) Cash flows from financing activities Proceeds from issue of shares Proceeds from share options exercised 30 10,049 1,668 Contribution from non-controlling interests 2,000 Repurchase and cancellation of shares (12,806) Dividends paid to shareholders (129,424) (69,835) Dividends paid to non-controlling interests (2,620) Net cash outflow from financing activities (117,201) (83,383) Net increase/(decrease) in cash and cash equivalents 31,735 (50,419) Cash and cash equivalents at beginning of period 372, ,472 Cash and cash equivalents at end of period 403, ,053 Analysis of balances of cash and cash equivalents Cash and bank balances 417, ,790 Bank overdrafts 27 (13,892) (31,737) 403, ,053 The notes on pages 117 to 235 form an integral part of this consolidated financial information Haitong International Securities Group Limited Annual Report 2009/2010

64 1 Corporate information 1 Haitong International Securities Group Limited (formerly known as Taifook Securities Group Limited) is a limited liability company incorporated in Bermuda. The principal place of business of the Company is located at 25th Floor, New World Tower, Queen s Road Central, Hong Kong During the 18 months ended 31 December 2010, the Group was involved in the following principal activities: securities, futures and options contracts broking and trading the provision of margin and other financing the provision of corporate advisory, placing and underwriting services bullion contracts dealing and trading leveraged foreign exchange trading the provision of nominee and custodian services the provision of fund management the provision of financial planning and advisory services proprietary securities trading Change of financial year end date In prior period, the financial year end date of the Company and its subsidiaries apart from Haitong International Securities Company Limited (formerly known as Taifook Securities Company Limited) (collectively, the Group ) has been changed from 31 December to 30 June to conform with the financial year end date of its prior holding companies, NWS Holdings Limited and New World Development Company Limited. The prior financial period therefore covered a 18-month period from 1 January 2008 to 30 June During the period, NWS Holdings Limited disposed of its controlling interest to Haitong International Holdings Limited (formerly known as Hai Tong (HK) Financial Holdings Limited). As a result, to conform with the financial year end date of its holding companies, Haitong International Holdings Limited and Haitong Securities Co., Ltd., the financial year end date of the Company and its subsidiaries apart from Haitong International Securities Company Limited has been changed from 30 June to 31 December Accordingly, the current financial period covered a 18-month period from 1 July 2009 to 31 December 2010 and the comparatives also covered a 18-month period from 1 January 2008 to 30 June /

65 2 Summary of significant accounting policies 2 The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. 2.1 Basis of preparation The consolidated financial statements of Haitong International Securities Group Limited have been prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS). They have been prepared under the historical cost convention, as modified by available-for-sale investments, financial investments at fair value through profit or loss and assets/liabilities classified as held for sale. 2.1 The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 3. 3 (a) Standards, amendments and interpretations effective for the period and relevant to the Group s operation HKFRS 7 Financial Instruments Disclosures (amendment). The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share. (a) Haitong International Securities Group Limited Annual Report 2009/2010

66 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (a) Standards, amendments and interpretations effective for the period and relevant to the Group s operation (Continued) HKAS 1 (revised), Presentation of financial statements. The revised standard prohibits the presentation of items of income and expenses (that is, non-owner changes in equity ) in the statement of changes in equity, requiring non-owner changes in equity to be presented separately from owner changes in equity in a statement of comprehensive income. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. 2.1 (a) 1 HKFRS 2 (amendment), Share-based payment. The amendment deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Group has adopted this amendment to HKFRS 2 in relation to the share options granted to the employees in current 18-month period /

67 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (a) Standards, amendments and interpretations effective for the period and relevant to the Group s operation (Continued) HKFRS 8, Operating Segments. HKFRS 8 replaces HKAS 14, Segment Reporting. The new standard requires a management approach, under which segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Executive Committee that makes strategic decisions. 2.1 (a) Amendment to HKFRS 8 Operating segments, effective for periods beginning on or after 1 January Disclosure of information about total assets and liabilities for each reportable segment is required only if such amounts are regularly provided to the chief operating decision maker. Early adoption is allowed. The Group has early adopted this amendment to HKFRS 8 for the period beginning 1 July Haitong International Securities Group Limited Annual Report 2009/2010

68 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (a) Standards, amendments and interpretations effective for the period and relevant to the Group s operation (Continued) HKFRS 3 (revised), Business combinations, and consequential amendments to HKAS 27, Consolidated and separate financial statements, HKAS 28, Investments in associates, and HKAS 31, Interests in joint ventures, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July (a) The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with HKFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. All acquisition-related costs are expensed. The revised standard does not result in a material impact on the Group s financial statements as the acquisitions in the current 18-month period do not involve any contingent payments and the Group acquired 100% interest in the acquirees. Note 32 to the consolidated financial statements includes further details on the Group s acquisitions of subsidiaries during the current 18-month period /

69 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (a) Standards, amendments and interpretations effective for the period and relevant to the Group s operation (Continued) As the Group has adopted HKFRS 3 (revised), it is required to adopt HKAS 27 (revised), consolidated and separate financial statements, at the same time. HKAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. HKAS 27 (revised) has had no impact on the Group s financial statement in the current 18-month period. 2.1 (a) HK(IFRIC) 13, Customer Loyalty Programmes. HK(IFRIC) Int 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple element arrangement, and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. HK(IFRIC) Int 13 is relevant to the Group s operation as the Group s companies operate some of the loyalty programmes Haitong International Securities Group Limited Annual Report 2009/2010

70 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (b) Standards, amendments and interpretations effective for the period but not relevant to the Group s operation HKAS 23 (amendment), Borrowing costs HK(IFRIC) Int 17, Distribution of non-cash assets to owners HK(IFRIC) Int 18, Transfer of assets from customers HK(IFRIC) Int 9, Reassessment of embedded derivatives and related amendments to HKAS 39, Financial instruments: Recognition and measurement HK(IFRIC) Int 16, Hedges of a net investment in foreign operation HKAS 38 (amendment), Intangible assets 2.1 (b) (c) Standards, amendments and interpretations that are not yet effective and have not been early adopted by the Group HKFRS 5 (amendment), Measurement of noncurrent assets (or disposal groups) classified as held for sale, effective for the periods beginning on or after 1 January The amendment is part of the HKICPA s annual improvements project published in May The amendment provides clarification that HKFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of HKAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of HKAS 1. The Group will apply HKFRS 5 (amendment) from 1 January It is not expected to have a material impact on the Group s financial statements. (c) /

71 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (c) Standards, amendments and interpretations that are not yet effective and have not been early adopted by the Group (Continued) HKAS 1 (amendment), Presentation of financial statements, effective for the periods beginning on or after 1 January The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The Group will apply HKAS 1 (amendment) from 1 January 2011 but it is not expected to result any impact to the Group s financial statements as the Group has not issued convertible instruments. 2.1 (c) HKAS 36 (amendment), Impairment of assets, effective for the periods beginning on or after 1 January The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by HKFRS 8. The Group will apply HKAS 36 (amendment) from 1 January Haitong International Securities Group Limited Annual Report 2009/2010

72 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (c) Standards, amendments and interpretations that are not yet effective and have not been early adopted by the Group (Continued) HKFRS 9, Financial instruments, issued in November This standard is the first step in the process to replace HKAS 39, Financial instruments: recognition and measurement. HKFRS 9 introduces new requirements for classifying and measuring financial assets. Key features are as follows: 2.1 (c) Financial assets are required to be classified into two measurement categories: those to be measured subsequently at fair value, and those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. The classification depends on the entity s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. An instrument is subsequently measured at amortised cost only if it is a debt instrument and both the objective of the entity s business model is to hold the asset to collect the contractual cash flows, and the asset s contractual cash flows represent only payments of principal and interest (that is, it has only basic loan features ). All other debt instruments are to be measured at fair value through profit or loss. 2009/

73 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (c) Standards, amendments and interpretations that are not yet effective and have not been early adopted by the Group (Continued) All equity instruments are to be measured subsequently at fair value. Equity instruments that are held for trading will be measured at fair value through profit or loss. For all other equity instruments, an irrevocable election can be made at initial recognition, to recognise unrealised and realised fair value gains and losses through other comprehensive income rather than profit and loss. There is to be no recycling of fair value gains and losses to profit and loss. This election may be made on an instrument-by-instrument basis. Dividends are to be presented in profit and loss, as long as they represent a return on investment. 2.1 (c) While adoption of HKFRS 9 is mandatory from 1 January 2013, earlier adoption is permitted The Group is considering the implications of the standard, the impact on the Group and the timing of its adoption by the Group. HKAS 24 (Revised), Related party disclosures (issued in November 2009). It supersedes HKAS 24, Related party disclosures, issued in HKAS 24 (revised) is mandatory for periods beginning on or after 1 January Earlier application, in whole or in part, is permitted Haitong International Securities Group Limited Annual Report 2009/2010

74 2 Summary of significant accounting policies (continued) Basis of preparation (Continued) (c) Standards, amendments and interpretations that are not yet effective and have not been early adopted by the Group (Continued) The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The Group will apply the revised standard from 1 January When the revised standard is applied, the Group and the parent will need to disclose any transactions between its subsidiaries and its associates. The adoption of this standard will not have material impact to the Group s financial statements. 2.1 (c) There are also a number of standards, amendments and interpretation which are not yet effective and not yet early adopted by the Group. These standards, amendments and interpretations issued are unlikely to have a material impact on the Group s financial statements and are not disclosed in detail. Third improvements to Hong Kong Financial Reporting Standards (2010) were issued in May 2010 by the Hong Kong Institute of Certified Public Accountants. All improvements are effective in the financial period beginning from 1 January No material changes to accounting policies are expected as a result of these amendments /

75 2 Summary of significant accounting policies (continued) Basis of consolidation (a) Subsidiaries The consolidated financial statements include the financial statement of the Company and all its subsidiaries made up to the 31 December (a) Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisitionby-acquisition basis, the Group recognises any noncontrolling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend and receivable. 128 Haitong International Securities Group Limited Annual Report 2009/2010