SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED 2020
ANNUAL REPORT
SHANGHAI INTERNATIONAL
SHANGHAI GROWTH INVESTMENT LIMITED
(Incorporated in the Cayman Islands with limited liability) (Stock Code: 770)
Investment Manager
Shanghai Interna�onal Asset Management (Hong Kong) Company Limited
CONTENTS
Page | |
Corporate Information | 2 |
Board of Directors' Statement | 3 |
Management Discussion and Analysis | 6 |
Economic Review | 6 |
Principal Investment Objective, Policies and Restrictions | 8 |
Listed Investments Review | 8 |
Unlisted Investment Review | 11 |
Biographical Details of Directors | 12 |
Corporate Governance Report | 15 |
Environmental, Social and Governance Report | 31 |
Report of the Directors | 43 |
Independent Auditor's Report | 50 |
Statement of Profit or Loss and | |
Other Comprehensive Income | 55 |
Statement of Financial Position | 56 |
Statement of Changes in Equity | 57 |
Statement of Cash Flows | 58 |
Notes to Financial Statements | 59 |
Five Year Financial Summary (Unaudited) | 96 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
DIRECTORS
Executive Directors:
Dr. WANG Ching
Mr. WU Bin
Independent Non-executive Directors:
Dr. HUA Min
Mr. ONG Ka Thai
Mr. YICK Wing Fat Simon
Non-executive Directors:
Mr. LU Xuefang
Mr. NI Jianwei (resigned on 12 June 2020)
Mr. FENG Huang (resigned on 27 October 2020)
COMPANY SECRETARY
Ms. NG Yin Yuet Jenny
INVESTMENT MANAGER
Shanghai International Asset Management (Hong Kong) Company Limited
In Hong Kong:
Room 1501, 15/F
Shanghai Industrial Investment Building
48-62 Hennessy Road
Wanchai, Hong Kong
In Shanghai:
16/F, Golden Bell Plaza
No. 98 Huai Hai Zhong Road
Shanghai 200021, China
LEGAL ADVISERS
In Hong Kong:
Charltons Solicitors & Notary Public
In the Cayman Islands:
Maples and Calder
CORPORATE INFORMATION
AUDITOR
Ernst & Young
Certified Public Accountants
CUSTODIAN
Standard Chartered Bank (Hong Kong) Limited
SHARE REGISTRAR AND
TRANSFER OFFICE
Tricor Secretaries Limited
Level 54, Hopewell Centre
183 Queen's Road East
Hong Kong
REGISTERED OFFICE
P. O. Box 309, Ugland House
Grand Cayman, KY1-1104
Cayman Islands
PRINCIPAL PLACE OF BUSINESS
Room 1501, 15/F
Shanghai Industrial Investment Building
48-62 Hennessy Road
Wanchai, Hong Kong
COMPANY'S WEBSITE
http://shanghaigrowth.etnet.com.hk
STOCK CODE
770
2 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
BOARD OF DIRECTORS' STATEMENT
The Board of Directors (the "Board") of Shanghai International Shanghai Growth Investment Limited (the "Company") is pleased to present its annual report of the Company for the year ended 31 December 2020.
REVIEW OF RESULTS
The Company recorded a net profit of US$37,831 for the year ended 31 December 2020, compared with a net loss of US$555,856 in 2019. Last corresponding period's losses were mainly due to drop in fair value on the Company's unlisted investment in Global Market Group Limited ("GMG"), which had been fully impaired since 30 June 2019. No gain or loss on unlisted investment was recorded for the year ended 31 December 2020. Profit for the year was entirely derived from gains on investment in listed securities after deduction of the Company's operating expenses.
Following the broadening of the Company's investment objectives since late November 2019 which allowed more flexibility in investing a wider variety of investment products, the Company authorised the Investment Manager to focus more cash resources to invest in listed securities in 2020 in a view to deliver more returns to shareholders.
The Company recorded realised gain of US$515,217 on disposal of listed securities for the year ended 31 December 2020 (2019: realised gain of US$229,875) and unrealised gain of US$32,087 was recorded on listed securities held as at 31 December 2020 (2019: unrealised gain of US$10,908). Dividend income from listed investment portfolio of US$20,622 was recorded in the reporting period as compared to US$7,811 in the last corresponding period. As a result, the Company recorded an overall gain of US$567,926 on listed securities investment in the year 2020, a 228% increase as compared with that of 2019.
In view of the impact of COVID-19 pandemic, the Investment Manager constructed the Company's listed securities portfolio in phases cautiously with emphasises on allocating a right proportion and nature of stocks along the different cycle of the market throughout the year. For the year 2020, the Hang Seng Index ("HSI") was down 3.4% and the Hang Seng China Enterprise Index ("HSCEI") shed 3.85%. The most outperforming industry sector for the year was auto manufacturing sector, followed by semi-conductor related and medical related industry sector. The return of the Company's listed investments portfolio for the year 2020 was a gain of 18.9%, outperforming the HSI and HSCEI by 22.3% and 22.8% respectively. This was the third yearly streak in outperforming the benchmark indexes.
The Company's audited net asset value ("NAV") per share as at 31 December 2020 was US$0.35, a 2.94% increase as compared with US$0.34 at the end of 2019 mainly due to positive returns on listed securities investment. As at 31 December 2020, the Company's share price was US$0.30 (2019: US$0.56), reflecting a 14.29% discount to NAV per share.
KEY PERFORMANCE INDICATOR
The Board considers that periodic NAV of the Company is a significant financial indicator by which the development and performance of the Company's business can be measured effectively.
Performance of the Company's NAV for the past five years are summarised in this report on page 96 under the heading "Five Year Financial Summary (Unaudited)". In the opinion of the Board, fluctuations in past NAV performances are mainly attributable to fluctuations in unrealised fair value loss in one of the Company's investments.
LIQUIDITY, FINANCIAL RESOURCES, GEARING AND CAPITAL COMMITMENT
The Company did not participate in any new unlisted investment in 2020. The Company's bank balances as of 31 December 2020 were US$3,458,439 (2019: US$3,419,680). No dividends were paid during the year. Apart from listed securities investments, cash were used for operating and administrative expenses. The COVID-19 pandemic did not have material impact on the Company's liquidity positions and working capital sufficiency.
2020 Annual Report | 3 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
BOARD OF DIRECTORS' STATEMENT
CHARGE ON ASSETS, CAPITAL COMMITMENT AND CONTINGENT LIABILITIES
As at 31 December 2020, there were no charges on the Company's assets and the Company had no material capital commitment on unlisted investments or any significant contingent liabilities (31 December 2019: Nil).
As at 31 December 2020, as far as the Directors were aware, the Company was not involved in any material litigation or arbitration and no material litigation or claim was pending or threatened or made against the Company.
GEARING RATIO
The Company did not have any bank borrowings as at 31 December 2020 and 31 December 2019. As at 31 December 2020, the Company's current ratio (current assets to current liabilities) was approximately 34.55 (2019: 36.73). The ratio of total liabilities to total assets of the Company was approximately 2.68% (2019: 2.51%).
EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES
The Company's assets, liabilities and transactions are denominated either in Hong Kong dollars or US dollars. As long as the Hong Kong dollar continues its peg to the US dollar in the foreseeable future, the Company does not envisage any material exposure to exchange fluctuations. Accordingly, no hedging instruments were made nor transacted to cushion for such exposure. As at 31 December 2020, the Company's investment in one unlisted security, whose operating currency is RMB, is valued at zero. There is no hedging policy, the value of this investment and currency exposure risk are monitored by the Investment Manager.
EMPLOYEES
The Company has two employees and continues to delegate the day-to-day administration of its investment portfolio to Shanghai International Asset Management (Hong Kong) Company Limited (the "Investment Manager"). The Company determines its staff remuneration in accordance with prevailing market salary scales, individual qualifications and performance. Remuneration packages of the Company's employees including basic salary, double pay and mandatory provident fund are reviewed on a regular basis.
DIVIDEND DISTRIBUTION
The Board does not recommend the payment of any dividend for the year ended 31 December 2020 (2019: Nil).
ANNUAL GENERAL MEETING
The annual general meeting of the Company will be held at the Ball Room, 1/F, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong on Tuesday, 18 May 2021 at 10:00 a.m.. Notice of annual general meeting will be published and sent to shareholders of the Company ("Shareholders") in the manner as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") in due course.
4 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
BOARD OF DIRECTORS' STATEMENT
RECORD DATE AND CLOSURE OF REGISTER OF MEMBERS
For the purposes of determining the right to attend and vote at the Company's annual general meeting to be held on
18 May 2021 ("2021 AGM"), the Register of Members of the Company will be closed as set out below:
Latest time to lodge transfer documents for registration | 4:30 p.m. on Tuesday, 11 May 2021 | |
Record date | Wednesday, 12 | May 2021 |
Closure of Register of Members | Wednesday, 12 | May 2021 to |
Tuesday, 18 May 2021 (both dates inclusive)
During the above closure periods, no transfer of shares will be registered. To be eligible to attend and vote at the 2021 AGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged for registration with the Company's share registrar, Tricor Secretaries Limited, Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong no later than the aforementioned latest time.
OUTLOOK FOR 2021
Looking ahead into the year of 2021, the launch of COVID-19 vaccines should revive confident of economic recovery around the globe. With the help of quantitative easing measures among major economies, stock markets will continue to move up. However, this will not be a one-directional development. Moreover, conflict between the U.S. and China will not be subsided because of Biden being the U.S. president. Rather, external pressure from around China will most likely escalate. This will bring a more volatile investment market to Hong Kong.
As such, the Investment Manager holds a view that Hong Kong stock market will likely fall first before moving up again. China will continue to strive as it has stood the test of various challenges recently. As always, the Company will continue to seek investing in listed companies with foreseeable growth potentials and be aware of risks lying ahead.
In respect of unlisted investments, the Investment Manager will continue to monitor closely the development of GMG and strike for appropriate exit opportunity.
On behalf of the Board
Shanghai International Shanghai Growth Investment Limited
LU Xuefang
Non-executive Director
Hong Kong, 22 March 2021
The Chinese version of this annual report is a translation of the English version. Should there be any discrepancies or inconsistencies between the two versions, the English version shall prevail.
2020 Annual Report | 5 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
ECONOMIC REVIEW
China Economy
China's major economic indicators:
Growth (year-on-year, percent) | 2020 | 2019 |
Gross domestic product ("GDP") | 2.3 | 6.1 |
Industrial value-added output (designated size) | 2.8 | 5.7 |
Retail sales | -3.9 | 8.0 |
Consumer price index ("CPI") | 2.5 | 2.9 |
Fixed asset investments ("FAI") | 2.9 | 5.4 |
Actual foreign direct investments | 6.2 | 5.8 |
Exports | 4.0 | 5.0 |
Imports | -0.7 | 1.6 |
Trade surplus (US$ billion) | 5,350 | 4,215 |
Foreign exchange reserve (US$ billion) | 3,216.5 | 3,107.9 |
(Source: Published information)
In the beginning of 2020, China economy encountered an exceptional challenge upon the sudden outbreak of Coronavirus Disease 2019 ("COVID-19"). The world economy has also been adversely affected due to the continuous pandemic widespread around the globe. China has since imposed a series of mandatory control, effectively contained the spread of the virus domestically and implemented stimulating policies and quantitative easing measures ("QE") to boost the recovery of the economy. China's GDP recorded -6.8% growth in the first quarter but showed a positive growth of 3.2% in the second quarter. And the third and fourth quarter continued to grow 4.9% and 6.5% respectively. For the year 2020, GDP exceeded RMB100 trillion with a growth of 2.3%, the only major economy that achieved positive growth in the world.
Under the ongoing support of infrastructure investments and the resumption of economic activities in China, both the durable goods exports and domestic consumption began to rebound strongly. Especially the exports sector where orders continued to grow, resulting in exports reaching new high recently. China's new model of development called "dual circulation" in which domestic and external demand complement each other is a new way to boost the world economy.
The signing of the Regional Comprehensive Economic Partnership ("RCEP") and concluded the China-EU Comprehensive Agreement on Investment have provided a positive impact for external demand. Besides, the continuous COVID-19 vaccination around the globe will support recovery in major world economies, China's foreign trade will speed up contributing to a strong economic growth in China in 2021.
6 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
ECONOMIC REVIEW (Cont'd)
Global Economy
Year 2020 was a pandemic year. Most of the economic activities were disrupted. According to Morgan Stanley, the global real GDP growth forecasts for 2020 was -3.5%. All developed markets will have negative growth, with largest drop most likely come from the UK and Euro Area.
Fortunately, after lockdowns were eased, there were some economic activities starting to rebound from the third quarter 2020. Coupled with QE policies around major central banks, economic recovery has been underway. The four major central banks have expanded 50.6% of their QE programs to US$7.8 trillion in 2020.
With the help of capital easing, and economic recovery expectations, the performance of global stock markets were rather satisfactory. Over the year 2020, the U.S. S&P 500 Index climbed 16.3%, and Japanese Nikkei 225 rose 16%. As for the emerging market economy, SHCOMP Index went up 13.9%.
Relevant stock markets' performance in 2020
31 December | 31 December | ||
Indices | 2020 | 2019 | Change |
Hang Seng Index | 27,231.13 | 28,189.75 | -3.40% |
Hang Seng China Enterprises Index | 10,738.40 | 11,168.06 | -3.85% |
Hang Seng China-Affiliated Corporations Index | 3,799.56 | 4,537.76 | -16.27% |
Shanghai SE Composite Index | 3,473.07 | 3,050.12 | 13.87% |
SZSE Component Index | 14,470.68 | 10,430.77 | 38.73% |
Taiwan Exchange Index | 14,732.50 | 11,997.14 | 22.80% |
Dow Jones Industrial Average Index | 30,606.48 | 28,538.44 | 7.25% |
Standard and Poor's 500 Index | 3,756.07 | 3,230.78 | 16.26% |
NASDAQ Composite Index | 12,888.28 | 8,972.60 | 43.64% |
2020 Annual Report | 7 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
PRINCIPAL INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Principal Investment Objective
The principal investment objective of the Company is to achieve long term capital appreciation through investing in listed and unlisted equity and debt securities as well as in other financial instruments and investment vehicles (which are established or have significant operations or businesses primarily in the Greater China Region which consists of the People's Republic of China, Hong Kong and, the Macau Special Administration Region and Taiwan. The Company sought Shareholders' approval in November 2019 to broaden the scope of investment such that the Company have the flexibility to invest in a wider variety of investment products.
Investment Policies and Restrictions
The Board is responsible for formulating the Company's investment strategy, policies and guidelines. Based on these, the Investment Manager is responsible for identifying and evaluating investment opportunities, executing investment decisions, monitoring and enhancing investments of the Company. The Company will comply with investment restrictions as set out in the Listing Rules as updated from time to time, principally (i) it will not take legal or effective management control of any invested company through which it has or controls more than 30% of the voting rights; and (ii) a reasonable spread of investments will be maintained meaning that it will not invest more than 20% of the net asset value of the Company in securities issued in any one company at the time of making such investment.
INVESTMENT REVIEW
Portfolio Allocation
31 December | 31 December | |
2020 | 2019 | |
Listed investments | 8% | 8% |
Cash and cash equivalents | 92% | 92% |
Unlisted investments | 0% | 0% |
Total | 100% | 100% |
LISTED INVESTMENTS REVIEW
Hong Kong Stock Market
The stock market in Hong Kong during 2020 turned out to be extremely volatile with the Hang Seng Index ("HSI") plunged approximate 8,000 points from its high to its year-low of 21,139 in mid-March 2020. The trigger for such a correction was obviously the COVID-19 pandemic breakout throughout the globe in the early part of the year. To prevent the slide of economies due to the pandemic, countries eased liquidity and stock market subsequently started rising for the next several months and ended at 27,231 as at 31 December 2020.
After the HSI experienced a fall of 16.3% in the first quarter of 2020, the stock market in the second quarter gradually recovered from liquidity-easing policies and constrained pandemic spread out. The HSI ended at 24,427 as at 30 June 2020, down 13.4% and the HSCEI was 12.6% lower.
8 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
LISTED INVESTMENTS REVIEW (Cont'd)
Hong Kong Stock Market (Cont'd)
During the third quarter, the market only rallied for a few days to a quarter high of 26,782 at the beginning of July and then dived in the latter half of September. The relationship between China and the US was still tense and the curbing of China big banks' mortgages weighted on the already weak market sentiment. The first nine months HSI closed at 23,459, down 16.8%.
Market sentiment improved significantly in November along with the US election. Market rallied in the last two months of the year, especially when buying were concentrated in telecom and banking stocks. HSI was up by as much as 9.3% and 3.4% in November and December respectively. For the year 2020, the HSI was down 3.4% and the HSCEI shed 3.85%. The most outperforming industry sector for the year was auto manufacturing sector, followed by semi-conductor related and medical related industry sector.
The return of the Company's listed investments portfolio for the year 2020 was a gain of 18.9%, outperforming the HSI and HSCEI by 22.3% and 22.8% respectively. This was the third yearly streak in outperforming the benchmark indexes.
Monthly year-to-date performance of listed investments portfolio vs the Hang Seng Index
2020 | Jan | Feb | Mar | Apr | May | Jun | July | Aug | Sep | Oct | Nov | Dec |
Year-to-date performance (%) | ||||||||||||
Listed investments portfolio | -0.81% | 0.66% | -1.46% | 3.69% | 5.83% | 11.00% | 16.15% | 21.10% | 14.85% | 17.65% | 18.58% | 18.93% |
Heng Seng Index | -6.66% | -7.31% | -16.27% | -12.58% | -18.55% | -13.35% | -12.75% | -10.69% | -16.78% | -14.48% | -6.56% | -3.40% |
The Investment Manger focused on allocating the right proportion and nature of stocks along the different cycle of the market throughout the year. The investment allocation increased the most from March to May, investing in stocks that were industry leaders in their own sectors, financially solid and sound, and mostly going to benefit under domestic demand growth.
Some of the most outperforming stocks in the listed investment portfolio during the year 2020 included Meituan Dianping (3690), Xiabuxiabu (520), Changsha Broad Homes Industrial Group (2163), Pharmaron (3759), and Tencent (700).
Given expectation of a meaningful correction in the stock market in the first quarter of 2021, the Investment Manager reduced stock exposure substantially and increase cash holding level near the end of the year 2020. While liquidity is very sufficient, valuations in the U.S. stock markets are exceptionally high. In addition, the financial market seems to be pricing in a euphoric scenario after Joe Biden won the election as the new U.S. President, expecting more favourable economic policies be adopted towards China. Many cyclical stocks, given their relatively poor growth and cheaper valuations, became the spotlights. However, the Investment Manager is wary of this could be short- lived as the core of U.S. foreign policy towards China will remain unchanged.
2020 Annual Report | 9 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
LISTED INVESTMENTS REVIEW (Cont'd)
Listed Investments Portfolio
As at 31 December 2020
% held of | % of net | % of | ||||||
Number of | total issued | Market | asset | total | Dividend | |||
Listed securities | Nature of business | shares held | shares | Cost | value | value | asset | received |
% | US$ | US$ | % | % | US$ | |||
Listed on Hong Kong Stock Exchange | ||||||||
Tencent Holdings | E-Commerce & | 600 | 0.000006 | 28,853 | 43,647 | 1.18 | 1.15 | 1,115 |
Limited | Internet services | |||||||
HKT Limited | Telecommunication | 116,000 | 0.0015 | 154,159 | 150,515 | 4.08 | 3.97 | - |
Xiabuxiabu | Restaurant & | 40,500 | 0.0037 | 60,511 | 92,356 | 2.51 | 2.44 | - |
Catering | Catering | |||||||
Management | ||||||||
(China) Holdings | ||||||||
Co., Ltd. | ||||||||
Other listed | - | - | - | - | 19,507 | |||
securities | ||||||||
Total investment in listed securities | 243,523 | 286,518 | 7.77 | 7.56 | 20,622 | |||
As at 31 December 2019 | ||||||||
% held of | % of net | % of | ||||||
Number of | total issued | Market | asset | total | Dividend | |||
Listed securities | Nature of business | shares held | shares | Cost | value | value | asset | received |
% | US$ | US$ | % | % | US$ | |||
Listed on Hong Kong Stock Exchange | ||||||||
A-Living Services | Property | 15,000 | 0.0002 | 29,649 | 51,788 | 1.42 | 1.38 | - |
Co., Ltd. | Management | |||||||
CLP Holdings | Electricity Supply | 12,000 | 0.00047 | 128,505 | 126,139 | 3.45 | 3.37 | 969 |
Limited | ||||||||
China Tower | Satellite & wireless | 500,000 | 0.00107 | 119,244 | 110,378 | 3.02 | 2.95 | 60 |
Corporation | communication | |||||||
Limited | ||||||||
Other listed | - | - | - | - | 6,782 | |||
securities | ||||||||
Total investment in listed securities | 277,398 | 288,305 | 7.89 | 7.70 | 7,811 | |||
10 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
UNLISTED INVESTMENT REVIEW
As at 31 December 2020, the Company held one unlisted securities investment but was fully written down. No new investment was consummated in the year in view of the Company's limited cash resources.
Unlisted Investment Portfolio
As at 31 December 2020 and 31 December 2019
Amount | Accumulated | |||||||
Nature of | % of equity | invested | Unrealised | % of net | Dividend | dividend | ||
Invested project | business | interest | at cost | loss | Fair value | asset value | income | income |
% | US$ | US$ | US$ | % | US$ | US$ | ||
Global Market Group Limited (Note) | B2B platform | 9.36 | 5,847,458 | (5,847,458) | - | - | - | 1,814,613 |
Note: An investment in shares through private placement in a B2B internet trading service provider, whose common shares were once listed on London Alternative Investment Market and delisted in September 2015 and reclassified as the Company's unlisted securities investment. This investment was fully written down since 30 June 2019.
Global Market Group Limited ("GMG")
GMG is a B2B internet trading service provider in the mainland China. It developed cross-borderE-commerce platform since 2016 and finally launch its own hot-sellingT-shirt products on the new platform in the second half of 2018. However, the revenue from the hot-selling products was disappointing and far from its original target, coupled with failing capital raising for its business expansion, GMG's business deteriorated significantly over these years.
The Company invested in GMG for a consideration of US$5 million in 2008. GMG's ordinary shares were once admitted to trading on the Alternative Investment Market of the London Stock Exchange in June 2012 but was subsequently cancelled from trading in September 2015. GMG's main operating subsidiary had been once listed on the New Third Board in mainland China in 2016 but subsequently delisted in May 2017 due to insufficient fund- raising capability. The Investment Manager had been in negotiation vigorously with GMG for an exit after those rounds of delisting decisions.
As at 31 December 2020, a total of 8,734,897 ordinary shares of GMG are held by the Company, representing 9.36% of GMG's total issued ordinary shares. In the absence of a readily quoted market price for GMG, the Investment Manager continued to adopt a relative valuation model to calculate the fair value of GMG by reference to comparable listed companies in Chinese E-commerce industry. Given continuous deteriorated performance and unsuccessful fund raising plans, coupled with the risk of material potential liability over a redeemable non- controlling interest and uncertainties in prospect, full provision on this investment has been reported since 30 June 2019. The financial position of GMG did not improve over the years and the risk of going concern is increasing. As a result, based on a relative valuation model, the Company considered the fair value of GMG as at 31 December 2020 remained at zero level. Despite a dividend income of approximately US$1.8 million was recorded in prior years, the Investment Manager would continue to push the management of GMG to strike for appropriate exit opportunity.
2020 Annual Report | 11 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
BIOGRAPHICAL DETAILS OF DIRECTORS
WANG Ching
Executive Director
Member of Remuneration Committee
Aged 65, was appointed as an Executive Director of the Company and an executive director of the Investment Manager in July 2007. Dr. Wang is currently registered as one of the responsible officers of the Investment Manager with the Securities and Futures Commission ("SFC"). SIIC Investment Company Limited is the holding company of the Investment Manager and a wholly-owned subsidiary of Shanghai Industrial Investment (Holdings) Company Limited ("SIIC"), which became a substantial shareholder of the Company since December 2015.
Dr. Wang has over 20 years' managerial experience in investment and commercial banking and fund management in the Unites States, Taiwan, Hong Kong and the PRC, with a wealth of experience in the securities and venture capital industries. Prior to joining the Company, Dr. Wang had been the Chief Executive of Investment and Proprietary Trading Group for Jih Sun Financial Holding Co. Ltd. in Taiwan, the managing director of JS Cresvale Securities International Limited, the managing director of SinoPac Securities Asia Ltd. in Hong Kong, the senior executive vice president of SinoPac Securities Co. Ltd. in Taiwan, the director of Investment Banking Department at Standard Chartered Bank Hong Kong and the associate director of Bear Stearns & Co. Inc., New York and Hong Kong.
Dr. Wang also serves as independent non-executive director of China Shuifa Singyes Energy Holdings Limited (formerly known as "China Singyes Solar Technologies Holdings Limited"), Luen Thai Holdings Limited and Minth Group Limited, all of which are listed on The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") and are third parties independent of the Company and connected persons of the Company. He is also a non-executive director of Global Market Group Limited, the Company's unlisted investment. He was previously an independent non-executive director of Yingde Gases Group Company Limited, which was listed on the Hong Kong Stock Exchange until 21 August 2017.
Dr. Wang received his bachelor degree majoring in economics from the National Taiwan University in 1977. He obtained his Master's degree in business administration from the University of Houston and Ph.D. in finance from Columbia University in the city of New York.
WU Bin
Executive Director
Member of Remuneration Committee
Aged 47, was appointed as an Executive Director of the Company and Deputy Managing Director of the Investment Manager in May 2007. Mr. Wu is currently registered as one of the responsible officers of the Investment Manager with the SFC. SIIC Investment Company Limited is the holding company of the Investment Manager and a wholly- owned subsidiary of SIIC, which became a substantial shareholder of the Company since December 2015.
Prior to joining the Company, Mr. Wu was the Assistant General Manager of Center for International Business Management with Shanghai International Group Co., Ltd. ("SIG") since 2006. Before that, he had been the Assistant General Manager of Investment Banking Department with Shanghai International Trust Corporation Ltd. since 2004, which is a subsidiary company of SIG and one of the substantial shareholders of the Company up till June 2016. From 1996 to 2004, he had held senior positions with foreign banking and securities institutions in the PRC. Mr. Wu has over 19 years' managerial experience in banking, securities and trust investment sectors in the PRC.
Mr. Wu obtained an MBA degree in Finance from Shanghai Jiao Tong University in 2002 and currently is a CFA charter holder. He also qualified as a PRC lawyer in 2000.
12 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
BIOGRAPHICAL DETAILS OF DIRECTORS
LU Xuefang
Non-executive Director
Aged 56, was appointed a Non-executive Director of the Company on 18 March 2019. Mr. Lu has been the director and chairman of the Investment Manager since 20 August 2018. He has been a member of the investment committee of the Company since November 2018. Since August 2018, he has been a director and the president of SIIC Investment Company Limited, the holding company of the Investment Manager and a wholly-owned subsidiary of SIIC (SIIC, together with its subsidiaries, the "SIIC Group") which became a substantial shareholder of the Company since December 2015.
Mr. Lu has over 25 years' experience in the fields of asset management, corporate and financial management, real estate and financial investment as well as capital markets operations. Mr. Lu joined the SIIC Group in 1996 and has held various positions in operating subsidiaries of the SIIC Group, including the head of investment department of SIIC Real Estate Holdings (Shanghai) Co., Ltd. (上實置業集團(上海)有限公司) from 1996 to 2000, the manager of financial investment department of Shanghai Cyber Galaxy Investment Co., Ltd. (上海星河數碼投資有限公司) from 2000 to 2006, the assistant general manager of finance and planning department of SIIC from 2006 to 2009 and the deputy general manager of Shanghai Cyber Galaxy Investment Co., Ltd (上海星河數碼投資有限公司) from 2009 to 2018. Further, Mr. Lu currently serves as a director in various private companies (including subsidiaries and affiliates of the SIIC Group) engaging in financial investment, property investment and management, consulting, production and sales of consumer products and hotel operations. He is the chairman of The Tien Chu (Hong Kong) Company Limited, a subsidiary of the SIIC Group.
Mr. Lu graduated from Fudan University with a Bachelor's degree in International Politics in 1987 and a Master's degree in World Economics in 1995. He was a teaching assistant and a lecturer in the faculty of humanities and social science of the Shanghai Medical College of Fudan University (復旦大學上海醫學院) (formerly known as "Shanghai Medical University" (上海醫科大學)) over the period from 1987 to 1995 and a financial analyst in China Worldbest Group Co., Ltd. (中國華源集團有限公司) from 1995 to 1996.
HUA Min
Independent Non-executive Director
Chairman of Nomination Committee, Member of Audit Committee and Remuneration Committee
Aged 70, has been an Independent Non-executive Director of the Company since September 2004 and Chairman of the Nomination Committee. Dr. Hua graduated from Fudan University with a Bachelor's degree in Economics and holds a Doctorate in World Economics from Fudan University. During the period from 1990 to January 2018, he was an advisor for doctoral candidates at Fudan University, and later was the Chief of Academic Committee of economic school Fudan University. He had been teaching and conducting research in world economics, China economics and finance at Fudan University. Dr. Hua is currently an independent non-executive director of Da Ming International Holdings Limited, a company listed on the Hong Kong Stock Exchange.
2020 Annual Report | 13 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
BIOGRAPHICAL DETAILS OF DIRECTORS
ONG Ka Thai
Independent Non-executive Director
Chairman of Remuneration Committee, Member of Audit Committee and Nomination Committee
Aged 66, has been an Independent Non-executive Director of the Company since June 1997 and Chairman of the Remuneration Committee. Mr. Ong is currently the Chairman of various companies including Ong Pacific (H.K.) Ltd. and Ong Pacific Pte. Ltd.. He is also the Senior Advisor to AIGF (ASEAN Industrial Growth Fund), a private equity fund that is co-managed by Mitsubishi Corporation, CIMB Group and Development Bank of Japan Inc.. These companies are third parties independent of the Company and connected persons of the Company. Mr. Ong holds a Bachelor of Arts degree major in Economics from the University of California at Los Angeles.
Mr. Ong had served as CEO for a number of multinational joint ventures. He was an independent non-executive director of Singamas Container Holdings Ltd. for 20 years, a company listed on the Hong Kong Stock Exchange and a third party independent of the Company and connected persons of the Company. Mr. Ong was previously an independent non-executive director of China Bohai Bank Limited.
Mr. Ong has over 44 years of experience in manufacturing, corporate and trade finance, regional equity, futures and commodities trading, investment banking and corporate advisory services, as well as direct and private equity investments.
YICK Wing Fat Simon
Independent Non-executive Director
Chairman of Audit Committee, Member of Nomination Committee and Remuneration Committee
Aged 62, has been an Independent Non-executive Director of the Company since July 1999 and Chairman of the Audit Committee. Mr. Yick holds a Bachelor's degree in Business Administration from the Chinese University of Hong Kong, majoring in Accounting. He is a fellow of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants in England. Mr. Yick has over 38 years of experience in audit, direct investment, investment banking and corporate advisory services.
Mr. Yick also serves as an independent non-executive director, chairman of the audit committee, and a member of both the remuneration committee and nomination committee of Shenzhen Neptunus Interlong Bio-technique Co., Ltd. and China Shuifa Singyes Energy Holdings Limited (formerly known as "China Singyes Solar Technologies Holdings Limited"), an independent non-executive director, chairman of the remuneration and nomination committee and a member of the audit and compliance committee of Nexteer Automotive Group Limited, and an independent non-executive director, chairman of the audit committee and the remuneration committee and a member of nomination committee of Modern Media Holdings Limited, all the above-mentioned companies are listed on the Hong Kong Stock Exchange. Mr. Yick was an independent non-executive director, convener of the remuneration and assessment committee and a member of the strategy committee of Chengdu Xingrong Environment Co, Ltd., a company listed on the Shenzhen Stock Exchange. These companies are third parties independent of the Company and connected persons of the Company.
14 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE
The Company is committed to maintaining sound corporate governance standards and procedures to ensure integrity, transparency and quality of disclosure to promote the ongoing development of the long term best interests of the Company and to enhance value for all its Shareholders. The Board has established procedures on corporate governance that comply with the requirements of the Corporate Governance Code (the "CG Code") contained in Appendix 14 of the Listing Rules. The Board has reviewed and taken measures to adopt the CG Code as the Company's code of corporate governance practices. During the financial year ended 31 December 2020, the Company has complied with the code provisions (the "Code Provisions") under the CG Code, save and except for the deviations as described below.
Code Provisions A.2.1 to A.2.9 set out the division of responsibilities between the chairman and chief executive as well as set out key responsibilities of the chairman from a corporate governance perspective, including Code Provision A.2.7 which stipulates that the chairman should at least annually hold meetings with the independent non- executive directors without the presence of other directors.
No chairman or chief executive has been appointed or designated by the Company. However, the Board is of the view that all Directors together bring diverse experience and expertise to the Board, and are collectively responsible for the stewardship of the Company. In view of the streamlined structure of the Company, contributions to the Company are made by the Board as a whole, while the investment portfolio and daily operations of the Company are managed by the Investment Manager under the supervision of the Board. The Board considers that this existing structure will not impair the balance of power and authority between the management of the Board and the management of its business as set out in the principle of A.2 of CG Code.
Code Provision A.4.1 provides that non-executive directors should be appointed for a specific term and subject to re-election. The Company's Non-executive Directors do not have a specific term of appointment. However, they are subject to retirement by rotation once every three years pursuant to the Company's Articles of Association.
Code Provision E.1.2 provides that, among others, the chairman of the board should attend the annual general meeting of the listed issuer. As stated in the above, no chairman has been appointed or designated by the Company. Given all Directors are collectively responsible for the Company's stewardship, the Board considers that it was adequate for the Board to elect a Director to chair the annual general meeting of the Company held on 22 May 2020.
2020 Annual Report | 15 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
BOARD OF DIRECTORS
The Board has overall responsibility for the stewardship of the Company, which includes, inter alia, the determination of long term corporate objectives and strategies, assessment of investment projects, adoption of corporate governance practices, supervision of the Company's Investment Manager to ensure that the Company's operations are conducted in accordance with the objectives of the Company, and in reviewing financial performance. The Company's investment portfolio and daily operations are managed by the Investment Manager pursuant to the terms and conditions of an investment management and administration agreement (the "Investment Management Agreement") between the Company and the Investment Manager, details of which are set out on pages 45 to 47 under the heading "Investment Management and Administration Agreement and Continuing Connected Transactions".
All Directors have full and timely access to all the information of the Company. The Directors may, upon request, seek independent professional advice in appropriate circumstances, at the Company's expense for discharging their duties to the Company.
All Directors commit to devote sufficient time and attention to the Company's affairs. Each have disclosed to the Company details of other offices held by them and the Board regularly reviews the contribution required from each Director to perform his responsibilities to the Company.
Composition
During the year, Mr. NI Jianwei and Mr. FENG Huang resigned as Non-executive Director of the Company on 12 June 2020 and 27 October 2020 respectively due to the change of job assignments. Following their resignation, the Board currently comprises six Directors of whom two are Executive Directors, one is Non-executive Director and three are Independent Non-executive Directors ("INEDs"). There is no designated chairman or chief executive of the Board. All Directors are, collectively and individually, aware of their responsibilities to the Shareholders. The Directors' respective biographical information is set out on pages 12 to 14 under the heading "Biographical Details of Directors". In addition, a list containing the names of the Directors and their roles and functions is published on the websites of the Company at http://shanghaigrowth.etnet.com.hk and of the Hong Kong Exchanges and Clearing Limited ("HKEX") at http://www.hkexnews.hk.
The Board believes that the balance between Executive Directors and Non-executive Directors (including INEDs) is reasonable and adequate to safeguard the interests of the Company and its Shareholders. Non-executive Directors (including INEDs) provide the Company with diversified expertise and experience. Their participation in Board and/or Board committee meetings bring an independent judgement and advice on various aspects, including the Company's goals and objectives, strategies, policies, performance, accountability, potential conflicts of interests and other management process.
All Directors have entered into respective letters of appointment with the Company. Code provision A.4.1 of the CG Code stipulates that non-executive directors should be appointed for a specific term, subject to re-election. Executive Directors and Non-executive Director of the Company do not have a specific term of appointment and are not entitled to any form of remuneration. All INEDs are engaged for a term of three years and each of them are remunerated at HK$130,000 per annum. All Directors (including those appointed for a specific term) are subject to retirement by rotation at least once every three years pursuant to the Company's Articles of Association.
16 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
BOARD OF DIRECTORS (Cont'd)
Board Diversity
The Board adopted a board diversity policy ("Board Diversity Policy") setting out the approach to diversity of members of the Board. The Company recognises the benefits of a Board that possesses a balance of skills, experience, expertise and diversity of perspectives appropriate to the requirements of the businesses of the Company.
The Company maintains that Board appointment should be based on merit that complements and expands the skills, experience and expertise of the Board as a whole, taking into account gender, age, professional experience and qualifications, cultural and educational background, and any other factors that the Board might consider relevant and applicable from time to time towards achieving a diverse Board.
The full Board of the Company is responsible for reviewing the structure, size and composition of the Board and the appointment of new directors of the Company from time to time to ensure that it has a balanced composition of skills, experience and expertise appropriate to the requirements of the businesses of the Company, with due regard to the benefits of diversity on the Board. The Board as a whole is also responsible for reviewing the succession plan for the directors of the Company.
The Board will review and monitor from time to time the implementation of this policy to ensure its effectiveness and will at an appropriate time set measurable objectives for achieving Board diversity.
Director Nomination Policy
The Board adopted a director nomination policy ("Director Nomination Policy"), which took effect on 1 January 2019, setting out the criteria and process in the nomination and appointment of Directors of the Company; ensuring the Board has a balance of skills, experience and diversity of perspectives appropriate to the Company; and ensuring the Board continuity and appropriate leadership at Board level.
The Board has delegated its responsibilities and authority for selection and appointment of Directors of the Company to the Nomination Committee. Without prejudice to the authority and duties of the Nomination Committee as set out in its terms of reference, the entire Board has the ultimate responsibility for selection and appointment of the Directors of the Company.
The Director Nomination Policy sets out the criteria in evaluation and selection of any candidate for directorship of the Company, including but not limited to, his/her character and integrity, qualifications, experience, diversity aspects under the Board Diversity Policy, potential contributions to the Board, willingness and ability to devote adequate time to discharge duties as a member of the Board and/or Board Committee(s), and in the nomination of Independent Non-executive Director, meeting the independence requirements with reference to the guidelines set out in the Listing Rules.
In addition, the nomination processes with regard to the appointment of new Director and the re-election of Director at the general meeting of the Company are set out in the Director Nomination Policy. Where the Board proposes a resolution to elect or re-elect a candidate as Director at the general meeting, relevant information of the candidate will be disclosed in the circular to the shareholders and/or explanatory statement accompanying the notice of the relevant general meeting in accordance with the Listing Rules and/or applicable laws and regulations.
The Nomination Committee will conduct regular review of the Director Nomination Policy and where appropriate, make recommendations on changes to the Board to complement the Company's corporate strategy and business needs.
2020 Annual Report | 17 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
BOARD OF DIRECTORS (Cont'd)
Independent Non-executive Directors
During the year ended 31 December 2020, the Board at all times met the requirements of the Listing Rules relating to the appointment of at least three INEDs representing one-third of the Board.
INEDs are selected with the necessary skills and experience to provide strong independent element on the Board and to exercise independent judgment. At least one of the INEDs has appropriate professional qualifications or accounting or related financial management expertise as provided under Rule 3.10 of the Listing Rules. Each of the INEDs has filed a written confirmation to the Company confirming their independence and has undertaken to inform the Hong Kong Stock Exchange as soon as practicable if there is any subsequent change in circumstances which may affect their independence. The Company is of the view that all of its INEDs meet the guidelines for assessing independence as set out in Rule 3.13 of the Listing Rules and are independent.
Retirement and Re-election of Directors
The Company's Articles of Association provides that any Director appointed by the Board shall hold office only until the next following general meeting of the Company (in the case of filling a casual vacancy) or until the next following annual general meeting of the Company (in the case of an addition to the Board) and shall then be eligible for reelection by ordinary resolution. At such annual general meeting, one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation, including those appointed for a specific term. All Directors are subject to retirement by rotation at least once every three years or such other period as the Hong Kong Stock Exchange may from time to time prescribe. The Directors to retire by rotation shall include any Director who wishes to retire and does not offer himself for re-election. Further Directors to retire shall be those having been in office the longest since their last re-election of appointment and subject to retirement by rotation. Re-election of retiring Directors at general meetings is dealt with by separate individual resolutions.
Dr. HUA Min and Mr. YICK Wing Fat Simon will retire by rotation at the 2021 AGM, and being eligible, offer themselves for re-election at the 2021 AGM in accordance with Articles 98(b) and 98(c) of the Company's Articles of Association.
Dr. HUA Min and Mr. YICK Wing Fat Simon, the retiring Directors, have served as INEDs for more than 9 years. During their years of appointment, they have demonstrated their ability to provide an independent view on the Company's matters. Notwithstanding their years of service as INEDs, the Board is of the opinion that Dr. HUA and Mr. YICK's knowledge and experience in the Company's business will continue to generate valuable contribution to the Board, the Company and the Shareholders as a whole and thus recommends them for re-election at the 2021 AGM. In accordance with the CG Code, the re-election of Dr. HUA and Mr. YICK will be subject to separate resolution to be approved at the 2021 AGM.
18 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
BOARD OF DIRECTORS (Cont'd)
Board Meetings and Attendance
The Board meets regularly at least 4 times every year with Directors participating either in person or through electronic means of communication. Schedule of Board meetings are made available to Directors in advance to provide sufficient notice to Directors and facilitate maximum attendance. Formal notices of regular Board meetings are served to all Directors at least 14 days before the meetings while reasonable notice is generally given for other Board and committee meetings. Minutes of each Board/Board committee meeting are sent to all Directors/respective Board committee members for their comments and records within a reasonable time. The Company also keeps detailed minutes of each Board/Board committee meeting, which are available for inspection by all Directors.
The Board held 5 Board meetings during the year ended 31 December 2020. Appropriate and sufficient information were provided in Board papers to Directors in a timely manner to keep them apprised of the Company's latest developments to enable them to make informed decisions on matters to be placed before the Board. The Board had also approved certain matters by way of passing written resolutions during the year. Monthly reports are provided to Directors to keep them updated on the Company's operational and financial performance.
Attendance of individual Directors at such meetings was:
Name of Director | Attendance | Name of Director | Attendance |
Dr. WANG Ching | 5/5 | Mr. YICK Wing Fat Simon | 5/5 |
Mr. WU Bin | 5/5 | Mr. LU Xuefang | 5/5 |
Dr. HUA Min | 5/5 | Mr. NI Jianwei* | 3/3 |
Mr. ONG Ka Thai | 5/5 | Mr. FENG Huang** | 5/5 |
- Resigned as Non-executive Director on 12 June 2020
- Resigned as Non-executive Director on 27 October 2020
As at 31 December 2020, certain Directors of the Company, namely Dr. WANG Ching, Mr. WU Bin and Mr. LU Xuefang are also directors of the Company's Investment Manager. Mr. LU Xuefang is a director and the president of SIIC Investment Company Limited, the holding company of the Investment Manager and is a wholly-owned subsidiary of Shanghai Industrial Investment (Holdings) Company Limited which became a substantial shareholder of the Company since December 2015. Details of such relationships are set out on page 48 under the heading "Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares and Underlying Shares".
Save as disclosed above, to the best knowledge of the Company, there are no financial, business or family relationship among members of the Board as at 31 December 2020. All of them are free to exercise their individual judgment.
2020 Annual Report | 19 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
BOARD COMMITTEES
The Board has established three committees, namely, the Audit Committee, Remuneration Committee and Nomination Committee for overseeing particular aspects of the Company's affairs. All Board committees are established with defined written terms of reference, which are on no less exacting terms than those set out in the CG Code. The terms of reference of all Board committees are published on the websites of the Company and HKEX and are available to the Shareholders upon request. Apart from Board committee meetings, committee members may approve various matters by way of passing written resolutions. Board committees report to the Board on their work, findings, decisions and recommendations pursuant to their respective terms of reference.
Board committees are provided with sufficient resources to discharge their duties and, upon request, are able to seek independent professional advice in appropriate circumstances, at the Company's expense.
AUDIT COMMITTEE
The Audit Committee has been established since July 1999 and currently comprises three members, all of whom are INEDs of the Company, namely, Mr. YICK Wing Fat Simon (Chairman), Dr. HUA Min and Mr. ONG Ka Thai. At least one of the members possesses appropriate qualifications or accounting or related financial management expertise. None of the members of the Audit Committee is a former partner of the Company's existing external auditor.
The latest terms of reference of the Audit Committee, which have been revised in accordance with the CG Code and adopted by the Board are available on the websites of the Company and HKEX.
The primary duties of the Audit Committee include:
- To review the Company's financial statements and reports and consider any significant matters raised by the Investment Manager or the external auditor before submission to the Board.
- To review the relationship with the Company's external auditor by reference to the work performed, its independence, remuneration and terms of engagement, and make recommendations to the Board on the appointment, reappointment and removal of external auditor.
- To review the adequacy and effectiveness of the Company's financial reporting system, risk management and internal control procedures.
- To review arrangements that employees of the Company or the Investment Manager may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters of the Company, and to ensure that proper arrangements are in place for fair and independent investigation of such matters and for appropriate follow-up action.
20 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
AUDIT COMMITTEE (Cont'd)
Three meetings were held during the year ended 31 December 2020. The external auditor attended two meetings. Attendance of Audit Committee members at such meetings was:
Name of Director | Attendance |
Mr. YICK Wing Fat Simon (Chairman) | 3/3 |
Dr. HUA Min | 3/3 |
Mr. ONG Ka Thai | 3/3 |
During the year, the Audit Committee reviewed the interim and annual results and reports (including the financial statements) of the Company. It also reviewed the accounting principles and policies adopted by the Company, and the continuing connected transactions conducted by the Company. In addition, it discussed with the Investment Manager and an external professional consultancy firm (as appropriate) on internal audit results, risk management and internal controls, latest reporting requirements on Environmental, Social and Governance, compliance procedures and financial reporting matters. During the year, the Audit Committee also held a meeting with the external auditor in the absence of the Investment Manager, to discuss issues regarding audit or any matters that the external auditor may wish to raise to the Audit Committee.
Up to the date of this report, the Audit Committee has reviewed the annual results for the year ended 31 December 2020.
REMUNERATION COMMITTEE
The Company's Remuneration Committee, established in March 2005, currently comprises all three INEDs, namely, Mr. ONG Ka Thai (Chairman), Dr. HUA Min, and Mr. YICK Wing Fat Simon and the two Executive Directors, namely, Dr. WANG Ching and Mr. WU Bin.
The latest terms of reference of the Remuneration Committee adopted by the Board by reference to the CG Code are available on the websites of the Company and HKEX.
The primary duties of the Remuneration Committee include:
- To establish formal and transparent procedures and structure in developing staff remuneration policies.
- To review and make recommendations to the Board on remuneration packages of the Directors, taking into consideration such factors like salaries and compensation packages paid by comparable companies, time commitment and responsibilities required of Directors.
The Remuneration Committee held one meeting during the year ended 31 December 2020. Attendance of Remuneration Committee member at such meeting was:
Name of Director | Attendance | Name of Director | Attendance |
Mr. ONG Ka Thai (Chairman) | 1/1 | Dr. WANG Ching | 1/1 |
Dr. HUA Min | 1/1 | Mr. WU Bin | 1/1 |
Mr. YICK Wing Fat Simon | 1/1 |
During the year, the Remuneration Committee reviewed current remuneration policies of the Company for its staff and of its Directors by reference to market comparables.
2020 Annual Report | 21 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
NOMINATION COMMITTEE
The Company's Nomination Committee, established in February 2012, currently comprises all three INEDs, namely Dr. HUA Min (Chairman), Mr. ONG Ka Thai and Mr. YICK Wing Fat Simon. Its latest terms of reference, which have been revised in accordance with the CG Code and adopted by the Board are available on the websites of the Company and HKEX.
The primary duties of the Nomination Committee include:
- To review the structure, size and composition (including the skills, knowledge and experience) of the Board on a regular basis and to make recommendations to the Board with regard to any proposed changes.
- To identify and nominate suitably qualified individuals for appointment as additional Directors or fill Board vacancies as and when they arise, in accordance with the Director Nomination Policy of the Company.
- To assess the independence of INEDs.
- To report its decisions and make recommendations to the Board on matters relating to the appointment or re- appointment of Directors and succession planning of Directors.
The Nomination Committee has adopted a set of nomination procedures for selection of candidates for directorship of the Company by making reference to the skills, experience, professional knowledge, personal integrity and time commitments of such individuals, the Company's needs and other relevant statutory requirements and regulations. In carrying out the responsibility for identifying suitably qualified candidates to become members of the Board, the Nomination Committee will give adequate consideration to the Board Diversity Policy and the Director Nomination Policy.
The Nomination Committee held one meeting during the year ended 31 December 2020. Attendance of Nomination Committee member at such meeting was:
Name of Director | Attendance |
Dr. HUA Min (Chairman) | 1/1 |
Mr. ONG Ka Thai | 1/1 |
Mr. YICK Wing Fat Simon | 1/1 |
During the year, the Nomination Committee reviewed current Board structure, size and composition, the independence of the INEDs, considered the qualifications of the retiring Directors standing for election at the annual general meeting, and reviewed the training and continuous professional development of the Directors and professional staff.
22 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
COMMUNICATION WITH SHAREHOLDERS AND INVESTORS
The Company considers that effective communication with Shareholders is essential in enhancing investor relations and investor understanding of the Company's business performance and strategies. The Company endeavours to maintain an on-going dialogue with Shareholders and in particular, through annual general meetings and other general meetings. Executive Directors, Non-executive Directors, INEDs and Chairman of respective Board committees (or their delegates) make themselves available at the annual general meetings to meet Shareholders and answer their enquiries.
Shareholders' Communication Policy
To promote effective communication, the Company maintains a corporate website http://shanghaigrowth.etnet.com.hk, where up-to-date information and published financial results, corporate governance practices and other information are posted. A Shareholders' Communication Policy has been adopted by the Board in September 2012 setting out relevant contact details and the Company's procedures in providing Shareholders with prompt and equal access to publicly available information of the Company. Such policy is published on the Company's website.
Dividends Policy
The Company has set out a dividends policy which aims at achieving a balance of stability, continuity and available resources for future investments. Dividends distribution will be considered with focuses on reasonable return from investments and sufficient cash to meet future expenses and obligations. Dividends may be distributed by way of cash and/or shares. They are the profits from the realization of listed and unlisted investments, cash income earned as dividends and interest from underlying investments net of fees and costs and provisional operating expenses of the Company. Pursuant to the Company's Articles of Association, profits arising from the revaluation of investments may not be available for distribution unless it is resolved by the Board. Special dividends may be paid out of share premium account subject to special circumstances and the Board's approval.
Annual General Meeting
The Company's 2020 annual general meeting ("2020 AGM" or "AGM") was held on 22 May 2020. The Chairman of the AGM exercised his power under the Company's Articles of Association to put each proposed resolution to the vote by way of a poll. The procedures for conducting a poll were also explained prior to the poll being taken. All resolutions put to the Shareholders at the AGM were passed. The Company's Share Registrar was appointed as scrutineer to monitor and count the poll votes cast at the AGM. The results of the voting by poll were published on the websites of the Company and HKEX. In addition, Executive Directors as well as respective Chairman of the Audit Committee, Remuneration Committee and Nomination Committee, and the Company's external auditor attended the 2020 AGM either in person or by phone to answer questions (if necessary).
2020 Annual Report | 23 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
COMMUNICATION WITH SHAREHOLDERS AND INVESTORS (Cont'd)
Annual General Meeting (Cont'd)
Attendance of Directors at the 2020 AGM was:
Directors | Attendance |
Executive Directors | |
Dr. WANG Ching | 1/1 |
Mr. WU Bin | 1/1 |
INEDs | |
Dr. HUA Min | 1/1 |
Mr. ONG Ka Thai | 1/1 |
Mr. YICK Wing Fat Simon | 1/1 |
Non-executive Directors | |
Mr. LU Xuefang | 1/1 |
Mr. NI Jianwei* | 1/1 |
Mr. FENG Huang** | 1/1 |
- Resigned as Non-executive Director on 12 June 2020
- Resigned as Non-executive Director on 27 October 2020
SHAREHOLDERS' RIGHTS
To safeguard Shareholder interests and rights, a separate resolution is proposed for each substantially separate issue at general meetings, including the election of individual directors. All resolutions put forward at general meetings will be voted on by poll pursuant to the Listing Rules and poll results will be posted on the websites of the Company and HKEX after each general meeting.
Under Article 42 of the Company's Articles of Association, any two or more Shareholders holding not less than one-tenth of the paid-up capital of the Company, or any one Shareholder which is a clearing house, may request the Board of Directors of the Company to convene a general meeting of the Company, in accordance with the requirements and procedures set out in the Articles of Association of the Company. The objects of the meeting must be stated in the written requisition, which must be signed by the requisitionists and deposited for the attention of the Company Secretary at the registered office of the Company at P.O. Box 309, Ugland House, Grand Cayman, KY1- 1104, Cayman Islands.
A Shareholder who wishes to propose a resolution to be considered at a general meeting must requisition the convening of a general meeting in accordance with Article 42 of the Company's Articles of Association.
Without prejudice to the foregoing, if a Shareholder wishes to propose a person other than a retiring Director for election as a director of the Company at any general meeting (including an annual general meeting), the Shareholder shall lodge a written notice of his intention to propose such person for election as a director with the Company, during a period of at least seven days commencing no earlier than the day after the dispatch of the notice of the meeting appointed for such election and ending no later than seven days prior to the date of such meeting. Such written notice must be accompanied by a notice in writing signed by the person to be proposed of his willingness to be elected.
24 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
SHAREHOLDERS' RIGHTS (Cont'd)
Putting Forward Enquiries to the Board
For putting forward any enquiries to the Board of the Company, Shareholders may send written enquiries to the Company.
Note: The Company will not normally deal with verbal or anonymous enquiries.
Contact Details
Shareholders may send their enquiries or requests as mentioned above to the Company's principal place of business as follows:
Address: Company Secretary
Room 1501, 15/F
Shanghai Industrial Investment Building
48-62 Hennessy Road, Wanchai
Hong Kong
Fax: | +852 2840 1286 |
For the avoidance of doubt, Shareholder(s) must send the original duly signed notice, statement or enquiry (as the case may be) to the address immediately above, while written requisition(s) to convene a general meeting must be deposited at the registered office of the Company as stated in the relevant paragraph above. Full name, contact details and identification of each Shareholder must be provided in order to give effect thereto. Shareholders' information may be disclosed as required by law.
CONSTITUTIONAL DOCUMENTS
There was no change in the Company's constitutional documents during the year ended 31 December 2020. The amended and restated memorandum and articles of association of the Company are available on the websites of the Company and HKEX.
CORPORATE GOVERNANCE FUNCTIONS
The Board is responsible for performing its corporate governance functions as required under the CG Code and has adopted the code provision D.3.1 contained in the CG Code as the terms of reference for its corporate governance functions:
- To develop and review the Company's policies and practices on corporate governance and make recommendations to the Board.
- To review and monitor the training and continuous professional development of Directors and senior management.
- To review and monitor the Company's policies and practices on compliance with legal and regulatory requirements.
2020 Annual Report | 25 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE FUNCTIONS (Cont'd)
- To develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors.
- To review the Company's compliance with the CG Code and disclosure in the Corporate Governance Report.
During the year, the Board reviewed the Company's corporate governance policies and practices, training and continuous professional development of Directors and professional staff, the Company's policies and practices on compliance with legal and regulatory requirements, the compliance of the Model Code, and the Company's compliance with the CG Code and disclosure in this Corporate Governance Report.
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Listing Rules as the code of conduct regarding securities transactions by the directors of the Company ("Model Code"). The Company has made specific enquiry of all Directors of the Company regarding any non-compliance with the Model Code during the year ended 31 December 2020, all Directors confirmed that they had fully complied with the required standard set out in the Model Code.
The Company has also established written guidelines no less exacting than the Model Code (the "Employees Written Guidelines") for securities transactions by employees who are likely to be in possession of unpublished price-sensitive information of the Company. During the year, no incident of non-compliance of the Employees Written Guidelines by the employees was noted by the Company.
DIRECTORS' TRAINING
The Company provides a comprehensive, formal and tailored induction to each newly appointed Director on his/her first appointment to enable him/her to gain an understanding of the business and operations of the Company and that he/she is fully aware of his/her responsibilities and obligations under the Listing Rules and relevant regulatory requirements.
There are also arrangements in place in providing continuing briefing and professional development to Directors at the Company's expense to develop and refresh their knowledge and skills. From time to time the Company Secretary updates and provides Directors with relevant reference material, amendments to Listing Rules, news releases and online training from the Hong Kong Stock Exchange on any developments in statutory and regulatory regime to facilitate the discharge of their responsibilities.
26 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
DIRECTORS' TRAINING (Cont'd)
All Directors has provided a record of their training to the Company Secretary. The individual training record of each Director during the year ended 31 December 2020 is summarised below:
Reading | Attending | |
regulatory | external | |
updates or | seminars/ | |
other relevant | conferences | |
reference | or webinar or | |
Directors | materials | online training |
Executive Directors | ||
Dr. WANG Ching | ✓ | ✓ |
Mr. WU Bin | ✓ | ✓ |
INEDs | ||
Dr. HUA Min | ✓ | ✓ |
Mr. ONG Ka Thai | ✓ | ✓ |
Mr. YICK Wing Fat Simon | ✓ | ✓ |
Non-executive Directors | ||
Mr. LU Xuefang | ✓ | ✓ |
Mr. NI Jianwei* | ✓ | ✓ |
Mr. FENG Huang** | ✓ | ✓ |
- Resigned as Non-executive Director on 12 June 2020
- Resigned as Non-executive Director on 27 October 2020
INSURANCE
The Company has arranged appropriate directors' and officers' liabilities and professional indemnity insurances coverage for the Directors and officers of the Company.
COMPANY SECRETARY
The Company Secretary supports the Board in ensuring Board procedures are followed and Board activities are efficiently and effectively conducted. She is also responsible for ensuring that the Board is fully apprised of relevant legislative, regulatory and corporate governance developments and for facilitating the induction and continuing professional development of Directors.
The appointment and dismissal of the Company Secretary are subject to Board approval in accordance with the Company's Articles of Association. Whilst the Company Secretary reports to Dr. WANG Ching, Executive Director of the Board, Directors have access to her advice and services. During the year, the Company Secretary has fulfilled professional training requirements in compliance with Rule 3.29 of the Listing Rules.
2020 Annual Report | 27 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
RISK MANAGEMENT AND INTERNAL CONTROL
During the year, the Company has complied with Principle C.2 of the Corporate Governance Code by establishing appropriate and effective risk management and internal control systems. Management is responsible for the design, implementation and monitoring of such systems, while the Board oversees management in performing its duties on an ongoing basis. Main features of the risk management and internal control systems are described as below:
Risk Management System
The Company adopts a risk management system which manages the risk associated with its business and operations. The system comprises the following phases:
- Identification: Identify ownership of risks, business objectives and risks that could affect the achievement of objectives.
- Evaluation: Analyze the possibility of occurrence of a risk event and assess the impact of risks and evaluate the risk portfolio accordingly.
- Management: Consider risk responses, risk management procedures and implementation effectiveness, and to ensure effective communication to the Board the on-going risk monitoring and assessment.
Based on the risk assessments conducted in 2020, the details of significant risk and the relevant risk response are highlighted as follow:
Business Risk
The Company is principally engaged in making investments in operating companies established or having significant operations in the PRC, both listed and unlisted. Market prices of listed securities and fair value of the unlisted investment are significantly affected by global economy and Chinese government policies, and performance of the operating companies. During the outbreak of COVID-19, the global economy and stock market took a heavy hit, on average the global stock market dropped by 30% at its worst, Hang Seng Index has experienced a decrease by around 27% from its highest 29,174 points to its lowest 21,139 points due to COVID-19's effect around the globe. In addition, the intensifying tensions between the U.S. and PRC, as well as the political issues in Hong Kong which has led Hang Seng Index to be capricious throughout the year 2020. All these factors affect the securities price and return of investment. Nonetheless, the Company recorded a gain of 18.9% growth on listed securities investments in the year 2020 given relevant risk control measures.
Risk response
The Investment Manager established an investment committee ("Committee") to monitor the investment activities. The Committee recommended investment decisions at its weekly meeting, or when necessary, in view of the changing global and local stock market, political issues and government policies. Daily investment portfolio was prepared and distributed to members of Committee for review, with alert level set for different listed securities. Besides, policies and procedures of investment management governing the securities trading activities were reviewed and updated regularly. As for unlisted investment, the Committee followed up closely with the management and performance of the investee company, valuation was prepared half-yearly using valuation techniques and reviewed by independent professionals. Price risk and valuation risk are being monitored on a continuous basis by the Investment Manager.
28 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
RISK MANAGEMENT AND INTERNAL CONTROL (Cont'd)
Internal Control System
The Company has in place an internal control system which is compatible with the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") 2013 framework. The framework enables the Company to achieve objectives regarding effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. The components of the framework are shown as follow:
- Control Environment: A set of standards, processes and structures that provide the basis for carrying out internal control across the Company.
- Risk Assessment: A dynamic and iterative process for identifying and analyzing risks to achieve the Company's objectives, forming a basis for determining how risks should be managed.
- Control Activities: Action established by policies and procedures to help ensure that management directives to mitigate risks to the achievement of objectives are carried out.
- Information and Communication: Internal and external communication to provide the Company with the information needed to carry out day-to-day controls.
- Monitoring: Ongoing and separate evaluations to ascertain whether each components of internal control is present and functioning.
To enhance the Company's system in handling inside information, and to ensure the truthfulness, accuracy, completeness and timeliness of its public disclosures, the Company adopts and implements an inside information policy and procedures. Certain reasonable measures have been taken from time to time to ensure that proper safeguards exist to prevent a breach of a disclosure requirement, which include:
- The access of information is restricted to a limited number of employees on a need-to-know basis. Employees who are in possession of inside information are fully conversant with their obligations to preserve confidentiality.
- Confidentiality agreements are in place when the Company enters into significant negotiations.
- Executive Directors are designated persons who speak on behalf of the Company when communicating with external parties such as the media, analysts or investors.
- Until an announcement is made, the Company's Directors and management must ensure that all information is kept strictly confidential. Where the Company believes that the necessary degree of confidentiality cannot be maintained or the confidentiality may have been breached, an announcement will be made as soon as practicable.
Based on the internal control reviews conducted in 2020, no significant control deficiency was identified.
Internal Auditors
The Company engages a professional consultancy firm consisting a number of professional consultants with relevant expertise (such as Certified Public Accountant) to carry out Internal Audit ("IA") function. The IA function is independent of the Company's daily operation which carries out appraisal of the risk management and internal control systems by conducting interviews, walkthroughs and tests of operating effectiveness.
An IA plan has been approved by the Board. According to the established plan, review of the risk management and internal control systems is conducted semi-annually and the results are reported to the Board via Audit Committee afterwards.
2020 Annual Report | 29 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
CORPORATE GOVERNANCE REPORT
RISK MANAGEMENT AND INTERNAL CONTROL (Cont'd)
Effectiveness of the Risk Management and Internal Control Systems
The Board is responsible for the risk management and internal control systems of the Company and ensuring review of the effectiveness of these systems has been conducted annually. Several areas have been considered during the Board's reviews, which include but not limited to (i) the changes in the nature and extent of significant risks since the last annual review, and the Company's ability to respond to changes in its business and the external environment, (ii) the scope and quality of management's ongoing monitoring of risks and of the internal control systems, and (iii) the disclosure requirements under CG Code.
The Board, through its review and the review made by IA function and Audit Committee, concluded that the risk management and internal control systems were effective and adequate. Such systems, however, are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. It is also considered that the resources, staff qualifications and experience of relevant staff were adequate and the training programs and budget provided were sufficient.
DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Board acknowledges its responsibilities for the preparation of financial statements of the Company and ensures that they are prepared in accordance with statutory requirements and applicable accounting standards. The Board also ensured the timely publication of such financial statements.
The Board is not aware of any material uncertainties relating to events or conditions which may cast significant doubt over the Company's ability to continue as a going concern. Accordingly, the Board has continued to adopt the going concern basis in preparing the financial statements.
AUDITOR'S REMUNERATION
The statement of the external auditor of the Company, Messrs. Ernst & Young, with regard to its reporting responsibilities on the Company's financial statements, is set out in the Independent Auditor's Report on pages 50 to 54.
For the year ended 31 December 2020, services provided to the Company by its external auditor and the respective fees paid were:
2020 | |
US$ | |
Audit services | 50,307 |
Taxation compliance and other services | 4,992 |
55,299 | |
30 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
The Company is pleased to present its Environmental, Social and Governance Report ("ESG Report") for the reporting period from 1 January 2020 to 31 December 2020 (the "Year"). This ESG Report demonstrates the Company's commitment to sustainable development as well as corporate social responsibility.
SCOPE OF THE REPORT
The ESG Report focuses on the environmental and social performance of the entire business of the Company. Unless otherwise specified, the reporting boundary of this ESG Report is the same as this Annual Report. The environmental key performance indicators ("KPIs") is based on the daily operation of the Company in the office in Hong Kong. As for the information on corporate governance, please refer to the Corporate Governance Report on pages 15 to 30 of this Annual Report.
REPORTING FRAMEWORK
This ESG Report has been prepared in accordance with the Environmental, Social and Governance Reporting Guide (the "Guide") as set out in Appendix 27 of the Listing Rules issued by the Stock Exchange of Hong Kong, and in compliance with the "comply or explain" reporting principle.
REPORTING PRINCIPLES
The content of the ESG Report is determined through stakeholder engagement and materiality assessment process, which includes identifying ESG-related issues, collecting and reviewing the management and stakeholders' opinions, assessing the relevance and materiality of the issues and preparing and validating the information reported. The ESG Report covers all key issues that are concerned by different stakeholders.
Quantitative environmental and social KPIs are disclosed in the ESG Report so that stakeholders are able to have a comprehensive understanding of the Company's ESG performance. Information of the standards, methodologies, references and source of key emission of these KPIs are stated wherever appropriate. To enhance comparability of the ESG performance between years, the Company has strived to adopt consistent reporting and calculation methodologies as far as reasonably practicable. For any changes in methodologies, the Company has presented and explained in details in the corresponding sections.
INFORMATION AND FEEDBACK
Your opinions are highly valued by the Company. Should you have any advice or suggestions, please feel free to contact the Company by mail to Room 1501, 15/F, Shanghai Industrial Investment Building, 48-62 Hennessy Road, Wanchai, Hong Kong.
ESG BOARD STATEMENT
The Company believes that good ESG governance strategies and practices are crucial to the business in long term, especially in enhancing investment values and returns. The Audit Committee assists the Board to oversee the ESG development and performance of the Company, to monitor and review the compliance status of ESG-related laws and regulations, to review the content and quality of the ESG Report annually, and to recommend the same to the Board, while the Board would make decision to adopt the ESG Report.
2020 Annual Report | 31 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
ESG BOARD STATEMENT (Cont'd)
During the Year, the Audit Committee has assigned an independent ESG consulting firm for managing the ESG performance of the Company, before which the selection process of such professional firm was well reported to and approved by the Board. Members of the Audit Committee were also well informed by the consulting firm, during the regular Audit Committee meeting, about the latest development of the ESG reporting requirements in Hong Kong.
To mitigate risks related to sustainability and ESG-related issues, the Company has conducted engagement exercises during the Year for better identifying potential and material ESG issues to the business and its stakeholders. Members of the Board have participated in the engagement exercise and provided constructive opinions in determining the materiality of ESG issues of the Company. The Board is responsible for reviewing the stakeholder communication channels regularly to ensure effective communication between the Company and stakeholders. In the aim of formulating and executing effective ESG policies and measures, the Board also reviews the plans and execution of the related work annually with respect to the targets and goals set, as well as oversees the coordination and management of ESG issues.
To better integrate ESG concepts into business operation, the Company will consider environmental and social factors when building investment portfolios to facilitate the Company's overall ESG goal by the Board. The Board will keep overseeing the coordination and management of ESG-related work and reviewing the plans and execution regularly with respect to the goal set.
STAKEHOLDER ENGAGEMENT
The Company believes that the involvement and continuous support of our stakeholders are crucial to the long- term development of the business. Through engaging with stakeholders, the Company could make continuous improvement to set out effective and feasible sustainable development goals and strategies. Therefore, the Company has adopted multiple means of communications which allow stakeholders from different aspects, including the government and regulators, shareholders, business partners, employees and the community, to express opinions and raise suggestions. In response, the Company would address their concerns in a timely manner through various communication channels, such as Annual and Interim Reports, ESG Reporting, Company's website and meetings with the stakeholders.
In the future, the Company will continue enhancing the level of stakeholder engagement so as to collect stakeholders' opinions more comprehensively towards the Company's business and ESG strategies.
32 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
STAKEHOLDER ENGAGEMENT (Cont'd)
Materiality Assessment
In view of the relevance and validity of this ESG report with the Company's environmental and social performance, the Company has conducted a materiality assessment to identify ESG issues that are material to the business of the Company and its stakeholders. The assessment is based on stakeholder surveys, materiality maps provided by well- known external institutions1, as well as professional opinions from the ESG consulting firm. The material ESG issues as identified are shown as follows:
Employment and Labour Practices | |
Employment Compliance | Employee Welfare |
Training and Development | Diversity and Equal Opportunity |
Occupational Health and Safety | |
Operating Practices | |
Operational Compliance | Quality Management |
Business Ethics |
SOCIAL
The Company values employees as important asset. It has provided comprehensive employment policies to protect employees' rights and benefits. It also complies with various employment related laws and regulations in Hong Kong, including but not limited to the Discrimination Ordinances (sex, disability, family statue and race), Employment Ordinance, Minimum Wage Ordinance, Employees' Compensation Ordinance and Occupational Safety and Health Ordinance.
As at 31 December 2020, the Company had two employees, who are all full-time employees in Hong Kong. The two employees are both female and aged between 30-50. During the Year, the employee turnover rate (by any category) is 0%.
EQUAL EMPLOYMENT OPPORTUNITIES
The Company strives to provide an equal and transparent working environment for all staff members. Thus, the recruitment and promotion is solely based on the candidates' performance, experience, qualifications, capability and relevant objective criteria. The Company also undertakes to provide equal employment opportunities irrespective of age, sex, race, religious affiliation, sexual orientation and other factors.
Child labour and forced labour are strictly prohibited in the Company. In order to prevent such practices, various internal policy are implemented, such as checking applicants' identity card and other certificates to confirm their ages, identities and experience. Once such practice is discovered, the Company would investigate the case thoroughly and dismiss relevant employees immediately. The Company also considers each dismissal and resignation seriously. Exit interviews would be conducted with the employees so as to provide the Company with feedback to reduce turnover in the future.
1 The materiality maps referenced in the materiality assessment include the ESG Industry Materiality Map and the SASB Materiality Map produced respectively by Morgan Stanley Capital International (MSCI) and the Sustainability Accounting Standards Board (SASB).
2020 Annual Report | 33 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
REMUNERATION AND WELFARE
The Company offers competitive salary and benefits to employees. All employees enjoy comprehensive remuneration package including MPF and discretionary bonus which is based on the competencies, experience, skills and qualifications required for the specific post. The Company highly values the work-life balance of employees that a five-day work week arrangement to ensure they can enjoy enough rest and leisure time. Employees also enjoy full-paid annual leave benefit, maternity leave and so on beyond the statutory holidays. To encourage continuous study and development, the employees are reimbursed with continuous professional training fees.
HEALTH AND SAFETY
As a responsible company, health and safety of employees is of utmost importance when it comes to sustaining the business operation. Therefore, the Company strictly complies with the Occupational Safety and Health Ordinance, as well as implements different internal policies that emphasize the importance of occupational safety and health, such as prohibit smoking at work premises. The Company has also established a clear and effective system for reporting hazards, injuries and illness, the management would thus respond to all reports of unsafe and unhealthy workplace environment as soon as possible. Besides, the management is responsible for providing and maintaining a clean and safe working environment, safe systems of work, machines and facilities in good condition and any measures needed to ensure all staff are safe from injury at work. Moreover, all staff are required to attend fire and evacuation drills, which are arranged by the premises, regularly to better prepare for any emergency.
In the past three years, the Company has no identified work-related fatalities and work injuries, hence no lost day due to work injury.
In correspondence to the outbreak of Coronavirus disease 2019 (COVID-19) worldwide, the Company has implemented a series of preventive measures and control policy. Special working arrangement was launched so that employees were allowed to work from home depending on the latest pandemic situation to avoid mass gatherings. All staff are required to wear mask, as well as measure body temperature before entering the premise. The Company has also established a reporting system to ensure employees' health are in good condition and without any close contact with confirmed or suspected case individuals. Besides, the management has strived its best to cooperate and support local government's pandemic prevention and control work, and prepared adequate pandemic prevention supplies for employees.
DEVELOPMENT AND TRAINING
The Company supports its staff to develop and enhance their professional knowledge and skills to cope with the evolving market environment and compliance level. Staff members are encouraged to take external professional training to strengthen work-related expertise. Beyond training on valuation and insurance tools, training workshops of the Year also covered data privacy, corporate governance risks as well as challenges and opportunities brought by COVID-19. Besides, employees have received trainings specifically on ESG reporting and compliance which was held by external consultancy firms. During the Year, the percentage of employees trained is 100%. Among the trained employees, all are female and belong to senior management level2. They participated in a total of 61 hours of training and the average training hours for each employee is 30.5 hours3.
- The Company has no male employees and no junior and middle level employees.
- The average training hours of each female employee and senior management are also 30.5 hours.
34 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
QUALITY MANAGEMENT
To maintain high quality of the business, the Company delegated investment powers to the Investment Manager and its investment committee to advise on investment strategies and guideline formulation, as well as making recommendation on investment proposals and execution of investment decisions. The Investment Manager is a licensed corporation, under supervision of Securities and Futures Commission, recruited with professionals and licensed holders to perform fund investment management services and general administration of the Company. Representatives of the Investment Manager are also appointed members of the Board. The Company also sets up an Investment Committee to review and evaluate on material investment proposals. The Board is responsible for overseeing and evaluating the performance of Investment Manager who reports to the Board on regular basis.
The Company has formulated a series of investment policies and procedures to meet its investment objectives. The Investment Manager shall recommend investment proposals aligned with the Company's scope of policies, strategies and guidelines determined and agreed by the Board from time to time. To avoid conflicts of interest, the Investment Manager is required to uphold fair consideration to respective investment objectives, funding capability and expected return on investments. Investment portfolio and proposed investments shall be discussed at the Investment Manager's investment committee meetings held on weekly interval. In case of unlisted investment, potential investment projects are recorded on a job log and preliminary due diligence would be conducted. As a continuous monitoring process, regular visits and communications with investee companies are essential to monitor the investment performance and understand corporate governance quality of the respective management.
BUSINESS ETHICS
The Company upholds high standards on promoting anti-corruption and adheres to the Prevention of Bribery Ordinance, with all its employees and Directors required to maintain a high level of business ethics. The Audit Committee has the overall responsibility for matters related to the internal controls of anti-corruption. To demonstrate the commitment, a written whistle-blowing policy and relevant communication channels have been established for employees to raise, in confidence, concerns on possible improprieties directly to the Audit Committee. This policy has been approved and adopted by the Board and is clearly stated in the Internal Policies and Procedures Manual of the Company.
In the Year, a staff member of the Company has attended a briefing session on the Elections (Corrupt and Illegal Conduct) Ordinance held by HKICPA while a self-studying training programme on anti-corruption published by ICAC was arranged for the Directors and all staff of the Company in November 2020. There were in total 6 Directors and 2 staff trained in the Year and the total training hour was 9.5 hours. The Company's Investment Manager was also arranged to attend the self-studying training programme from ICAC. During the year, the Company had no legal cases regarding corrupt practices brought against the Company or its employees.
Despite there are no customers or clients involved due to the Company's business nature, the Company strictly respects data privacy protection on information related to its operation, such as transaction details and employees' personal information. The Company at all times maintains strict confidentiality on all information pertaining to potential investment projects as well as the investment process. A Non-Disclosure Agreement (NDA) is in place for potential investment projects to collect and protect financial data and operating information of both parties.
Besides, the Company also demonstrates its respect for intellectual property rights. Only legitimate software that complies with the license agreement is allowed to be used within the Company. Employees are also required to follow application procedures before software installation to avoid infringement of others' intellectual property rights.
2020 Annual Report | 35 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
COMMUNITY
The Company attaches great importance to interacting with the wider community in fulfilling corporate social responsibility. In light of community investment, the Company would keep exploring the possibility to identify suitable business partners who align with the Company's missions and values, as well as supporting various community and environmental programmes in an effort to build a sustainable and harmonious society.
The Company believes that the best way to serve the community is to drive positive impact through our investment portfolio. To create shared values with the community and stakeholders, the Company will continue to consider and prioritise ESG factors in selecting future investment projects.
ENVIRONMENTAL
Emissions
Despite there is no manufacturing or construction process involved in the Company's business, the Company has quantified the greenhouse gas (GHG) emissions and resource usage of its office operation for a better ESG management. Since there is no company vehicles, the major source of GHG produced in the Year is from electricity generation which supports the office operation. The results are summarised as follows:
GHG Emissions (Note (i)) | 2020 | 2019 |
Scope 1 GHG Emissions (kg CO e) (Note (ii)) | 0 | 0 |
2 | ||
Scope 2 GHG Emissions (kg CO e) (Note (iii)) | 3,841 | 4,552 |
2 | ||
Scope 3 GHG Emissions (kg CO e) (Note (iv)) | 120 | 151 |
2 | ||
Total GHG Emissions (kg CO e) | 3,960 | 4,703 |
2 | ||
Emission Intensity (kg CO e/employee) | 1,980.2 | 2,351.5 |
2 |
Notes:
-
The Company's office also accommodates 6 other non-Company staff who are from its Investment Manager. As such, a factor of 1/4 is used to calculate the utility consumption accounted for the Company's staff. The calculation method of carbon emissions is based on Appendix 2 "Reporting Guidance on Environmental KPIs" issued by the Stock Exchange of Hong
Kong. The Company's GHG inventory includes carbon dioxide (CO2) only. For the ease of reading and understanding, the GHG emissions data is presented in carbon dioxide equivalent (CO2e). - Scope 1 GHG Emissions refer to direct emissions from operations that are owned or controlled by the Company. During the Year, the Company had no direct emissions.
- Scope 2 GHG Emissions refer to energy indirect emissions resulting from the generation of purchased or acquired electricity, heating, cooling and steam consumed within the Company. The disclosed figures are resulted from electricity purchased from power companies. Emission factors used for calculating carbon emission is provided by the Hong Kong Electric Company.
- Scope 3 Emissions refer to other indirect emissions that occur outside the Company. During the Year, there is no business travel, and the disclosed figures are resulted from paper waste disposed of at landfills. The amount of paper used in 2019 was calculated based on the best estimation of the management. During the Year, the Company has improved the data collection method and the amount of paper used is calculated based on the actual weight of the paper purchased with the assumption that all purchased paper will be disposed of at landfills finally.
36 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
ENVIRONMENTAL (Cont'd)
Emissions (Cont'd)
The Company strives to handle waste properly to reduce impact to the environment. The Company generates both hazardous and non-hazardous wastes. For non-hazardous wastes, general wastes is produced from daily office operation, while hazardous wastes refer to the used toner cartridges from the printer in office, which are collected by suppliers. During the Year, the data of waste generated in office are as follows:
Wastes (Note (i)) | 2020 |
Non-hazardous waste | |
Total non-hazardous waste (kg) (Note (ii)) | 300 |
Intensity of non-hazardous waste (kg/employee) | 150 |
Hazardous waste | |
Total hazardous waste (kg) (Note (iii)) | 0.36 |
Intensity of hazardous waste (kg/employee) | 0.18 |
Notes:
- During the Year, the Company has improved the data collection method and started to disclose the emission data relating to non-hazardous waste and hazardous waste. The Company's office also accommodates 6 other non-Company staff who are from its Investment Manager, which are excluded from the emission data.
- Emissions data relating to non-hazardous waste was based on the daily estimated volume of general waste in office and the volume-to-weight conversion factors provided by the United States Environmental Protection Agency.
- Emissions data relating to hazardous waste was based on the actual weight of used toner cartridges.
To reduce waste generation, reuse of office stationary is widely encouraged and implemented. Recyclable toner and ink cartridges are also used. Usage of material is also evaluated regularly to avoid overstock. The Company targets to reduce paper waste in office in the future by controlling paper usage requirement.
RESOURCE CONSERVATION
The Company basically does not rely on natural resources for its business operation. Electricity is the only major resource consumed by the Company. Despite that the Company consumes little amount of electricity and water, the importance of energy and water saving is well recognized. During the Year, the electricity consumption and its corresponding intensity are shown in the following table:
Electricity Consumption (Note (i)) | 2020 | 2019 |
Total electricity consumed (kWh) | 4,742 | 5,763 |
Consumption intensity (kWh/employee) | 2,370.8 | 2,881.5 |
Notes:
- The Company's office also accommodates 6 other non-Company staff who are from its Investment Manager. As such, a factor of 1/4 is used to calculate the utility consumption accounted for the Company's staff.
2020 Annual Report | 37 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
RESOURCE CONSERVATION (Cont'd)
As the Company's operation is mainly office-based, the Company is committed to adopting eco-friendly measures at the office. For example, staff is encouraged to reduce paper consumption by double-sided printing and reusing papers printed on one side. In addition, the Company uses electronic systems to substitute paper-based office administration systems. To conserve water, staff is also encouraged to turn off the faucet when not in use, as well as check the pipes for leak regularly. During the Year, there was no issue in sourcing water. The Company targets to achieve water saving by making continuous effort to reduce the use of water and make sure the water tap is turned off after use.
In terms of energy saving measures, the Company has set up a number of good office practices, such as installing a mix of LED and fluorescent lights to reduce energy consumption and maintaining the room temperature at a minimum of 25°C in summer to save energy. Besides, conference calls are always preferred instead of face-to- face meeting to reduce carbon footprint. The Company is dedicated to sustaining implementation of various energy saving measures, and reducing the use of electricity. The Company targets to achieve electricity saving and hence reduction in carbon footprint in the future by exploring eco-friendly and energy-efficient initiatives for a sustainable business.
CLIMATE CHANGE
In recent years, climate change has become a growing concern at international level. The Company recognizes the importance of identifying and managing risks associated with climate change, so it has taken different measures to assess and mitigate the risks. The Company has identified different physical risks, for instance, changes in precipitation patterns and increased extreme weather events like super typhoons, which may pose threats to the business and affect its financial performance. In addition, climate change may create various transition risks such as policy and legal risks. Operation costs of the Company might be increased with the enhancement of emissions- reporting obligations and there could be higher possibility for the Company to be exposed to litigation with increased climate-related compliance obligations.
In response, the Company has carried out risk identification to better adapt to and prepare for future extreme weather events. It also discussed with service providers to understand their company policies on extreme weather conditions and the contingency plans in advance. Besides, news alerts and communication related to impacts of climate-related risks and business sustainability are provided to enhance climate resilience of the Company. When there are extreme weather conditions or events, special work arrangement would be adopted to ensure safety of staff and the workplace.
38 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
APPENDIX: CONTENT INDEX OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING GUIDE
ESG Indicators | Overview | Sections | Page/Explanation |
Environmental | |||
A1 Emissions | General disclosure | Emissions | 36-37 |
A1.1 | The types of emissions and respective emissions | N/A | No emissions from business |
data. | operation. | ||
A1.2 | Direct and energy indirect greenhouse gas | Emissions | 36-37 |
emissions and, where appropriate, intensity. | |||
A1.3 | Total hazardous waste produced and, where | Emissions | 36-37 |
appropriate, intensity. | |||
A1.4 | Total non-hazardous waste produced and, where | Emissions | 36-37 |
appropriate, intensity. | |||
A1.5 | Description of emissions target(s) set and steps | Emissions | 36-37 |
taken to achieve them. | |||
A1.6 | Description of how hazardous and non-hazardous | Emissions | 36-37 |
wastes are handled, and a description of reduction | |||
target(s) set and steps taken to achieve them. | |||
A2 Use of | General disclosure | Resource | 37-38 |
Resources | Conservation | ||
A2.1 | Direct and/or indirect energy consumption by type | Resource | 37-38 |
in total and intensity. | Conservation | ||
A2.2 | Water consumption in total and intensity. | N/A | Water resource is maintained |
and paid by the landlord | |||
hence data is unavailable. | |||
A2.3 | Description of energy use efficiency target(s) set | Resource | 37-38 |
and steps taken to achieve them. | Conservation | ||
A2.4 | Description of whether there is any issue in | Resource | 37-38 |
sourcing water that is fit for purpose, water | Conservation | ||
efficiency target(s) set and steps taken to achieve | |||
them. | |||
A2.5 | Total packaging material used for finished products | N/A | The Company's business |
and, if applicable, with reference to per unit | does not involve packaging | ||
produced. | material. | ||
A3 Environmental | General disclosure | N/A | Not material as identified in |
and Natural | the materiality assessment. | ||
Resources | |||
A3.1 | Description of the significant impacts of activities | N/A | Not material as identified in |
on the environment and natural resources and the | the materiality assessment. | ||
actions taken to manage them. | |||
2020 Annual Report | 39 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
APPENDIX: CONTENT INDEX OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING GUIDE (Cont'd)
ESG Indicators | Overview | Sections | Page/Explanation |
A4 Climate Change | General disclosure | Climate Change | 38 |
A4.1 | Description of the significant climate-related | Climate Change | 38 |
issues which have impacted, and those which may | |||
impact, the issuer, and the actions taken to manage | |||
them. | |||
Social | |||
B1 Employment | General disclosure | Equal Employment | 33-34 |
Opportunities, | |||
Remuneration and | |||
Welfare | |||
B1.1 | Total workforce by gender, employment type, age | Social | 33 |
group and geographical region. | |||
B1.2 | Employee turnover rate by gender, age group and | Social | 33 |
geographical region. | |||
B2 Health and | General disclosure | Health and Safety | 34 |
Safety | |||
B2.1 | Number and rate of work-related fatalities. | Health and Safety | 34 |
B2.2 | Lost days due to work injury. | Health and Safety | 34 |
B2.3 | Description of occupational health and safety | Health and Safety | 34 |
measures adopted, how they are implemented and | |||
monitored. | |||
B3 Development | General disclosure | Development and | 34 |
and Training | Training | ||
B3.1 | The percentage of employees trained by gender | Development and | 34 |
and employee category. | Training | ||
B3.2 | The average training hours completed per | Development and | 34 |
employee by gender and employee category. | Training | ||
B4 Labour | General disclosure | Equal Employment | 33 |
Standards | Opportunities | ||
B4.1 | Description of measures to review employment | Equal Employment | 33 |
practices to avoid child and forced labour. | Opportunities | ||
B4.2 | Description of steps taken to eliminate such | Equal Employment | 33 |
practices when discovered. | Opportunities | ||
B5 Supply Chain | General disclosure | N/A | Not material as identified in |
Management | the materiality assessment. | ||
B5.1 | Number of suppliers by geographical region. | N/A | Not material as identified in |
the materiality assessment. | |||
40 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
APPENDIX: CONTENT INDEX OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING GUIDE (Cont'd)
ESG Indicators | Overview | Sections | Page/Explanation |
B5.2 | Description of practices relating to engaging | N/A | Not material as identified in |
suppliers, number of suppliers where the practices | the materiality assessment. | ||
are being implemented, how they are implemented | |||
and monitored. | |||
B5.3 | Description of practices used to identify | N/A | Not material as identified in |
environmental and social risks along the supply | the materiality assessment. | ||
chain, and how they are implemented and | |||
monitored. | |||
B5.4 | Description of practices used to promote | N/A | Not material as identified in |
environmentally preferable products and services | the materiality assessment. | ||
when selecting suppliers, and how they are | |||
implemented and monitored. | |||
B6 Product | General disclosure | N/A | The Company's business |
Responsibility | does not involve product | ||
manufacturing and | |||
provision of services, hence | |||
product health and safety, | |||
advertising, labelling and | |||
privacy matters are not | |||
relevant. | |||
B6.1 | Percentage of total products sold or shipped | N/A | The Company's business |
subject to recalls for safety and health reasons. | does not involve any | ||
products. | |||
B6.2 | Number of products and service-related complaints | N/A | The Company's business |
received and how they are dealt with. | does not involve any | ||
products and services. | |||
B6.3 | Description of practices relating to observing and | Business Ethics | 35 |
protecting intellectual property rights. | |||
B6.4 | Description of quality assurance process and recall | N/A | Recall procedures are not |
procedures. | applicable as the Company's | ||
business does not involve | |||
any products. | |||
B6.5 | Description of consumer data protection and | N/A | Consumer data protection |
privacy policies, how they are implemented and | is not applicable as the | ||
monitored. | Company's business does | ||
not involve any consumers. | |||
2020 Annual Report | 41 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
APPENDIX: CONTENT INDEX OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING GUIDE (Cont'd)
ESG Indicators | Overview | Sections | Page/Explanation |
B7 Anti-corruption | General disclosure | Business Ethics | 35 |
B7.1 | Number of concluded legal cases regarding | Business Ethics | 35 |
corrupt practices brought against the issuer or its | |||
employees during the reporting period and the | |||
outcomes of the cases. | |||
B7.2 | Description of preventive measures and whistle- | Business Ethics | 35 |
blowing procedures, how they are implemented | |||
and monitored. | |||
B7.3 | Description of anti-corruption training provided to | Business Ethics | 35 |
directors and staff. | |||
B8 Community | General disclosure | Community | 36 |
Investment | |||
B8.1 | Focus areas of contribution. | N/A | Not material as identified in |
the materiality assessment. | |||
B8.2 | Resources contributed to the focus area. | N/A | Not material as identified in |
the materiality assessment. | |||
42 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial statements for the year ended 31 December 2020.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Company is an investment company whose principal business is to make investments in listed and unlisted equity and debt securities as well as in other financial instruments and investment vehicles which are established or have significant operations or businesses primarily in the Greater China Region.
Further discussion and analysis of these activities as required by Schedule 5 to the Hong Kong Companies Ordinance, including a description of the principal risks and uncertainties facing the Company and an indication of likely future development in the Company's business, can be found in the Board of Director's Statement and the Management Discussion and Analysis set out on pages 3 to 11 of this annual report. This discussion forms part of this Report of the Directors.
RESULTS AND DIVIDENDS
The Company's profit for the year ended 31 December 2020 and the Company's financial position at that date are set out in the financial statements on pages 55 to 95.
The Directors do not recommend the payment of any dividend in respect of the year.
SUMMARY FINANCIAL INFORMATION
A summary of the published results and assets and liabilities of the Company for the last five financial years, as extracted from the audited financial statements and restated/reclassified as appropriate, is set out on page 96. This summary does not form part of the audited financial statements.
SHARE CAPITAL
There was no movement in the Company's authorised or issued share capital during the year.
DISTRIBUTABLE RESERVES
At 31 December 2020, the Company's reserves available for distribution, calculated in accordance with the provisions of the Company Law (Revised) of the Cayman Islands and the Company's Articles of Association (currently in force), amounted to US$2,620,735.
2020 Annual Report | 43 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
DIRECTORS
The Directors of the Company during the year and up to the date of this report are:
Executive Directors:
Dr. WANG Ching
Mr. WU Bin
Independent Non-executive Directors ("INEDs"):
Dr. HUA Min
Mr. ONG Ka Thai
Mr. YICK Wing Fat Simon
Non-executive Directors:
Mr. LU Xuefang
Mr. NI Jianwei (resigned on 12 June 2020)
Mr. FENG Huang (resigned on 27 October 2020)
All Directors are subject to retirement by rotation in accordance with the Company's Articles of Association. All three of the Company's INEDs are each appointed for a term of three years.
Dr. HUA Min and Mr. YICK Wing Fat Simon will retire by rotation at the 2021 AGM, and being eligible, offer themselves for re-election at the 2021 AGM in accordance with Articles 98(b) and 98(c) of the Company's Articles of Association.
The Company has received annual confirmations of independence pursuant to Rule 3.13 of the Listing Rules from all INEDs, namely Dr. HUA Min, Mr. ONG Ka Thai and Mr. YICK Wing Fat Simon, and as at the date of this report still considers them to be independent.
DIRECTORS' BIOGRAPHIES
Biographical details of the Directors of the Company are set out on pages 12 to 14 of the annual report.
CHANGE IN DIRECTOR'S INFORMATION
Pursuant to Rule 13.51B(1) of the Listing Rules, changes of Director's information since the publication of the Company's 2020 Interim Report is set out below:
Names of Director | Change |
Mr. FENG Huang | Resigned as Non-executive Director of the Company with effect from 27 October |
2020 |
44 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
DIRECTORS' SERVICE CONTRACTS
The INEDs of the Company each has a service contract with the Company for a term of three years. Dr. HUA Min's current service contract commenced on 28 September 2020, Mr. ONG Ka Thai's current service contract commenced on 1 June 2019 and Mr. YICK Wing Fat Simon's current service contract commenced on 1 August 2019. All of them are subject to termination by either party giving not less than one month's written notice. Each INED is entitled to annual remuneration of HK$130,000.
In compliance with Code Provision D.1.4 of CG Code, Executive Directors and other Non-executive Directors have also executed respective service contracts with the Company for an indefinite term, with no entitlement to any remuneration from the Company. They are, however, subject to retirement by rotation at least once every three years pursuant to the Company's Articles of Association.
PERMITTED INDEMNITY PROVISION
The Company's Articles of Association provides that every Director shall be entitled to be indemnified out of the funds of the Company against all losses or liabilities which they may sustain or incur in or about the execution of the duties of their office otherwise in relation thereto. A permitted indemnity provision for the benefit of the Directors is currently in force and was in force throughout the year ended 31 December 2020. The Company has maintained liability insurance to provide appropriate cover for the Directors of the Company.
DIRECTORS' REMUNERATION
Directors' remuneration is subject to Shareholders' approval at general meeting, which is determined by the Company's Board of Directors with reference to Directors' duties, responsibilities and performance and the results of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENT AND CONTINUING CONNECTED TRANSACTIONS
The Company's investment portfolio is managed by Shanghai International Asset Management (Hong Kong) Company Limited (the "Investment Manager"), in accordance with the terms and conditions of an investment management and administration agreement (the "Investment Management Agreement") between the Company and the Investment Manager dated 12 November 1993, as supplemented by supplemental agreements dated 22 January 2001, 12 September 2001, 3 November 2003, 11 April 2005, 28 March 2008, 28 March 2011, 19 March 2014, 23 March 2017 and 17 March 2020 respectively (collectively referred to as the "Supplemental Agreements"). For the aforesaid continuing connected transaction, certain details are disclosed below in compliance with the requirements of Chapter 14A of the Listing Rules. In accordance with the terms of the agreements, the Investment Manager is entitled to receive management fee inclusive of administration fee and an incentive fee.
The investment management and administration fee is calculated in United States dollars ("US$") and payable quarterly in advance, at the rate of 0.5% per quarter of the net asset value (calculated before deduction of fees payable to the Investment Manager, the investment adviser and the custodian for that quarter) of the Company calculated on the last business day of the previous quarter.
On 17 March 2020, the Company and the Investment Manager entered into the Ninth Supplemental Agreement, which was approved by the independent Shareholders of the Company at the annual general meeting held on 22 May 2020. The terms were amended as follows:
- The appointment of the Investment Manager under the Investment Management Agreement shall be extended for a term of three years commencing from 1 July 2020 to 30 June 2023. The Investment Manager shall be entitled to resign its appointment under the Investment Management Agreement, and the Company may by resolution of the Board terminate the appointment of the Investment Manager, in either case by giving not less than two months' prior notice in writing to the Company or the Investment Manager (as the case may be).
2020 Annual Report | 45 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENT AND CONTINUING CONNECTED TRANSACTIONS (Cont'd)
- The Investment Manager shall be entitled to an Incentive Fee equal to twenty per cent (20%) of the amount by which the Net Asset Value as at 31 December in the year for which the Incentive Fee is being calculated exceeds the High Water Mark. The definition of "High Water Mark" was revised under the Eighth Supplemental Agreement. High Water Mark means the highest Net Asset Value as at 31 December in any year from the year ended 31 December 2016 in which the Incentive Fee was accrued other than the applicable Calculation Year, less the Dividend Amount. The Net Asset Value as at 31 December 2016 (being US$8,182,713) shall be the initial High Water Mark ("Initial High Water Mark").
For illustration purpose only, assuming the Net Asset Value as at 31 December 2017 (having taken into account any New Capital and/or Share Repurchase) ("2017 NAV") exceeds the Initial High Water Mark, the Incentive Fee for the year ended on 31 December 2017 would be calculated as follows:
2017 Incentive Fee = 20% x (2017 NAV - Initial High Water Mark)
The 2017 NAV will then be the new High Water Mark for the purposes of calculating the Incentive Fee (if any) payable in respect of the Calculation Year ended December 2018 and thereafter until the High Water Mark is reached. - The maximum amount of fees payable to the Investment Manager under the Investment Management Agreement (including the aggregate of the Management and Administration Fee and the Incentive Fee (if payable)) shall be revised to the following amounts over the term of the Ninth Supplemental Agreement:
Period | Amount (Note) | |
From 1 | July 2020 to 31 December 2020 inclusive | US$65,000 (approximately HK$507,000) |
For the year 2021 | US$160,000 (approximately HK$1,248,000) | |
For the year 2022 | US$210,000 (approximately HK$1,638,000) | |
From 1 | January 2023 to 30 June 2023 inclusive | US$130,000 (approximately HK$1,014,000) |
Note: For illustration purpose only, US$ is converted into HK$ at the rate of US$1 to HK$7.8. No representation is made that any amounts in US$ has been or could be converted at the above rate or at any other rates.
Each of the above amounts is referred to as the "New Cap" or collectively, as the "New Caps". Other than the above amendments, the other terms of the Investment Management Agreement remained the same.
In the event that the total fees payable to the Investment Manager (consisting of the Management and Administration Fee and, if any, the Incentive Fee) for each of the periods covered by the Ninth Supplemental Agreement exceed the corresponding New Cap, the Company will have to re-comply with the relevant provisions under Chapter 14A of the Listing Rules, including without limitation, making a further announcement and obtaining further approval from its independent Shareholders.
46 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENT AND CONTINUING CONNECTED TRANSACTIONS (Cont'd)
Reasons for Revising the Definition of High Water Mark
The high water mark under the Investment Management Agreement (as amended by the Seventh Supplemental Agreement) is the Net Asset Value as at 31 December 2010, being US$31,048,060. However, the Net Asset Value of the Company has been substantially reduced after distribution of dividends in the aggregate total of US$1.40 per Share (amounting to a total of US$12,467,000) over the period from 2010 to 2014, which substantially reduced the Company's working capital for new investments and thus limited the Company's potential ability in generating remarkable returns in absolute terms. The Directors consider that, coupled with the lack of profitable projects and downturn of economic conditions since 2011, the chance of exceeding the 2010 high water mark level is extremely remote.
The Directors are of the view that it is reasonable to reset the initial high water mark to the latest audited Net Asset Value as at 31 December 2016, which is a reasonable and achievable new initial high water mark serving as an incentive to drive the Investment Manager to exert its best efforts to raise new funds and identify investments with good returns for the Company.
During the year ended 31 December 2020, investment management and administration fees of US$73,005 were paid to the Investment Manager, no incentive fee was entitled during the relevant period.
The INEDs of the Company have reviewed the continuing connected transactions set out above and have confirmed that these continuing connected transactions were entered into (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms or on terms no less favourable to the Company than terms available to or from independent third parties; and (iii) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders of the Company as a whole.
Ernst & Young, the Company's auditor, were engaged to report on the Company's continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. Ernst & Young have issued their unqualified letter containing their findings and conclusions in respect of the continuing connected transactions disclosed above by the Company in accordance with Rule 14A.56 of the Listing Rules. A copy of the auditor's letter has been provided by the Company to the Hong Kong Stock Exchange.
As at 31 December 2020, Dr. WANG Ching, Mr. WU Bin and Mr. LU Xuefang are also directors of the Investment Manager.
DIRECTORS' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
None of the Directors had registered an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the Securities and Futures Ordinance ("SFO"), or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as at 31 December 2020.
2020 Annual Report | 47 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENT OR CONTRACTS
No Director nor a connected entity of a Director had a material interest, either directly or indirectly, in any transactions, arrangements or contracts of significance to the business of the Company to which the Company was a party during the year.
ARRANGEMENT TO PURCHASE SHARES OR DEBENTURES
None of the Directors or their spouses or children under the age of 18 had any right to subscribe for securities of the Company, or had exercised any such right during the year.
At no time during the year was the Company a party to any arrangements to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate.
CONTRACTS OF SIGNIFICANCE
No contracts of significance in relation to the Company's business in which the Company was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted during or at the end of the year.
SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES
At 31 December 2020, as far as the Directors were aware, the following entities or persons had interests and short positions of 5% or more of the issued shares and underlying shares of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:
Long positions in the ordinary shares of US$0.10 each of the Company
Percentage of | ||||
Number of | total issued | |||
Name | Capacity | shares | shares | Notes |
Shanghai Industrial Investment | Held by controlled corporation | 1,884,792 | 17.64% | (1) |
(Holdings) Company Limited | ||||
Mr. Yuan Chufeng | Held by controlled corporation | 1,781,000 | 16.67% | (2) |
Rosebrook Opportunities Fund LP | Investment manager | 1,216,701 | 11.39% |
Notes:
- Shanghai Industrial Investment (Holdings) Company Limited has an indirect interest of 1,884,792 shares in the Company through its 100% indirect ownership in Eternity Business (HK) Investment Limited.
- Mr. Yuan Chufeng's indirect interest in the Company were 1,781,000 shares by virtue of his 100% control over ZKJK Capital Management Limited.
Save as disclosed above, as at 31 December 2020, no person had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.
48 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
REPORT OF THE DIRECTORS
MAJOR CUSTOMERS AND SUPPLIERS
A substantial portion of the Company's income is derived from the Company's investments and bank deposits and the disclosure of information regarding customers would not be meaningful. The Company has no major suppliers requiring disclosure.
EMOLUMENT POLICY
The emolument policy of the employees of the Company is set up by the Remuneration Committee based on the employee's credential qualifications and competence. In addition, the emoluments of the INEDs are decided by the Board of Directors, having regard to the Company's operating results, individual performance and comparable market statistics, whereas no emoluments are determined for the Executive Directors or the Non-executive Directors of the Company.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY
During the year, the Company did not purchase, sell or redeem any of its own shares.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Company's Articles of Association or the laws of Cayman Islands which would oblige the Company to offer new shares on a pro rata basis to existing Shareholders.
SUFFICIENCY OF PUBLIC FLOAT
Based on information that is publicly available to the Company and within the knowledge of the Directors, there is sufficient public float of at least 25% of the Company's total number of issued shares was held by the public as at the date of this report.
DIRECTORS' INTERESTS IN A COMPETING BUSINESS
During the year and up to the date of this report, no Director is considered to have interests in a business which competes or is likely to compete, either directly or indirectly, with the businesses of the Company, as defined in the Listing Rules.
AUDITOR
Ernst & Young retires and a resolution for its reappointment as auditor of the Company will be proposed at the forthcoming Annual General Meeting.
On behalf of the Board
Shanghai International Shanghai Growth Investment Limited
LU Xuefang
Non-executive Director
Hong Kong, 22 March 2021
2020 Annual Report | 49 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
Ernst & Young | Tel | : +852 2846 9888 | |
22/F, CITIC Tower | 1 | Fax | : +852 2868 4432 |
1 Tim Mei Avenue | 22 | ey.com | |
Central, Hong Kong |
To the shareholders of Shanghai International Shanghai Growth Investment Limited (An exempted company incorporated in the Cayman Islands with limited liability)
OPINION
We have audited the financial statements of Shanghai International Shanghai Growth Investment Limited (the "Company") set out on pages 55 to 95, which comprise the statement of financial position as at 31 December 2020, and the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2020, and of its financial performance and its cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the HKICPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
50 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
To the shareholders of Shanghai International Shanghai Growth Investment Limited (An exempted company incorporated in the Cayman Islands with limited liability)
KEY AUDIT MATTERS (Cont'd)
Key audit matterHow our audit addressed the key audit matter
Valuation of the unlisted investment in Global Market Group Limited ("GMG")
The unlisted investment in GMG was classified as a financial asset at fair value through profit or loss in the statement of financial position at 31 December 2020.
We focused on this area because selecting both the valuation technique and the inputs to the valuation technique used to estimate the fair value of GMG involves significant judgment. The estimation process requires management to make assumptions that include, amongst others, enterprise value to sales ("EV/S") ratio and discount for lack of marketability ("DLOM").
As at 31 December 2020, the investment was written down to nil as disclosed in note 13 and was categorised within Level 3 in the fair value hierarchy as set out in note 20 to the financial statements.
The procedures we performed that addressed the key audit matter included, amongst others:
- Performed a walkthrough to understand the process for the preparation, review, approval and recording of the valuation of the investment;
- Sent a confirmation to the investee company to confirm the Company's shareholding;
- Evaluated the competence, capabilities and objectivity of management's specialist;
- Involved valuation specialists to assess the appropriateness of the valuation technique selected by reference to market practice for similar investments;
• | A g r e e d o b s e r v a b l e i n p u t s ( i . e . d a t a o f |
comparable companies including share price, | |
number of shares, revenue, cash, debts and non- | |
controlling interests) to the valuation model to | |
external market data; |
- Evaluated unobservable inputs including the EV/S and DLOM by comparing to assumptions used by market participants when valuing similar investments;
- Obtained the financial information of the investee company and analysed the financial performance and liquidity of the investee company;
- Assessed the revenue of the investee company by back - testing to its historical financial information;
- Assessed qualitative factors by reviewing the business plan of the investee company and communication between management and the investee company; and
- Assessed the completeness of the financial statement disclosures regarding fair value hierarchy as set out in note 20 to the financial statements against the requirements of HKFRSs.
2020 Annual Report | 51 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
To the shareholders of Shanghai International Shanghai Growth Investment Limited
(An exempted company incorporated in the Cayman Islands with limited liability)
OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
The directors of the Company are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors of the Company are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Company either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so.
The directors of the Company are assisted by the Audit Committee in discharging their responsibilities for overseeing the Company's financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Our report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
52 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
To the shareholders of Shanghai International Shanghai Growth Investment Limited
(An exempted company incorporated in the Cayman Islands with limited liability)
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
(Cont'd)
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
- Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion.
2020 Annual Report | 53 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
To the shareholders of Shanghai International Shanghai Growth Investment Limited
(An exempted company incorporated in the Cayman Islands with limited liability)
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
(Cont'd)
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Hui Wing Yee.
Ernst & Young
Certified Public Accountants
Hong Kong
22 March 2021
54 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Year ended 31 December 2020 | |||
2020 | 2019 | ||
Note | US$ | US$ | |
INCOME AND GAIN/(LOSS) ON INVESTMENTS | |||
Interest income | 53 | 4,426 | |
Dividend income | 20,622 | 7,811 | |
Other income | 5 | 13,935 | - |
Net change in unrealised gain/(loss) on financial assets | |||
at fair value through profit or loss | 7 | 32,087 | (248,557) |
Net gain on disposal of financial assets at fair | |||
value through profit or loss | 7 | 515,217 | 229,875 |
Exchange gain | 10,523 | 11,661 | |
592,437 | 5,216 | ||
EXPENSES | |||
Investment manager's fees | 18(a) | (73,005) | (80,061) |
Administrative expenses | (481,601) | (481,011) | |
(554,606) | (561,072) | ||
Profit/(Loss) before tax | 6 | 37,831 | (555,856) |
Income tax | 10 | - | - |
PROFIT/(LOSS) FOR THE YEAR | 37,831 | (555,856) | |
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR | 37,831 | (555,856) | |
EARNINGS/(LOSS) PER SHARE - BASIC AND DILUTED | 12 | US0.35 cents | (US5.20 cents) |
2020 Annual Report | 55 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
STATEMENT OF FINANCIAL POSITION
31 December 2020
2020 | 2019 | ||
Note | US$ | US$ | |
NON-CURRENT ASSET | |||
Financial assets at fair value through profit or loss | 13 | 286,518 | 288,305 |
Total non-current assets | 286,518 | 288,305 | |
CURRENT ASSETS | |||
Prepayments | 14 | 45,815 | 37,636 |
Cash and bank balances | 15 | 3,458,439 | 3,419,680 |
Total current assets | 3,504,254 | 3,457,316 | |
CURRENT LIABILITIES | |||
Accruals | 49,603 | 43,092 | |
Amount due to the investment manager | 18(c) | 51,834 | 51,025 |
Total current liabilities | 101,437 | 94,117 | |
NET CURRENT ASSETS | 3,402,817 | 3,363,199 | |
NET ASSETS | 3,689,335 | 3,651,504 | |
EQUITY | |||
Share capital | 16 | 1,068,600 | 1,068,600 |
Reserves | 2,620,735 | 2,582,904 | |
Total equity | 3,689,335 | 3,651,504 | |
NET ASSET VALUE PER SHARE | 17 | 0.35 | 0.34 |
LU Xuefang | WU Bin |
Director | Director |
56 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2020
Share | ||||||
Share | premium | Capital | Accumulated | |||
capital | account | reserve | losses | Total | ||
Note | US$ | US$ | US$ | US$ | US$ | |
(Note b) | ||||||
At 31 December 2019 | 1,068,600 | 12,921,815* | (5,836,550)* | (4,502,361)* | 3,651,504 | |
Total comprehensive income for the year: | - | - | - | 37,831 | 37,831 | |
Transfer from accumulated losses (Note b): | ||||||
Net unrealised gain on change | ||||||
in fair value of financial assets | ||||||
at fair value through profit or loss | 7 | - | - | 32,087 | (32,087) | - |
At 31 December 2020 | ||||||
1,068,600 | 12,921,815* | (5,804,463)* | (4,496,617)* | 3,689,335 | ||
At 31 December 2018 | 1,068,600 | 12,921,815 | (5,575,542) | (4,207,513) | 4,207,360 | |
Total comprehensive loss for the year: | - | - | - | (555,856) | (555,856) | |
Transfer from accumulated losses (Note b): | ||||||
Net unrealised loss on change in fair value of | ||||||
financial assets at fair value through profit or | ||||||
loss | 7 | - | - | (261,008) | 261,008 | - |
At 31 December 2019 | 1,068,600 | 12,921,815* | (5,836,550)* | (4,502,361)* | 3,651,504 | |
- These reserve accounts comprise the reserves of US$2,620,735 (2019: US$2,582,904) in the statement of financial position.
Notes:
Pursuant to the Company's Amended and Restated Memorandum and Articles of Association passed on 26 November 2019, profits arising from the realisation of investments shall be available for distribution as dividends. Profits arising from revaluation of investments may be available for distribution as dividends only at the discretion of the board of directors. As a result, a net unrealised gain on change in fair value of financial assets at fair value through profit or loss is transferred from accumulated losses to the capital reserve.
During the year ended 31 December 2020, a net unrealised gain on change in fair value of financial assets at fair value through profit or loss of US$32,087 was transferred from accumulated losses to the capital reserve (2019: net unrealised loss of US$261,008)
2020 Annual Report | 57 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
STATEMENT OF CASH FLOWS
Year ended 31 December 2020
2020 | 2019 | ||
Note | US$ | US$ | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Profit/(loss) before tax | 37,831 | (555,856) | |
Adjustments for: | |||
Interest income | (53) | (4,426) | |
Dividend income | (20,622) | (7,811) | |
Net gain on disposal of financial assets | |||
at fair value through profit or loss | (515,217) | (229,875) | |
Net change in unrealised (gain)/loss | |||
on financial assets at fair value through profit or loss | (32,087) | 248,557 | |
Operating cash flows before movements in working capital | (530,148) | (549,411) | |
Increase in financial assets at fair value through profit or loss | 549,091 | 410,874 | |
(Increase)/decrease in prepayments | (8,179) | 52,423 | |
Increase/(decrease) in accruals | 6,511 | (2,215) | |
Increase in an amount due to the investment manager | 809 | 9,866 | |
Cash generated from/(used in) operations | 18,084 | (78,463) | |
Interest received | 53 | 4,426 | |
Dividend received | 20,622 | 7,811 | |
Net cash flows from/(used in) operating activities | 38,759 | (66,226) | |
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | 38,759 | (66,226) | |
Cash and cash equivalents at beginning of year | 3,419,680 | 3,485,906 | |
CASH AND CASH EQUIVALENTS AT END OF YEAR | 3,458,439 | 3,419,680 | |
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS | |||
Bank balances | 15 | 3,458,439 | 3,419,680 |
CASH AND CASH EQUIVALENTS AS STATED | |||
IN THE STATEMENT OF CASH FLOWS | 3,458,439 | 3,419,680 | |
58 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
1. CORPORATE INFORMATION
Shanghai International Shanghai Growth Investment Limited (the "Company") is incorporated in the Cayman Islands as an exempted company with limited liability and the Company's shares with stock code 770 are listed on The Stock Exchange of Hong Kong Limited ("Hong Kong Stock Exchange"). The registered office address of the Company is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
The Company is an investment company whose principal business is to make investments in listed and unlisted equity and debt securities as well as in other financial instruments and investment vehicles which are established or have significant operations or businesses primarily in the Greater China Region.
2.1 BASIS OF PREPARATION
These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for financial assets at fair value through profit or loss which have been measured at fair value. These financial statements are presented in United States dollars ("US$") and all values are rounded to the nearest dollar except when otherwise indicated.
2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Company has adopted the Conceptual Framework for Financial Reporting 2018 and the following revised HKFRSs, for the first time for the current year's financial statements.
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKFRS 9, HKAS 39 | Interest Rate Benchmark Reform |
and HKFRS 7 | |
Amendments to HKAS 1 and HKAS 8 | Definition of Material |
Amendments to HKFRS 16 | Covid-19-Related Rent Concessions |
(early adopted) |
Except for the amendments to HKFRS 3, HKFRS 9, HKAS 39 and HKFRS 7 and HKFRS 16, which are not relevant to the preparation of the Company's financial statements, the nature and the impact of the Conceptual Framework for Financial Reporting 2018 and the revised HKFRSs are described below:
2020 Annual Report | 59 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (Cont'd)
Conceptual Framework for Financial Reporting 2018 (the "Conceptual Framework") sets out a comprehensive set of concepts for financial reporting and standard setting, and provides guidance for preparers of financial statements in developing consistent accounting policies and assistance to all parties to understand and interpret the standards. The Conceptual Framework includes new chapters on measurement and reporting financial performance, new guidance on the derecognition of assets and liabilities, and updated definitions and recognition criteria for assets and liabilities. It also clarifies the roles of stewardship, prudence and measurement uncertainty in financial reporting. The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The Conceptual Framework did not have any significant impact on the financial position and performance of the Company.
The amendments to HKAS 1 and HKAS 8 provide a new definition of material that states, "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.". The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments have had no impact on the financial statements of, nor is there expected to be any future impact on the Company.
60 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS
The Company has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.
Amendments to HKFRS 3 | Reference to the Conceptual Framework2 |
Amendments to HKFRS 9, | Interest Rate Benchmark Reform - Phase 21 |
HKAS 39, HKFRS 7, | |
HKFRS 4 and HKFRS 16 | |
Amendments to HKFRS 10 | Sale or Contribution of Assets between an Investor and its |
and HKAS 28 (2011) | Associate or Joint Venture4 |
HKFRS 17 | Insurance Contracts3 |
Amendments to HKFRS 17 | Insurance Contracts3,6 |
Amendments to HKAS 1 | Classification of Liabilities as Current or Non-current3,5 |
Amendments to HKAS 16 | Property, Plant and Equipment: Proceeds before Intended |
Use2 | |
Amendments to HKAS 37 | Onerous Contracts - Cost of Fulfilling a Contract2 |
Annual Improvements to HKFRSs | Amendments to HKFRS 1, HKFRS 9, Illustrative Examples |
2018-2020 | accompanying HKFRS 16, and HKAS 412 |
1
2
3
4
5
6
Effective for annual periods beginning on or after 1 January 2021 Effective for annual periods beginning on or after 1 January 2022 Effective for annual periods beginning on or after 1 January 2023
No mandatory effective date yet determined but available for adoption
As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial Statements - Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause was revised in October 2020 to align the corresponding wording with no change in conclusion
As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to extend the temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for annual periods beginning before 1 January 2023
Further information about those HKFRSs that are expected to be applicable to the Company is described below.
2020 Annual Report | 61 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (Cont'd)
Amendments to HKAS 1 clarify the requirements for classifying liabilities as current or non-current. The amendments specify that if an entity's right to defer settlement of a liability is subject to the entity complying with specified conditions, the entity has a right to defer settlement of the liability at the end of the reporting period if it complies with those conditions at that date. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability. The amendments also clarify the situations that are considered a settlement of a liability. The amendments are effective for annual periods beginning on or after 1 January 2023 and shall be applied retrospectively. Earlier application is permitted. The amendments are not expected to have any significant impact on the Company's financial statements.
Annual Improvements to HKFRSs 2018-2020 sets out amendments to HKFRS 1, HKFRS 9, Illustrative Examples accompanying HKFRS 16, and HKAS 41. Details of the amendments that are expected to be applicable to the Company are as follows:
- HKFRS 9 Financial Instruments: clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other's behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual periods beginning on or after 1 January 2022. Earlier application is permitted. The amendment is not expected to have a significant impact on the Company's financial statements.
- HKFRS 16 Leases: removes the illustration of payments from the lessor relating to leasehold improvements in Illustrative Example 13 accompanying HKFRS 16. This removes potential confusion regarding the treatment of lease incentives when applying HKFRS 16.
62 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair value measurement
The Company measures its equity investments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 | - based on quoted prices (unadjusted) in active markets for identical assets or liabilities | |
based on valuation techniques for which the lowest level input that is significant to the fair | ||
Level 2 | - | value measurement is observable, either directly or indirectly |
based on valuation techniques for which the lowest level input that is significant to the fair | ||
Level 3 | - | value measurement is unobservable |
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
2020 Annual Report | 63 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Related parties
A party is considered to be related to the Company if:
- the party is a person or a close member of that person's family and that person
- has control or joint control over the Company;
- has significant influence over the Company; or
- is a member of the key management personnel of the Company or of a parent of the Company;
or
- the party is an entity where any of the following conditions applies:
- the entity and the Company are members of the same group;
- one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
- the entity and the Company are joint ventures of the same third party;
- one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
- the entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company;
- the entity is controlled or jointly controlled by a person identified in (a);
- a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
- the entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to the parent of the Company.
64 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Investments and other financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Company's business model for managing them. The Company initially measures a financial asset at its fair value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. The Company's investments in unlisted and listed equity securities are designated as at fair value through profit or loss and the Company expects to hold the investments for more than twelve months.
In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Company's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortised cost
Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in profit or loss.
This category includes equity investments which the Company had not irrevocably elected to classify at fair value through other comprehensive income. Dividends on equity investments classified as financial assets at fair value profit or loss are also recognised as dividend income in profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
2020 Annual Report | 65 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Investments and other financial assets (Cont'd)
Subsequent measurement (Cont'd)
Financial assets at fair value through profit or loss (Cont'd)
A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.
A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Company's statement of financial position) when:
- the rights to receive cash flows from the asset have expired; or
- the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass- through" arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company's continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
66 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Impairment of financial assets
The Company recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-month (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, the Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.
The Company considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs.
Stage 1 | - | Financial instruments for which credit risk has not increased significantly since initial |
recognition and for which the loss allowance is measured at an amount equal to | ||
12-month ECLs | ||
Stage 2 | - | Financial instruments for which credit risk has increased significantly since initial |
recognition but that are not credit-impaired financial assets and for which the loss | ||
allowance is measured at an amount equal to lifetime ECLs | ||
Stage 3 | - | Financial assets that are credit-impaired at the reporting date (but that are not |
purchased or originated credit-impaired) and for which the loss allowance is | ||
measured at an amount equal to lifetime ECLs |
2020 Annual Report | 67 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company's financial liabilities include accruals and an amount due to the investment manager.
Subsequent measurement
After initial recognition, financial liabilities are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
Cash and cash equivalents
For the purpose of the statement of cash flows and the statement of financial position, cash and cash equivalents comprise cash at bank, which is not restricted as to use, is subject to an insignificant risk of changes in value, and has a short maturity of generally within three months when acquired, and forms an integral part of the Company's cash management.
68 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Employee benefits
Pension scheme
The Company operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the "MPF Scheme") under the Mandatory Provident Fund Schemes Ordinance for all of its employees. Contributions are made based on a percentage of the employees' basic salaries and are charged to the profit or loss and other comprehensive income as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Company in an independently administered fund. The Company's employer contributions vest fully with the employees when contributed into the MPF Scheme.
Fees and commission
Unless included in the effective interest calculation, fees and commissions are recognised on an accrual basis.
Income tax
The Cayman Islands
Under the current Cayman Islands law, there are no income tax, corporation tax, capital gains tax or any other kinds of tax on profits or gains or tax in the nature of estate duty or inheritance tax currently in effect.
Hong Kong
Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Company operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
- when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, if any, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
2020 Annual Report | 69 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Income tax (Cont'd)
Hong Kong (Cont'd)
Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, proofed and the carryforward of unused tax credits and unused tax losses can be utilised, except:
- when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, if any, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if and only if the Company has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Revenue recognition
Interest income from a financial asset excluding financial assets at fair value through profit or loss is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.
Dividend income from investments in securities is recognised when the shareholders' right to receive payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably
70 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Dividends
Final dividends proposed by the directors are classified as a separate allocation of retained profits/within the equity section of the statement of financial position, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.
Interim dividends are simultaneously proposed and declared, because the Company's memorandum and articles of association grant the directors the authority to declare the interim dividends. Consequently, interim dividends are recognised immediately as liability when they are proposed and declared.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as other income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed.
Foreign currencies
These financial statements are presented in United States dollars, which is the Company's functional currency. Foreign currency transactions are initially recorded using its functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on the translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).
In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of initial transaction is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of the advance consideration.
2020 Annual Report | 71 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.
Judgements
In the process of applying the Company's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:
Going concern
The Company's management has made an assessment on the Company's ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.
Fair value of financial instruments
When the fair value of financial assets recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. The estimates include considerations of liquidity and model inputs such as the share price of the underlying investment, correlation, volatility and transactions of shares. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the statement of financial position and the level where the instruments are disclosed in the fair value hierarchy.
The unlisted equity investments have been valued based on a market-based valuation technique as detailed in note 20 to the financial statements. The valuation requires the Company to determine the comparable public companies (peers) and select the price multiple. In addition, the Company makes estimates about the discount for illiquidity and size differences. The Company classifies the fair value of these investments as Level 3.
72 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (Cont'd)
Fair value of financial instruments (Cont'd)
HKFRS 13 requires disclosures relating to fair value measurements using a three-tier fair value hierarchy that reflects the significance of the inputs used in measuring fair values. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustments based on unobservable inputs, then that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. To assess the significance of a particular input to the entire measurement, the Company performs a sensitivity analysis (note 20).
Deferred tax assets
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
4. OPERATING SEGMENT INFORMATION
For management purposes and information used by the Company's executive directors, as the chief operating decision makers, the Company is organised into business units based on the categories of investments and has two reportable operating segments as follows:
Listed securities | - | Investments in equity securities listed on relevant stock exchanges |
Unlisted securities | - | Investments in unlisted equity securities |
Further details of the Company's investments are included in note 13 to the financial statements.
2020 Annual Report | 73 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
4. OPERATING SEGMENT INFORMATION (Cont'd)
The following is an analysis of the Company's results by operating segments:
Listed | Unlisted | ||
Year ended 31 December 2020 | securities | securities | Total |
US$ | US$ | US$ | |
Segment results | 567,926 | - | 567,926 |
Interest income from bank deposits | 53 | ||
Exchange gain | 10,523 | ||
Other income | 13,935 | ||
Unallocated expenses | (554,606) | ||
Profit before tax | |||
37,831 | |||
For the year ended 31 December 2020, segment results represented the net gain on disposal of listed equity securities classified as financial assets at fair value through profit or loss, net gain on change in fair value of listed equity securities classified as financial assets at fair value through profit or loss, and the corresponding dividend income earned by each segment without the allocation of administrative expenses and interest income from bank deposits as well as the investment manager's fees.
Listed | Unlisted | ||
Year ended 31 December 2019 | securities | securities | Total |
US$ | US$ | US$ | |
Segment results | 248,594 | (259,465) | (10,871) |
Interest income from bank deposits | 4,426 | ||
Exchange gain | 11,661 | ||
Unallocated expenses | (561,072) | ||
Loss before tax | (555,856) | ||
For the year ended 31 December 2019, segment results represented the net gain on disposal of listed equity securities classified as financial assets at fair value through profit or loss, net loss on change in fair value of both listed and unlisted equity securities classified as financial assets at fair value through profit or loss, and the corresponding dividend income earned by each segment without the allocation of administrative expenses and interest income from bank deposits as well as the investment manager's fees.
As management considers that the Company's nature of business is investment holding, there was no information regarding major customers as determined by the Company and no segment revenue is presented.
74 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
4. OPERATING SEGMENT INFORMATION (Cont'd)
The following is an analysis of the Company's assets by operating segments:
Listed | Unlisted | ||
At 31 December 2020 | securities | securities | Total |
US$ | US$ | US$ | |
Financial assets at fair value | |||
through profit or loss | 286,518 | - | 286,518 |
Total segment assets | |||
286,518 | - | 286,518 | |
Unallocated assets | 3,504,254 | ||
Total assets | |||
3,790,772 | |||
Listed | Unlisted | ||
At 31 December 2019 | securities | securities | Total |
US$ | US$ | US$ | |
Financial assets at fair value | |||
through profit or loss | 288,305 | - | 288,305 |
Total segment assets | 288,305 | - | 288,305 |
Unallocated assets | 3,457,316 | ||
Total assets | 3,745,621 | ||
For the purposes of monitoring segment performance and allocating resources between segments, all assets are allocated to reportable segments other than prepayments, and cash and bank balances.
All liabilities as at 31 December 2020 and 2019 were unallocated liabilities.
2020 Annual Report | 75 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
5. OTHER INCOME
An analysis of other income is as follows:
2020 | 2019 | |
US$ | US$ | |
Government grants | 13,935 | - |
13,935 | - | |
Government grants from Hong Kong Special Administrative Region ("HKSAR") Government Employment Support Scheme ("ESS") have been received for retaining employees who may otherwise be made redundant. The related salary expenditure for which government grant intended to compensate has been fully undertaken and recognised as other income. There are no unfulfilled conditions or contingencies relating to these grants.
6. PROFIT/(LOSS) BEFORE TAX
The Company's profit/(loss) before tax is arrived at after charging:
2020 | 2019 | |
US$ | US$ | |
Auditor's remuneration | 50,307 | 50,153 |
Custodian fee | 10,462 | 12,221 |
Employee benefit expense | ||
(excluding directors' remuneration) (Note 8) | ||
Salaries and other benefits | 183,074 | 176,352 |
Retirement benefit costs | 4,642 | 4,595 |
76 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
7. | GAIN OR LOSS ON INVESTMENTS | |||
Listed | Unlisted | |||
At 31 December 2020 | securities | securities | Total | |
US$ | US$ | US$ | ||
Included in profit or loss: | ||||
Realised gain: | ||||
Financial assets at fair value through profit or loss | 515,217 | - | 515,217 | |
Unrealised gain: | ||||
Financial assets at fair value through profit or loss | 32,087 | - | 32,087 | |
Total realised and unrealised gain | ||||
included in profit or loss | 547,304 | - | 547,304 | |
Total realised and unrealised gain for the year | ||||
547,304 | - | 547,304 | ||
At 31 December 2019 | ||||
Included in profit or loss: | ||||
Realised gain: | ||||
Financial assets at fair value through profit or loss | 229,875 | - | 229,875 | |
Unrealised gain/(loss): | ||||
Financial assets at fair value through profit or loss | 10,908 | (259,465) | (248,557) | |
Total realised and unrealised gain/(loss) | ||||
included in profit or loss | 240,783 | (259,465) | (18,682) | |
Total realised and unrealised gain/(loss) for the year | 240,783 | (259,465) | (18,682) | |
2020 Annual Report | 77 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
8. DIRECTORS' REMUNERATION
Directors' remuneration for the year, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and
- of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, is as follows:
2020 | 2019 | |
US$ | US$ | |
Fees: | ||
Dr. HUA Min | 16,757 | 15,985 |
Mr. ONG Ka Thai | 16,757 | 15,985 |
Mr. YICK Wing Fat, Simon | 16,757 | 15,985 |
50,271 | 47,955 | |
Except for the directors' fees paid to the independent non-executive directors totalling US$50,271 (2019: US$47,955), none of the directors has received any other emoluments for 2020 and 2019.
There were no other emoluments payable to the directors during the year (2019: Nil).
78 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
9. FIVE HIGHEST PAID EMPLOYEES
The five highest paid employees during the year included three directors (2019: three directors), details of whose remuneration are set out in note 8 above. Details of the remuneration for the year of the remaining two (2019: two) highest paid employees who are neither a director nor chief executive of the Company are as follows:
2020 | 2019 | |
US$ | US$ | |
Salaries, allowances and benefits in kind | 183,074 | 176,352 |
Pension scheme contributions | 4,642 | 4,595 |
187,716 | 180,947 | |
The number of non-director and non-chief executive highest paid employees whose remuneration fell within the following bands is as follows:
Number of employees | ||
2020 | 2019 | |
Nil to HK$1,000,000 | 2 | 2 |
HK$1,000,001 to HK$1,500,000 | - | - |
HK$1,500,001 to HK$2,000,000 | - | - |
2 | 2 | |
2020 Annual Report | 79 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
10. INCOME TAX
No provision for Hong Kong profits tax has been made in the financial statements as the Company did not generate assessable profits arising in Hong Kong for the year ended 31 December 2020 (2019: Nil).
A reconciliation of the tax expense applicable to profit/(loss) before tax at the statutory rate to the tax expense at the effective tax rate, and a reconciliation of the applicable rate (i.e., the statutory tax rate) to the effective tax rate, are as follows:
2020 | 2019 | ||||
US$ | % | US$ | % | ||
Profit/(loss) before tax | 37,831 | (555,856) | |||
Tax at the statutory tax rate | 6,242 | 16.5 | (91,716) | 16.5 | |
Tax losses not recognised | - | - | 51,494 | (9.3) | |
Tax losses utilised | (1,736) | (4.6) | - | - | |
Income not subject to tax | (5,710) | (15.1) | (3,911) | 0.7 | |
Expenses not deductible for tax | 1,204 | 3.2 | 44,133 | (7.9) | |
Tax charge at the Company's | |||||
effective rate | - | - | - | - | |
Deferred tax assets have not been previously recognised as the Company has been loss-making for some time and it is not considered probable that taxable profits will be available to set off against the accumulated tax losses from previous years of assessment in the foreseeable future.
11. DIVIDENDS
No dividend has been proposed by the directors for the year ended 31 December 2020 (2019: Nil).
12. EARNINGS/(LOSS) PER SHARE - BASIC AND DILUTED
The calculation of the basic earnings/(loss) per share is based on the profit for the year of US$37,831 (2019: loss of US$555,856) and the weighted average number of ordinary shares of 10,686,000 (2019: 10,686,000) in issue during the year.
No adjustment has been made to the basic earnings/(loss) per share amounts presented for the years ended 31 December 2020 and 2019 in respect of dilution as the Company had no potentially dilutive ordinary shares in issue during the years ended 31 December 2020 and 2019.
80 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
13. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2020 | 2019 | |
US$ | US$ | |
Non-current: | ||
Unlisted equity investment - Ordinary shares, at fair value | ||
- Global Market Group Limited ("GMG") | - | - |
Listed equity investments, at fair value | 286,518 | 288,305 |
Total | 286,518 | 288,305 |
Unlisted equity investment - Ordinary shares, at fair value:
The above unlisted investment at 31 December 2020 represented 8,734,897 ordinary shares of GMG which was 9.36% of GMG's total issued ordinary shares (2019: 9.36%).
As at 31 December 2020 and 2019, the value of GMG's ordinary shares was measured using the relative valuation model. Management considered both quantitative and qualitative information including GMG's financial performance and its ability to attract new funding in the future. During the years ended 31 December 2020 and 2019, based on the available financial information, the management believed that GMG would not have sufficient working capital to maintain its business operation due to continuous operating losses and potential contingent liabilities involved. In addition, GMG had no clear business plan and capital raising plan in the near future. Hence, the management believed that GMG's business model would not be sustainable and decided to write down the unlisted investment to nil (2019: nil).
Listed equity investments, at fair value:
The Company's investments in listed equity securities are designated by the Company as at fair value through profit or loss. The Company considered these investments to be strategic in nature.
During the year ended 31 December 2020, the net fair value gain in respect of the Company's Hong Kong investments recognised in profit or loss amounted to US$547,304 (2019: a net fair value gain of US$240,783), of which a net gain of US$515,217 (2019: a net gain of US$229,875) was recognised upon disposal of the listed equity investments for the year.
2020 Annual Report | 81 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
14. PREPAYMENTS
2020 | 2019 | |
US$ | US$ | |
Prepayments | 45,815 | 37,636 |
15. CASH AND BANK BALANCES
Cash at bank earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with a creditworthy bank with no recent history of default.
16. SHARE CAPITAL
2020 | 2019 | |
US$ | US$ | |
Authorised: | ||
18,000,000 (2019: 18,000,000) ordinary shares | ||
of US$0.10 each | 1,800,000 | 1,800,000 |
Issued and fully paid | ||
10,686,000 (2019: 10,686,000) ordinary shares | ||
of US$0.10 each | 1,068,600 | 1,068,600 |
17. NET ASSET VALUE PER SHARE
The calculation of the net asset value ("NAV") per share is based on the Company's NAV of US$3,689,335 as at 31 December 2020 (2019: US$3,651,504) and the number of ordinary shares of 10,686,000 in issue as at 31 December 2020 (2019: 10,686,000).
82 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
18. RELATED PARTY TRANSACTIONS
- In addition to the transactions detailed elsewhere in these financial statements, the Company had the following transactions with a related party during the year:
2020 | 2019 | ||
Note | US$ | US$ | |
Investment management and administration | |||
fees charged by the Investment Manager | (i) | 73,005 | 80,061 |
Notes:
-
Shanghai International Asset Management (Hong Kong) Company Limited (the "Investment Manager") provides key management personnel services to the Company. All directors of the Investment Manager are common directors of the Company.
In accordance with the terms of the investment management agreement and nine supplemental agreements (collectively the "Investment Management Agreements"), the management and administration fees are calculated and payable quarterly in advance at 0.5% of the NAV (calculated before deductions of the fees payable to the Investment Manager, and the custodian for that quarter) of the Company calculated on the last business day of the previous quarter. - With effect from the year ended 31 December 2014, the Investment Manager is entitled to an incentive fee equal to 20% of the excess amount by which the NAV of the Company as at 31 December of each year exceeds the high water mark, i.e. the highest NAV as at 31 December in any year less the aggregate amount of all dividends paid by the Company during the year. As defined in the seventh supplemental agreement dated 19 March 2014 to the Investment Management Agreements, the initial high water mark should be the NAV as at 31 December 2010, being US$31,048,060. With effect from 1 July 2017, as defined in the eighth supplemental agreement dated 23 March 2017, the high water mark has been reset to the NAV as at 31 December 2016, being US$8,182,713.
During the year ended 31 December 2020, the Investment Manager was not entitled to receive any incentive fee in relation to the performance of the Company (2019: Nil), in accordance with the incentive fee calculation of the Investment Management Agreements.
The above related party transactions also constitute continuing connected transactions as defined in Chapter 14A of the Listing Rules.
-
Shanghai International Asset Management (Hong Kong) Company Limited (the "Investment Manager") provides key management personnel services to the Company. All directors of the Investment Manager are common directors of the Company.
- Other transactions with a related party
Employee benefit expense was paid for administrative services provided by two employees of the Investment Manager who were seconded and provided administrative services only to the Company. The employee benefit expense was paid by the Investment Manager and charged back to the Company in the form of fee note every quarter which is normally settled at the beginning of each quarter. Details of employee benefit expense is included in note 6 to the financial statements.
The above related party transactions also constitute continuing connected transactions as defined in Chapter 14A of the Listing Rules. Exemption from the connected transaction requirements are available for such transactions in relation to administrative services shared between the Company and the Investment Manager on a cost basis. - Outstanding balance with a related party:
An amount due to the Investment Manager comprises mainly the employee benefit expense payable and out-of-pocket expense payable. The Company had an outstanding amount due to the Investment Manager of US$51,834 (2019: US$51,025) as at the end of the reporting period. This balance is unsecured, interest-free and repayable on demand. - Compensation of key management personnel of the Company:
The key management personnel of the Company comprise the directors of the Company. Details of directors' emoluments are included in notes 8 and 9 to the financial statements.
2020 Annual Report | 83 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
19. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:
2020 | |||
Financial | Financial | ||
assets at fair | assets at | ||
value through | amortised | ||
Financial assets | profit or loss* | cost | Total |
US$ | US$ | US$ | |
Financial assets at fair value through profit or loss | 286,518 | - | 286,518 |
Cash and bank balances | - | 3,458,439 | 3,458,439 |
286,518 | 3,458,439 | 3,744,957 | |
- Designated as such upon initial recognition
Financial liabilities at
Financial liabilitiesamortised cost US$
Amount due to the investment manager | 51,834 |
84 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
19. FINANCIAL INSTRUMENTS BY CATEGORY (Cont'd)
The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows: (Cont'd)
2019 | |||
Financial | Financial | ||
assets at fair | assets at | ||
value through | amortised | ||
Financial assets | profit or loss* | cost | Total |
US$ | US$ | US$ | |
Financial assets at fair value through profit or loss | 288,305 | - | 288,305 |
Cash and bank balances | - | 3,419,680 | 3,419,680 |
288,305 | 3,419,680 | 3,707,985 | |
- Designated as such upon initial recognition
Financial liabilities at
Financial liabilitiesamortised cost US$
Amount due to the investment manager | 51,025 |
20. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS
The financial assets at fair value through profit or loss held by the Company are carried at fair value.
Management has assessed that the fair values of all other financial assets and liabilities, carried at amortised cost, approximate to their respective carrying amounts due to the relatively short-term nature of these instruments.
The Investment Manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments and reports directly to the chief financial officer and the audit committee. At each reporting date, the Investment Manager analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer and the directors. The valuation process and results are discussed with the audit committee twice a year for interim and annual financial reporting.
2020 Annual Report | 85 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
20. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (Cont'd)
The fair values of listed equity investments are based on quoted market prices. The fair value of an unlisted equity investment designated at fair value through profit or loss has been estimated using a market-based valuation technique based on assumptions that are not supported by observable market prices or rates. The valuation requires the directors to determine comparable public companies (peers) based on industry, size, leverage and strategy, and to calculate an appropriate price multiple, such as enterprise value to sales ("EV/S") multiple for each comparable company identified. The multiple is calculated by dividing the enterprise value of the comparable company by a sales measure. The multiple is then discounted for considerations such as illiquidity based on company-specific facts and circumstances. The discounted multiple is applied to the corresponding sales measure of the unlisted equity investments to measure the fair value. The directors believe that the estimated fair value resulting from the valuation technique, being further written down to nil, which is recorded in the statement of financial position, and the related change in fair value, which is recorded in profit or loss, is reasonable, and that it was the most appropriate value at the end of the reporting period.
Below is a summary of significant unobservable inputs to the valuation of a financial instrument together with a quantitative sensitivity analysis as at 31 December 2020 and 2019:
Significant | ||||
Valuation | unobservable | Sensitivity of | ||
technique | input | Amount | fair value to the input | |
Unlisted equity | Relative valuation | *EV/S ratio | 2020: 1.81X | 10% (2019: 10%) increase/ |
investment | model | (2019: 2.44X) | decrease in EV/S ratio would | |
result in increase/decrease | ||||
in fair value by Nil (2019: Nil) | ||||
(note a). | ||||
Revenue | 2020: | 10% (2019: 10%) increase/ | ||
US$5.32 million | decrease in revenue would | |||
(2019: | result in increase/decrease | |||
US$5.02 million) | in fair value by Nil (2019: Nil) | |||
(Note a). | ||||
Discount for | 2020: 40% | 10% (2019: 10%) increase/ | ||
lack of | (2019: 40%) | decrease in discount would | ||
marketability | result in increase/decrease in | |||
fair value by Nil (2019: Nil). |
- EV/S ratio stands for the Enterprise Value to Sales ratio.
Note a: The 2020 and 2019 fair value of the unlisted equity investment was written down to nil, so the inputs would not result in any impact on its fair value.
86 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
20. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (Cont'd)
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Company's financial instruments:
Assets measured at fair value:
As at 31 December 2020 | ||||
Fair value measurement using | ||||
Quoted price | Significant | Significant | ||
in active | observable | unobservable | ||
markets | inputs | inputs | ||
(Level 1) | (Level 2) | (Level 3) | Total | |
US$ | US$ | US$ | US$ | |
Financial assets at fair value | ||||
through profit or loss: | ||||
Listed equity investments | 286,518 | - | - | 286,518 |
Unlisted equity investment** | - | - | - | - |
286,518 | - | - | 286,518 | |
As at 31 December 2019 | ||||
Fair value measurement using | ||||
Quoted price | Significant | Significant | ||
in active | observable | unobservable | ||
markets | inputs | inputs | ||
(Level 1) | (Level 2) | (Level 3) | Total | |
US$ | US$ | US$ | US$ | |
Financial assets at fair value | ||||
through profit or loss: | ||||
Listed equity investments | 288,305 | - | - | 288,305 |
Unlisted equity investment** | - | - | - | - |
288,305 | - | - | 288,305 | |
- Level 3 contained the unlisted equity investment of the Company that was written down to nil. Please refer to note 13 to the financial statements.
2020 Annual Report | 87 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
20. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (Cont'd)
Fair value hierarchy (Cont'd)
Assets measured at fair value: (Cont'd)
2020 | 2019 | |
US$ | US$ | |
Equity investment at fair value through profit or loss - unlisted: | ||
At 1 January | - | 259,465 |
Change in fair value | - | (259,465) |
At 31 December | - | - |
The Company did not have any financial liabilities measured at fair value as at 31 December 2020 and 2019.
During the year, there were no transfers of fair value measurements between Level 1 and Level 2 (2019: Nil)
and no transfers into or out of Level 3 for financial assets at fair value through profit or loss (2019: Nil).
88 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's principal financial instruments comprise investments in listed securities, unlisted securities, cash and bank balances and an amount due to the investment manager.
The main risks arising from the Company's financial instruments are equity price risk, foreign currency risk, interest rate risk, credit risk and liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below:
Market risk
The Company's exposures to market risk include equity price risk, foreign currency risk and interest rate risk.
- Equity price risk
Equity price risk is the risk that the fair values of equity securities decrease as a result of changes in the levels of equity indices and the value of individual securities. The Company is exposed to equity price risk arising from mainly individual equity investments included in financial assets at fair value through profit or loss (note 13) as at 31 December 2020. The Company's listed investments are listed on the Hong Kong Stock Exchange and are valued at quoted market prices at the end of the reporting period.
The market equity index for the following stock exchange from the close of business of the nearest trading day in the year to the end of the reporting period and its respective highest and lowest points during the year were as follows:
31 December | High/low | 31 December | High/low | |
2020 | 2020 | 2019 | 2019 | |
Hong Kong | ||||
- Hang Seng Index ("HSI") | 27,231 | 29,175/ | 28,190 | 30,280/ |
21,139 | 24,900 |
The Company views the HSI as an indication of a reasonably possible market movement for its securities listed in Hong Kong. The following table demonstrates the sensitivity to a reasonably possible 5.69% (2019: 4.94%) change in the fair values of the equity investments, with all other variables held constant and before any impact on tax, based on their carrying amounts at the end of the reporting period.
As at 31 December 2020, the investment in GMG was valued using the relative valuation model where the comparable companies used in the model were listed on different stock exchanges. Management's best estimate of the effect on the change in profit before tax and equity due to a reasonably possible increase of 10% in the EV/S ratio or the revenue of GMG, with all variables held constant, amounted to nil (2019: nil). An equivalent decrease in the EV/S ratio or the revenue of GMG would have resulted in an equivalent, but opposite, impact.
2020 Annual Report | 89 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd)
Market risk (Cont'd)
- Equity price risk (Cont'd)
Carrying | Increase/ | ||
amount | (decrease) | Increase/ | |
of equity | in profit/(loss) | (decrease) | |
investments | before tax | in equity* | |
US$ | US$ | US$ | |
2020 | |||
Investments listed in Hong Kong | |||
- Financial assets at fair value | |||
through profit or loss | 286,518 | 16,303 | - |
2019 | |||
Investments listed in Hong Kong | |||
- Financial assets at fair value | |||
through profit or loss | 288,305 | 14,242 | - |
- Foreign currency risk
Certain financial assets and liabilities of the Company including cash and bank balances, an amount due to the investment manager, investments in unlisted securities and investments in listed securities are denominated in Renminbi (RMB), HK$ and US$. The Company currently does not have a foreign currency hedging policy. However, management closely monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.
In 2020, the Company was mainly exposed to fluctuations in the exchange rate of RMB (2019: RMB) against US$. As HK$ is pegged to US$, the exposure to fluctuations in the exchange rate of HK$ is not considered to be significant, and thus, this effect is not considered in the sensitivity analysis below.
Management considered the sensitivity to a reasonably possible change between US$ and RMB as shown in the table below for assessing the currency risk, after considering the average exchange rates between the currencies in 2020 and 2019. However, management closely monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.
90 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd)
Market risk (Cont'd)
- Foreign currency risk (Cont'd)
The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the RMB exchange rates against US$, with all other variables held constant, on the Company's profit/(loss) before tax and the Company's equity:
Increase/ | |||
Increase/ | (decrease) | Increase/ | |
(decrease) | in profit/(loss) | (decrease) | |
in RMB rate | before tax | in equity* | |
% | US$ | US$ | |
2020 | |||
If the US$ weakens against the RMB | (6.3) | (997) | - |
If the US$ strengthens against the RMB | 6.3 | 997 | - |
2019 | |||
If the US$ weakens against the RMB | (1.2) | (181) | - |
If the US$ strengthens against the RMB | 1.2 | 181 | - |
- Excluding accumulated losses
- Interest rate risk
Management closely monitors interest rate movements and manages the potential risk. The Company currently does not have an interest rate hedging policy. However, management monitors interest rate change exposure and will consider hedging significant interest rate change exposure should the need arise.
The Company is exposed to cash flow interest rate risk through the impact of rate changes on interest-bearing financial assets, which are variable rate bank balances of US$3,458,439 (2019: US$3,419,680).
As the interest rates of the bank balances are minimal, the Company's exposure to interest rate risk is also minimal.
2020 Annual Report | 91 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd)
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss on the Company by failing to discharge an obligation.
The Company is exposed to the risk of credit-related losses that can occur as a result of a counterparty or issuer being unable or unwilling to honour its contractual obligations. These credit exposures exist within financing relationships and other transactions.
It is the Company's policy to enter into financial instruments with reputable counterparties.
The Investment Manager closely monitors the creditworthiness of the Company's counterparties (e.g., brokers, custodian and banks) by reviewing their credit ratings, financial statements and press releases on a regular basis.
The Company is exposed to credit risk on its cash and bank balances and investments placed with Standard Chartered Bank (Hong Kong) Limited, the Company's custodian, which management believes is of high credit quality.
Maximum exposure and year-end staging
The table below shows the credit quality and the maximum exposure to credit risk based on the Company's credit policy, which is mainly based on past due information unless other information is available without undue cost or effort, and year-end staging classification as at 31 December.
The amounts presented are gross carrying amounts for financial assets and the exposure to credit risk for the financial guarantee contracts.
92 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd)
Credit risk (Cont'd)
Maximum exposure and year-end staging (Cont'd)
As at 31 December 2020
12 month | |||||
ECLs | Lifetime ECLs | ||||
Simplified | |||||
Stage 1 | Stage 2 | Stage 3 | approach | Total | |
US$ | US$ | US$ | US$ | US$ | |
Cash and bank balances | |||||
- Not yet past due | 3,458,439 | - | - | - | 3,458,439 |
3,458,439 | - | - | - | 3,458,439 | |
As at 31 December 2019 | |||||
12 month | |||||
ECLs | Lifetime ECLs | ||||
Simplified | |||||
Stage 1 | Stage 2 | Stage 3 | approach | Total | |
US$ | US$ | US$ | US$ | US$ | |
Cash and bank balances | |||||
- Not yet past due | 3,419,680 | - | - | - | 3,419,680 |
3,419,680 | - | - | - | 3,419,680 | |
The credit risk of the Company's other financial assets, which comprise cash and bank balances and other receivables, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.
2020 Annual Report | 93 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd)
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company's strategy is to minimise its exposure to liquidity risk by monitoring the Company's liquid capital from time to time. In the management of the liquidity risk, the Company monitors and maintains a level of cash and bank balances deemed adequate by management to finance the Company's operations.
The following table summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted cash flows. The fair values of balances due within six months are equal to their carrying amounts, as the impact of discounting is insignificant. The table also analyses the maturity profile of the Company's financial assets (undiscounted where appropriate) in order to provide a complete view of the Company's contractual commitments and liquidity.
The maturity grouping of financial liabilities is based on the remaining period from the end of the reporting period to the contractual maturity date. When a counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Company can be required to pay.
Analysis of financial assets at fair value through profit or loss by maturity groupings is based on the expected date on which these assets will be realised. For other assets, the analysis by maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or, if earlier, the expected date on which the assets will be realised.
The maturity profile of the Company's financial assets and liabilities as at the end of the reporting period is as follows:
Less than | 1 to 5 | ||||
On demand | 1 year | years | Total | ||
Notes | US$ | US$ | US$ | US$ | |
2020 | |||||
Financial assets at fair value | |||||
through profit or loss | 13 | - | - | 286,518 | 286,518 |
Cash and bank balances | 15 | 3,458,439 | - | - | 3,458,439 |
Total financial assets | |||||
3,458,439 | - | 286,518 | 3,744,957 | ||
Amount due to the | |||||
investment manager | 18(c) | 51,834 | - | - | 51,834 |
Total financial liability | |||||
51,834 | - | - | 51,834 | ||
94 2020 Annual Report
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2020
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont'd)
Liquidity risk (Cont'd)
Less than | 1 to 5 | ||||
On demand | 1 year | years | Total | ||
Notes | US$ | US$ | US$ | US$ | |
2019 | |||||
Financial assets at fair value | |||||
through profit or loss | 13 | - | - | 288,305 | 288,305 |
Cash and bank balances | 15 | 3,419,680 | - | - | 3,419,680 |
Total financial assets | 3,419,680 | - | 288,305 | 3,707,985 | |
Amount due to the | |||||
investment manager | 18(c) | 51,025 | - | - | 51,025 |
Total financial liability | 51,025 | - | - | 51,025 | |
Capital management
The primary objectives of the Company's capital management are to safeguard the Company's ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.
The Company actively and regularly reviews and manages its capital structure and makes adjustments to it in light of the changes in the Company's business and economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders. The Company is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2020 and 31 December 2019.
22. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorised for issue by the board of directors on 22 March 2021.
2020 Annual Report | 95 |
SHANGHAI INTERNATIONAL SHANGHAI GROWTH INVESTMENT LIMITED
FIVE YEAR FINANCIAL SUMMARY (UNAUDITED)
A summary of the results and of the assets and liabilities of the Company for the last five financial years, as extracted from the published audited financial statements and reclassified as appropriate, is set out below:
Year ended 31 December | |||||
2016 | 2017 | 2018 | 2019 | 2020 | |
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
RESULTS | |||||
Income | 39 | 227 | 30 | 254 | 593 |
Expenses | (1,553) | (1,649) | (2,714) | (810) | (555) |
Profit/(loss) before tax | (1,514) | (1,422) | (2,684) | (556) | 38 |
Tax | - | - | - | - | - |
Profit/(loss) for the year | (1,514) | (1,422) | (2,684) | (556) | 38 |
Earnings/(loss) per share (US cents) | |||||
- Basic and diluted | (15.59) | (13.31) | (25.12) | (5.20) | 0.35 |
At 31 December | |||||
2016 | 2017 | 2018 | 2019 | 2020 | |
US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
ASSETS AND LIABILITIES | |||||
Total assets | 8,252 | 7,218 | 4,294 | 3,746 | 3,791 |
Total liabilities | 69 | 326 | 86 | 94 | 101 |
Net assets | 8,183 | 6,892 | 4,208 | 3,652 | 3,690 |
Net asset value per share | US$0.77 | US$0.64 | US$0.39 | US$0.34 | US$0.35 |
96 2020 Annual Report
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Shanghai International Shanghai Growth Investment Ltd. published this content on 07 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 April 2021 08:35:13 UTC.
