2012 Judges Report - Hong Kong Management Association

hkma.org.hk

2012 Judges Report - Hong Kong Management Association

2 0 1 2

BEST ANNUAL

REPORTS AWARDS

JUDGES' REPORT

ORGANIZER

CO-ORGANIZER

LEAD SPONSOR

PRINCIPAL SPONSOR


INTRODUCTION

The Best Annual Reports Awards is an annual competition organized by The Hong Kong

Management Association since 1973. It assesses annual reports with a view to enabling

persons who are involved in preparing annual reports for an organisation to be more effective

in informing the organization’s stakeholders and the public about the performance and

future prospects of their organisation. This is achieved primarily by conducting annual

Awards for Excellence in annual reporting which includes the adjudication of annual reports

and recognizing reports that meet the criteria with an award. In an effort to make the

Awards more meaningful to a wider audience and in an attempt to further improve

relevant Annual Reports with reference to new and broader benchmarks, the HKMA

is pleased to announce, in collaboration with the Australasian Reporting Awards (ARA),

the first Joint HKMA-ARA Sustainability Reporting Award in 2013. The winners of

the HKMA 2012 Sustainability Reporting Award and the ARA 2013 Sustainability

Reporting Award will automatically be considered for the first Joint HKMA-ARA 2013

Sustainability Reporting Award.

OBJECTIVE

The Awards has several objectives. The first objective is to encourage the publication

of accurate, informative, well presented and timely annual reports for shareholders,

employees, and others who may have an interest in the performance and activities of

the organization in question. The second objective is to showcase companies that have

done a good job in reporting. The hope is that these companies will serve as an example

to others. The third objective is to reward companies for excellence in reporting.

This third objective should reinforce the first objective and offer an incentive to companies

to pay even greater care and attention to the preparation of their annual reports.

ENTRIES

103 reports in the two categories were received as follows:

General .................................................................................................................................. 85

Non-profit Making and Charitable Organizations............................................... 18

SCHEDULE OF CRITERIA

2012

HKMA

BEST

ANNUAL

REPORTS

AWARDS

General

1. Conformity with the requirements of the

relevant financial reporting standards,

including Hong Kong Financial Reporting

Standards/International Financial

Reporting Standards/China Accounting

Standards for Business Enterprises; and

the provision of accounting information

over and above the requirements

2. a. Conformity with the disclosure

requirements of the Hong Kong Stock

Exchange and Hong Kong Companies

Ordinance

b. Provision of voluntary information

relating to corporate governance

3. a. General presentation such as design,

general layout, photographs, graphs,

charts, diagrams and indexing

b. Understandability and clarity

4. Summary of past results and highlights

5. Management discussion and analysis

a. General description of business

b. Analysis of assets/liabilities

c. Analysis of income/expenses

6. Indications of prospects/Forward looking

statements

7. Employee relations and development/

Corporate social responsibility

8. Promptness of reporting

Non-profit Making and Charitable

Organizations

1. General presentation of financial statements

a. Balance sheets

b. Income statements

c. Cash flow statements

d. Details of revenue and expenses

e. Sources of financing and application

2. Provision of information relating to

corporate governance

3. a. General presentation such as design,

general layout, photographs, graphs,

charts, diagrams and indexing

b. Understandability and clarity

4. Purpose, general description of activities

and performance

5. Indication of prospects/Forward looking

statements

6. Employee relations and development/

Corporate social responsibility

7. Promptness of reporting

8. Availability of the annual reports on the

organization's website

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2012

HKMA

BEST

ANNUAL

REPORTS

AWARDS

PANEL OF ADJUDICATORS

The following persons have been appointed by The Hong Kong Management Association

to serve on the 2012 Panel of Adjudicators:

Professor Richard Petty

(Chairman)

Past Chairman & President

CPA Australia

Professor in Accounting and Finance

Macquarie Graduate School of

Management

(Representing CPA Australia)

Mr Michael Cheng

Advisor

Listing Division

Hong Kong Exchanges and

Clearing Limited

(Representing Hong Kong

Exchanges and Clearing Limited)

Ms Jill Cheshire

Director

Jill Cheshire Design

Dr Keith Lam

Deputy Principal

HKU SPACE Po Leung Kuk

Community College

(Representing Institute of Financial

Planners of Hong Kong)

Mr Craig Lindsay

Director

Hong Kong Securities and Investment Institute

Managing Director & Chief Operating Officer

CITIC Securities International Investment

Management (HK) Limited

(Representing Hong Kong Securities and

Investment Institute)

Dr Albert Lung

FCIS, FCS

The Hong Kong Institute of

Chartered Secretaries

(Representing The Hong Kong

Institute of Chartered Secretaries)

Dr John Tang

National Director

Independence - China

Ernst & Young

Ms Cheri Wong

Chief Executive Officer

The Hong Kong Society of

Financial Analysts

(Representing The Hong Kong

Society of Financial Analysts)

Mr Ronald Yam

Partner

RSM Nelson Wheeler

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THE AWARDS OF THE 2012 HKMA BEST ANNUAL REPORTS

COMPETITION ARE AS FOLLOWS

Best Report Award

CLP Holdings Limited

“General” Category

Gold: Hong Kong Exchanges and Clearing Limited

Silver: MTR Corporation Limited

Swire Pacific Limited

Bronze: Hang Lung Group Limited

The Link Real Estate Investment Trust

Transport International Holdings Limited

2012

HKMA

BEST

ANNUAL

REPORTS

AWARDS

“Non-profit Making and Charitable Organizations” Category

Gold: Securities and Futures Commission

Silver: The Hong Kong Jockey Club

Bronze: Mandatory Provident Fund Schemes Authority

Honourable Mentions

Companies Registry

COSCO International Holdings Limited

Hang Lung Properties Limited

Hong Kong Monetary Authority

HSBC Holdings plc

The Land Registry

Sustainability Reporting Award

Winner: CLP Holdings Limited

Finalists: Airport Authority Hong Kong

Securities and Futures Commission

Tung Wah Group of Hospitals

Citation for Design

ANTA Sports Products Limited

Hong Kong Police Force

Next Media Limited

Trinity Limited

Citation for Corporate Governance Disclosure

CITIC Securities Company Limited

Hong Kong Productivity Council

Industrial and Commercial Bank of China Limited

Lenovo Group Limited

Best New Entry

“General” Category

Swire Properties Limited

“Non-Profit Making and Charitable Organizations” Category

Hong Kong Applied Science and Technology Research Institute Company Limited

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2012

HKMA

BEST

ANNUAL

REPORTS

AWARDS

BEST REPORT AWARD

CLP Holdings Limited

A top quality report with standout design which

continues to set the bar in overall excellence.

Non-profit Making and Charitable Organizations

Gold

Securities and Futures Commission

An outstanding and eye-catching report which

nicely illustrates the idea of interconnectivity.

Silver

Bronze

The Hong Kong Jockey Club

An impressive report with beautifully coordinated

themes, graphic design and other media.

Mandatory Provident Fund Schemes Authority

An informative report with clear and detailed

analysis of the organization’s financial performance.

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General

Gold

2012

HKMA

BEST

ANNUAL

REPORTS

AWARDS

Hong Kong Exchanges and Clearing Limited

A well-executed and accessible report with a high

degree of transparency and professional

presentation of various achievements and project

highlights.

Silver

MTR Corporation Limited

A high quality production with a sustainability

report that effectively demonstrates the importance

of sustainable development.

Swire Pacific Limited

A well-presented report with extensive discussion of

future business plans and prospects.

Bronze

Hang Lung Group Limited

A comprehensive report with in-depth coverage of

employee relations and sustainability performance.

The Link Real Estate Investment Trust

A lively and colourful report with thoughtful use of

attractive graphics and illustrations.

Transport International Holdings Limited

An engaging report which adopts an “excellence

through innovation” theme to project a vibrant and

interactive image of the company.

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COMMENTS ON SPECIFIC CRITERIA BY THE PANEL OF ADJUDICATORS

GENERAL CATEGORY

1. Accounting – Conformity with the Requirements of the Relevant Financial Reporting

Standards, including Hong Kong Financial Reporting Standards / International

Financial Reporting Standards / China Accounting Standards for Business Enterprises;

and the Provision of Accounting Information over and above the Requirements

1.1 Conformity with the requirements of the relevant financial reporting standards

As in past years, there was a high level of compliance with the mandatory disclosure requirements.

The standard of reporting this year was on par with 2011 in terms of compliance with financial

reporting and accounting standards.

HKAS 1 (Revised) Presentation of Financial Statements

Hong Kong Accounting Standard 1 (Revised) “Presentation of Financial Statements” requires qualitative

and quantitative information that enables users of financial statements to evaluate the company’s

objectives, policies and processes for managing capital. The disclosure requirements under this

standard were not fully addressed in all of the annual reports. About 8% of the companies omitted

to disclose the nature, terms and conditions of significant items or transactions and the description

of the nature and purpose of each reserve within equity including, for example, capital redemption

reserve and contributed surplus. In addition, more than 20% of companies did not provide details

of all relevant accounting policies that have a significant effect on the amounts recognized in the

financial statements. Examples of missing accounting policies included those related to segment

reporting, related parties, employee benefits, trade and other payables, provisions and contingent

liabilities and borrowing costs.

HKAS 2 Inventories

As in previous years, various omissions from the standard disclosures required under Hong Kong

Accounting Standard 2 “Inventories” were identified. The Standard requires a reporting entity to

disclose the amount of inventories recognized as an expense during the year, the carrying amount

of inventories pledged as security for liabilities, and the circumstances that led to the reversal of

a write-down of inventories. Approximately 6% of the companies did not include such disclosures.

HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Some companies engaged in policy changes that were not clearly explained so as to enhance the

relevance and comparability of the entity’s financial statements over time as intended by the Standard.

Stricter compliance with the requirements of the standard should be a focal point for improvement

for next year for some firms.

HKAS 24 (Revised) Related Party Disclosures

Hong Kong Accounting Standard 24 (Revised) “Related Party Disclosures” requires the disclosure of

key management personnel compensation in total and divided into various categories (for example,

short-term employee benefits, post-employment benefits, other long-term benefits, termination

benefits, and share-based payments), the nature of relationship, outstanding balances, and related

provisions. Not all companies made such disclosures. About 18% of the companies omitted to

analyze key management personnel compensation into the relevant categories as required under

the Standard. Some of them did not describe the relationship between the parties while some

provided the terms and conditions of the transactions but omitted disclosure of any related provisions

for doubtful debts on outstanding balances.

HKAS 28 (Revised) Investments in Associates

Hong Kong Accounting Standard 28 (Revised) “Investments in Associates” requires an entity to disclose

the reasons why an investor is regarded to have significant influence when it holds, directly or

indirectly through subsidiaries, less than 20% of the voting or potential voting power of the investee.

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Instances were noted where companies omitted the

disclosure of the reasons why an investor had significant

influence over an investee despite the fact that the

investor held less than 20% equity interest in the

investee.

HKAS 36 Impairment of Assets

The Standard requires companies to disclose the key

assumptions used in determining recoverable amounts

of assets, such as discount and growth rates, as well as

explanations on the methodology used. It also requires

the disclosure of events and circumstances that led to

the recognition or reversal of material impairment losses. Approximately

6% of the companies did not fully comply with the disclosures required.

HKAS 38 Intangible Assets

Hong Kong Accounting Standard 38 “Intangible Assets” provides examples of

factors to be considered in determining the useful life of an intangible asset,

such as the expected usage of the asset and product life cycles. The Standard requires an entity

to disclose the factors that play a significant role in determining that the asset has an indefinite

useful life. About 13% of the companies did not provide the reasons supporting the assessment

of an indefinite useful life. In addition, 7% of companies did not disclose the line item(s) of

the statement of comprehensive income in which amortization of intangible assets was included

as required under the Standard.

HKFRS 3 (Revised) Business Combinations

Various omissions from the standard disclosures required under Hong Kong Financial Reporting

Standard 3 (Revised) “Business Combinations” were noted. The Standard requires, for each business

combination, an entity shall disclose the acquisition-date fair value of the consideration, the reasons

why the transaction has resulted in goodwill or bargain purchase, their share of the acquiree’s

post-acquisition profit and losses as well as the revenue and profit or loss of the combined entity

for the period as if the acquisition during the period had been made at the beginning of the

period. Approximately 10% of the companies did not fully comply with the disclosures.

HKFRS 7 (Revised) Financial Instruments: Disclosures

The disclosure requirements under Hong Kong Financial Reporting Standard 7 (Revised) “Financial

Instruments: Disclosures” were not always fully addressed. The Standard requires companies to categorize

their financial instruments into a three-level hierarchy, and to disclose movements between the levels

as well as the assumptions and valuation methods applied for each level. Over 12% of the companies

omitted the disclosure. The Standard also requires the disclosures on objectives, policies and

processes for managing credit risk and the methods used to mitigate credit risk. About 9% of

companies did not provide such information in their reports. Companies should pay closer attention

to requirements of the Standard.

1.2 Provision of accounting information over and above the requirements

In aggregate, companies increasingly are providing accounting information over and above the

statutory minimum. More companies are providing more detailed information on environmental

issues and on sustainability. This is a positive trend and is one that is to be encouraged.

1.3 Other comments

Many entities were making their annual reports more readable, but companies still must fully

report on material items using simple language. Visual images are not a substitute for detailed

written communication. After several years of making this observation, it is still the case that

the descriptions of accounting policies, as well as other information, for some companies appeared

to have been written by the accounting firms’ technical specialists in a too convoluted manner.

In many cases, the drafting of the notes to the financial statements seemed designed more to confuse

or impress the reader than to communicate meaning. There is still room for greater voluntary

disclosure of a meaningful and decision-relevant nature by all companies.

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2. Conformity with the Disclosure Requirements of the Hong Kong Stock Exchange

and Hong Kong Companies Ordinance, and Provision of Voluntary Information

Relating to Corporate Governance

2.1 Overall standards and comments

The overall standard of the annual reports submitted for this year’s review was high. Companies

complied with mandatory disclosure requirements under the relevant financial reporting standards,

the Companies Ordinance and the Listing Rules with some minor exceptions set out in section

2.3 of this report.

The best annual reports among those submitted for competition – as listed in section 2.4 below

– were those which not only included information that complied with minimum disclosure

requirements but also provided additional information for shareholders to make more informed

investment decisions. The inclusion of voluntary disclosures made the annual reports more

informative. Examples of the additional information provided are set out in section 2.2 below.

2.2 Areas in which this year’s entries have shown very good performance

The Listing Rules require listed companies to publish annual results announcements within 3

months of financial year end. Except for one unlisted company, all of this year’s participants were

able to release their annual results announcements within 90 days after their financial year end

and over 25% of the companies were able to do so within 70 days.

Some companies provided information over and above the statutory minimum. This trend is to

be encouraged. Examples of additional information disclosed voluntarily included:

(a) Financial statistics and ten-year financial summaries

A majority of the participants provided additional financial information in their reports by

means of detailed review of financials and performance. These companies provided disclosures

of their profit margin, return on equity, net earnings, dividend yield, gearing ratio, interest

cover, and net asset value per share in their annual reports. About 39% of the companies

provided key performance indicators for the last 5 years together with the basis of computation.

Approximately 21% of the companies also provided details of undrawn borrowing facilities in

their commentary on the company’s financial and liquidity position. Over 20% of this year’s

participants included a ten-year financial summary on a voluntary basis in their annual reports.

(b) Specialized industry information and operation statistics

To provide a better understanding of their business and operations, over 18% of the participants

included operation statistics in their annual reports, for example, the company’s sales and

distribution networks, number of stores/factories by location, production capacity, commentary

on sourcing of goods, major customers and suppliers, and employee utilization and capacity.

Some companies operating in specialized industry sectors provided information which was of

particular relevance to their industry, for example, companies engaged in hotel business disclosed

the number of hotel rooms, average occupancy rate, and average room rate; companies engaged

in banking business disclosed their capital adequacy ratio, loan-to-deposit ratio, average liquidity

ratio; companies engaged in public transportation (for example, aircraft, railway and bus

operators) disclosed their fleet profile and utilization, on-time delivery, safety performance,

bus routes and service networks; companies engaged in property investment and development

disclosed their property portfolio by location, area, and usage, along with analysis of leased

properties versus properties held for sale, and completed properties versus those under

development.

(c) Corporate Governance Report

All participants under the “General” category, including the three unlisted companies, prepared

a corporate governance report and included such report together with biographical details of

directors in their annual reports. This indicates that unlisted companies also acknowledge

the importance of disclosures in their communication with their stakeholders.

The Code on Corporate Governance Practices (“the Code”, now renamed Corporate Governance

Code) applicable to annual reports for this year’s competition includes recommended best

practices and participants provided disclosures as follows:

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Over 82% had appointed independent nonexecutive

directors representing at least onethird

of the full board of directors.

More than 26% disclosed the division of

responsibility between the board and

management, including their separate

functions, powers and level of authority.

18 companies (including 14 A+H companies)

announced and published their quarterly financial

results within 45 days after the end of the

relevant quarter.

About 12% disclosed number of shares held by senior

management on a named basis.

Over 7% provided details of remuneration payables to senior

management on a named basis.

Six companies established separate corporate governance committee

and disclosed the composition, the role and function of the committee.

In October 2011, the Exchange published its Consultation Conclusions on Review of the

Corporate Governance Code and Associated Listing Rules. The amendments from the review

bring the Corporate Governance Code into line with international best practices. For annual

(or interim) reports covering a period after 1 April 2012, listed issuers are required to state

in their annual (or interim) reports whether they have complied with the revised Corporate

Governance Code as well as those of the former Code. Issuers may adopt the revised Code

at an earlier date than 1 April 2012. It was noted that a number of this year’s participants

disclosed in their annual reports that they have early adopted the revised Code or have adopted

various code provisions in the revised Code prior to their effective date.

(d) Shareholders’ rights and investor information

Over 45% of companies disclosed particulars of shareholders’ rights, including the procedures

for putting forward proposals at a shareholders’ meeting, the way in which shareholders can

convene an extraordinary general meeting, and the procedures by which enquiries may be

put to the board of directors.

More than 75% of companies provided useful investor information, including details of

shareholders by type and aggregate shareholding, important shareholders’ dates in the coming

financial year, and public float capitalization at the year end. In addition, over 28% of the

participants disclosed historical trends in their share price and over 68% disclosed their dividend

payment history.

(e) Review of internal controls

A majority of the participants provided a narrative statement explaining how they have complied

with the Code’s code provisions concerning internal control. Some companies also disclosed

the procedures adopted for handling and dissemination of price sensitive information. A number

of companies also included a statement on how often internal controls were reviewed, an

explanation of how they defined their system of internal control, the criteria used by the

directors in assessing the effectiveness of internal controls, and a statement on whether the

directors considered that their internal control systems were effective and adequate.

(f) Voluntary additional disclosures

More than half of this year’s participants provided a commentary on corporate values and strategy,

long term business models and principal drivers of performance. About 40% of the companies

provided a discussion on business risks they faced and their risk management policy.

Ten companies included a separate Remuneration Report covering the composition of the

Remuneration Committee, its roles, the number of meetings held, and details of the company’s

remuneration policy, incentive scheme, retirement and pension plan, remuneration arrangements

for executive directors and non-executive directors, and emoluments paid to directors and senior

management on an individual and named basis.

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Over 60% of the companies included a Corporate Social Responsibility Report either as a separate

booklet or in a separate section within their annual reports. This report often contained

commentary on their responsibility to the community and other social and reputational issues,

disclosures of their environmental policies including compliance with relevant laws and

regulations, as well as disclosures of relationships with their employees, customers and suppliers.

2.3 Areas in which this year’s entries have performed poorly

Although the overall standard of disclosure in relation to financial reporting and regulatory

requirements remained high this year, there were certain exceptions and some examples of these

are set out below.

(a) Disclosure of financial information required under the Listing Rules

As in the previous year, some omissions from the mandatory disclosures required under the

Listing Rules were noted as follows:

About 5% of the companies did not provide details of their credit policy or ageing analysis

of receivables as required under paragraph 4(2)(b)(ii) of Appendix 16 of the Listing Rules.

Over 3% did not disclose information in respect of their directors’ emolument policy or

the basis of determining the emolument payable to directors as required under paragraph

24B of Appendix 16.

23% did not provide information in respect of distributable reserves as required under

paragraph 29 of Appendix 16.

Approximately 10% only provided the consolidated balance sheet of the Group in their annual

reports. They failed to include the balance sheet of the company itself as required under

paragraph 28 of Appendix 16 and Rule 13.46 of the Listing Rules.

One company did not disclose whether its auditor had issued a confirmation on its continuing

connected transactions as required under Rule 14A.39 of the Listing Rules.

Four mineral companies that submitted their reports for review had provided details of

exploration, development and mining production activities in their annual reports. However,

two omitted to include a summary of expenditure incurred on such activities and another

one did not provide an update of resources and reserves as required under Chapter 18 of

the Listing Rules.

(b) Disclosure of corporate governance required under the Listing Rules

The mandatory disclosure requirements under Appendix 23 of the Listing Rules (that was

merged with Appendix 14 on 1 April 2012) were not always fully complied with. Some findings

included:


3 companies disclosed that both the roles of chairman and chief executive officer were carried

out by the same individual. This did not follow the Code’s code provision which requires

that the roles of chairman and chief executive officer of a listed company should be carried

out by separate individuals and that the division of responsibilities should be clearly set

out in writing.

About 30% of the companies either did not provide details of auditors’ remuneration, or

the stated amounts in their corporate governance report differed from that disclosed in

the financial statements.

2.4 Outstanding companies deserving special mention

The following companies deserve special mention for the overall standard of presentation in their

annual reports. They exhibited compliance with the disclosure requirements of accounting standards,

the Listing Rules, and the Companies Ordinance, and also provided additional voluntary information.

Airport Authority Hong Kong, Bank of China Limited, BOC Hong Kong (Holdings) Limited, CLP

Holdings Limited, COSCO Pacific Limited, Hang Lung Properties Limited, Hang Seng Bank Limited,

Hong Kong Exchanges and Clearing Limited, Hysan Development Company Limited, Industrial and

Commercial Bank of China Limited, Li & Fung Limited, MTR Corporation Limited, Pacific Basin

Shipping Limited, Shenzhen Expressway Company Limited and Transport International Holdings

Limited.

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3a. General Presentation such as Design, General

Layout, Photographs, Graphs, Charts, Diagrams

and Indexing

The overall standard continued to be high with many

companies utilizing design in an imaginative way, to

portray their corporate identity and engage the

readers.

Companies which deserve a special mention for their

design of highlights pages and striking front cover

designs are:

Airport Authority Hong Kong, ANTA Sports Products Limited, China

Resources Enterprise, Limited, China Rongsheng Heavy Industries Group

Holdings Limited, COSCO International Holdings Limited, Esprit Holdings

Limited, Franshion Properties (China) Limited, Hang Seng Bank Limited, The

Hongkong and Shanghai Hotels, Limited, Ping An Insurance (Group)

Company of China, Ltd., Power Assets Holdings Limited, Swire Pacific

Limited, The Wharf (Holdings) Limited and Xtep International Holdings Limited.

Companies which deserve a special mention for overall excellence are:

China Telecom Corporation Limited – Well presented, with a Feedback Survey Questionnaire, for

readers to complete and return.

CLP Holdings Limited – As ever, a “cut above the rest”. This company continued to “set the

bar” in design excellence.

Hysan Development Company Limited – A well-executed report, with a concise and effective

Corporate Responsibility Report.

The Link Real Estate Investment Trust – A lively and colourful report with good consistency through

their chosen graphics.

Minmetals Resources Limited – A particularly engaging Sustainability Report which was informative

and reader friendly.

MTR Corporation Limited – Outstanding, with a thorough Sustainability Report.

Next Media Limited – Beautifully presented, with a clever front cover design, which focused the

reader on the core aspects of the company business.

Transport International Holdings Limited – With its “excellence through innovation” theme, and

to quote the company’s own description, the design of this report projected a “vibrant and interactive

image of the company and its services”.

Trinity Limited – This company made a clear effort, investing in a design that was complimentary

to the nature of their business.

3b. Understandability and Clarity

In general, the reports were well-written and information was clearly laid out. More than 10%

of the companies presented their milestones, major events, honors and awards during the year,

and their corporate strategies and core competence to assist readers to more fully understand the

operations of the companies. Many of them provided an overview of the structure of the report

and page references, and over 20% included in the first few pages the vision, mission and values

that best described the identity of the companies. A number of companies have also included

a Corporate Social Responsibility Report in their annual reports to demonstrate their good practice

of corporate governance.

Many companies used design and presentation techniques to help make the financial statements

look more interesting and appealing. About 85% of entrants made use of diagrams, photos, pictures,

maps and other illustrations to supplement the description of their operating activities and financial

information. The pictures and photos well depicted some of these companies’ products, senior

management and staff at work or in the community, and current/future projects, thus bringing

to light the vigor of the companies and making their annual reports full of life. Some of the

chart design also effectively summarized key issues and data without using lengthy explanations.

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In addition, over 50% of the companies included a glossary of terms and abbreviations or provided

definitions and formulas referred to in their reports, which further enhanced a reader’s

understanding of the annual reports. Some reports made use of a Question and Answer format

to bring out the highlights and present the core messages.

Companies to be commended are:

ANTA Sports Products Limited, CLP Holdings Limited, Hang Lung Group Limited, Hang Seng

Bank Limited, The Hongkong and Shanghai Hotels, Limited, Hong Kong Exchanges and Clearing

Limited, The Link Real Estate Investment Trust, MTR Corporation Limited, Swire Pacific Limited,

Transport International Holdings Limited, The Wharf (Holdings) Limited and Xtep International

Holdings Limited.

4. Summary of Past Results and Highlights

Users of financial reports have a keen interest in knowing the past performance of a company

in order to identify prevalent trends and detect any major structural changes of the company.

Summary of past results and highlights provides insights on them. Same as last year, the overall

quality of presentation in this area was very high. Many companies were able to convey these

messages clearly and comprehensively. Most of them presented a good summary of their past

financial results as well as clear reports of their business activities. The use of graphs, charts

as well as ratios with formulas and reconciliation under different accounting standards helped users

better understand their past performance, but expansion of the number of ratios presented is

encouraged. Furthermore, the per-share data has been improved. For instance, other than the

conventional earnings per share and dividend per share, over 20% of the organizations presented

per-share data in respect of the shareholders’ equity, total assets, net tangible assets, net assets,

and net operating cash flow. In addition, some companies disclosed their operating highlights

apart from the traditional financial highlights, which demonstrated the enhancement in the yearon-year

comparisons.

Organizations which are particularly outstanding in this aspect include:

ANTA Sports Products Limited, CLP Holdings Limited, First Pacific Company Limited, Hang Lung

Group Limited, Hang Lung Properties Limited, Hang Seng Bank Limited, Hong Kong Exchanges

and Clearing Limited, Hutchison Whampoa Limited, Industrial and Commercial Bank of China

Limited, Li Ning Company Limited, MTR Corporation Limited, Swire Properties Limited, The Wharf

(Holdings) Limited and Xtep International Holdings Limited.

5. Management Discussion and Analysis

The overall standard of Management Discussion and Analysis was excellent. Most companies provided

detailed discussions and analyses of their business operations and performances including (i)

discussion of the general business environment, (ii) analysis of their business by operations by

segment, major product lines and/or geographic locations, (iii) analysis of the assets/liabilities and

income/expenses items, (iv) risk management, and (v) future prospects. However, the discussion

of future prospects and risk factors affecting future operation was still quite weak for many

companies.

5.1 General description of business

Most companies did well in providing a comprehensive review of the factors that affected their

operations in the reporting year including the general economy, the industry and company specific

factors like expansion of production capacity and diversification of product lines.

5.2 Analysis of assets / liabilities

Many companies, particularly the banks, provided detailed analyses of their assets/liabilities positions

and risk management.

5.3 Analysis of income / expenses

Reviews of the income/expenses items were comprehensive and the standard was high. Explanations

of the changes in the income/expenses items were presented by segments, product lines and/

or geographic locations.

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Companies that deserve mention for extensive and

informative management discussion and analysis

include:

ANTA Sports Products Limited, Bank of China

Limited, CLP Holding Limited, Hang Lung Properties

Limited, Hong Kong Exchanges and Clearing Limited,

HSBC Holdings plc, Li & Fung Limited and Transport

International Holdings Limited.

6. Indications of Prospects / Forward Looking

Statements

A good report in this area should begin with an overview of the

macro environment and then provide a more detailed industry analysis.

It should then discuss in detail the prospects and the operating environment

of the company followed by future business plans and strategy. There is further

room for improvement in the area of future plans and specific targets to

be achieved as stakeholders care more about the future than the past.

Most companies gave good general overview of the outlook for the global economy and structural

adjustment and macroeconomic challenges in the Chinese economy. Although there was evident

improvement as most companies provided more discussion on their prospects and operating

environment, few companies gave sufficient coverage to specific issues related to future business

plans and prospects, especially on how companies were positioned to face future challenges and

to take advantage of future opportunities. It would be helpful if companies could provide details

both at the divisional level and the overall company as a whole.

Companies deserving special mention in this area include:

China Overseas Land & Investment Limited, CLP Holdings Limited, First Pacific Company Limited,

Hong Kong Exchanges and Clearing Limited, Pacific Basin Shipping Limited, Shenzhen Expressway

Company Limited, Shui On Land Limited and Swire Pacific Limited.

7. Employee Relations and Development / Corporate Social Responsibility

The standard of disclosure for this area varied but improvement was shown in some reports. About

80% of companies provided adequate coverage of matters in the area of employee relations and

development/corporate social responsibility. Top performers included corporate social responsibility

policy statements covering Human Resources, Environment, Health and Safety. A discussion on

the implementation and summary of sustainability performance and progress with measurable

benchmarks was reviewed. Future strategic priorities were set.

On employee relations, investors are interested in knowing about staff training and retention

programs and in particular about the succession planning for its senior executive team. In general,

the overall standard in reporting information of this type needs to be improved.

The following companies deserved a special mention for this area of disclosure:

China Mobile Limited, CLP Holdings Limited, Hang Lung Group Limited, Hang Lung Properties

Limited, The Hongkong and Shanghai Hotels, Limited, Hong Kong Exchanges and Clearing Limited,

The Link Real Estate Investment Trust, Minmetals Resources Limited and MTR Corporation Limited.

8. Sustainability Reporting

8.1 Overall standards and comments

Many companies have invested significant resources into sustainability and in areas of corporate

social responsibility, sustainable development, health safety environment and community. Some

companies also put resources into the preparation of sustainability report which was either included

in the annual report or as a separate booklet.

Some companies asked shareholders to give comments and feedback on their annual report and

on their sustainability reporting and attached a reply form so that shareholders could easily

communicate with the companies. Some companies have also attached in the annual report/

13


sustainability report comment from third parties on the results and performance of the companies

on sustainable development. It was good to observe that some companies have set up a separate

Sustainability Committee to oversee this area of reporting.

Although most companies have included information on sustainability, the information was in some

cases scattered throughout the annual report and could be more focused. For example, some

companies have mentioned the importance of sustainability, but they have not set out the work

that had been done during the year in relation to sustainability and it was difficult to evaluate

their work or confirm that it was actually carried out in the company. Having a contingency

plan and confirming that one is in place is important as there may have been unforeseen events

that may occur which are unexpected. Companies that don’t have such a plan are advised that

it would be desirable to have one.

Companies to be commended on their sustainability reporting are:

Airport Authority Hong Kong, Cathay Pacific Airways Limited, China Mobile Limited, CLP Holdings

Limited, The Hongkong and Shanghai Hotels, Limited, HSBC Holdings plc, MTR Corporation

Limited and Shui On Land Limited.

9. Promptness of Reporting

More than 30% of this year’s participants published their annual reports within 90 days after their

financial year end to provide more timely financial information. Companies are encouraged to

continue to make efforts in achieving promptness of reporting so as to enhance the value and

usefulness of the information which is essential to all stakeholders.

10. Conclusion

The overall standard compared well with last year with continued improvement in provision of

voluntary information, presentation techniques and preparation of sustainability report. Simple

and straightforward language with a clear format was used to enhance understandability. It was

pleasing to see a general commitment on the part of most companies to communicate openly

with stakeholders and actively collecting their feedback to satisfy their needs.

Despite the generally high standards of reporting, the Panel did identify several areas for

improvement. Companies are encouraged to report more on future strategic planning and on

employee relations, and to present an overall outlook of the company that is more useful to help

shareholders assess risk, governance, and the likely future performance of their investment.

Promptness of reporting is also highly encouraged to maximize the value and usefulness of

information provided.

The Best Report Award winner, CLP Holdings Limited, was a standout performer this year with

a report that was transparent and detailed. It was a thoroughly comprehensive yet highly readable

report. Other medal winners were of very high standard and more companies than ever produced

good and often well-designed reports. Entities wishing to improve their performance should look

to those leaders for lessons in what to do to make their annual reports better.

This year for the first time an award was being given for reporting on sustainability. This recognizes

the growing importance of this information to stakeholders and society’s expressed desire for entities

to report on the overall impacts of their operations – using both financial and non-financial metrics

– so as to explain the way in which the entity is working to be socially and environmentally friendly,

and to be sustainable over the long-term.

Winners of the lead award categories and those that received Honourable Mentions have already

attained an outstanding level in each of the judging criteria. As in previous years, they are deemed

ineligible for consideration for an award in any of the sub-categories.

14


NON-PROFIT MAKING AND CHARITABLE

ORGANIZATIONS CATEGORY

1. General Presentation of Financial Statements

The general presentation of financial reports was

generally very good. There was a high degree of

professionalism, with clear, detailed and comprehensive

reports of the organization’s financial situation set out

in an easily understood manner, and careful use of

charts and graphs, and useful explanatory notes. Some entities also

presented a separate financial report to provide more detailed information

as appropriate.

Outstanding entities deserving special mention are:

Companies Registry, The Hong Kong Jockey Club, Hong Kong Monetary

Authority, The Hong Kong Polytechnic University, Hong Kong Productivity Council,

The Land Registry, Mandatory Provident Fund Schemes Authority and Securities and Futures

Commission.

2. Provision of Information Relating to Corporate Governance

The general standard of disclosure in relation to corporate governance was good and some

organizations continued to achieve a very high standard. Some of them have done well in disclosing

information in respect of their corporate vision, mission and values, corporate governance practice

emphasizing accountability, transparency and fairness, their performance during the year with

commentary as well as analysis on their overall performance towards meeting their vision, mission

and values. Some organizations also included organization chart and Corporate Social Responsibility

Report to reflect their good corporate governance.

Examples of information provided included disclosure of business outlook, the care for staff and

society, the establishment of an audit committee, a remuneration committee and other executive

committees together, with an explanation of the functions and composition of the committees and

the number of committee meetings held and members’ attendance during the year. Some

organizations provided information on risk management and included separate sessions, namely

their internal audit functions and the independent audit report, which helped readers to understand

the corporate governance aspects of an organization. Some also included detailed information on

remuneration of senior executives and non-executive board members, performance pledges, and past

chairmen and historical events highlighted; while others included statistics on enquiries and

complaints handled during the year.

Over 60% described respective roles and relationship between the board and management.

Approximately 50% mentioned the functions and composition of different committees. About

40% provided information on risk management and the internal audit function. Over 60% disclosed

the identity of their chairman and chief executive officer, and whether the roles were undertaken

by separate individuals. About 40% disclosed remuneration package of senior executives and nonexecutive

board members, but mostly using remuneration bands rather than actual figures. However,

one organization was noted to have ceased the practice of disclosing information on remuneration

package of senior executives.

Organizations which are particularly outstanding in this aspect include:

Companies Registry, Hong Kong Housing Society, Hong Kong Monetary Authority, Hong Kong

Productivity Council, Mandatory Provident Fund Schemes Authority and Securities and Futures

Commission.

3a. General Presentation such as Design, General Layout, Photographs, Graphs, Charts,

Often with limited staff and resources, this category still rose to the challenge and often achieved

excellence in design.

15


Organizations to be commended are:

City University of Hong Kong – A well-presented, clear and well-written report.

Hong Kong Applied Science and Technology Research Institute Company Limited – A cleverly

designed report which was likely both to engage and educate readers of it.

The Hong Kong Jockey Club – Outstanding in design, with its beautifully coordinated themes,

graphics, photographs and other media, all coming together to provide an entertaining and

informative report.

Hong Kong Police Force – As in previous years, their motto of “serving with Pride and Care”

was clearly manifested in the design of the report. Their photographs portraying their department

representatives (inside cover) was a great method to summarize their core services to the public.

Oxfam Hong Kong – Whilst concise, this report was beautifully executed, having effective highlights

pages, and used design to effectively showcase the nature of the company’s work.

Entities which deserve a special mention, for their striking front cover and highlights pages are:

Hong Kong Examinations and Assessment Authority, Hong Kong Housing Society, The Hong Kong

Polytechnic University and The Land Registry.

3b. Understandability and Clarity

In general, the understandability and clarity was of a high standard. Most organizations under

this category have done well in presenting a high quality report describing their organizations’

major mission, values and delineating information regarding their overall performance during the

year relative to these mission and values. Many of them clearly presented their activities by dividing

the contents of their annual reports into various sections by using different colors or divider pages

to attract reading and for the ease of locating the relevant topics by the readers. An increasing

number of entities also included abbreviation and index sessions which were conducive to the ease

of reading and understanding of their annual reports. In addition, many organizations were able

to present information in a clear, logical and structured manner with careful use of photographs,

charts, diagrams and graphs. Such presentation gave a clear and simple picture to portray the

organization’s structure and major activities during the year.

Organizations to be commended are:

Companies Registry, Hong Kong Housing Society, The Hong Kong Jockey Club, Hong Kong

Monetary Authority, Hong Kong Police Force, The Hong Kong Polytechnic University, Hong Kong

Productivity Council, The Land Registry, Mandatory Provident Fund Schemes Authority and Tung

Wah Group of Hospitals.

4. Purpose, General Description of Activities and Performance

The disclosure for this area has shown marked improvement, for example, more organizations

included the events highlight and over 90% of the organizations disclosed their vision, mission, or

value at the beginning of the annual reports. A good report in this area presented a detailed

review of the key divisional performance and how its initiatives contributed to the overall organization

and the economy in general.

About 70% disclosed their milestones, highlights of the year, awards, recognitions and achievements

while over 60% of the entries included the respective statement from the chairman and/or the

chief executive officer and/or general manager. This information demonstrated the organizations’

accomplishments, revealing their message of commitment to diversity and key historic development

to the readers. Some improvements were found in the area of management philosophy and direction

of the organizations as over 90% of the organizations disclosed their vision, mission and values

which enabled the readers to better understand the management philosophy and strategic insight

of the organizations.

Organizations which are particularly outstanding in this aspect include:

Companies Registry, Hong Kong Housing Society, The Hong Kong Jockey Club, Hong Kong

Monetary Authority, Hong Kong Productivity Council, The Land Registry, Mandatory Provident

Fund Schemes Authority, Securities and Futures Commission and Tung Wah Group of Hospitals.

16


5. Indications of Prospects / Forward Looking

Statements

The disclosure for this area has seen some

improvements but further enhancement is still

warranted. Although an increasing number of

organizations mentioned their future plans and

activities whilst top performers provided detailed

plans, goals and initiatives for the year ahead, there

was a general lack of details in the discussion and

further improvement is justified. About 40% of

organizations failed to mention their outlook for the

future and plans. More effort is needed to incorporate challenges

the organizations may face and their risk management plan, and give an

indication how the organizations will position themselves. This will help the

stakeholders learn about their strategic plan for the years to come in order

to better understand the value of the public sector and non-profit

organizations to society.

Organizations which are particularly outstanding in this aspect include:

Companies Registry, Hong Kong Applied Science and Technology Research Institute Company

Limited, Hong Kong Housing Society, Hong Kong Monetary Authority, Hong Kong Productivity

Council, Mandatory Provident Fund Schemes Authority and Securities and Futures Commission.

6. Employee Relations and Development / Corporate Social Responsibility

Public sector and non-profit making organizations make vital contributions to the Hong Kong

community by providing a wide range of essential public services. It is therefore important for

these organizations to maintain a high standard of corporate governance principles and practices.

The policy of these organizations toward their employees is one of the key factors that reflect

their corporate governance practices and future development and more information on such policies

is to be encouraged. While 75% of the participating organizations included organization charts

in their annual report, about 40% of the entries contained little or no discussion on employee

relationships and development/ corporate social responsibility. A more detailed disclosure in the

employee relationships and development and/or social responsibility enables the stakeholders to

gauge the effectiveness of these organizations’ services and to evaluate the efficient utilization of

their resources.

Organizations which deserve special mention for their inclusion of wide coverage on human resources

management, staff training and development plans, safety at work as well as staff welfare and benefits,

and social responsibility are:

Companies Registry, Hong Kong Housing Authority, The Hong Kong Jockey Club, Hong Kong

Monetary Authority, The Land Registry, Mandatory Provident Fund Schemes Authority, Securities

and Futures Commission and Tung Wah Group of Hospitals.

7. Sustainability Reporting

Some companies prepared a separate sustainability report to highlight their effort in promoting

and implementing sustainability within the organization and in Hong Kong generally, through a

green governance structure to oversee and implement the organization’s sustainability strategy, with

input from different functional areas within the organization as well as other stakeholders such

as green groups, suppliers and customers. Indications from some entities as to how they fulfilled

their commitment as a responsible employer to upholding the highest standards in their employment

practices also provided a variety of learning and development opportunities to employees and

supported their physical and mental well-being.

Entities to be commended are:

The Hong Kong Jockey Club, Hong Kong Monetary Authority, Hong Kong Productivity Council,

New Life Psychiatric Rehabilitation Association, Securities and Futures Commission and Tung Wah

Group of Hospitals.

17


8. Promptness of Reporting

Only 17% of the entries succeeded in delivering their reports within 90 days after their year end

this year. Organizations should continue to make an effort in achieving prompt delivery of

information to the general public. Timely preparation of annual reports is essential to maximize

the value and usefulness of the information provided for public interest.

9. Availability of the Annual Report on the Organization’s Website

It was pleasing to notice that all entities made their reports available on the organization’s website,

allowing the general public to gain access to the reports more conveniently and have a deeper

understanding of the performance and activities of the organizations.

10. Conclusion

The standard of performance was generally good with regard to the general presentation of financial

statements and governance disclosure. All organizations under this category have done well in

disclosing information in respect of their corporate mission and values, and their performance during

the year with commentary and analysis on the overall performance towards meeting their mission

and values. Many organizations in this sector succeeded in making the annual reports speak for

their organizations in a user friendly and easy to understand fashion with an effective use of

photographs, charts and graphs. It was also encouraging to see that areas in employee relations

and development / social responsibility have improved and that many of the entities have invested

in the area of sustainability and sustainability reporting. The needs for improved promptness in

reporting and for comment on future strategic planning are areas that entrants can look to better

address next year.

18


THE PANEL OF ADJUDICATORS WISHES TO RECORD ITS THANKS TO THE

FOLLOWING COMPANIES AND ORGANIZATIONS WHICH HAVE

SUBMITTED THEIR REPORTS FOR JUDGING

Agricultural Bank of China Limited

Airport Authority Hong Kong

ANTA Sports Products Limited

Anton Oilfield Services Group

Bank of China Limited

Bank of Communications Co., Ltd.

BOC Hong Kong (Holdings) Limited

Cathay Pacific Airways Limited

China Agri-Industries Holdings Limited

China Construction Bank

China Merchants Bank

China Minsheng Banking Corp., Ltd.

China Mobile Limited

China Overseas Land & Investment Limited

China Resources Enterprise, Limited

China Resources Power Holdings Company Limited

China Rongsheng Heavy Industries Group Holdings Limited

China Telecom Corporation Limited

China Unicom (Hong Kong) Limited

CITIC Pacific Ltd.

CITIC Securities Company Limited

CITIC Telecom International Holdings Limited

City University of Hong Kong

Clear Media Limited

CLP Holdings Limited

Companies Registry

COSCO International Holdings Limited

COSCO Pacific Limited

CSR Corporation Limited

Datang International Power Generation Co., Ltd.

Emperor International Holdings Limited

Employees Retraining Board

English Schools Foundation

Esprit Holdings Limited

First Pacific Company Limited

Franshion Properties (China) Limited

Galaxy Entertainment Group Limited

Hang Lung Group Limited

Hang Lung Properties Limited

Hang Seng Bank Limited

HKR International Limited

Hong Kong Applied Science and Technology Research Institute

Company Limited

Hong Kong Examinations and Assessment Authority

Hong Kong Exchanges and Clearing Limited

The Hong Kong Federation of Insurers

Hong Kong Housing Society

The Hong Kong Jockey Club

Hong Kong Monetary Authority

Hong Kong Police Force

The Hong Kong Polytechnic University

Hong Kong Productivity Council

The Hongkong and Shanghai Hotels, Limited

HSBC Holdings plc

Huaneng Power International, Inc.

Hui Xian Asset Management Limited

Hutchison Whampoa Limited

Hysan Development Company Limited

Industrial and Commercial Bank of China Limited

The Insurance Claims Complaints Bureau

IRC Limited

Karrie International Holdings Limited

Kerry Properties Limited

The Land Registry

Lenovo Group Limited

Li & Fung Limited

Li Ning Company Limited

The Link Real Estate Investment Trust

Mandatory Provident Fund Schemes Authority

Minmetals Resources Limited

Mongolia Energy Corporation Limited

MTR Corporation Limited

NetDimensions (Holdings) Limited

New Life Psychiatric Rehabilitation Association

New World Department Store China Limited

Next Media Limited

Noble Group Limited

NWS Holdings Limited

Orient Overseas (International) Limited

Oxfam Hong Kong

Pacific Basin Shipping Limited

Ping An Insurance (Group) Company of China, Ltd.

Power Assets Holdings Limited

Prosperity REIT

Sa Sa International Holdings Limited

Sands China Ltd.

Sateri Holdings Limited

Securities and Futures Commission

Shenzhen Expressway Company Limited

Shui On Land Limited

Sino Land Company Limited

SOCAM Development Limited

Soloman Systech (International) Limited

Swire Pacific Limited

Swire Properties Limited

Techtronic Industries Co. Ltd.

Transport International Holdings Limited

Trinity Limited

Tse Sui Luen Jewellery (International) Limited

Tung Wah Group of Hospitals

The Wharf (Holdings) Limited

Xinjiang Goldwind Science & Technology Co., Ltd.

Xtep International Holdings Limited

Zhaojin Mining Industry Company Limited

19


APPRECIATION

The Hong Kong Management Association would like to express its appreciation to the Panel of

Adjudicators, including Professor Richard Petty from Macquarie Graduate School of Management, Mr

Michael Cheng from Hong Kong Exchanges and Clearing Limited, Ms Jill Cheshire from Jill Cheshire

Design, Dr Keith Lam from HKU SPACE Po Leung Kuk Community College, Mr Craig Lindsay from

CITIC Securities International Investment Management (HK) Limited, Dr Albert Lung from The Hong

Kong Institute of Chartered Secretaries, Dr John Tang from Ernst & Young, Ms Cheri Wong from

The Hong Kong Society of Financial Analysts, and Mr Ronald Yam from RSM Nelson Wheeler, for

their efforts and time given to judging the entries.

The Association would also like to thank CPA Australia, Hong Kong Exchanges and Clearing Limited,

The Hong Kong Institute of Chartered Secretaries, Hong Kong Securities and Investment Institute,

The Hong Kong Society of Financial Analysts, and Institute of Financial Planners of Hong Kong for

nominating their representatives to serve on the Panel.

20


CO-ORGANIZER

LEAD SPONSOR

PRINCIPAL SPONSOR

GRAND SPONSORS

SPONSORS

Airport Authority Hong Kong

COSCO International Holdings Limited

First Pacific Company Limited

Hong Kong Exchanges and Clearing Limited

The Hongkong and Shanghai Hotels, Limited

Hysan Development Company Limited

Kerry Properties Limited

The Link Real Estate Investment Trust

Power Assets Holdings Limited

Toppan Vite Limited

Transport International Holdings Limited

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