BOCOM INTERNATIONAL HOLDINGS COMPANY LIMITED (Incorporated in Hong Kong with limited liability) Stock code: 3329
2020
INTERIM REPORT
Contents
Financial Highlights | 2 |
Corporate Information | 4 |
Management Discussion and Analysis | 5 |
Corporate Governance and Other Information | 17 |
Report on Review of Interim Financial Information | 21 |
Condensed Consolidated Income Statement | 22 |
Condensed Consolidated Statement of Comprehensive Income | 23 |
Condensed Consolidated Statement of Financial Position | 24 |
Condensed Consolidated Statement of Changes in Equity | 26 |
Condensed Consolidated Statement of Cash Flows | 27 |
Notes to the Condensed Consolidated Financial Statements | 29 |
Glossary | 64 |
Financial Highlights
Results
Revenue and other income | Profit attributable to | Basic/Diluted earnings |
(in million HK$) | Shareholders of the Company | per share |
(in million HK$) | (in HK$) |
775 | 1,001 | 254 | 281 | 0.09 | 0.10 | |||||||||
2019 1H | 2020 1H | 2019 1H | 2020 1H | 2019 1H | 2020 1H | |||||||||
Revenue and other income by segment | ||||||||||||||
Brokerage | Corporate finance and | Asset management and | ||||||||||||
(in million HK$) | underwriting | advisory | ||||||||||||
(in million HK$) | (in million HK$) |
75 | 90 | 61 | 45 | 57 | 77 | |||||||||
2019 1H | 2020 1H | 2019 1H | 2020 1H | 2019 1H | 2020 1H | |||||||||
Margin financing | Investment and loans | Others | ||||||||||||
(in million HK$) | (in million HK$) | (in million HK$) |
122 | 84 | 414 | 660 | 46 | 45 | |||||||||||
2019 1H | 2020 1H | 2019 1H | 2020 1H | 2019 1H | 2020 1H | |||||||||||
2 BOCOM International Holdings Company Limited
Financial Highlights
Financial Position
Shareholders' equity - attributable to shareholders of the Company
(in million HK$)
7,000 | 6,528 | 6,603 |
6,000 | ||
5,000 | ||
4,000 | ||
3,000 | ||
2,000 | ||
1,000 | ||
0 |
At 31 | At 30 |
December 2019 | June 2020 |
Total assets
(in million HK$)
35,000 | |
30,000 | |
25,000 | 22,387 |
20,000 | 18,730 |
15,000 | |
10,000 | |
5,000 | |
0 |
At 31 | At 30 |
December 2019 | June 2020 |
Number of shares in issue
(in million shares)
3,500 | ||
3,000 | 2,734 | 2,734 |
2,500 |
2,000
1,500
1,000
500
0
At 31 | At 30 |
December 2019 | June 2020 |
NAV per share - attributable to shareholders of the Company
(in HK$)
3.5 | ||
3.0 | ||
2.5 | 2.39 | 2.41 |
2.0 | ||
1.5 | ||
1.0 | ||
0.5 | ||
0.0 |
At 31 | At 30 |
December 2019 | June 2020 |
Interim Report 2020 | 3 |
Corporate Information
BOARD OF DIRECTORS
Executive Directors
TAN Yueheng (Chairman)
CHENG Chuange (Deputy Chief Executive Officer)
Non-executive Directors
WANG Yijun
(retirement effective from 19 June 2020) LIN Zhihong
SHOU Fugang
PO Ying
(appointment effective from 19 June 2020)
Independent Non-executive Directors
TSE Yung Hoi
MA Ning
LIN Zhijun
BOARD COMMITTEES
Executive Committee
TAN Yueheng (Chairman)
CHENG Chuange
XI Xuanhua*
SU Fen*
Audit and Risk Management Committee
LIN Zhijun (Chairman)
LIN Zhihong
TSE Yung Hoi
Remuneration Committee
TSE Yung Hoi (Chairman)
SHOU Fugang
MA Ning
LIN Zhijun
Nomination Committee
TAN Yueheng (Chairman)
WANG Yijun
(retirement effective from 19 June 2020) PO Ying
(appointment effective from 19 June 2020) TSE Yung Hoi
MA Ning
LIN Zhijun
COMPANY SECRETARY
YI Li
KWONG Yin Ping, Yvonne
(resignation effective from 19 May 2020)
AUTHORISED REPRESENTATIVES
CHENG Chuange
YI Li (appointment effective from 19 May 2020) KWONG Yin Ping, Yvonne
(resignation effective from 19 May 2020)
REGISTERED OFFICE
9/F, Man Yee Building, 68 Des Voeux Road Central, Hong Kong
LEGAL ADVISER
As to Hong Kong laws
Freshfields Bruckhaus Deringer
AUDITOR
PricewaterhouseCoopers
Certified Public Accountants
Registered Public Interest Entity Auditor
SHARE REGISTRAR
Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong
PRINCIPAL BANKERS
Bank of Communications Co., Ltd. Hong Kong Branch Standard Chartered Bank (Hong Kong) Limited Industrial and Commercial Bank of China (Asia) Limited Industrial Bank Co., Ltd. Hong Kong Branch China CITIC Bank International Limited
OCBC Wing Hang Bank Limited Dah Sing Bank
Agricultural Bank of China Hong Kong Branch China Construction Bank (Asia) Corporation Limited
STOCK CODE
HKEX | 3329 | |
Reuters | 3329.HK | |
Bloomberg | 3329 | HK |
COMPANY WEBSITE
www.bocomgroup.com
- Ms. XI Xuanhua and Mr. SU Fen are Deputy Chief Executive Officers of the Company.
4 BOCOM International Holdings Company Limited
Management Discussion and Analysis
MARKET REVIEW
In the first half of 2020, the shock of the pandemic spread globally, plunging the global economy into an unprecedented crisis. Central banks took coordinated actions for easing, the Federal Reserve slashed the interest rate to zero and developed countries turned to more unconventional strategies to shore up their reeling economies. The global fiscal stimulus has exceeded the intensity during the 2008 Global Financial Crisis.
However, the current pandemic is a factor that is largely out of the realm of monetary and fiscal policy. Faced with abrupt suspension of economic activities, such unprecedented counter-cyclical control measures have done little to boost growth. International trade plummeted, unemployment soared, consumer activity remained sluggish, and supply chain disruption has exposed many industries to the risk of disrupting manufacturing operations. Financial markets have seen extreme volatility under wild mood swings and unprecedented easing. After several rounds of meltdowns, global stock markets staged a "boom" deviating substantially from real economy.
In the first half of 2020, China's economic growth experienced a decline before bouncing back, leading a global recovery. Due to the outbreak of the pandemic at the beginning of the year and the complicated external environment, China's economic growth suffered the most serious blow since the reform and opening up, with the first GDP contraction on record in the first quarter. However, China's strict containment measures bore fruit. With a variety of policy stimulus providing targeted support, China's economic activity recovered and overall growth showed a V-shaped recovery as productivity gradually recovered in the second quarter.
China's monetary policy has been proactive, with the scale of new RMB loans and total social financing both reaching historic highs and M2 increasing by double digits again. Fiscal policy has been implemented in a forceful and timely manner, with increasing fiscal deficit and accelerating expansion of government special-purpose bonds issuance. Capital market reform has been steadily advancing, with the successful implementation of the new securities law and the GEM registration system making financing more accessible to the real economy.
US-China tensions and the COVID-19 pandemic have added to the woes of Hong Kong's economy, which has yet to recover from the social unrest. Exports, consumption, and investment have stalled, unemployment has increased, and Hong Kong has fallen into a deeper economic recession. Geopolitical tension and sanctions threats posed by the US put Hong Kong in a difficult and uncertain situation. However, the successful passing of the new National Security Law has laid a solid foundation essential for the long-term stable development of Hong Kong, strengthening investor confidence and helping the economy get back on track.
In the first half of 2020, the Hong Kong market saw considerable volatility due to the impact of the pandemic. During the epic plunge in March 2020, the Hang Seng index had also reached its lows in the current cycle, and these are unlikely to be turned around. Thanks to the secondary listing of China concept stocks, the Hong Kong IPO market has remained vibrant in such a turbulent environment, with total financing ranking third in the world. HKD continued to strengthen and triggered the strong-side convertibility undertaking after four years, due to interest rate spreads between Hong Kong and the US and IPO activities from the flocking back of US-listed Chinese companies.
Interim Report 2020 | 5 |
Management Discussion and Analysis
BUSINESS REVIEW
As one of the earliest licensed securities firms with PRC background in Hong Kong, we are one of the largest securities firms specialising in securities brokerage and margin financing, corporate finance and underwriting, investment and loans, asset management and advisory businesses. We believe that one of our core competitive strengths is our ability to offer comprehensive and integrated financial services and products that fulfill various investment and wealth management needs of clients. During the Reporting Period, the Group's revenue and other income was HK$1,000.6 million, representing an increase of 29.1% when compared with HK$775.2 million for the same period last year. The Group's profit was HK$278.8 million, representing an increase of 9.7% when compared with HK$254.3 million for the same period last year.
Securities Brokerage and Margin Financing
Our securities brokerage business includes executing trades on behalf of clients in listed company stocks, bonds, futures, options and other marketable securities. We execute trades on behalf of clients of various securities products, with a primary focus on stocks of companies listed on the Stock Exchange, and other types of securities, including eligible A shares under the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, B shares of listed companies on the PRC stock exchanges, US stocks and bonds as well as futures and other exchange-tradable securities. Futures and options contract products include Hang Seng Index futures and options, mini-Hang Seng Index futures and options, H-shares index futures and options, mini-H-shares index futures and options and stock options.
To cope with the challenges from technology-led new market entrants, we have redefined our business model by implementing digital transformation, so as to give full play to our differentiators and core capabilities. We believe that the power of technology and innovative thinking are crucial components of success, and have devoted considerable resources to enhance our online trading platform, data management, cyber security and market surveillance to satisfy various needs. Positioning ourselves as a "bespoke" player in the market, our high-quality wealth management team is dedicated to providing
- full spectrum of products and financing options and offering creative-client-based solutions to our target client segments. In addition, with the power of technology, we guaranteed efficient and high- quality services for clients during the period affected by the pandemic by providing remote services and arranging virtual meetings and other means.
During the Reporting Period, our trading turnover of Hong Kong stocks increased by 32% as compared to the corresponding period last year, outperforming the market.
6 BOCOM International Holdings Company Limited
Management Discussion and Analysis
For the six months ended 30 June 2020, our commission and fee income from the securities brokerage business was HK$82.0 million, an increase of HK$17.7 million or 27.5% as compared with the corresponding period of 2019.
The following table sets forth a breakdown of the commission of our securities brokerage business by product types:
For the six months ended 30 June | ||||||||||||
2020 | 2019 | |||||||||||
HK$'million | % | HK$'million | % | |||||||||
Hong Kong stocks | 62.1 | 75.7 | 48.7 | 75.7 | ||||||||
Non-Hong Kong stocks | 10.3 | 12.6 | 4.2 | 6.5 | ||||||||
Bonds | 2.7 | 3.3 | 4.1 | 6.4 | ||||||||
Others | 6.9 | 8.4 | 7.3 | 11.4 | ||||||||
82.0 | 100.0 | 64.3 | 100.0 | |||||||||
Our margin financing business includes offering collateralised financing relating to securities transactions to both retail and institutional customers.
In response to the increasing credit risk, regulatory changes in the margin financing business, and the market volatility and the liquidity risk caused by unexpected capital flows, we have adopted structural adjustments to improve the margin financing risk management.
During the first half of 2020, the number of margin client accounts continued to grow. The monthly average loan balance decreased and interest income from margin loans for the six months ended
30 June 2020 was HK$83.6 million, a decrease of HK$38.2 million or 31.4% as compared with the corresponding period in 2019.
Interim Report 2020 | 7 |
Management Discussion and Analysis
The following table sets forth a summary of key operating and financial information of our margin financing business:
30/6/2020 | 31/12/2019 | |
Number of margin accounts | 8,509 | 8,254 |
Balance of gross margin loans (HK$'million) | 2,434.4 | 2,774.9 |
Monthly average balance (HK$'million) | 2,563.2 | 3,421.9 |
Highest month end balance (HK$'million) | 2,732.6 | 3,814.3 |
Lowest month end balance (HK$'million) | 2,434.4 | 2,658.2 |
Margin value (HK$'million) (Note 1) | 1,896.9 | 2,789.8 |
Market value (HK$'million) (Note 2) | 6,533.3 | 11,563.5 |
Notes:
- Margin value refers to the market value of the securities pledged as collateral for margin loans multiplied by a collateral discount ratio for each individual security.
- Market value refers to the value of the securities pledged as collateral for margin loans at the real-time price of each individual security.
Corporate Finance and Underwriting
We are dedicated to building a comprehensive and cross-border platform for our corporate finance and underwriting business. To address various needs of our corporate clients at different stages, we provide advisory services ranging from IPO sponsorship, equity securities underwriting, debt securities underwriting, mergers and acquisitions, pre-IPO financing, and financial advisory.
In the first half of 2020, there were a total of 64 new listings in Hong Kong, including transfers of listing from GEM to Main Board. The number of new listings has decreased by 23.8% as compared with the corresponding period in 2019. The aggregate amount of funds raised through IPOs was HK$87.5 billion, an increase of 21.8% as compared with the corresponding period in 2019.
That New Economy will play a dominant role in the fund-raising market, we have devoted more resources in building up execution teams specialising in the TMT, healthcare and biotechnology industries in order to capture the business opportunities of a new era. During the Reporting Period, we acted as a joint sponsor for 1 IPO project. Furthermore, we acted as a global coordinator and/or book-runner for 11 IPO projects. In respect of debt capital markets, we completed 22 debt issuance projects, and successfully assisted corporations in raising US$9.84 billion in aggregate.
For the six months ended 30 June 2020, our commission and fee income from corporate finance and underwriting services was HK$44.6 million, a decrease of HK$16.1 million or 26.5% as compared to HK$60.7 million in the corresponding period of 2019.
8 BOCOM International Holdings Company Limited
Management Discussion and Analysis
Asset Management and Advisory
We offer a full range of asset management products including both public and private funds, and discretionary managed accounts, as well as investment advisory services. In addition to Hong Kong, we also provide asset management services in Mainland China via BOCOM International (Shanghai) in Shanghai and BOCOM International (Shenzhen) in Qianhai, Shenzhen.
Our core value is to provide comprehensive investment solutions and high-quality services to individual investors and institutional clients. In addition to traditional investments, we also offer alternative investments to investors. We have built up a cross-border asset management platform through our presence in Hong Kong, Shanghai and Shenzhen to grasp the distinct sources of investment growth in Mainland China. With a focus on investing in artificial intelligence, new materials, bio-pharmaceuticals and next-generation information technology, we also provide integrated financial services to investors, including but not limited to the sourcing of investments, project structuring, full value chain financing and tax arrangements. BOCOM Science and Technology Innovation Fund, which we established under our Shanghai asset management platform, is China's first bank-affiliated science and technology investment fund, with underlying investments aiming to be listed on the Science and Technology Innovation Board (STAR Market). We serve as fund manager, leveraging on the resources of the BOCOM Group to provide high-quality technology and innovation companies with full-scale comprehensive financial services. As at 30 June 2020, BOCOM Science and Technology Innovation Fund has completed 7 pre-IPO investments, of which 3 will be ready for listing in the near future on the STAR Market. BOCOM Science and Technology Innovation Fund has completed more than 70% of its investment target, mainly distributed in the Yangtze River Delta region, focusing on the fields of biomedicine and information technology. To improve business influence in the region, Nanjing Jiaoyin Suyan & SOHO Equity Investment Partnership Enterprise (Limited Partnership) (南京交銀蘇鹽蘇豪股權投資合夥企業（有限合夥）) was set up in Jiangsu by BOCOM Science and Technology Innovation Fund in 2020. In August 2020, BOCOM International (Shanghai) Science and Technology Investment Management Co., Ltd. (交銀國際（上海）科創投資管理 有限公司) was incorporated through BOCOM International (Shanghai), a subsidiary of the Group, so as to further our business expansion and operational compliance in Mainland China.
Apart from the Yangtze River Delta region, we established our first QFLP fund, Minrui Fund under our Shenzhen asset management platform in the first half of 2020. Minrui Fund is a domestic enterprise with foreign investments, marking another successful milestone of BOCOM International's access to cross-border investment and financing channels and creation of new drivers for growth.
Diversified products are the building blocks of our asset management business. As at 30 June 2020, the total amount of AUM was approximately HK$27,613.8 million, representing an increase of approximately 0.6% from HK$27,437.4 million as at 31 December 2019. For the six months ended 30 June 2020, asset management and advisory fee income increased by HK$17.2 million or 30.0% to HK$74.4 million, which comprised of management fee income of HK$38.1 million and advisory fee income of HK$36.3 million.
Investment and Loans
Our investment and loans business comprises of investments in equity and debt securities as well as public and private funds, and the provision of structured finance and corporate loans. We aim to achieve a balance between investment returns and tolerable risks.
Interim Report 2020 | 9 |
Management Discussion and Analysis
For equity investments, we focus on investing in companies which engage in innovative technology, biotechnology, healthcare industry and other new economy industries, and have formulated clear plans for public listings in Hong Kong, Mainland China or overseas. Some of these target investments are unicorn startup companies, with broad market recognition and strong growth potential.
Based on our investment objectives, we strive to achieve an optimal allocation in our fixed-income investments and structured financing business. Supported by high-quality underlying assets and tailor- made structures, we mitigated market risks and strengthened collateral controls.
The fixed income market was volatile in the first half of 2020 and is expected to stabilise in the second half of 2020. Our portfolio remained comparatively resilient during the market turmoil and we actively seized new opportunities. For the six months ended 30 June 2020, interest income from loans and advances and receivables from structured financing was HK$105.1 million, representing an increase of approximately 55.7% as compared to HK$67.5 million for the corresponding period in 2019. Proprietary trading income was HK$541.6 million, an increase of HK$202.5 million or 59.7% as compared to HK$339.1 million for the corresponding period in 2019.
The table below sets forth our investment position by asset types for our equity and fixed income investment business:
30/6/2020 | 31/12/2019 | |||||||
HK$'million | % | HK$'million | % | |||||
Fixed income securities | 10,965.9 | 81.8 | 8,591.1 | 75.9 | ||||
Bonds | 8,657.6 | 64.5 | 6,545.2 | 57.8 | ||||
Preference shares | 2,275.0 | 17.0 | 1,992.5 | 17.6 | ||||
REIT(s) | 33.3 | 0.3 | 53.4 | 0.5 | ||||
Equity investments | 314.1 | 2.3 | 179.6 | 1.6 | ||||
Equity-linked loan | - | - | 443.1 | 3.9 | ||||
Funds | 2,138.3 | 15.9 | 2,106.0 | 18.6 |
Research
Our research team has a strong and solid understanding of and insight into the global economic environment, financial markets and major industries, as well as a track record in comprehensive analyses of sector- and company-specific fundamentals. The team is well-recognised among institutional investors in Hong Kong, Mainland China and the overseas markets. As at 30 June 2020, our research team comprised of 35 strategy, industry analysts and professional staff in Hong Kong, Beijing and Shanghai, covering about 148 companies listed in Hong Kong, Mainland China and New York across various sectors. In the first half of 2020, the research team published 615 reports, and launched the "frontier research center", strengthening cross-sector and forward-looking analysis.
In addition to solid capabilities in investment research, our research team also sought to provide better services to our clients, which mainly included: tracking the quantity of readership of our reports, the enhancement of market influence, the foundation of our official research WeChat, and the enhancement of connections with the media and communication with investors, thereby promoting the overall image of the Group.
10 BOCOM International Holdings Company Limited
Management Discussion and Analysis
FINANCIAL REVIEW
Financial performance
For the six months ended 30 June 2020, the Group's total revenue and other income was approximately HK$1,000.6 million, representing an increase of approximately 29.1% over HK$775.2 million for the corresponding period in 2019.
The following table sets out the breakdown of total revenue and other income by segments:
For the six months ended 30 June | ||||||||||||
2020 | 2019 | |||||||||||
HK$'million | % | HK$'million | % | |||||||||
Brokerage | 90.1 | 9.0 | 74.8 | 9.7 | ||||||||
Corporate finance and underwriting | 44.6 | 4.5 | 60.7 | 7.8 | ||||||||
Asset management and advisory | 76.9 | 7.7 | 57.4 | 7.4 | ||||||||
Margin financing | 83.6 | 8.3 | 121.8 | 15.7 | ||||||||
Investment and loans | 660.2 | 66.0 | 414.0 | 53.4 | ||||||||
Others | 45.2 | 4.5 | 46.5 | 6.0 | ||||||||
Total | 1,000.6 | 100.0 | 775.2 | 100.0 | ||||||||
The Group's profit for the six months ended 30 June 2020 was approximately HK$278.8 million, representing an increase of approximately 9.7% over HK$254.3 million for the corresponding period in 2019.
Operating expenses
Operating expenses and finance costs for the six months ended 30 June 2020 amounted to HK$651.9 million (2019 1H: HK$508.7 million), an analysis of which is listed below:
For the six months ended 30 June | ||||||||||||
2020 | 2019 | |||||||||||
HK$'million | % | HK$'million | % | |||||||||
Commission and brokerage expenses | 25.8 | 4.0 | 20.1 | 3.9 | ||||||||
Finance costs | 161.4 | 24.8 | 165.0 | 32.4 | ||||||||
Staff costs | 156.5 | 24.0 | 185.6 | 36.5 | ||||||||
Depreciation | 39.9 | 6.1 | 38.9 | 7.7 | ||||||||
Other operating expenses | 95.4 | 14.6 | 91.1 | 17.9 | ||||||||
Change in impairment allowance | 172.9 | 26.5 | 8.0 | 1.6 | ||||||||
Total | 651.9 | 100.0 | 508.7 | 100.0 | ||||||||
Due to an increase in brokerage revenue, commission and brokerage expenses also increased accordingly.
Interim Report 2020 11
Management Discussion and Analysis
Depreciation increased slightly by 2.4%.
Other operating expenses increased by 4.8% mainly due to the settlement of regulatory fines.
Change in impairment allowance increased to HK$172.9 million, representing the increase in provision for the Group's exposures as result of the current environment under the requirements of HKFRS 9 Financial Instruments.
Liquidity, Financial Resources and Gearing Ratio
The Group's cash and bank balances as at 30 June 2020 increased by HK$373.4 million to HK$918.5 million (31 December 2019: HK$545.1 million).
The Group's net current assets decreased by HK$4,707.0 million to approximately HK$2,678.3 million as at 30 June 2020 from HK$7,385.3 million as at 31 December 2019. The current ratio, being the ratio of current assets to current liabilities, was approximately 1.2 times as at 30 June 2020 (31 December 2019: 2.3 times).
As at 30 June 2020, the Group had borrowings of HK$12,058.6 million (31 December 2019: HK$9,652.3 million) while the subordinated loans from the ultimate holding company amounted to HK$1,000.0 million (31 December 2019: HK$1,000.0 million).
As at 30 June 2020, the Group's gearing ratio was 189.4% (31 December 2019: 160.7%), as calculated by dividing total borrowings by total equity.
The Directors are of the view that the Group has maintained adequate liquidity for business operations and any investment opportunities that may arise in the near future.
Capital Structure
The Group finances its working capital requirements by cash generated from business operations and bank loans (including loans from BOCOM). Our capital structure consists of share capital and reserves.
12 BOCOM International Holdings Company Limited
Management Discussion and Analysis
Principal Risks
The Group faces a number of principal risks and uncertainties that if not properly managed could create an exposure for the Group. Thorough risk assessment and mitigation help to ensure these that risks are well managed and effectively controlled. The Group focuses on addressing the following principal risks:
Currency Risk
The Group has certain transactions denominated in foreign currencies and is therefore exposed to exchange rate fluctuations. Our currency risk exposure mainly lies in RMB and USD at present. The exchange rate of HKD against USD is relatively stable under the current pegged rate system in Hong Kong.
Interest Rate Risk
Our interest rate risk relates primarily to margin loans to customers, loans and subordinated loans and investments in debt securities. The Group has set up an asset portfolio management system and mitigates the interest rate risk by diversification of assets and regular monitoring of risk exposure so as to quantify market exposure in duration terms.
Credit Risk
Our credit risk arises from the possibility that our clients or counterparties for a transaction may default. The Group has a range of credit policies and practices in place to mitigate such risk and ensure such risk is monitored on an ongoing basis.
Liquidity Risk
Our businesses rely on having sufficient funds to pay due debts, perform payment obligations and satisfy the capital requirements. The Group has implemented internal measures to monitor the liquidity risk and the foreseeable funding requirements to ensure certain subsidiaries of the Company that are regulated under the SFO to continuously comply with the relevant rules and regulations.
Operational Risk
Our operational risk arises from direct or indirect financial loss resulting from incomplete or irregular internal processes, personnel mistakes, information technology system failures, or external events. The Group has implemented a range of internal control and other measures and plans to mitigate such risk.
Market Risk
Our market risk includes currency risk, interest rate risk and other price risk. The Group has implemented measures to manage and monitor such risks in order to keep potential losses within an acceptable level and maximise returns.
Interim Report 2020 13
Management Discussion and Analysis
Material Acquisitions and Disposals
During the Reporting Period, there was no material acquisition or disposal of subsidiaries, associates or joint ventures of the Group.
Significant Investments Held
During the Reporting Period, there was no significant investment held by the Group.
Charges on Group Assets
As at 30 June 2020, there was no charge on Group assets (31 December 2019: Nil).
Capital Commitments
As at 30 June 2020, the Group had no significant capital commitment.
Employees and Remuneration Policies
As at 30 June 2020, the Group had a total of 319 employees. Total staff costs amounted to approximately HK$156.5 million for the six months ended 30 June 2020.
The Group continuously refines its remuneration and incentive policies to boost business development and ensure employees receive competitive remuneration packages. The remuneration of the Directors are determined with reference to their duties, responsibilities, experience and to the prevailing market conditions. Mandatory provident fund scheme and insurance packages have been provided to employees in accordance with local laws and regulations. We conduct performance evaluations of our employees annually to provide feedback on their performance.
We systematically provide comprehensive and diverse trainings to improve the professional skills of our employees. Employees are subsidised for participating in training courses which keep them abreast of the latest industry and technical developments.
Contingent liabilities
As at 30 June 2020, the Group had certain contingent liabilities arising in the ordinary course of business. Please refer to Note 26 to the Condensed Consolidated Financial Statements of this interim report for details.
Use of Proceeds
The net proceeds from the Listing in 2017 after deducting underwriting fees and commissions and expenses in connection with the Listing, were approximately HK$1,879.2 million. As at 30 June 2020, the Group utilised approximately 98.0% of the net proceeds for the purposes as set out in the section headed "Future Plans and Use of Proceeds - Use of proceeds" in the Prospectus. The unutilised amount is expected to be utilised within 3 years.
14 BOCOM International Holdings Company Limited
Management Discussion and Analysis
An analysis of the application/intended application and utilisation of the net proceeds from the Listing as at 30 June 2020 is set out below:
Utilised | ||||||||||||
Net proceeds | Utilised | amount during | Utilised | |||||||||
from the | amount as at | the Reporting | amount as at | Unutilised | ||||||||
Listing | 31/12/2019 | Period | 30/6/2020 | amount | ||||||||
Application/Intended application | (HK$'million) | (HK$'million) | (HK$'million) | (HK$'million) (HK$'million) | ||||||||
1. | Expand margin financing business | 845.7 | 845.7 | - | 845.7 | - | ||||||
2. | Expand asset management and advisory | |||||||||||
business | 281.9 | 281.9 | - | 281.9 | - | |||||||
3. | Expand investment and loans business | 187.9 | 187.9 | - | 187.9 | - | ||||||
4. | Develop IT infrastructure and internal | |||||||||||
control systems | 187.9 | 122.4 | 27.7 | 150.1 | 37.8 | |||||||
5. | Attract and retain talent as well as | |||||||||||
optimising human resources structure | 187.9 | 187.9 | - | 187.9 | - | |||||||
6. | Working capital and general corporate | |||||||||||
purposes | 187.9 | 187.9 | - | 187.9 | - | |||||||
Total | 1,879.2 | 1,813.7 | 27.7 | 1,841.4 | 37.8 | |||||||
Outlook
The continued spread of COVID-19 has brought about huge and unprecedented challenges to global economic recovery. Even if countries contain the virus' contagious spread at the high cost of suspending economic activity, the pandemic is yet to be fully controlled, and the global economy has plunged into a deep recession. Industrial production, consumption, and employment dropped beyond expectations and fell to record lows. Almost all regions of the world suffered contraction, ending a decade of global expansion.
Currently, the epicenter of the pandemic has been gradually shifting to emerging countries, and the expected resumption of economic activities is likely to be encumbered in Europe and the United States due to a second wave of the pandemic. The global economy remains far from a full recovery. The stance of monetary policy will remain accommodative, enabling unprecedented levels of fiscal expansion under the normal state of low interest rates. But central banks across the world are not omnipotent, and reckless money printing is likely to be self-defeating. Developed economies' measures have been blurring the line between monetary and fiscal policy, and the current liquidity deluge is increasing the risk of hyperinflation in the coming years.
China is leading the global recovery, which will continue in the second half of this year. The impact of the pandemic on China's economy has been significant but temporary. Thanks to effective control measures and orderly resumption of work and production, China's economy managed to grow more strongly than expected with a V-shape recovery. However, the global economy faces a difficult return to recovery from the pandemic. Against the backdrop of weakening overseas conditions, domestic demand has been a major driving force for growth.
Interim Report 2020 15
Management Discussion and Analysis
Infrastructure will remain the key theme of stable investment. Consumption is expected to rebound with a package of economic assistance policies such as "six guarantees" and "six stability" coordinated with investment to boost growth. As the economy gets back on track, China's monetary policy will pay more attention to structural control, and maintain reasonable and abundant liquidity. While the US turns to emphasise "the art of deal" with unilateralism, China has been enhancing its global influence via the Belt and Road Initiative and becoming a force to be reckoned with on the global stage. Markets have reached a historical pivot. China is set to outperform the US in the long run, and both A-shares and Hong Kong stocks offer long-term investment value.
In the face of the complex external environment, we have also seen the resilience of China's economy in response to various risks and challenges. The pandemic has had a huge impact on the economy in the short term, but it has also spawned a number of new emerging industries and intensified industrial transformation. In the post-pandemic era of "creating opportunities amid crisis", we have to rethink corporate strategies and business models, turning challenges into opportunities through further innovation and speculation.
In order to cope with the complex internal and external environment, leverage on FinTech for high- quality development, and enhance technological empowerment and market competitiveness, the Group intends to further expand its FinTech business beyond its existing main activities after considering its actual operation and management. In August 2020, the Company established and completed the registration for BOCOM Financial Technology through its wholly-owned subsidiary, BOCOM International (Shanghai). BOCOM Financial Technology, as a subsidiary of the Company, is purported to provide financial technology services for the Group, BOCOM Group and the public. The services provided to the Group and BOCOM Group mainly include assisting the Group and BOCOM Group to realise digital and intelligent transformation, while the services provided to the public include the construction of open and ecological platforms. The Group will strive to open up new business fields by building its own FinTech development team to gradually realise digital and intelligent transformation, as well as integrate with its other existing businesses, so as to better meet customers' needs for diversified and personalised financial services.
The Group will focus on value creation and promote high-quality and large-scale development by facilitating synergetic development of the licensed business and asset business. In such uncertain times, the Group will adhere to the risk appetite of "prudence, stability, and compliance" and accelerate high- quality development with respect to scale relying on a mature and complete investment and research system, so as to build a wealth management investment bank with global influence and regional market competitiveness, and create greater value for clients and shareholders.
16 BOCOM International Holdings Company Limited
Corporate Governance and Other Information
DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
As at 30 June 2020, the interests and short positions of the Directors and Chief Executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code set out in Appendix 10 to the Listing Rules were as follows:
Long Positions in Shares of the Company
Approximate | |||||
percentage to the | |||||
total number of | |||||
Number of | issued Shares of | ||||
Name of Director/Chief Executive | Capacity | Shares held | the Company (%) | ||
TAN Yueheng | Beneficial owner | 2,000,000 | 0.07 | ||
XI Xuanhua | Beneficial owner | 1,000,000 | 0.04 | ||
Long Positions in shares of associated corporation - BOCOM | |||||
Approximate | |||||
percentage | Approximate | ||||
to the total | percentage | ||||
number of | to the total | ||||
Class of | relevant class of | number of | |||
shares held in | issued shares of | issued shares of | |||
the associated | Number of | the associated | the associated | ||
Name of Director | Capacity | corporation | shares held | corporation (%) | corporation (%) |
TAN Yueheng | Beneficial owner | H shares | 100,000 | 0.00 | 0.00 |
A shares | 140,000 | 0.00 | 0.00 | ||
CHENG Chuange | Beneficial owner | A shares | 40,000 | 0.00 | 0.00 |
SHOU Fugang | Beneficial owner | H shares | 20,000 | 0.00 | 0.00 |
A shares | 80,000 | 0.00 | 0.00 | ||
PO Ying | Beneficial owner | A shares | 35,000 | 0.00 | 0.00 |
Interim Report 2020 17
Corporate Governance and Other Information
Save as disclosed above, as at 30 June 2020, none of the Directors or Chief Executives of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations as recorded in the register required to be kept pursuant to Section 352 of the SFO or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
For the six months ended 30 June 2020, none of the Company or any of its subsidiaries had signed any agreements to enable the Directors to acquire benefits by means of acquisition of shares or debt securities (including debentures) of the Company or any other body corporate and none of the Directors, his/her spouses or children under the age of 18 had any rights to subscribe for securities of the Company, or had exercised any such rights.
SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES
As at 30 June 2020, the interests and short positions of those persons (other than the Directors or Chief Executives of the Company) in the Shares and underlying Shares of the Company as required to be recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO or to the best of Directors' knowledge, were as follows:
Approximate | ||||
percentage | ||||
of the total | ||||
number | ||||
of issued | ||||
Name of | Long position/ | Total number | Shares of the | |
shareholder | Capacity | short position | of Shares held | Company (%) |
BOCOM | Interest in a controlled corporation, | Long position | 2,000,000,000 | 73.14 |
beneficiary of trust(1) | ||||
BOCOM Nominee | Interest in a controlled corporation, | Long position | 2,000,000,000 | 73.14 |
Trustee (other than bare trustee)(2) |
Notes:
- Expectation Investment is an indirect subsidiary of BOCOM and is the beneficial owner of 500,000 Shares. BOCOM is deemed to be interested in an aggregate of 2,000,000,000 Shares which BOCOM Nominee is interested in as trustee (other than a bare trustee) and which Expectation Investment is interested in as beneficial owner.
- BOCOM Nominee is a subsidiary of BOCOM and (a) holds 1,999,500,000 Shares on trust for BOCOM and (b) controls 50% of voting rights of Expectation Investment which is the beneficial owner of 500,000 Shares.
18 BOCOM International Holdings Company Limited
Corporate Governance and Other Information
Save as disclosed above, as at 30 June 2020, the Company is not aware of any other persons, other than the Directors and Chief Executives of the Company, whose interests are set out in the section headed "Directors' and Chief Executives' Interests and Short Positions in Shares, Underlying Shares and Debentures" above, had interests or short positions in the Shares or underlying Shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Company has adopted the Corporate Governance Code of the Listing Rules as its own code of corporate governance. For further details, please refer to the "Corporate Governance Report" section contained in the Company's 2019 annual report. During the six months ended 30 June 2020, save as disclosed below, the Company has complied with all the code provisions set out in the Corporate Governance Code.
Code Provision A.2.1 of the Corporate Governance Code states that the roles of the chairman and chief executive should be separate and should not be performed by the same individual. Mr. TAN Yueheng, the Chairman of the Company, also assumes the responsibilities of Chief Executive of the Company. Mr. TAN has assumed the responsibilities of the Chief Executive since 2007. The Board believes that Mr. TAN is a suitable candidate to assume the responsibilities of the Chief Executive of the Company and the above arrangement can help to improve the efficiency of the decision-making and execution process of the Company. The Company has put in place an appropriate check-and- balance mechanism through the Board and the Independent Non-executive Directors. In light of the above, the Board considers that the deviation from Code Provision A.2.1 of the Corporate Governance Code is appropriate in the circumstances of the Company.
COMPLIANCE WITH MODEL CODE
The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its code of conduct regarding securities transactions by the Directors. All Directors confirmed that they complied with the Model Code throughout the six months ended 30 June 2020 in response to specific enquiries made by the Company.
Interim Report 2020 19
Corporate Governance and Other Information
CHANGE IN INFORMATION OF DIRECTORS AND CHIEF EXECUTIVES
Pursuant to Rule 13.51B(1) of the Listing Rules, the changes in information of Directors and Chief Executives are set out below:
Ms. PO Ying, a Non-executive Director, ceased to be the deputy general manager of the financial budget department of BOCOM with effect from 23 June 2020.
Mr. TSE Yung Hoi, an Independent Non-executive Director, has resigned as an independent non- executive director of Guoan International Limited (stock code: 0143) with effect from 1 June 2020 and has ceased to be an independent non-executive director of HJ Capital (International) Holdings Company Limited (formerly known as "iOne Holdings Limited") (stock code: 00982) with effect from 20 July 2020 and was appointed as an independent non-executive director of Jinmao Hotel and Jinmao (China) Hotel Investments and Management Limited (stock code: 06139) with effect from 9 June 2020.
Mr. LIN Zhijun, an Independent Non-executive Director, has ceased to be an independent non-executive director of Springland International Holdings Limited (withdrawal of listing on the Stock Exchange) with effect from 2 March 2020.
Mr. SU Fen, a Deputy Chief Executive Officer, was appointed as a director of BOCOM International Product and Solution Limited, an indirect wholly-owned subsidiary of the Company, with effect from 9 July 2020.
REVIEW OF INTERIM RESULTS
The Audit and Risk Management Committee has reviewed with management and the Company's auditor, PricewaterhouseCoopers, the accounting principles and practices adopted by the Group and discussed the financial reporting matters including the review of the Company's interim report for the six months ended 30 June 2020.
The unaudited condensed consolidated interim financial information for the Reporting Period has been reviewed by the Company's auditor, PricewaterhouseCoopers, in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants.
INTERIM DIVIDEND
No dividend was paid or declared by the Company for the six months ended 30 June 2020 (2019 1H: Nil).
20 BOCOM International Holdings Company Limited
Financial Statements
Report on Review of Interim Financial Information
TO THE BOARD OF DIRECTORS OF BOCOM INTERNATIONAL HOLDINGS COMPANY LIMITED (incorporated in Hong Kong with limited liability)
INTRODUCTION
We have reviewed the interim financial information set out on pages 22 to 63, which comprises the condensed consolidated statement of financial position of BOCOM International Holdings Company Limited (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
SCOPE OF REVIEW
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting".
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 26 August 2020
Interim Report 2020 21
Financial Statements
Condensed Consolidated Income Statement
Six months ended | |||||||
30/6/2020 | 30/6/2019 | ||||||
(Unaudited) | (Unaudited) | ||||||
Notes | HK$'000 | HK$'000 | |||||
Revenue | 6 | 931,401 | 710,630 | ||||
Other income | 6 | 69,159 | 64,593 | ||||
Revenue and other income | 1,000,560 | 775,223 | |||||
Commission and brokerage expenses | (25,787) | (20,074) | |||||
Finance costs | 8 | (161,414) | (164,997) | ||||
Staff costs | 8 | (156,513) | (185,581) | ||||
Depreciation | 8 | (39,846) | (38,928) | ||||
Other operating expenses | (95,446) | (91,087) | |||||
Change in impairment allowance | 7 | (172,858) | (7,993) | ||||
Total expenses | (651,864) | (508,660) | |||||
Operating profit | 348,696 | 266,563 | |||||
Share of results of associates | 13 | (26,007) | 17,682 | ||||
Share of results of joint ventures | (368) | 23 | |||||
Profit before taxation | 8 | 322,321 | 284,268 | ||||
Income tax expense | 9 | (43,508) | (30,011) | ||||
Profit for the period | 278,813 | 254,257 | |||||
Attributable to: | |||||||
Shareholders of the Company | 280,721 | 253,891 | |||||
Non-controlling interests | (1,908) | 366 | |||||
278,813 | 254,257 | ||||||
Earnings per share attributable to shareholders | |||||||
of the Company for the period | |||||||
- Basic/Diluted (in HKD per share) | 11 | 0.10 | 0.09 | ||||
22 BOCOM International Holdings Company Limited
Financial Statements
Condensed Consolidated Statement of Comprehensive Income
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
(Unaudited) | (Unaudited) | |||||
HK$'000 | HK$'000 | |||||
Profit for the period | 278,813 | 254,257 | ||||
Other comprehensive income/(loss) | ||||||
Items that will be reclassified subsequently to profit or loss | ||||||
Changes in fair value of debt investments at fair value through | ||||||
other comprehensive income | 17,654 | 72,523 | ||||
Amounts reclassified to profit or loss upon disposal of debt | - | |||||
investments at fair value through other comprehensive income | (815) | |||||
16,839 | 72,523 | |||||
Exchange differences on translation of foreign operations | (7,785) | (6,056) | ||||
9,054 | 66,467 | |||||
Items that will not be reclassified subsequently to profit or loss | ||||||
Changes in fair value of equity investments at fair value through | ||||||
other comprehensive income | 28,154 | 25,276 | ||||
Other comprehensive income, net of tax | 37,208 | 91,743 | ||||
Total comprehensive income | 316,021 | 346,000 | ||||
Attributable to: | ||||||
Shareholders of the Company | 320,629 | 345,918 | ||||
Non-controlling interests | (4,608) | 82 | ||||
316,021 | 346,000 | |||||
Interim Report 2020 23
Financial Statements
Condensed Consolidated Statement of Financial Position
30/6/2020 | 31/12/2019 | ||||||
(Unaudited) | (Audited) | ||||||
Notes | HK$'000 | HK$'000 | |||||
Assets | |||||||
Non-current Assets | 29,269 | ||||||
Property and equipment | 34,054 | ||||||
Right-of-use assets | 102,228 | 73,623 | |||||
Intangible assets | 3,196 | 3,196 | |||||
Interest in associates | 13 | 364,955 | 393,964 | ||||
Interest in joint ventures | 47,074 | 33,274 | |||||
Other assets | 34,659 | 24,710 | |||||
Financial assets at fair value through other | 3,704,098 | ||||||
comprehensive income | 12 | 3,172,930 | |||||
Loans and advances | 14 | 1,675,933 | 1,509,172 | ||||
Receivable from reverse repurchase agreements | 15 | 146,363 | 224,987 | ||||
Deferred tax assets | 10,042 | 10,758 | |||||
Total non-current assets | 6,117,817 | 5,480,668 | |||||
Current Assets | 1,073,458 | ||||||
Loans and advances | 14 | 817,323 | |||||
Tax recoverable | 5,824 | - | |||||
Accounts receivable | 16 | 1,733,204 | 511,929 | ||||
Other receivables and prepayments | 17 | 472,298 | 346,462 | ||||
Margin loans to customers | 18 | 2,344,095 | 2,679,240 | ||||
Receivable from reverse repurchase agreements | 15 | 109,847 | 379,596 | ||||
Amount due from an associate | 248 | 547 | |||||
Amounts due from related parties | 1,418 | 1,937 | |||||
Financial assets at fair value through other | 1,252,851 | ||||||
comprehensive income | 12 | 1,457,609 | |||||
Financial assets at fair value through profit or loss | 12 | 8,329,726 | 6,507,553 | ||||
Derivative financial assets | 12 | 27,552 | 2,224 | ||||
Cash and bank balances | 19 | 918,542 | 545,141 | ||||
Total current assets | 16,269,063 | 13,249,561 | |||||
Total assets | 22,386,880 | 18,730,229 | |||||
Equity and liabilities | |||||||
Equity attributable to shareholders of the Company | 3,942,216 | ||||||
Share capital | 23 | 3,942,216 | |||||
Retained earnings | 2,810,319 | 2,778,837 | |||||
Revaluation reserve | (119,021) | (167,158) | |||||
Foreign currency translation reserve | (30,998) | (25,913) | |||||
Total equity attributable to shareholders of the | |||||||
Company | 6,602,516 | 6,527,982 | |||||
Non-controlling interests | 292,743 | 99,828 | |||||
Total equity | 6,895,259 | 6,627,810 | |||||
24 BOCOM International Holdings Company Limited
Financial Statements
Condensed Consolidated Statement of Financial Position (Continued)
30/6/2020 | 31/12/2019 | ||||||
(Unaudited) | (Audited) | ||||||
Notes | HK$'000 | HK$'000 | |||||
Liabilities | |||||||
Non-current Liabilities | |||||||
Borrowings | 20 | - | 4,964,230 | ||||
Subordinated loans from the ultimate holding | 1,000,000 | ||||||
company | 20 | 1,000,000 | |||||
Obligation under repurchase agreements | 20 | 859,643 | 248,915 | ||||
Lease liabilities | 41,180 | 25,019 | |||||
Total non-current liabilities | 1,900,823 | 6,238,164 | |||||
Current Liabilities | |||||||
Borrowings | 20 | 8,358,117 | 3,216,467 | ||||
Obligation under repurchase agreements | 20 | 2,840,866 | 1,222,714 | ||||
Tax payable | 42,363 | 11,388 | |||||
Provision for staff costs | 70,545 | 101,524 | |||||
Other payables and accrued expenses | 129,904 | 67,213 | |||||
Accounts payable | 21 | 1,213,247 | 405,443 | ||||
Dividend payable | 246,095 | - | |||||
Contract liabilities | 22 | 47,882 | 55,479 | ||||
Lease liabilities | 66,246 | 51,700 | |||||
Amount due to the ultimate holding company | 36,813 | 5,459 | |||||
Amount due to a fellow subsidiary | 486 | 55 | |||||
Financial liabilities at fair value through profit or loss | 12 | 506,747 | 723,871 | ||||
Derivative financial liabilities | 12 | 31,487 | 2,942 | ||||
Total current liabilities | 13,590,798 | 5,864,255 | |||||
Total liabilities | 15,491,621 | 12,102,419 | |||||
Total equity and liabilities | 22,386,880 | 18,730,229 | |||||
Net current assets | 2,678,265 | 7,385,306 | |||||
Total assets less current liabilities | 8,796,082 | 12,865,974 | |||||
Interim Report 2020 25
Financial Statements
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the Company | |||||||||||||||
Foreign | |||||||||||||||
currency | Non- | ||||||||||||||
Share | Retained | Revaluation | translation | controlling | Total | ||||||||||
capital | earnings | reserve | reserve | Total | interests | equity | |||||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||||||
At 31 December 2019 (Audited) | 3,942,216 | 2,778,837 | (167,158) | (25,913) | 6,527,982 | 99,828 | 6,627,810 | ||||||||
Profit for the period | - | 280,721 | - | - | 280,721 | (1,908) | 278,813 | ||||||||
Other comprehensive (loss)/income | - | ||||||||||||||
for the period | (3,144)* | 48,137 | (5,085) | 39,908 | (2,700) | 37,208 | |||||||||
Total comprehensive income for the period | - | 277,577 | 48,137 | (5,085) | 320,629 | (4,608) | 316,021 | ||||||||
Capital contribution by non-controlling interests | - | - | - | - | - | 197,523 | 197,523 | ||||||||
Final Dividend for 2019 (Note 10) | - | (246,095) | - | - | (246,095) | - | (246,095) | ||||||||
At 30 June 2020 (Unaudited) | 3,942,216 | 2,810,319 | (119,021) | (30,998) | 6,602,516 | 292,743 | 6,895,259 | ||||||||
At 31 December 2018 (Audited) | 3,942,216 | 2,520,038 | (170,708) | (17,472) | 6,274,074 | 134 | 6,274,208 | ||||||||
Impact on initial application of HKFRS 16 | - | (4,418) | - | - | (4,418) | - | (4,418) | ||||||||
Adjusted balance at 1 January 2019 | 3,942,216 | 2,515,620 | (170,708) | (17,472) | 6,269,656 | 134 | 6,269,790 | ||||||||
Profit for the period | - | 253,891 | - | - | 253,891 | 366 | 254,257 | ||||||||
Other comprehensive income/(loss) | - | - | |||||||||||||
for the period | 97,799 | (5,772) | 92,027 | (284) | 91,743 | ||||||||||
Total comprehensive income for the period | - | 253,891 | 97,799 | (5,772) | 345,918 | 82 | 346,000 | ||||||||
Capital contribution by non-controlling interests | - | - | - | - | - | 33,138 | 33,138 | ||||||||
Final Dividend for 2018 (Note 10) | - | (218,751) | - | - | (218,751) | - | (218,751) | ||||||||
Dividends paid by a subsidiary | - | - | - | - | - | (133) | (133) | ||||||||
At 30 June 2019 (Unaudited) | 3,942,216 | 2,550,760 | (72,909) | (23,244) | 6,396,823 | 33,221 | 6,430,044 | ||||||||
- Amounts reclassified to retained earnings upon disposal of equity investments at fair value through other comprehensive income.
26 BOCOM International Holdings Company Limited
Financial Statements
Condensed Consolidated Statement of Cash Flows
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
(Unaudited) | (Unaudited) | |||||
HK$'000 | HK$'000 | |||||
Operating activities | ||||||
Profit before taxation | 322,321 | 284,268 | ||||
Adjustments for: | (27,196) | |||||
Dividend income | (33,214) | |||||
Interest income from loans or clients | (188,666) | (189,282) | ||||
Interest income from financial assets | (271,502) | (132,369) | ||||
Other interest income | (16,443) | (23,853) | ||||
Finance costs | 161,414 | 164,997 | ||||
Depreciation | 39,846 | 38,928 | ||||
Change in impairment allowance | 172,858 | 7,993 | ||||
Revaluation gain on financial assets and liabilities measured at | (269,086) | |||||
fair value through profit or loss | (122,126) | |||||
Revaluation loss on derivative financial assets and liabilities | 7,286 | 684 | ||||
Net gain on disposal of debt investments at fair value | (815) | - | ||||
through other comprehensive income | ||||||
Foreign exchange gain | (29,124) | (21,945) | ||||
Share of results of associates | 26,007 | (17,682) | ||||
Share of results of joint ventures | 368 | (23) | ||||
Operating cash flows before movements in working capital | (72,732) | (43,624) | ||||
Increase in other assets | (9,949) | (3,670) | ||||
Increase in financial assets at fair value through profit or loss | (1,554,063) | (1,280,283) | ||||
(Decrease)/increase in financial liabilities at fair value through | (216,148) | |||||
profit or loss | 157 | |||||
(Increase)/decrease in derivative financial assets | (23,235) | 4,397 | ||||
Increase/(decrease) in derivative financial liabilities | 19,166 | (4,540) | ||||
Increase in accounts receivable | (1,226,582) | (245,645) | ||||
Decrease in margin loans to customers | 292,604 | 578,708 | ||||
(Increase)/decrease in loans and advances | (419,068) | 760,808 | ||||
Decrease/(increase) in receivable from reverse repurchase | 348,362 | |||||
agreements | (54,474) | |||||
Decrease in amounts due from related parties | 521 | 572 | ||||
Decrease in amount due from an associate | 299 | - | ||||
Increase in amount due from a fellow subsidiary | - | (28) | ||||
Increase in other receivables and prepayments | (114,152) | (1,015,284) | ||||
Increase in accounts payable | 807,804 | 198,197 | ||||
Increase/(decrease) in amount due to the ultimate holding | 31,354 | |||||
company | (480) | |||||
Increase/(decrease) in amount due to a fellow subsidiary | 431 | (83) | ||||
Decrease in provision for staff costs | (30,979) | (19,307) | ||||
Increase in other payables and accrued expenses | 60,592 | 608,233 | ||||
(Decrease)/increase in contract liabilities | (7,597) | 7,232 | ||||
Net cash used in operations | (2,113,372) | (509,114) | ||||
Interim Report 2020 27
Financial Statements
Condensed Consolidated Statement of Cash Flows (Continued)
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
(Unaudited) | (Unaudited) | |||||
HK$'000 | HK$'000 | |||||
Income tax paid | (17,700) | (38,080) | ||||
Interest received from loans or clients | 193,794 | 190,106 | ||||
Other interest income received | 17,968 | 24,853 | ||||
Interest expenses paid | (160,043) | (150,621) | ||||
Net cash used in operating activities | (2,079,353) | (482,856) | ||||
Investing activities | ||||||
Dividend received | 27,196 | 33,214 | ||||
Interest income received | 253,367 | 108,639 | ||||
Purchase of property and equipment | (978) | (4,210) | ||||
Purchase of associates | - | (70,080) | ||||
Distribution from associates | 86 | - | ||||
Capital injection to joint ventures | (14,523) | - | ||||
Distribution from joint ventures | 15 | - | ||||
Purchase of financial assets at fair value through other | (1,106,657) | |||||
comprehensive income | (1,453,199) | |||||
Proceeds on disposal of financial assets at fair value through | 677,312 | |||||
other comprehensive income | 215,417 | |||||
Net cash used in investing activities | (164,182) | (1,170,219) | ||||
Financing activities | ||||||
Net drawdown of bank loans and other borrowings | 2,451,783 | 1,912,761 | ||||
Capital contribution by non-controlling interests | 197,523 | 33,138 | ||||
Dividend from a subsidiary paid to non-controlling interests | - | (133) | ||||
Principal elements of lease payments | (31,060) | (35,093) | ||||
Net cash generated from financing activities | 2,618,246 | 1,910,673 | ||||
Net increase in cash and cash equivalents | 374,711 | 257,598 | ||||
Cash and cash equivalents at 1 January | 540,455 | 589,348 | ||||
Effect of exchange rate changes on cash and cash equivalents | (1,310) | 28,343 | ||||
Cash and cash equivalents at 30 June | 913,856 | 875,289 | ||||
28 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements
1. GENERAL INFORMATION
BOCOM International Holdings Company Limited (the "Company") is a company incorporated in Hong Kong. The address of its registered office is 9/F, Man Yee Building, 68 Des Voeux Road Central, Hong Kong.
The principal activity of the Company is investment holding. The Group is principally engaged in securities brokerage, margin financing, corporate finance and underwriting, investment and loans, asset management and advisory businesses. The regulated activities carried out by the Company's licensed subsidiaries include dealing in securities and futures and advising on securities and futures contracts, providing securities margin financing, advising on corporate finance and providing asset management services.
The parent and ultimate holding company is Bank of Communications Co., Ltd., a company incorporated in the People's Republic of China ("PRC") and listed on the Shanghai Stock Exchange and The Stock Exchange of Hong Kong Limited.
The consolidated financial statements are presented in Hong Kong dollars, which is also the functional currency of the Company, unless otherwise stated.
The financial information relating to the year ended 31 December 2019, that is included in the condensed consolidated interim report for the six months ended 30 June 2020 as comparative information does not constitute the Company's statutory annual consolidated financial statements for that financial year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows:
The Company has delivered the financial statements for the year ended 31 December 2019 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (Cap. 622).
The Company's auditor has reported on those financial statements. The auditor's report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or 407(3) of the Hong Kong Companies Ordinance (Cap. 622).
Interim Report 2020 29
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
2. BASIS OF PREPARATION
This condensed consolidated interim financial statements for the six months ended 30 June 2020 has been prepared in accordance with HKAS 34, 'Interim financial reporting' and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with HKFRSs.
To clarify the inadvertent clerical errors in the Interim Report 2019, HK$9,149,000 of "trading gains" should read "trading losses" from the derivatives transactions for the period ended 30 June 2019 in Note 25 of the Interim Report 2019. The comparative figures in Note 24 have been restated. There is no impact on the profit before taxation for the corresponding period.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2019, as described in those annual financial statements, except for the estimation of income tax using the tax rate that would be applicable to expected total annual earnings and the adoption of amendments to HKFRSs effective for the financial year ending 31 December 2020.
The Group has applied the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants to these financial statements for the current accounting period.
- Definition of Material - Amendments to HKAS 1 and HKAS 8
- Definition of a Business - Amendments to HKFRS 3
- Revised Conceptual Framework for Financial Reporting
- COVID-19- Related Rent Concessions - Amendments to HKFRS 16
Amendments to HKFRSs effective for the financial year ending 31 December 2020 do not have a material impact on the Group.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
30 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2019, with the exception of changes in estimates that are required in determining the impairment losses and valuation of financial assets and fair value of financial instruments. The level of estimation uncertainty and judgement for the calculation of impairment allowance and valuation has significantly increased as a result of the economic effects of the COVID-19 pandemic, where the estimates are often based on future economic condition and sensitive to such condition changes.
5. SEGMENT INFORMATION
The Group manages the business operations by the following segments in accordance with the nature of the operations and services provided:
- Brokerage segment provides securities trading and brokerage services.
- Corporate finance and underwriting segment provides corporate finance services including equity underwriting, debt underwriting, sponsor services and financial advisory services to institutional clients.
- Asset management and advisory segment offers traditional asset management products and services to third party clients. In addition, it also offers investment advisory services, portfolio management services and transaction execution services.
- Margin financing segment provides securities-backed financial leverage for both retail and institutional customers.
- Investment and loans segment engages in direct investment business including investments in various debt and equity securities, investments in companies and investments in loans.
- Others include headquarter operations such as bank interest income, and interest expense incurred for general working capital purposes.
Inter-segment transactions, if any, are conducted with reference to the prices charged to external third parties. There was no change in basis during the relevant periods.
Interim Report 2020 31
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
5. SEGMENT INFORMATION (continued)
The following is an analysis of the segment revenue and segment profit or loss from continuing operations:
Six months ended 30 June 2020 (Unaudited) | |||||||||||||||||
Corporate | Asset | ||||||||||||||||
finance and | management | Margin | Investment | ||||||||||||||
Brokerage | underwriting | and advisory | financing | and loans | Others | Elimination | Total | ||||||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||||||
Total revenue | |||||||||||||||||
Revenue | |||||||||||||||||
Commission and fee income | - | - | - | - | |||||||||||||
- External | 82,030 | 44,647 | 74,426 | 201,103 | |||||||||||||
- Internal | 232 | - | 1,969 | - | - | - | (2,201) | - | |||||||||
Interest income | - | - | - | - | - | ||||||||||||
- External | 83,560 | 105,106 | 188,666 | ||||||||||||||
- Internal | - | - | - | - | 20,667 | - | (20,667) | - | |||||||||
Proprietary trading income | - | - | - | - | - | - | |||||||||||
- External | 541,632 | 541,632 | |||||||||||||||
- Internal | - | - | - | - | - | - | - | - | |||||||||
Other income | 8,049 | - | 2,438 | - | 13,433 | 45,239 | - | 69,159 | |||||||||
90,311 | 44,647 | 78,833 | 83,560 | 680,838 | 45,239 | (22,868) | 1,000,560 | ||||||||||
Total expenses | (115,062) | (55,410) | (55,764) | (90,824) | (357,672) | - | 22,868 | (651,864) | |||||||||
Share of results of associates | - | - | - | - | (26,007) | - | - | (26,007) | |||||||||
Share of results of joint ventures | - | - | - | - | (368) | - | - | (368) | |||||||||
(Loss)/profit before taxation | (24,751) | (10,763) | 23,069 | (7,264) | 296,791 | 45,239 | - | 322,321 | |||||||||
Other disclosures | |||||||||||||||||
Depreciation | (15,721) | (2,970) | (5,360) | (2,618) | (13,177) | - | - | (39,846) | |||||||||
Change in impairment allowance | (111) | (3) | - | (42,539) | (130,205) | - | - | (172,858) | |||||||||
Finance costs | (310) | (111) | (118) | (28,854) | (152,688) | - | 20,667 | (161,414) | |||||||||
32 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
5. SEGMENT INFORMATION (continued)
Six months ended 30 June 2019 (Unaudited) | |||||||||||||||||
Corporate | Asset | ||||||||||||||||
finance and | management | Margin | Investment | ||||||||||||||
Brokerage | underwriting | and advisory | financing | and loans | Others | Elimination | Total | ||||||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||||||
Total revenue | |||||||||||||||||
Revenue | |||||||||||||||||
Commission and fee income | |||||||||||||||||
- External | 64,324 | 60,707 | 57,243 | - | - | - | - | 182,274 | |||||||||
- Internal | 203 | - | 1,864 | - | - | - | (2,067) | - | |||||||||
Interest income | |||||||||||||||||
- External | - | - | - | 121,775 | 67,507 | - | - | 189,282 | |||||||||
- Internal | - | - | - | - | 26,072 | - | (26,072) | - | |||||||||
Proprietary trading income | |||||||||||||||||
- External | - | - | - | - | 339,074 | - | - | 339,074 | |||||||||
- Internal | - | - | - | - | - | - | - | - | |||||||||
Other income | 10,427 | - | 160 | - | 7,473 | 46,533 | - | 64,593 | |||||||||
74,954 | 60,707 | 59,267 | 121,775 | 440,126 | 46,533 | (28,139) | 775,223 | ||||||||||
Total expenses | (95,634) | (76,156) | (58,434) | (67,761) | (238,814) | - | 28,139 | (508,660) | |||||||||
Share of results of associates | - | - | - | - | 17,682 | - | - | 17,682 | |||||||||
Share of results of joint ventures | - | - | - | - | 23 | - | - | 23 | |||||||||
(Loss)/profit before taxation | (20,680) | (15,449) | 833 | 54,014 | 219,017 | 46,533 | - | 284,268 | |||||||||
Other disclosures | - | - | |||||||||||||||
Depreciation | (15,514) | (2,835) | (5,299) | (5,879) | (9,401) | (38,928) | |||||||||||
Change in impairment allowance | - | (7) | - | 2,188 | (10,174) | - | - | (7,993) | |||||||||
Finance costs | - | - | (155) | (39,364) | (151,550) | - | 26,072 | (164,997) | |||||||||
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Unaudited) | |||||
Total revenue from external customer by location of | ||||||
operations: | ||||||
- Hong Kong | 960,562 | 739,225 | ||||
- Mainland China | 39,998 | 35,998 | ||||
1,000,560 | 775,223 | |||||
Interim Report 2020 33
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
6. | REVENUE AND OTHER INCOME | ||||||||
Six months ended | |||||||||
30/6/2020 | 30/6/2019 | ||||||||
HK$'000 | HK$'000 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
REVENUE | |||||||||
COMMISSION AND FEE INCOME | 82,030 | ||||||||
Brokerage commission | 64,324 | ||||||||
Corporate finance and underwriting fee | 44,647 | 60,707 | |||||||
Asset management and advisory income | 74,426 | 57,243 | |||||||
201,103 | 182,274 | ||||||||
INTEREST INCOME | 83,560 | ||||||||
Interest income from margin financing | 121,775 | ||||||||
Interest income from loans and advances | 84,098 | 46,742 | |||||||
Interest income from receivable from reverse repurchase | 21,008 | ||||||||
agreements | 20,765 | ||||||||
188,666 | 189,282 | ||||||||
PROPRIETARY TRADING INCOME | |||||||||
Net trading and investment income* | |||||||||
- Net gain on financial assets at fair | 279,990 | ||||||||
value through profit or loss | 186,034 | ||||||||
- Net loss on financial assets at fair | (15,517) | ||||||||
value through other comprehensive income | (10,572) | ||||||||
- Net (loss)/gain on financial liabilities at | (10,509) | ||||||||
fair value through profit or loss | 780 | ||||||||
- Net loss on derivative financial instruments | (8,515) | (427) | |||||||
- Fair value changes from financial liabilities to | (2,515) | ||||||||
the investors of the funds consolidated | (2,324) | ||||||||
Dividend income from | |||||||||
- Financial assets at fair value through profit or loss | 21,277 | 22,526 | |||||||
- Financial assets at fair value through other | 5,919 | ||||||||
comprehensive income | 10,688 | ||||||||
Interest income from | |||||||||
- Financial assets at fair value through profit or loss | 133,609 | 67,689 | |||||||
- Financial assets at fair value through other | 137,893 | ||||||||
comprehensive income | 64,680 | ||||||||
541,632 | 339,074 | ||||||||
931,401 | 710,630 | ||||||||
- During the Reporting Period, the Group has considered the disclosures of net trading gains/losses (including the realised and unrealised amounts) and the fair value changes of financial liabilities due to investors of a fund consolidated by the Group with reference to the relevance to the Group's business. Accordingly, the comparative figures have been re-presented. There is no impact on proprietary trading income and the profit before taxation for the corresponding period.
34 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
6. REVENUE AND OTHER INCOME (continued)
Six months ended | |||||||
30/6/2020 | 30/6/2019 | ||||||
HK$'000 | HK$'000 | ||||||
(Unaudited) | (Unaudited) | ||||||
OTHER INCOME | |||||||
Handling fees | 6,943 | 10,373 | |||||
Other interest income | 16,443 | 23,853 | |||||
Exchange gains | 29,124 | 21,945 | |||||
Others | 16,649 | 8,422 | |||||
69,159 | 64,593 | ||||||
7. CHANGE IN IMPAIRMENT ALLOWANCE
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Unaudited) | |||||
Change in impairment allowance on: | ||||||
Receivable from reverse repurchase agreements | 11 | (12) | ||||
Accounts receivable | 113 | 36 | ||||
Margin loans to customers | 42,539 | (2,188) | ||||
Loans and advances | (3,828) | (1,303) | ||||
Debt investments at FVOCI | 134,227 | 10,976 | ||||
Other receivables | (202) | 484 | ||||
Amounts due from related parties | (2) | - | ||||
172,858 | 7,993 | |||||
Interim Report 2020 35
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
8. PROFIT BEFORE TAXATION
Six months ended
30/6/2020 30/6/2019
HK$'000 HK$'000
(Unaudited) (Unaudited)
Profit before taxation has been arrived at after charging: | ||||||
Finance costs: | ||||||
- Interest expenses on subordinated loans from | ||||||
the ultimate holding company | 16,349 | 14,539 | ||||
- Interest expenses on bank loans from | ||||||
the ultimate holding company | 11,963 | 12,930 | ||||
- Interest expenses on bank loans and overdraft from | ||||||
other financial institutions | 95,446 | 102,847 | ||||
- Interest expenses on obligation under | ||||||
repurchase agreements | 26,533 | 21,492 | ||||
- Interest expenses on lease liabilities | 1,381 | 2,145 | ||||
- Others | 44 | 116 | ||||
151,716 | 154,069 | |||||
- Other borrowing costs to the ultimate holding company | 875 | 744 | ||||
- Other borrowing costs to other financial institutions | 8,823 | 10,184 | ||||
161,414 | 164,997 | |||||
Depreciation | 39,846 | 38,928 | ||||
Operating lease charges | 1,694 | 1,390 | ||||
Staff costs | 156,513 | 185,581 | ||||
36 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
9. | INCOME TAX EXPENSE | ||||||||
Six months ended | |||||||||
30/6/2020 | 30/6/2019 | ||||||||
HK$'000 | HK$'000 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
Current tax: | |||||||||
Hong Kong Profits Tax | 40,031 | 29,017 | |||||||
PRC Enterprise Income Tax | 9,201 | 5,204 | |||||||
(Over)/under provision in prior periods | (6,282) | 298 | |||||||
Total current tax | 42,950 | 34,519 | |||||||
Deferred tax: | |||||||||
Provision for/(reversal of) temporary differences | 558 | (4,508) | |||||||
Income tax expense recognised in profit or loss | 43,508 | 30,011 | |||||||
Income tax expense is recognised based on management's estimate of the weighted average effective annual income tax rate expected for the full financial year.
Hong Kong Profits Tax has been provided at the rate of 16.5% on the estimated assessable profit for the current and prior period. Under the Law of the People's Republic of China on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the People's Republic of China's entities is 25%.
Interim Report 2020 37
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
10. DIVIDENDS
Dividends approved during the interim period
Six months ended
30/6/2020 30/6/2019
HK$'000 HK$'000
(Unaudited) (Unaudited)
Final dividend for previous financial year declared and | ||
approved of HK$0.09 per ordinary share | ||
(2019: HK$0.08 per ordinary share) | 246,095 | 218,751 |
Dividends attributable to the interim period
No dividend was paid or declared by the Company for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).
11. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the period.
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
(Unaudited) | (Unaudited) | |||||
Profit attributable to shareholders of the Company | ||||||
(in HK$'000) | 280,721 | 253,891 | ||||
Weighted average number of ordinary shares in issue | ||||||
(in '000 shares) | 2,734,392 | 2,734,392 | ||||
Earnings per share (in HKD per share) | 0.10 | 0.09 | ||||
There were no potential diluted ordinary shares and the diluted earnings per share was the same as the basic earnings per share.
38 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
12. FINANCIAL ASSETS AND LIABILITIES
The table below summarised the information relating to the fair value hierarchy of financial assets and financial liabilities measured at fair value on a recurring basis.
Financial assets at fair value through other comprehensive income
At 30 June 2020 (Unaudited) | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||
Designated at fair value through other | |||||||||
comprehensive income upon initial recognition | 222,591 | - | - | 222,591 | |||||
Equity securities | |||||||||
Preference shares | 750,659 | - | - | 750,659 | |||||
Unlisted equities | - | - | 63,935 | 63,935 | |||||
973,250 | - | 63,935 | 1,037,185 | ||||||
Mandatorily measured at fair value through other | |||||||||
comprehensive income | 3,765,044 | - | 154,720 | 3,919,764 | |||||
Debt investments | |||||||||
4,738,294 | - | 218,655 | 4,956,949 | ||||||
Analysed for reporting purposes: | |||||||||
3,704,098 | |||||||||
Non-current | |||||||||
Current | 1,252,851 | ||||||||
4,956,949 | |||||||||
At 31 December 2019 (Audited) | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||
Designated at fair value through other | |||||||||
comprehensive income upon initial recognition | - | - | |||||||
Equity securities | 1,688 | 1,688 | |||||||
Preference shares | 753,725 | - | - | 753,725 | |||||
Unlisted equities | - | - | 84,549 | 84,549 | |||||
755,413 | - | 84,549 | 839,962 | ||||||
Mandatorily measured at fair value through other | |||||||||
comprehensive income | - | ||||||||
Debt investments | 3,635,117 | 155,460 | 3,790,577 | ||||||
4,390,530 | - | 240,009 | 4,630,539 | ||||||
Analysed for reporting purposes: | |||||||||
Non-current | 3,172,930 | ||||||||
Current | 1,457,609 | ||||||||
4,630,539 | |||||||||
Interim Report 2020 39
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
12. FINANCIAL ASSETS AND LIABILITIES (continued)
Financial assets at fair value through profit or loss
At 30 June 2020 (Unaudited) | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||
Designated at fair value through profit or loss | |||||||||
upon initial recognition | - | - | |||||||
Equity securities | 128,706 | 128,706 | |||||||
Debt investments | 2,347 | - | - | 2,347 | |||||
Preference shares | - | - | 1,302,992 | 1,302,992 | |||||
Unlisted equities | - | - | 217,370 | 217,370 | |||||
131,053 | - | 1,520,362 | 1,651,415 | ||||||
Mandatorily measured at fair value through | |||||||||
profit or loss | - | - | |||||||
Equity securities | 694,354 | 694,354 | |||||||
Debt investments | 4,268,066 | - | - | 4,268,066 | |||||
Club debenture | - | - | 1,920 | 1,920 | |||||
Funds | 42,768 | - | - | 42,768 | |||||
Unlisted funds | - | - | 1,650,176 | 1,650,176 | |||||
Structured financial products | - | - | 21,027 | 21,027 | |||||
5,005,188 | - | 1,673,123 | 6,678,311 | ||||||
5,136,241 | - | 3,193,485 | 8,329,726 | ||||||
40 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
12. FINANCIAL ASSETS AND LIABILITIES (continued)
Financial assets at fair value through profit or loss (continued)
At 31 December 2019 (Audited)
Level 1 | Level 2 | Level 3 | Total | ||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||
Designated at fair value through profit or loss upon initial recognition
Equity securities
Debt investments
Preference shares
Unlisted equities
Mandatorily measured at fair value through profit or loss
Equity securities
Debt investments
Club debenture
Funds
Unlisted funds
Equity-linked loan
Structured financial products
138,442 | - | - | 138,442 | |||
2,373 | - | - | 2,373 | |||
- | - | 1,238,733 | 1,238,733 | |||
- | - | 97,416 | 97,416 | |||
140,815 | - | 1,336,149 | 1,476,964 | |||
76,017 | - | - | 76,017 | |||
2,752,249 | - | - | 2,752,249 | |||
- | - | 1,952 | 1,952 | |||
34,172 | - | - | 34,172 | |||
- | - | 1,616,259 | 1,616,259 | |||
- | - | 443,061 | 443,061 | |||
- | - | 106,879 | 106,879 | |||
2,862,438 | - | 2,168,151 | 5,030,589 | |||
3,003,253 | - | 3,504,300 | 6,507,553 | |||
Derivative financial assets | |||||||||
At 30 June 2020 (Unaudited) | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||
Derivative financial assets | 25,443 | 2,109 | - | 27,552 | |||||
At 31 December 2019 (Audited) | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||
Derivative financial assets | 2,224 | - | - | 2,224 | |||||
Interim Report 2020 41
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
12. FINANCIAL ASSETS AND LIABILITIES (continued)
Financial liabilities at fair value through profit or loss
At 30 June 2020 (Unaudited) | ||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||||
Designated at fair value through profit or loss | ||||||||||
upon initial recognition | ||||||||||
Financial liabilities to the investors of the funds | (12,570) | - | - | (12,570) | ||||||
consolidated | ||||||||||
Notes payable | - | (465,554) | - | (465,554) | ||||||
Structured note payable | - | - | (28,623) | (28,623) | ||||||
(12,570) | (465,554) | (28,623) | (506,747) | |||||||
At 31 December 2019 (Audited) | ||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||||
Designated at fair value through profit or loss | ||||||||||
upon initial recognition | ||||||||||
Financial liabilities to the investors of the funds | - | - | ||||||||
consolidated | (11,765) | (11,765) | ||||||||
Notes payable | - | (692,674) | - | (692,674) | ||||||
Structured note payable | - | - | (19,432) | (19,432) | ||||||
(11,765) | (692,674) | (19,432) | (723,871) | |||||||
Derivative financial liabilities | ||||||||||
At 30 June 2020 (Unaudited) | ||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||||
Derivative financial liabilities | - | (31,487) | - | (31,487) | ||||||
At 31 December 2019 (Audited) | ||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||||
Derivative financial liabilities | - | (2,942) | - | (2,942) | ||||||
Details of disclosure for fair value measurement are set out in Note 27.
42 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
13. INTEREST IN ASSOCIATES | |||||||
30/6/2020 | 31/12/2019 | ||||||
HK$'000 | HK$'000 | ||||||
(Unaudited) | (Audited) | ||||||
Unlisted investment at the beginning of the period/year | 372,006 | 213,401 | |||||
Addition for the period/year | - | 158,664 | |||||
Transfer during the period/year | - | (59) | |||||
372,006 | 372,006 | ||||||
Profit after acquisition | |||||||
- As at 1 January | 26,723 | 152 | |||||
- Share of (loss)/profit for the period/year | (26,007) | 26,571 | |||||
Distribution for the period/year | (86) | - | |||||
Accumulated exchange difference arising from translation | |||||||
of foreign operations | (7,681) | (4,765) | |||||
364,955 | 393,964 | ||||||
14. LOANS AND ADVANCES
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Gross loans and advances | 2,753,320 | 2,334,252 | ||||
Less: impairment allowance | (3,929) | (7,757) | ||||
2,749,391 | 2,326,495 | |||||
Net loans and advances: | ||||||
1,675,933 | ||||||
Non-current | 1,509,172 | |||||
Current | 1,073,458 | 817,323 | ||||
2,749,391 | 2,326,495 | |||||
There was no past due but not impaired loans and advances as at 30 June 2020 and 31 December 2019.
Interim Report 2020 43
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
15. RECEIVABLE FROM REVERSE REPURCHASE AGREEMENTS
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Gross receivable from reverse repurchase agreements | 256,221 | 604,583 | ||||
Less: impairment allowance | (11) | - | ||||
256,210 | 604,583 | |||||
Net receivable from reverse repurchase agreements: | ||||||
Non-current | 146,363 | 224,987 | ||||
Current | 109,847 | 379,596 | ||||
256,210 | 604,583 | |||||
As at 30 June 2020, the fair value of the collateral allowed to be repledging for the outstanding receivable was HK$296,270 thousand (31 December 2019: HK$1,167,434 thousand).
16. ACCOUNTS RECEIVABLE
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Corporate finance and underwriting business | 26,767 | 14,498 | ||||
Dealing in securities and futures business | ||||||
- Clients | 1,304,560 | 106,816 | ||||
- Brokers | 197,643 | 126,883 | ||||
- Clearing house | 206,403 | 265,788 | ||||
1,708,606 | 499,487 | |||||
Less: impairment allowance | (2,169) | (2,056) | ||||
1,733,204 | 511,929 | |||||
44 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
16. ACCOUNTS RECEIVABLE (continued)
The following is an ageing analysis of accounts receivable based on the date of invoice or contract note at the reporting date:
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Neither past due nor credit-impaired | 1,721,366 | 510,474 | ||||
Less than 31 days past due | 7,808 | 22 | ||||
31-60 days past due | - | 2 | ||||
61-90 days past due | 251 | - | ||||
Over 90 days past due | 5,948 | 3,487 | ||||
14,007 | 3,511 | |||||
Less: impairment allowance | (2,169) | (2,056) | ||||
1,733,204 | 511,929 | |||||
Client receivables from securities dealing are receivable on the settlement dates of their respective transactions, normally two or three business days after the respective trade dates.
The receivable from brokers are neither past due nor credit-impaired.
Brokers and clearing house receivables are repayable on the settlement dates of their respective trade dates, normally two or three business days after the respective trade dates.
The settlement of the receivables from corporate finance and underwriting business is done based on the completion of each phase of the project.
Interim Report 2020 45
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
17. OTHER RECEIVABLES AND PREPAYMENTS
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Other receivables | 429,516 | 296,109 | ||||
Less: impairment allowance | (808) | (1,010) | ||||
428,708 | 295,099 | |||||
Prepayments | 43,590 | 51,363 | ||||
472,298 | 346,462 | |||||
18. MARGIN LOANS TO CUSTOMERS
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Gross margin loans to customers | 2,434,382 | 2,774,924 | ||||
Less: impairment allowance | (90,287) | (95,684) | ||||
2,344,095 | 2,679,240 | |||||
No ageing analysis is disclosed, as in the opinion of the Directors, an ageing analysis does not give additional view of the nature of the margin loan business. The amount of credit facilities granted to margin clients is determined by the discounted market value of the collateral securities accepted by the Group.
46 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
19. CASH AND BANK BALANCES
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Current and savings accounts | 913,856 | 540,455 | ||||
Time deposits with original maturity of more than three | ||||||
months | 1,696 | 1,696 | ||||
Restricted cash | 2,990 | 2,990 | ||||
918,542 | 545,141 | |||||
20. BORROWINGS
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Bank loans and other borrowings | - | |||||
Non-current - ultimate holding company (Note 24) | 450,000 | |||||
Non-current - authorised institutions | - | 4,514,230 | ||||
- | 4,964,230 | |||||
Current - ultimate holding company (Note 24) | 682,080 | - | ||||
Current - authorised institutions | 7,676,037 | 3,216,467 | ||||
8,358,117 | 3,216,467 | |||||
Obligation under repurchase agreements | ||||||
Non-current | 859,643 | 248,915 | ||||
Current | 2,840,866 | 1,222,714 | ||||
3,700,509 | 1,471,629 | |||||
Subordinated loans (Note 24) | ||||||
Non-current | 1,000,000 | 1,000,000 | ||||
Total | 13,058,626 | 10,652,326 | ||||
Interim Report 2020 47
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
20. BORROWINGS (continued)
At the reporting date, bank and other borrowings were repayable as follows:
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Bank loans and other borrowings | 11,198,983 | |||||
Within 1 year | 4,439,181 | |||||
Between 1 and 2 years | 295,053 | 5,213,145 | ||||
Between 2 and 5 years | 426,773 | - | ||||
Over 5 years | 137,817 | - | ||||
12,058,626 | 9,652,326 | |||||
Undated | 1,000,000 | 1,000,000 | ||||
13,058,626 | 10,652,326 | |||||
21. ACCOUNTS PAYABLE
Accounts payable arising from the business of dealing in securities and options are as follows:
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Clients - trade settlement | 527,877 | 367,768 | ||||
Clearing house | 254,922 | 36,679 | ||||
Brokers | 430,448 | 996 | ||||
1,213,247 | 405,443 | |||||
No ageing analysis is disclosed, as in the opinion of the Directors, an ageing analysis does not give additional view of the nature of these business.
The settlement terms of accounts payable arising from client businesses are normally two to three days after trade date or at specific terms agreed with clients, brokers or clearing house.
22. CONTRACT LIABILITIES
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Contract liabilities | 47,882 | 55,479 | ||||
The obligation of the Group to transfer advisory and management and other services to customers according to consideration received was presented as contract liabilities.
48 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
23. | SHARE CAPITAL | ||||||||
Number of shares | Share capital | ||||||||
Six months | Six months | ||||||||
ended | Year ended | ended | Year ended | ||||||
30/6/2020 | 31/12/2019 | 30/6/2020 | 31/12/2019 | ||||||
Thousand | Thousand | ||||||||
Shares | Shares | HK$'000 | HK$'000 | ||||||
(Unaudited) | (Audited) | (Unaudited) | (Audited) | ||||||
Issued and fully paid | |||||||||
At the end of the reporting period | 2,734,392 | 2,734,392 | 3,942,216 | 3,942,216 | |||||
24. | RELATED PARTY TRANSACTIONS | ||||||||
During the period, the Group entered into the following material transactions with related parties:
(a) Ultimate holding company | |||||||
Six months ended | |||||||
30/6/2020 | 30/6/2019 | ||||||
HK$'000 | HK$'000 | ||||||
(Unaudited) | (Unaudited) | ||||||
Transaction | |||||||
Interest income from deposits | 843 | 3,933 | |||||
Finance costs | 29,187 | 28,213 | |||||
Commission expenses | 940 | 1,262 | |||||
Asset management and advisory income | 1,227 | 2,007 | |||||
Fund management fee income | 9,893 | 9,893 | |||||
Rental expenses | 148 | 146 | |||||
Other operating expenses | 733 | 775 | |||||
Trading gain from derivatives transactions* | 222,184 | - | |||||
Trading loss from derivatives transactions* | - | 9,149 | |||||
Realised gain on financial assets at fair value | |||||||
through profit or loss | 25 | 1,210 | |||||
Unrealised gain on financial assets at fair value | - | ||||||
through profit or loss | 3,335 | ||||||
Unrealised loss on financial assets at fair value | - | ||||||
through profit or loss | 12 | ||||||
- Trading gain/loss from derivative transactions represented gain/loss from over-the-counter derivative transactions in respect of commodities entered into between the Group and the ultimate holding company. The Group had effectively offset the risk by entering into exchange-traded futures contracts with third parties.
Interim Report 2020 49
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
24. RELATED PARTY TRANSACTIONS (continued)
- Ultimate holding company (continued)
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Balance of transaction | ||||||
Derivative financial assets | - | 701 | ||||
Derivative financial liabilities | 25,293 | - | ||||
Borrowings | 682,080 | 450,000 | ||||
Subordinated loans | 1,000,000 | 1,000,000 | ||||
Accounts receivable | 278,343 | - | ||||
Accounts payable | - | 95,922 | ||||
Amount due to the ultimate holding company | 36,813 | 5,459 | ||||
- Fellow subsidiaries, associates and joint ventures
Six months ended | ||||||
30/6/2020 | 30/6/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Unaudited) | |||||
Transaction | ||||||
Interest income from deposits | 14 | 19 | ||||
Commission income | 5,226 | 3,737 | ||||
Commission expenses | 1,716 | 558 | ||||
Asset management and advisory income* | 2,275 | 876 | ||||
Fund management fee income | 8,377 | 1,428 | ||||
Underwriting fee income* | 2,765 | 3,720 | ||||
Rental expenses | 4,242 | 4,524 | ||||
Other operating expenses | 1,340 | 1,176 | ||||
30/6/2020 HK$'000 (Unaudited)
31/12/2019 HK$'000 (Audited)
Balance of transaction | ||||||
Amount due from an associate | 248 | 547 | ||||
Amount due to a fellow subsidiary | 486 | 55 | ||||
- During the Reporting Period, the Group has reclassified certain asset management and advisory income in prior period to underwriting fee income to conform with the current year presentation. There is no impact on the profit before taxation for the corresponding period.
50 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
24. RELATED PARTY TRANSACTIONS (continued)
- Related parties
Six months ended
30/6/2020 30/6/2019
HK$'000 HK$'000
(Unaudited) (Unaudited)
Transaction | - | |||||
Interest income from debt investment | 441 | |||||
Fund management fee income | 10,316 | 8,556 | ||||
30/6/2020 HK$'000 (Unaudited)
31/12/2019 HK$'000 (Audited)
Balance of transaction | ||||||
Gross amounts due from related parties | 1,420 | 1,941 | ||||
Less: impairment allowance | (2) | (4) | ||||
1,418 | 1,937 | |||||
25. COMMITMENTS
Operating leases commitments
At the end of the Reporting Period, the Group had commitments for future aggregate minimum lease payments under non-cancellable operating leases as follows:
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
No later than 1 year | 2 | 13 | ||||
Later than 1 year and no later than 5 years | - | - | ||||
2 | 13 | |||||
Interim Report 2020 51
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
25. COMMITMENTS (continued)
Investment commitments
At the end of the Reporting Period, the Group had certain investment commitments contracted for at the end of the reporting period but not yet incurred. The amounts will be drawn down on as-needed basis. The table below provides further information regarding the commitments.
30/6/2020 31/12/2019
HK$'000 HK$'000
(Unaudited) (Audited)
Unfunded commitments | 162,688 | 169,575 | ||||
Loan commitments
The following table indicates the contractual amounts of the Group's credit related commitments which the Group has committed to its customers:
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Under 1 year | - | 97,163 | ||||
Later than 1 year and no later than 5 years | 74,833 | - | ||||
74,833 | 97,163 | |||||
52 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
26. CONTINGENT LIABILITIES AND OTHERS
Return guarantee in providing asset management service
In connection with the Group's asset management services, the Group entered into an asset management service agreement with a client in August 2015 which also provides the client with a minimum return guarantee on the investment principal. The investment principal amounted to MOP500,000,000. This service agreement expired in August 2020.
In November 2016, the Group entered into another asset management service agreement with the same client on similar terms for an additional investment principal of MOP500,000,000, which will expire in November 2021. In March 2018, the Group entered into a third asset management service agreement with the same client on similar terms for an additional investment principal of MOP2,000,000,000, which will expire in March 2023.
The Group provides a minimum return guarantee on the principal amounts on a cumulative basis throughout the life of the service contracts. In addition to an asset management fee at a fixed rate based on the capital amount, the Group is also entitled to a performance fee if the returns, on a cumulative basis, are above certain level. The underlying investment portfolios mainly consist of fixed income instruments. The average yield of the underlying investment portfolios will be evaluated twice a year in June and December until the maturity of the respective service contracts. If the average yield were below the level of guaranteed return, the Group shall make up the shortfall through paying cash into the client's account under management. Subsequently, if the performance of the underlying investment portfolios recovers and exceeds the minimum guaranteed return on a cumulative basis, the Group is entitled to obtain the payment made previously in the last evaluation(s) to the extent the average yield as of the evaluation date shall be no less than the level of guaranteed return.
As at 31 December 2019, the average cumulative yield of the underlying investment portfolios was above the level of guaranteed return thus no cash payment was required. As at 30 June 2020, the average cumulative yield of one of the underlying investment portfolios was below the level of guaranteed return and the Group has paid a cash amount of HK$73,000,000 or MOP75,190,000 accordingly. The Group does not expect to incur loss in relation to the cash payment in fulfilling the return guarantee by assessing the estimated future performance of the underlying investment portfolios. Such assessment involved significant management judgement on the future economic environment and conditions which might significantly affect the performance of the investment portfolios.
Interim Report 2020 53
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT
The Group's major financial instruments include financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss, loans and receivables (made up of other assets, accounts and other receivables, loans and advances), margin loans to customers, receivable from reverse repurchase agreements, amounts due from an associate and related parties, cash and bank balances, accounts payable, borrowings, obligation under repurchase agreements, lease liabilities, subordinated loans from the ultimate holding company and amount due to the ultimate holding company and a fellow subsidiary. Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.
The Group's activities expose it to a variety of financial risks: credit risk, market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and other price risk), and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group, from time to time, uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by the Risk Management Department under policies approved by the Board of Directors. Risk Management Department identifies and evaluates certain risks in close co-operation with the Group's operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
The COVID-19 pandemic has significantly increased in level of uncertainty of global economics, which bring challenges to the Group on the financial risks management including credit risk, market risk and liquidity risk. During the Reporting Period, there were no material changes to the principles and policies for the management of risk. However, in response to the pandemic, appropriate measures were exercised by the Group as and when required. The Group has been actively managing the risk resulting from the pandemic and its impact on the Group's operations and its financial risks during the first half of 2020.
The unaudited condensed consolidated interim financial statements do not include all financial risk management information and disclosures related to the unaudited condensed consolidated financial statements, and should be read in conjunction with disclosure in the consolidated financial statements for the year ended 31 December 2019.
54 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK EXPOSURE OF FINANCIAL INSTRUMENTS
Analysis of the gross carrying amount of financial instruments for which an expected credit loss ("ECL") allowance is recognised as follows according to the stage of ECL:
Stage of assets | ||||||||||||||
Stage 1 | Stage 2 | Stage 3 | ||||||||||||
Lifetime | ||||||||||||||
12-month | Lifetime | ECL (credit- | ||||||||||||
ECL | ECL | impaired) | Total | |||||||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | |||||||||||
(a) | Margin loans to customers | |||||||||||||
Gross carrying amount as at | ||||||||||||||
1 January 2020 | 2,179,041 | 305,401 | 290,482 | 2,774,924 | ||||||||||
Increases | 504,553 | 5,905 | 3,021 | 513,479 | ||||||||||
Decreases | (778,148) | (3,101) | (24,836) | (806,085) | ||||||||||
Write-off | - | - | (47,936) | (47,936) | ||||||||||
Transfers between stages | ||||||||||||||
- Increase | 160,956 | 18,931 | 214,410 | 394,297 | ||||||||||
- Decrease | (18,931) | (216,891) | (158,475) | (394,297) | ||||||||||
As at 30 June 2020 | 2,047,471 | 110,245 | 276,666 | 2,434,382 | ||||||||||
Gross carrying amount as at | ||||||||||||||
1 January 2019 | 3,553,670 | 314,156 | 141,216 | 4,009,042 | ||||||||||
Increases | 641,340 | 85,442 | 6,694 | 733,476 | ||||||||||
Decreases | (1,822,997) | (58,914) | (85,683) | (1,967,594) | ||||||||||
Transfers between stages | ||||||||||||||
- Increase | 253,800 | 218,517 | 228,255 | 700,572 | ||||||||||
- Decrease | (446,772) | (253,800) | - | (700,572) | ||||||||||
As at 31 December 2019 | 2,179,041 | 305,401 | 290,482 | 2,774,924 | ||||||||||
- Accounts receivable, other receivables, and amounts due from an associate and related companies
Gross carrying amount as at | - | |||||||||||
1 January 2020 | 810,346 | 2,236 | 812,582 | |||||||||
Increases | 1,355,183 | - | 6,264 | 1,361,447 | ||||||||
Decreases | (6,552) | (532) | (388) | (7,472) | ||||||||
Transfers between stages | ||||||||||||
- Increase | - | 4,378 | 4,430 | 8,808 | ||||||||
- Decrease | (8,808) | - | - | (8,808) | ||||||||
As at 30 June 2020 | 2,150,169 | 3,846 | 12,542 | 2,166,557 | ||||||||
Gross carrying amount as at | ||||||||||||
- | ||||||||||||
1 January 2019 | 879,693 | 1,682 | 881,375 | |||||||||
Increases | 73,300 | - | 440 | 73,740 | ||||||||
Decreases | (142,533) | - | - | (142,533) | ||||||||
Transfers between stages | ||||||||||||
- Increase | - | - | 114 | 114 | ||||||||
- Decrease | (114) | - | - | (114) | ||||||||
As at 31 December 2019 | 810,346 | - | 2,236 | 812,582 | ||||||||
Interim Report 2020 55
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK EXPOSURE OF FINANCIAL INSTRUMENTS (continued)
Stage of assets | |||||
Stage 1 | Stage 2 | Stage 3 | |||
Lifetime | |||||
12-month | Lifetime | ECL (credit- | |||
ECL | ECL | impaired) | Total | ||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||
- Debt investments at FVOCI
Gross carrying amount as at | |||||||||
1 January 2020 | 3,614,637 | 95,506 | 80,434 | 3,790,577 | |||||
Increases | 928,941 | 4,806 | 959 | 934,706 | |||||
Decreases | (665,839) | (87,639) | (52,041) | (805,519) | |||||
Transfers between stages | |||||||||
- Increase | - | 343,858 | 84,835 | 428,693 | |||||
- Decrease | (343,858) | (84,835) | - | (428,693) | |||||
As at 30 June 2020* | 3,533,881 | 271,696 | 114,187 | 3,919,764 | |||||
Gross carrying amount as at | |||||||||
- | - | ||||||||
1 January 2019 | 1,306,675 | 1,306,675 | |||||||
Increases | 2,820,841 | - | - | 2,820,841 | |||||
Decreases | (265,195) | (52,029) | (19,715) | (336,939) | |||||
Transfers between stages | |||||||||
- Increase | - | 147,535 | 100,149 | 247,684 | |||||
- Decrease | (247,684) | - | - | (247,684) | |||||
As at 31 December 2019 | 3,614,637 | 95,506 | 80,434 | 3,790,577 | |||||
(d) | Other financial assets | ||||||||
at amortised cost | |||||||||
Gross carrying amount as at | - | - | |||||||
1 January 2020 | 2,938,835 | 2,938,835 | |||||||
Increases | 590,622 | - | - | 590,622 | |||||
Decreases | (519,916) | - | - | (519,916) | |||||
As at 30 June 2020 | 3,009,541 | - | - | 3,009,541 | |||||
Gross carrying amount as at | |||||||||
- | |||||||||
1 January 2019 | 2,052,827 | 270,970 | 2,323,797 | ||||||
Increases | 2,063,463 | - | - | 2,063,463 | |||||
Decreases | (1,177,455) | - | - | (1,177,455) | |||||
Write-off | - | - | (270,970) | (270,970) | |||||
As at 31 December 2019 | 2,938,835 | - | - | 2,938,835 | |||||
- Debt investments measured at FVOCI are measured at fair value with the allowance for ECL (as disclosed on page 58) as a memorandum item. Change in ECL allowance is disclosed in Note 7.
56 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK EXPOSURE OF FINANCIAL INSTRUMENTS (continued)
As at 30 June 2020 and 31 December 2019, the Group's credit risk exposure of financial instruments for which an ECL allowance is recognised as follows according to the stage of ECL:
Stage of assets | |||||||||
Stage 1 | Stage 2 | Stage 3 | |||||||
Lifetime | |||||||||
ECL | |||||||||
12-month | Lifetime | (credit- | |||||||
ECL | ECL | impaired) | Total | ||||||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||||||
(a) | Margin loans to customers | ||||||||
As at 1 January 2020 | 2,183 | 4,761 | 88,740 | 95,684 | |||||
Increases | 490 | 122 | 42,134 | 42,746 | |||||
Reverses | (203) | (4) | - | (207) | |||||
Write-off | - | - | (47,936) | (47,936) | |||||
Transfers between stages | |||||||||
- Increase | - | 12 | 4,127 | 4,139 | |||||
- Decrease | (12) | (4,127) | - | (4,139) | |||||
As at 30 June 2020 | 2,458 | 764 | 87,065 | 90,287 | |||||
As at 1 January 2019 | 11,569 | 251 | 78,851 | 90,671 | |||||
Increases | 1,463 | - | 8,690 | 10,153 | |||||
Reverses | (3,264) | (1,876) | - | (5,140) | |||||
Transfers between stages | |||||||||
- Increase | 12 | 6,398 | 1,199 | 7,609 | |||||
- Decrease | (7,597) | (12) | - | (7,609) | |||||
As at 31 December 2019 | 2,183 | 4,761 | 88,740 | 95,684 | |||||
- Accounts receivable, other receivables, and amounts due from an associate and related parties
As at 1 January 2020 | 1,166 | - | 1,904 | 3,070 | ||||
Increases | 285 | - | 13 | 298 | ||||
Reverses | (257) | (19) | (113) | (389) | ||||
Transfers between stages | ||||||||
- Increase | - | 35 | 35 | 70 | ||||
- Decrease | (70) | - | - | (70) | ||||
As at 30 June 2020 | 1,124 | 16 | 1,839 | 2,979 | ||||
As at 1 January 2019 | 281 | - | 1,683 | 1,964 | ||||
Increases | 943 | - | 221 | 1,164 | ||||
Reverses | (58) | - | - | (58) | ||||
As at 31 December 2019 | 1,166 | - | 1,904 | 3,070 | ||||
Interim Report 2020 57
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK EXPOSURE OF FINANCIAL INSTRUMENTS (continued)
Stage of assets | |||||
Stage 1 | Stage 2 | Stage 3 | |||
Lifetime | |||||
ECL | |||||
12-month | Lifetime | (credit- | |||
ECL | ECL | impaired) | Total | ||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||
- Debt investments at FVOCI
As at 1 January 2020 | 22,725 | |
Increases | 10,174 | |
Reverses | (8,072) | |
Transfers between stages | ||
- Increase | - | |
- Decrease | (3,019) | |
As at 30 June 2020 | 21,808 | |
As at 1 January 2019 | 12,371 | |
Increases | 15,262 | |
Reverses | (2,347) | |
Transfers between stages | ||
- Increase | - | |
- Decrease | (2,561) | |
As at 31 December 2019 | 22,725 | |
- Other financial assets at amortised cost
As at 1 January 2020 | 7,757 | |
Increases | 1,740 | |
Reverses | (5,557) | |
As at 30 June 2020 | 3,940 | |
As at 1 January 2019 | 2,295 | |
Increases | 7,467 | |
Reverses | (2,005) | |
Write-off | - | |
As at 31 December 2019 | 7,757 | |
5,646 | 21,655 | 50,026 | |||
9,723 | 122,450 | 142,347 | |||
(48) | - | (8,120) | |||
3,019 | 5,565 | 8,584 | |||
(5,565) | - | (8,584) | |||
12,775 | 149,670 | 184,253 | |||
- | - | 12,371 | |||
3,622 | 21,118 | 40,002 | |||
- | - | (2,347) | |||
2,024 | 537 | 2,561 | |||
- | - | (2,561) | |||
5,646 | 21,655 | 50,026 | |||
- | - | 7,757 | |||
- | - | 1,740 | |||
- | - | (5,557) | |||
- | - | 3,940 | |||
- | 270,970 | 273,265 | |||
- | - | 7,467 | |||
- | - | (2,005) | |||
- | (270,970) | (270,970) | |||
- | - | 7,757 | |||
58 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK EXPOSURE OF FINANCIAL INSTRUMENTS (continued)
Management assessment on economic scenarios, weightings and sensitivity analysis of ECL model
The Group established ECL model by using a statistical approach for financial instruments. This approach involves estimation of four risk parameters, i.e. Probability of Default ("PD"), Loss Given Default ("LGD"), Exposure at Default ("EAD") and expected life, as well as the use of effective interest rate ("EIR") and forward-looking information.
The impairment allowance calculation as at 31 December 2019, on a forward-looking basis, have not considered the credit risk associated with the outbreak of COVID-19 in early 2020. To reflect the prevailing market condition, the forward-looking macroeconomic information including unemployment rate and gross domestic product ("GDP") has been updated with revision of weightings of its three economic scenarios, i.e. "Optimistic scenario", "Basic scenario" and "Pessimistic scenario". The weighting of "Basic scenario" adopted by the Group overweight the aggregated weighting of non "Basic scenario".
By applying the sensitivity of the impairment allowance results against the forward-looking macroeconomic variables where Optimistic and Pessimistic scenario weights both arise by 10% and Basic scenario weight is lowered by 20%, the impairment allowance of loans and advances will increase by HK$2,712 thousand, the impairment of debt securities will increase by HK$5,784 thousand and impairment allowance of margin finance will increase by HK$1,076 thousand.
FAIR VALUE OF THE GROUP'S FINANCIAL ASSETS AND FINANCIAL LIABILITIES THAT ARE MEASURED AT FAIR VALUE ON RECURRING BASIS
Certain financial assets and liabilities of the Group are measured at fair value or with fair value disclosed for financial reporting purposes. The fair value has been determined using appropriate valuation techniques and inputs for fair value measurements. The appropriateness of the valuation techniques and the inputs to the fair value measurements are reviewed by the Board of Directors periodically.
The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2020.
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
Interim Report 2020 59
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
FAIR VALUE OF THE GROUP'S FINANCIAL ASSETS AND FINANCIAL LIABILITIES THAT ARE MEASURED AT FAIR VALUE ON RECURRING BASIS (continued)
Level 3 financial instruments are valued using models which utilise observable Level 1 and/or Level 2 inputs, as well as unobservable Level 3 inputs.
The table below provides further information regarding the valuation of material financial assets and liabilities under Level 3.
Relationship | ||||
of | ||||
unobservable | ||||
As at 30 June 2020 | inputs to | |||
Valuation technique | Unobservable inputs | Range | fair value | |
Financial assets at fair | ||||
value through other | ||||
comprehensive income | ||||
Unlisted equities | Allocated net asset | Net asset value | N/A | (iv) |
value | 10.7x-27.2x | |||
Market comparable | EBITDA multiples | (iii) | ||
approach | Discount rate for lack of | 35% | (ii) | |
marketability | ||||
Recent transaction price | (i) | N/A | N/A | |
Debt investment | Recent transaction price | (i) | N/A | N/A |
Financial assets at fair value | ||||
through profit or loss | ||||
Club debenture | Recent transaction price | Liquidity discount rate | 25% | (ii) |
Unlisted equities | Recent transaction price | (i) | N/A | N/A |
Allocated net asset | Net asset value | N/A | (iv) | |
value | 1x-21.2x | |||
Unlisted funds | Market comparable | Sales multiples | (iii) | |
approach | Discount rate for lack of | 15.87%- | (ii) | |
marketability | 20.70% | |||
Allocated net asset | Net asset value | N/A | (iv) | |
value | ||||
Recent transaction | (i) | N/A | N/A | |
price of underlying | ||||
investment portfolio | ||||
Preference shares | Recent transaction price | (i) | N/A | N/A |
Market comparable | Sales multiples | 11x-21.2x | (iii) | |
approach | Discount rate for lack of | 15.87% | (ii) | |
marketability | ||||
Structured financial products | Guaranteed principal | Expected rate | N/A | (v) |
plus expected return | ||||
Financial liabilities at fair | ||||
value through profit or loss | ||||
Structured note payable | Recent transaction price | (i) | N/A | N/A |
60 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
FAIR VALUE OF THE GROUP'S FINANCIAL ASSETS AND FINANCIAL LIABILITIES THAT ARE MEASURED AT FAIR VALUE ON RECURRING BASIS (continued)
Relationship | ||||
of | ||||
unobservable | ||||
inputs to | ||||
As at 31 December 2019 | Valuation technique | Unobservable inputs | Range | fair value |
Financial assets at fair | ||||
value through other | ||||
comprehensive income | ||||
Unlisted equities | Allocated net asset value | Net asset value | N/A | (iv) |
Market comparable | EBITDA multiples | 10.7x-27.2x | (iii) | |
approach | Discount rate for lack of | 35% | (ii) | |
marketability | ||||
Recent transaction price | (i) | N/A | N/A | |
Debt investment | Recent transaction price | (i) | N/A | N/A |
Financial assets at fair value | ||||
through profit or loss | ||||
Club debenture | Recent transaction price | Liquidity discount rate | 25% | (ii) |
Unlisted equities | Recent transaction price | (i) | N/A | N/A |
Allocated net asset value | Net asset value | N/A | (iv) | |
Unlisted funds | Market comparable | Sales multiples | 0.3x-7.3x | (iii) |
approach | Discount rate for lack of | 15.5%- | (ii) | |
marketability | 24.5% | |||
Allocated net asset value | Net asset value | N/A | (iv) | |
Recent transaction price | (i) | N/A | N/A | |
Preference shares | Recent transaction price | (i) | N/A | N/A |
Market comparable | Sales multiples | 0.4x-15.2x | (iii) | |
approach | ||||
Equity-linked loan | Discounted cash flow/ | Discount rate/(i)/ | 14.6%/N/A/ | (ii)/N/A/(vi) |
Monte Carlo Simulation | Underlying fund terms | Within | ||
1 year | ||||
Structured financial products | Guaranteed principal plus | Expected rate | N/A | (v) |
expected return | ||||
Financial liabilities at fair | ||||
value through profit or loss | ||||
Structured note payable | Recent transaction price | (i) | N/A | N/A |
- The Directors of the Company consider that the financial position of these investments has no significant change between its recent transaction date/exit date and the reporting date, and hence no adjustment to the recent transaction price/exit price is needed.
- The higher the discount rate, the lower the fair value.
Interim Report 2020 61
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
FAIR VALUE OF THE GROUP'S FINANCIAL ASSETS AND FINANCIAL LIABILITIES THAT ARE MEASURED AT FAIR VALUE ON RECURRING BASIS (continued)
- The higher the multiples, the higher the fair value.
- The higher the net asset value, the higher the fair value.
- The higher the expected rate, the higher the fair value.
- The longer the term of the underlying fund, the higher the fair value.
The following table presents the changes in Level 3 instruments for the six months ended 30 June 2020 and for the year ended 31 December 2019.
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Financial assets at fair value through other | ||||||
comprehensive income | ||||||
Beginning of the period/year | 240,009 | 125,301 | ||||
Addition during the period/year | - | 178,658 | ||||
Disposal during the period/year | (13,720) | (58,737) | ||||
Net loss recognised in profit or loss | (740) | (1,080) | ||||
Net loss recognised in other comprehensive income | (6,894) | (4,133) | ||||
End of the period/year (Note 12) | 218,655 | 240,009 | ||||
62 BOCOM International Holdings Company Limited
Financial Statements
Notes to the Condensed Consolidated Financial Statements (Continued)
27. FINANCIAL RISK MANAGEMENT (continued)
FAIR VALUE OF THE GROUP'S FINANCIAL ASSETS AND FINANCIAL LIABILITIES THAT ARE MEASURED AT FAIR VALUE ON RECURRING BASIS (continued)
30/6/2020 | 31/12/2019 | |||||
HK$'000 | HK$'000 | |||||
(Unaudited) | (Audited) | |||||
Financial assets at fair value through profit or loss | ||||||
Beginning of the period/year | 3,504,300 | 3,483,928 | ||||
Addition during the period/year | 174,897 | 892,743 | ||||
Disposal during the period/year | (629,276) | (1,006,052) | ||||
Net gain recognised in profit or loss | 143,564 | 133,681 | ||||
End of the period/year (Note 12) | 3,193,485 | 3,504,300 | ||||
30/6/2020 HK$'000 (Unaudited)
31/12/2019 HK$'000 (Audited)
Financial liabilities at fair value through profit or loss | ||||||
Beginning of the period/year | 19,432 | 19,550 | ||||
Addition during the period/year | 9,283 | - | ||||
Net gain recognised in profit or loss | (92) | (118) | ||||
End of the period/year (Note 12) | 28,623 | 19,432 | ||||
The Group adopted consistent and transparent methodology basing on these valuation techniques above for determining fair value. Regardless of the valuation methodology used, once used, it should continue to be used until a new methodology will provide a better approximation of the investment's current fair value. The management expected that there would not be frequent changes in valuation techniques.
Interim Report 2020 63
Glossary
"1H" | the first six months of a particular calendar year |
"AUM" | the amount of assets under management |
"Board" or "Board of | the Board of Directors of the Company |
Directors" | |
"BOCOM" | Bank of Communications Co., Ltd. (交通銀行股份有限公司), established in |
1908, a company registered in the PRC as a joint stock limited liability | |
company on 24 December 2004, the H shares and A shares of which | |
are listed on the Stock Exchange and the Shanghai Stock Exchange, | |
respectively, and the ultimate controlling shareholder of the Company | |
"BOCOM Financial | BOCOM Financial Technology Company Limited (交銀金融科技有限公司), a |
Technology" | company incorporated in the PRC with limited liability on 25 August 2020, |
a subsidiary of BOCOM International (Shanghai) and an indirect subsidiary | |
of the Company | |
"BOCOM Group" | BOCOM and its subsidiaries (excluding the Group) |
"BOCOM International | BOCOM International (Shanghai) Equity Investment Management Company |
(Shanghai)" | Limited (交銀國際（上海）股權投資管理有限公司), a company incorporated |
in the PRC with limited liability on 25 October 2010 and a subsidiary of | |
the Company | |
"BOCOM International | BOCOM International Equity Investment Management (Shenzhen) Company |
(Shenzhen)" | Limited (交銀國際股權投資管理（深圳）有限公司), a company incorporated |
in the PRC with limited liability on 3 February 2016, a subsidiary of BOCOM | |
International Asset Management Limited and an indirect subsidiary of the | |
Company | |
"BOCOM Nominee" | Bank of Communications (Nominee) Company Limited, a company |
incorporated in Hong Kong with limited liability on 21 August 1981 and | |
a subsidiary of BOCOM and a shareholder of the Company holding Shares | |
on trust for BOCOM | |
"BOCOM Science and | BOCOM Science and Technology Innovation Equity Investment Fund |
Technology Innovation | (Shanghai) Partnership Enterprise (Limited Partnership) (交銀科創股權投資基 |
Fund" | 金（上海）合夥企業（有限合夥）), a limited partnership established under |
the laws of the PRC | |
"Companies Ordinance" | the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as |
amended, supplemented or otherwise modified from time to time |
64 BOCOM International Holdings Company Limited
Glossary
"Company" or "BOCOM | BOCOM International Holdings Company Limited (交銀國際控股有限公司), |
International" | a company incorporated in Hong Kong with limited liability on 3 June |
1998, the issued Shares of which are listed on the Main Board of the | |
Stock Exchange | |
"Corporate Governance | code on corporate governance practices contained in Appendix 14 to the |
Code" | Listing Rules |
"Director(s)" | director(s) of the Company |
"Expectation Investment" | Expectation Investment Limited, a company incorporated in Hong Kong |
with limited liability on 29 January 1997, an indirect subsidiary of BOCOM | |
and a shareholder of the Company | |
"GDP" | gross domestic product |
"Group" or "we" or "us" | the Company and its subsidiaries |
"HKD" or "HK$" | Hong Kong dollars, the lawful currency of Hong Kong |
"IPO(s)" | initial public offering(s) |
"Listing" | listing of the shares on the Main Board of the Stock Exchange |
"Listing Rules" | the Rules Governing the Listing of Securities on The Stock Exchange of |
Hong Kong Limited (as amended, supplemented or otherwise modified | |
from time to time) | |
"Minrui Fund" | Shenzhen Minrui Jiaoyin International Equity Investment Partnership |
Enterprise (Limited Partnership) (深圳敏睿交盈國際股權投資合夥企業 | |
（有限合夥）), a limited partnership established under the laws of the PRC | |
"Model Code" | Model Code for Securities Transactions by Directors of Listed Issuers as |
set out in Appendix 10 to the Listing Rules | |
"MOP" | Macau Pataca, the lawful currency of Macau |
"MSCI" | the Morgan Stanley Capital International Index |
"PRC" or "China" | People's Republic of China |
"Prospectus" | the prospectus of the Company dated 5 May 2017 |
"Reporting Period" | the six months ended 30 June 2020 |
"RMB" | Renminbi, the lawful currency of the PRC |
Interim Report 2020 65
Glossary
"Science and Technology | the Sci-Tech Innovation Board of the Shanghai Stock Exchange |
Innovation Board (STAR | |
Market)" | |
"SFC" | Securities and Futures Commission |
"SFO" | the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong |
Kong), as amended, supplemented or otherwise modified from time to time | |
"Shanghai Stock | the Shanghai Stock Exchange (上海證券交易所) |
Exchange" | |
"Share(s)" | ordinary share(s) in the capital of the Company |
"Shareholder(s)" | holder(s) of the Share(s) |
"Stock Exchange" or | The Stock Exchange of Hong Kong Limited |
"HKEX" | |
"TMT" | telecommunications, media and technology |
"US" or "United States" | the United States of America |
"USD" or "US$" | United States dollars, the lawful currency of the United States |
66 BOCOM International Holdings Company Limited
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