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INTRODUCTION

The Best Annual Reports Awards is an annual competition organized by The Hong Kong Management Association since 1973. It assesses annual reports with a view to enabling persons who are involved in preparing annual reports for an organization to be more effective in informing the organization’s stakeholders and the public about the performance and future prospects of their organization. This is achieved primarily by conducting annual Awards for Excellence in Annual Reporting which includes the adjudication of annual reports and recognizing reports that meet the criteria with an award.

OBJECTIVES

The Awards has several objectives. The first objective is to encourage the publication of accurate, informative,well-presented and timely annual reports for shareholders, employees, and others who may have an interest in the performance and activities of the organization in question. The second objective is to showcase companies that have done a good job in reporting. The hope is that these companies will serve as an example to others. The third objective is to reward companies for excellence in reporting. This third objective should reinforce the first objective and off er an incentive to companies to pay even greater care and attention to the preparation of their annual reports.

ENTRIES

78 reports in the two categories were received as follows:General .............................................................................................................................................................................................. 52Non-profi t Making and Charitable Organizations ........................................................................................................... 26

SCHEDULE OF CRITERIA

General1. Conformity with the requirements of the relevant

fi nancial reporting standards, including Hong Kong Financial Reporting Standards/ International Financial Reporting Standards/ China Accounting Standards for Business Enterprises; and the provision of accounting information over and above the requirements

2. a. Conformity with the disclosure requirements of the Hong Kong Stock Exchange and Hong Kong Companies Ordinance b. Provision of information relating to

environmental, social and governance3. a. General presentation such as design, general layout, photographs, graphs, charts, diagrams and indexing b. Understandability, clarity and conciseness4. Summary of past results and highlights5. Management discussion and analysis a. General description of business b. Analysis of assets/liabilities c. Analysis of income/expenses6. Indications of prospects/Forward looking statements7. Promptness of reporting8. Accessibility of the annual report on the

organization's website

Non-profi t Making and Charitable

Organizations

1. General presentation of fi nancial statements a. Balance sheets b. Income statements c. Cash fl ow statements d. Details of revenue and expenses2. Provision of information relating to environmental,

social and governance3. a. General presentation such as design, general layout, photographs, graphs, charts, diagrams and indexing b. Understandability, clarity and conciseness4. Purpose, general description of activities and

performance5. Indications of prospects/Forward looking

statements6. Promptness of reporting7. Accessibility of the annual report on the

organization's website

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PANEL OF ADJUDICATORS

The following persons have been appointed by The Hong Kong Management Association to serve on the 2020 Panel of Adjudicators:

Mr Patrick Wu (Chairman)

Managing Director and Vice ChairmanDuff & Phelps

Mr David Chau

Board Director Hong Kong Securities and Investment Institute

(Representing Hong Kong Securities and Investment Institute)

Ms Ashley Khoo

DirectorCFA Society Hong Kong

(Representing CFA Society Hong Kong)

Ms Jill Cheshire

DirectorJill Cheshire Design

Dr Keith Lam

Deputy PrincipalHKU SPACE Po Leung Kuk Stanley Ho

Community College

Mr Steve Ong

Senior Vice President, Listing DivisionHong Kong Exchanges and Clearing

Limited(Representing Hong Kong Exchanges

and Clearing Limited)

Mr Edward Chiu

Accounting Internship Co-ordinatorCentennial College

Mr Julian Leung

Committee MemberACCA Hong Kong

(Representing ACCA Hong Kong)

Ms May Tsue

Fellow Member The Hong Kong Institute of Chartered

SecretariesJoint Company Secretary

CNOOC Limited(Representing The Hong Kong Institute

of Chartered Secretaries)

Mr Steve Chiu

Director and Immediate Past ChairmanInstitute of Financial Planners of Hong Kong

(Representing Institute of Financial Planners of Hong Kong)

Dr Artie Ng

Deputy Director, School of Professional Education and Executive

DevelopmentThe Hong Kong Polytechnic University

Dr Raymond Wong

Associate ProfessorDepartment of AccountancyCity University of Hong Kong

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THE AWARDS OF THE 2020 HKMA BEST ANNUAL REPORTS

COMPETITION ARE AS FOLLOWS

Best Report AwardCLP Holdings Limited

“General” CategoryGold: Hong Kong Exchanges and Clearing LimitedSilver: Hang Seng Bank Limited The Hongkong and Shanghai Hotels, Limited Swire Properties LimitedBronze: MTR Corporation Limited Swire Pacifi c Limited

“Non-profi t Making and Charitable Organizations” CategoryGold: Securities and Futures CommissionSilver: Hong Kong Monetary AuthorityBronze: Mandatory Provident Fund Schemes Authority

Honourable MentionChow Tai Fook Jewellery Group LimitedHong Kong Housing SocietyThe Hong Kong Jockey ClubHysan Development Company LimitedThe Land RegistryLink Real Estate Investment Trust

Sustainability Reporting Award

“General” CategoryCLP Holdings Limited

“Non-profi t Making and Charitable Organizations” CategoryThe Hong Kong Jockey Club

Excellence Award for Charitable OrganizationsHong Kong Housing SocietyThe Hong Kong Jockey ClubTung Wah Group of Hospitals

Excellence Award for First-Year Listed CompaniesJY Grandmark Holdings Limited

Excellence Award for H Share & Red Chip EntriesBank of China LimitedCOSCO SHIPPING Ports LimitedLenovo Group Limited

Excellence Award for Small Size EntriesChampion REITCompetition CommissionInvestor and Financial Education Council

Best New Entry“General” CategoryAoyuan Healthy Life Group Company Limited

“Non-profi t Making and Charitable Organizations” CategoryEstate Agents Authority

Citation for DesignCK Hutchison Holdings LimitedFu Hong Society Shui On Land Limited

Citation for Environmental, Social and Governance DisclosureAAC Technologies Holdings Inc.COSCO SHIPPING Ports LimitedDrainage Services DepartmentUrban Renewal Authority

HKMA 60th Anniversary Judges’ Special AwardCLP Holdings Limited

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BEST ANNUAL REPORT

Non-profi t Making and Charitable Organizations

Securities and Futures Commission

An outstanding report with detailed elaboration of the organization’s strategic priorities and CSR practices, demonstrating its unwavering commitment to competence, independence and public accountability.

CLP Holdings Limited

A diverse and all-round report providing an in-depth overview of the Group’s key performance and drivers of business strategy, and a user-friendly online Snapshot. CLP maintains the highest standard of design, transparency and ESG disclosure.

Hong Kong Monetary Authority

An engaging report with timely disclosure of fi nancial information and impressive presentationof the organization’s past performance and achievements.

Mandatory Provident Fund Schemes

Authority

A well-structured report with competent design and eye-catching highlights pages to emphasize the organization’s dedication to “create better value for MPF together”.

BronzeSilver

Gold

5

General

Silver

Bronze

Hong Kong Exchanges and Clearing Limited

An excellent report with smart design and extensive coverage on the company’s three-year CSR strategy and plan, exhibiting its commitment to promote the global sustainability agenda.

Hang Seng Bank Limited

An informative and attractive report with lively highlights pages presenting the company’s digital innovations and enhancements to drive improved outcomes for customers.

The Hongkong and Shanghai Hotels, Limited

An exquisitely designed and classy report which illustrates the company’s theme of “Building a Sustainable Legacy” and long-term strategy to create a portfolio of the highest quality assets.

Swire Properties Limited

A materiality-driven and comprehensive report available on a dynamic online platform to facilitate seamless accessibility across all devices and fi lled with interactive features.

MTR Corporation Limited

A well-presented report with effective use of infographics and the company’s “Keep Moving” message being inherent throughout the inspirational design.

Swire Pacifi c Limited

A well - executed repor t which makes thoughtful use of colourful charts to present performance review and outlook by divisions in an easily digestible manner.

Gold

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COMMENTS ON SPECIFIC CRITERIA BY THE PANEL OF ADJUDICATORS

GENERAL CATEGORY

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

Hong Kong Financial Reporting Standards / International Financial Reporting Standards / China Accounting

Standards for Business Enterprises; and the Provision of Accounting Information over and above the

Requirements

1.1 Overall standards and comments

The travel and other restrictions that had arisen in connection with the COVID-19 pandemic disrupted the reporting or audit processes of entities. Although under such challenging situation, we were pleased to note that out of the 52 entries, 48 entries (which are listed issuers with financial year-end on 31 December 2019 or 31 March 2020) managed to publish their audited results announcements and annual reports within three months and four months after their fi nancial year-end in accordance with the requirement of the Listing Rules. 11 of them published their annual reports within 90 days after their fi nancial year-end. Moreover, it was noted that one entry (which is a listed issuer with financial year-end on 31 December 2019) published unaudited results announcement on 31 March 2020 pursuant to the guidance jointly issued by the Securities and Futures Commission (the “SFC”) and the Stock Exchange of Hong Kong (the “Exchange”)1 and then published audited results announcement and annual report within four months after fi nancial year-end.

Most entries complied with mandatory disclosure requirements under the financial reporting standards, the Companies Ordinance and the Listing Rules. Other than the mandatory disclosure requirements, it was pleasing to note that many annual reports also provided additional information that made the annual reports more informative for shareholders and investors to understand their performance and fi nancial position in order to make more informed investment decisions.

In regard to disclosure of the impact of recent COVID-19 pandemic, most of the annual reports (with year ended after 31 December 2019) included a brief summary of its impact as the post balance sheet events section, but the details of disclosures varied. Consideration should be given to the timing and impact on stakeholders, the impacts of travel restrictions, quarantines and lockdowns, early or temporarily closure of businesses and government incentives to support businesses.

Unless otherwise specified, HKFRSs and their paragraph numbers referred to in this report correspond to those in IFRSs. Discussions in this report in relation to accounting standards are intended for general guidance only. Readers should read the full HKFRSs to fully understand the implications of HKFRSs.

1.2 Conformity with the requirements of the relevant fi nancial reporting standards

Omissions and incomplete disclosures of certain information required by accounting standards were noted and are set out below:

HKAS 1 (Revised) “Presentation of Financial Statements”

Many entries did not provide details of all relevant accounting policies that have a significant effect on the amounts recognized in the fi nancial statements. Examples of missing accounting policies included related parties, segment reporting, provisions and contingent liabilities. In addition, a few entities did not provide adequate disclosure to describe the nature and explain the movements of material items in the annual reports, for example, they had material balances of “other expenses”, “other receivables” or “other payables”, but did not provide an analysis and explanation of the nature and fl uctuation of those balances.

HKAS 1 (Revised) requires entities to disclose information of judgements and estimation uncertainty. The disclosure should include details of the nature of the assumption or other estimation uncertainty, and carrying amounts of the related assets and liabilities as at the end of the reporting period. Around one-fifth of the entries described the nature of judgements and estimates but did not disclose the carrying amounts of the related assets and liabilities as at the end of the reporting period.

1 The SFC and the Exchange issued “Joint Statement in relation to Results Announcements in light of Travel Restrictions related to the Severe Respiratory Disease associated with a Novel Infectious Agent” on 4 February 2020 and “Further Guidance on the Joint Statement in relation to Results Announcements in light of the COVID-19 Pandemic” on 16 March 2020. Pursuant to these guidance, an issuer with year-end on 31 December 2019 could defer the publication of its annual report before 15 May 2020 if the issuer had published, on or before 31 March 2020, (i) its preliminary results with its auditors’ agreement in compliance with the Listing Rules; (ii) its preliminary results without its auditors’ agreement; (iii) its management accounts; or (iv) Material Financial Information as set out in the guidance issued on 16 March 2020.

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HKAS 1 (Revised) also requires an entity to disclose information about objectives, policies and processes for managing capital. An entity should disclose qualitative information about its objectives, policies and processes for managing capital (including description of capital it manages, nature of external capital requirements (if any), how it is meeting its objectives), quantitative data about what the entity regards as capital, changes from one period to another, whether the entity has complied with any external capital requirements and if it has not complied, the consequences of such non-compliance. It was noted that around one-fourth of the entries did not disclose quantitative information of what they managed as capital or did not mention whether they were subject to any externally imposed capital requirements and whether they complied with them.

HKAS 21 “The Eff ects of Changes in Foreign Exchange Rates”

HKAS 21 requires an entity to disclose its functional currency and that when the presentation currency is different from the functional currency, this fact should be stated in the financial statements, together with the reason for using a different presentation currency. However, 15% of the entries did not disclose their functional currency or did not explain the reason for using a presentation currency which was diff erent from the functional currency.

HKAS 36 “Impairment of Assets”

HKAS 36 requires disclosure of certain information where an impairment loss had been recognized or reversed, for example, the events and circumstances that led to the recognition or reversal and whether the recoverable amount is fair value less costs of disposal or value in use. But around one-fifth of the entries recognized impairment losses on non-current assets but did not provide the required disclosure.

HKAS 36 also requires that, for each cash-generating unit for which the carrying amount of goodwill and intangible assets with indefinite useful lives allocated to that unit is significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefi nite useful lives, an entity should disclose certain information about impairment assessment, such as whether the recoverable amount is value in use or fair value less costs of disposal, period over which management projected cash flows and reasons for a period over five years, key assumption applied, discount rates and terminal growth rates. However, 10% of the entries did not adequately disclose these information. In addition, directors are reminded to exercise judgement to assess the reasonableness of key assumptions applied in impairment testing and should not rely solely on professional valuers or other experts without carrying out suffi cient due diligence2.

HKAS 38 “Intangible Assets”

HKAS 38 requires an entity to disclose whether the useful lives are indefinite or finite and, if finite, disclose the useful lives or the amortization rates used; if indefinite, explain the reasons supporting the assessment of an indefinite useful life and the factors that played a significant role in determining that the asset has an indefinite useful life. However, around one-fourth of the entries did not disclose the required information for all intangible assets they had or only provided very brief explanation on why they considered an intangible asset had an indefi nite useful life.

Entities should take into account all of the relevant factors and disclose the key judgements made by the management in determining the useful life of an intangible asset. In particular, an entity should consider the list of the factors in paragraph 90 of HKAS 38 when describing the factors that played a signifi cant role in determining that the useful life of an intangible asset is indefi nite.

HKFRS 7 “Financial Instruments: Disclosures”

In relation to credit risk, HKFRS 7 sets out extensive disclosure requirements about an entity ’s credit risk management practices and recognition and measurement of expected credit losses, including the methods, assumptions and information used to measure expected credit losses. However, over half of the entries did not provide sufficient information in this regard. For example, they did not disclose how they determined whether the credit risk had increased significantly since initial recognition, how they determined that financial assets were credit-impaired, the defi nition of default or the write-off policy adopted.

2 Directors can make reference to the SFC’s “Guidance note on directors’ duties in the context of valuations in corporate transactions” issued in May 2017.

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TRANSPARENCY.

CONFIDENCE.

TRUST.

Some things can’t be bought, sold or traded.

Clients have relied on Duff & Phelps to help protect these fundamental ideals

for more than 80 years. We deliver objective advice in the areas of valuation,

disputes and investigations, M&A, restructuring, and compliance and regulatory

consulting. Balancing proven technical skills with deep industry expertise, we

help our clients address their most complex business needs.

Learn more at www.duffandphelps.hk

M&A advisory, capital raising and secondary market advisory services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities,

LLC. M&A advisory, capital raising and secondary market advisory services in the United Kingdom are provided by Duff & Phelps Securities Ltd. (DPSL), which is authorized and regulated by the Financial Conduct

Authority. Valuation Advisory Services in India are provided by Duff & Phelps India Private Limited under a category 1 merchant banker license issued by the Securities and Exchange Board of India.

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In addition, when entities reported that they measured the expected credit losses based on the provision matrix or expected loss rates, they should disclose such information and make reference to the example of a provision matrix for trade receivables (paragraph B5.5.35 and Illustrative Example 12 of HKFRS 9). However, it was noted that some entries reported that they measured the expected credit losses based on the provision matrix or expected loss rates but did not disclose the relevant matrix or rates.

HKFRS 12 “Disclosure of Interests in Other Entities”

HKFRS 12 requires an entity to disclose information about signifi cant judgements and assumptions it has made in determining that it has control of another entity and that it has significant influence over another entity. It was noted that around one-fourth of the entries held less than half of the voting rights of a subsidiary or less than 20% equity interest in an investee but did not explain how they controlled that subsidiary or how they had signifi cant infl uence over that investee.

HKFRS 13 “Fair Value Measurement”

For recurring fair value measurement categorized in Level 3 of the fair value hierarchy, HKFRS 13 requires disclosure of a description of the valuation processes used, quantitative information about the significant unobservable inputs used in the fair value measurement and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs. However, around one-third of the entries did not sufficiently disclose the required information.

HKFRS 15 “Revenue from Contracts with Customers”

Most entities disclosed disaggregation of revenue (mostly based on types of good or services, geographical region, at point in time or over time). But the extent and level of details varied. Entities are reminded to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. When selecting the categories to use to disaggregate revenue, entities should read the guidance in paragraphs B87 to B89 of HKFRS 15.

In addition, nearly one-fifth of the entries did not disclose amount of revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period or omitted the disclosure of aggregate amount of the transaction price allocated to the performance obligations that were unsatisfied (or partially unsatisfied) as of the end of the reporting period and when the entity expected to recognize it as revenue.

HKFRS 16 “Leases”

HKFRS 16 requires a lessee to disclose various information for investors to assess the effect that leases have on their financial position, financial performance and cash flows. Around one-fourth of the entries omitted or did not clearly disclose some of the required information, such as, total cash outflow for leases, a maturity analysis of lease liabilities, whether they accounted for short-term leases or leases of low-value assets applying paragraph 6 of HKFRS 16 and the amounts of expenses relating to those leases.

1.3 Provision of accounting information over and above the requirements

Some entries provided additional information in the fi nancial statements in the following aspects:

(a) Disclosure of impact of COVID-19 pandemic

HKAS 10 “Events After the Reporting Period” states that if non-adjusting events after the reporting period are material, non-disclosure could influence the economic decisions that users make on the basis of the financial statements. Accordingly, an entity should disclose the nature of the event; and an estimate of its financial eff ect, or a statement that such an estimate cannot be made.

The COVID-19 pandemic’s impact on an issuer ’s business operations varies according to individual circumstances and management responses are also specific to each entity’s own situation. An entity should update investors on the impact of the COVID-19 pandemic on its operations, including but not limited to its impact on the operating results, measures it has taken or will take in light of changes in the operating environment, any adjustments to future operating plans and any material impact on its fi nancial resources and cash fl ow.

ed nd h s r

equity

Key operating companies:

First Pacific Company Limited (HKSE: 00142) is a Hong Kong-based investment management company, with diversified strategic businesses in consumer food products, telecommunications, infrastructure and natural resources in the fast-growing economies of Southeast Asia.

Listed in Hong Kong since 1988, the company has grown from a start-up capital of US$0.9 million to a market capitalization of US$1.2 billion with major businesses valued at US$28.4 billion as at end-September 2020.

www.firstpacific.com

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It was noted that some entries provided specific disclosure on how the pandemic affected their operations, such as duration of suspension of production facilities or construction, how the travel restriction aff ected the fl ight business, train service or hotel operations. A few entries disclosed the estimated financial impact for the first quarter of 2020. However, many entries only provided generic disclosure that the pandemic might have negative impacts on their fi nancial performance.

(b) Initial adoption of new HKFRS on leases

In relation to the adoption of HKFRS 16 “Leases”, all entries, except two with fi nancial year-end on 30 June 2019, adopted the new standard on leases in the annual reports participated in the Award and provided clear disclosure of the changes in accounting policies, transition approach adopted, practical expedients applied and the impact on the fi nancial statements.

In addition, it was noted that nearly one-fourth of them disclosed additional information about the leasing activities, such as range of lease terms, usage of the leased assets, any restrictions or covenants imposed by the leases; variable lease payment terms.

As many leases contain more complex features, which can include variable payments, termination and extension options and residual value guarantees, a lessee needs to disclose any material entity-specific information that is necessary in order to meet the disclosure objective and is not covered elsewhere in the fi nancial statements. Judgement should be applied in determining the most useful and relevant disclosures. Entities should read the guidance in paragraphs B48 to B52 and the Illustrative Example 9 of HKFRS 16.

(c) Impairment assessment of assets

HKAS 36 “Impairment of Assets” requires that if a reasonably possible change of a key assumption on which management has based its determination of the cash-generating unit’s recoverable amount would cause the carrying amount of the cash-generating unit to exceed its recoverable amount, an entity should disclose the amount by which a cash-generating unit’s recoverable amount exceeds its carrying amount.

This disclosure provides investors with information on what change in the values of key assumptions used in impairment testing would cause the carrying amount of the cash-generating unit to exceed the recoverable amount, which means how imminent is a possible impairment loss. Therefore, entities are reminded to make realistic estimates in determining possible changes in key assumptions that would cause a cash-generating unit’s carrying amount to exceed its recoverable amount and disclose clear information when providing the required analysis.

Nearly one-third of the entries voluntarily provided additional information in relation to the impairment tests performed, including a negative statement that no reasonably possible change in key assumptions would cause an impairment loss be recognized, quantitative data of key assumptions applied other than the terminal growth rate and pre-tax discount rate, the recoverable amount of the cash-generating unit and the headroom available, highlighting whether the impairment assessment was based on a valuation by an independent professional valuer.

(d) Non-GAAP fi nancial measures

There is an increasing trend that entities use non-GAAP financial measures to discuss and analyze their performance, financial position and cash flows (such as earnings before interests, income tax, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted net profi t).

More than half of the entries who had presented non-GAAP financial measures followed good practices to present these measures. Most of them clearly labeled the non-GAAP financial measures, did not present the non-GAAP financial measures with more prominence than the most directly comparable GAAP measures, and disclosed comparative information. A few of them provided a reconciliation of the non-GAAP fi nancial measures from the relevant GAAP measures and explained the reason for using the non-GAAP fi nancial measures.

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In order to enhance investors’ understanding of why non-GAAP fi nancial measures are presented and how they are calculated, entities are encouraged to follow good practices3 when disclosing these measures, in particular, explain the reason for using the non-GAAP financial measures and provide a reconciliation of the non-GAAP fi nancial measures from the relevant GAAP measures together with explanation of the adjusting items.

(e) Judgements and estimates

HKAS 1 (Revised) “Presentation of Financial Statements” requires entities to disclose information for investors to understand the judgements that management makes about the future and about other sources of estimation uncertainty. The disclosure should include details of the nature of the assumption or other estimation uncertainty and carrying amounts of the related assets and liabilities as at the end of the reporting period.

In addition to these required information, entities should also consider providing additional information, such as the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their calculation, including the reasons for the sensitivity; the expected resolution of an uncertainty and the range of reasonably possible outcomes within the next fi nancial year in respect of the carrying amounts of the assets and liabilities aff ected; an explanation of changes made to past assumptions concerning those assets and liabilities, if the uncertainty remains unresolved.

It was noted that one entry disclosed the sensitivity of carrying amounts to the assumptions underlying the calculation.

(f ) Undrawn borrowing facilities

Around half of the entries disclosed the amount of undrawn borrowing facilities that might be available for future operating activities and to settle capital commitments.

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

Ordinance, and Provision of Information Relating to Environmental, Social and Governance (ESG)

2.1 Overall standards and comments

The overall standard of the annual reports submitted for this year’s review was very good. Good tracking on ordinance requirements by most annual reports was observed. The level of details disclosed in annual reports varied with the number of years of the companies being listed. Disclosures of large-cap Hong Kong listed companies with a longer listing history were more comprehensive than those recently listed. Majority of the listed companies only complied with mandatory disclosure requirements under the Listing Rules and the Companies Ordinance. Nevertheless, it was encouraging to note that some listed companies with increasing international business exposures attempted the adoption of new requirements under Listing Rules which made their annual reports more informative than others. Apart from the mandatory disclosure requirements under the Listing Rules, some annual reports also had contents about the recent uncertain and volatile business environment. There were companies which categorized and analyzed the principal types of risks that they faced, and the underlying control and mitigation measures to address those risks. It assisted investors to better understand the nature and patterns of the risks.

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

(a) Additional disclosures in Corporate Governance Report

The Corporate Governance Code (the “Code”) sets out “comply or explain” code provisions that issuers should comply with and recommended best practices that issuers can comply on a voluntary basis. Some entries complied with the recommended best practices and provided additional disclosures including:

31% disclosed the division of responsibilities between the board and management, including their separate powers and level of authority.

19% conducted regular evaluation of board performance. Most of them conducted self-evaluation and a few of them engaged external consultants to conduct an evaluation.

12% provided details of remuneration payable to senior management (those individuals whose biographical details are disclosed in annual report) on an individual and named basis.

12% included a separate remuneration report which provided details of the Remuneration Committee, including composition, role, number of meetings held, and details of the remuneration policy of how remunerations to executive directors, non-executive directors and senior management were determined.

3 To enhance the disclosure of non-GAAP financial measures, entities are encouraged to read “Statement on Non-GAAP Financial Measures” issued by the International Organization of Securities Commissions and the Guidance Letter GL103-19 “Guidance for applicants on the presentation of the non-GAAP fi nancial measures in a listing document and any relevant documents pursuant to the Exchange’s Listing Rules” issued by the Exchange in April 2019.

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(b) Additional disclosures in relation to internal controls

Most entries disclosed a narrative statement that the board has conducted a review of the effectiveness of the internal control system in accordance with Code Provision C.2.1 of the Code, which is mandatory. Most of the entries disclosed the required information as set out in the Code. In addition, some entries voluntarily provided additional disclosures in respect of their internal control system, for example:

48% disclosed that they have a whistleblowing policy and system for employees and those who deal with the issuers (e.g. customers and suppliers) to raise concerns, in confidence, with the audit committee about possible improprieties in any matter related to the issuer.

38% disclosed that the board of directors received a confi rmation from management on the effectiveness of the risk management and internal control systems and 27% specifically pointed out that they did not identify any significant areas of concern in relation to risk management and internal control systems.

Around one-fifth of the entries included a separate risk management report or section, in which disclosed responsibilities and work performed of risk committee, risk management framework, the process used to identify, evaluate and manage signifi cant risks, the process used to review the eff ectiveness of the risk management and internal control systems and to resolve material internal control defects.

Some entries provided detailed discussion of the principal risks they faced and how the risks were managed and mitigated. It was also noted that some entries discussed risks in respect of cyber security and data fraud or theft. Given the importance of such risks, entities should elaborate more on how they have evaluated the internal controls in place to prevent critical information from cyber-attacks or being misused through data fraud or theft. In addition, a few entries discussed crisis management and the risk associated with outbreak of pandemic.

(c) Additional disclosures in relation to investor information

69% of the entries provided useful investor information, including details of the last Annual General Meeting (such as date, venue and resolutions approved) or important shareholders’ dates in the coming fi nancial year.

50% of the entries disclosed dividend payment history of at least 5 years and dividend payout policy. 17% of the entries disclosed historical trends in their market prices and some of them compared the

trends of their market prices against the Hang Seng Index.

(d) ESG reports

All entries included ESG reports in their annual reports or published separate ESG reports in accordance with the ESG Reporting Guide in Appendix 27 to the Listing Rules. A number of them that provided a standalone ESG or Sustainability Report demonstrated relatively more quality and systematic disclosures on ESG information and data. Only few of them started providing pertinent information about Climate Change as well as UN Sustainable Development Goals in these reports. It was noted that nearly half of the ESG reports were supported by an independent review report or verifi cation statement.

Entities should note that the Exchange published amendments to the ESG Reporting Guide4, which will apply to the ESG reports for financial years commencing on or after 1 July 2020. One of the amendments is to encourage issuers to seek independent assurance to strengthen the credibility of the ESG information disclosed. Where independent assurance is obtained, the issuer should describe the level, scope and processes adopted for the assurance given clearly in the ESG report. In addition, entities should read the guidance on ESG reporting issued by the Exchange5.

(e) Others

37% of the entries provided a commentary on corporate values, strategy and principal drivers of performance.

21% of the entries provided fi nancial summary of ten years.

4 Entities should refer to the “Consultation Conclusions on Review of the Environmental, Social and Governance Reporting Guide and Related Listing Rules” (issued in December 2019).

5 The guidance on ESG reporting issued by the Exchange is available at: http://www.hkex.com.hk/Listing/Rules-and-Guidance/Other-Resources/Listed-Issuers/Environmental-Social-and-Governance?sc_lang=en

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

(a) Disclosure of fi nancial information required by the Listing Rules6

Omissions of mandatory disclosures required by the Listing Rules were noted and are set out below:

46% did not fully disclose the financial information in the management discussion and analysis section as required by paragraph 32 of Appendix 16 to the Listing Rules7. Most commonly omitted items included the extent to which borrowings are at fixed interest rates; the currencies in which borrowings are made and cash and cash equivalents are held.

38% did not provide a clear statement on whether related party transactions (as defi ned in HKAS 24 (Revised) “Related Party Disclosures”) fell under the definition of “connected transaction” or “continuing connected transaction” in Chapter 14A of the Listing Rules. Issuers should note that paragraph 8(2) of Appendix 16 to the Listing Rules requires an issuer to specify whether or not the related party transaction falls under the definition of “connected transaction” or “continuing connected transaction” in Chapter 14A of the Listing Rules and confirm whether it has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules.

27% did not fully disclose in directors’ report the information in relation to “business review” as required by Schedule 5 of the Companies Ordinance and paragraph 28 of Appendix 16 to the Listing Rules. Most of them did not provide a clear description of principal risks and uncertainties facing the entities. It was also noted that some entries did not discuss or provided very brief discussion of the impact of COVID-19 as an event after the reporting period.

15% did not disclose the basis on which the ageing analysis of accounts receivable and accounts payable was presented as required by paragraph 4 of Appendix 16 to the Listing Rules.

17% did not analyze directors’ remuneration into the categories as required by paragraph 24 of Appendix 16 to the Listing Rules.

13% did not provide information in respect of distributable reserves as required by paragraph 29 of Appendix 16 to the Listing Rules.

(b) Disclosure in relation to corporate governance required by the Listing Rules

Although many entries voluntarily provided additional information in their corporate governance reports, some of them omitted certain mandatory disclosures as required by Appendix 14 to the Listing Rules8 . These omissions include:

31% did not disclose senior management’s remuneration by band, which is required by Code Provision B.1.5 of Appendix 14 to the Listing Rules.

17% did not provide sufficient information in respect of the risk management and internal control, in particular the procedures and internal controls for the handling and dissemination of inside information; how often the risk management and internal control systems were reviewed and the period covered; and whether they had an internal audit function or the reason for the absence of such function. In addition, one entry omitted all of the information in respect of risk management and internal control as required by Code Provisions C.2.4 and C.2.5 and Section Q of Appendix 14 to the Listing Rules.

17% did not provide analysis of remuneration in respect of audit and non-audit services provided by the auditors, or did not provide the details of nature of signifi cant non-audit service assignments in accordance with Section M of Appendix 14 to the Listing Rules. It was also noted that in some entries’ annual reports, the amount of auditors’ remuneration disclosed in the Corporate Governance Report was not consistent with that disclosed in the fi nancial statements. However, no explanation on the diff erence was provided.

(c) Inclusion of stock code on report cover required by the Listing Rules

Some of the listed companies might have nice cover designs in their annual reports, however, a few companies failed to properly disclose their company’s stock code on their cover which is required by the Listing Rules.

6 Entities are encouraged to read the Listing Newsletter and Listed Issuer Regulation Newsletter, which update topics of interest to listed issuers and highlight matters that may assist listed issuers in compliance with the Listing Rules. In addition, entities should read the reports of the Review of Issuers’ Annual Report Disclosure which give meaningful guidance on specifi c areas to focus on when preparing annual reports. The latest Review of Issuers’ Annual Report Disclosure – Report 2019 was published on 31 January 2020.

7 Entities should also note that the Exchange added a disclosure requirement of a breakdown and information of signifi cant investments (including any investment in an investee company with a value of 5% or more of the total assets as at the year-end date) in Appendix 16 to the Listing Rules. This amendment had come into effect on 1 October 2019. Entities should refer to “Consultation Conclusions on Backdoor Listing, Continuing Listing Criteria and Other Rule Amendments” issued in July 2019.

8 The Exchange published “Guidance for Boards and Directors” in July 2018 to provide guidance and practical advice to board and directors in certain area in relation to corporate governance, in particular, risk management and internal control, directors’ duties and board eff ectiveness.

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(d) ESG reports

Quality of ESG reports remained an area of concerns. Some companies only maintained a section in their annual report with limited information that was not too well-integrated into their business strategies and operations. Most companies focused on discussing about their charitable activities but remained light on social and environmental sustainability issues. Stakeholders’ engagement and materiality assessment related disclosures remained insuffi cient among the entries. Being situated in a global fi nancial centre, Hong Kong listed companies should be encouraged to step up their ESG disclosures as a growingly recognized international practice.

2.4 Outstanding companies deserving special mention

AAC Technologies Holdings Inc., CLP Holdings Limited, COSCO SHIPPING Ports Limited, Hang Seng Bank Limited, Hong Kong Exchanges and Clearing Limited, The Hongkong and Shanghai Hotels, Limited, Hysan Development Company Limited, Link Real Estate Investment Trust, MTR Corporation Limited and Techtronic Industries Company Limited.

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

Majority of the companies put considerable thought into and made good use of design and presentation in their annual reports to enhance readability. The overall standards remained high, integrating corporate elements into the design of annual reports apparently became the general norm of participating companies. In view of the growing importance of sustainability reporting, more companies put more effort and resources in presenting information related to this area. It was encouraging to see that despite the unprecedented and challenging times of 2019/2020, many companies continued to submit their reports and also upheld their good standard of report presentation.

Companies deserving a special mention for their well-designed Highlights Pages and Sustainability Reports include:

AAC Technologies Holdings Inc., Aoyuan Healthy Life Group Company Limited, China Everbright Greentech Limited, China Mobile Limited, COSCO SHIPPING Ports Limited, Country Garden Holdings Company Limited, Kerry Logistics Network Limited, New World Department Store China Limited, Sa Sa International Holdings Limited, Techtronic Industries Company Limited, VPower Group International Holdings Limited, Wharf Real Estate Investment Company Limited and Yuzhou Group Holdings Company Limited (previously named as Yuzhou Properties Company Limited).

Companies which receive overall design and presentation commendations are:

Airport Authority Hong Kong – Despite the clear and direct setbacks this company encountered during 2019/2020, it was to be commended for its ‘upbeat and resilient’ approach, in the production of a good, all-round, well-designed, informative and forward thinking report.

China Tower Corporation Limited – A well-packaged report with the most innovative and interactive front cover design using “LED lighting” tool both to engage the readers and to portray that communication is their business.

CK Hutchison Holdings Limited – The report included a very good summary of core business segments with key business indicators.

CLP Holdings Limited – A comprehensive, diverse, engaging and well-executed report with an excellent Sustainability Report.

First Pacifi c Company Limited – A well-designed report employing the design to engage the readers. Each page was carefully considered and constructed.

Hang Seng Bank Limited – A competent design, to be commended for its lively highlights pages, and an attractive and informative Corporate Sustainability Report.

Hong Kong Exchanges and Clearing Limited – A smart and effective design, with an excellent Corporate Social Responsibility Report.

The Hongkong and Shanghai Hotels, Limited – Another exquisitely designed report with good craft on cover page, classy and elegant, a fitting tribute to their hotels and corporate identity, and was complemented by a smart and impressive Corporate Responsibility and Sustainability Report.

Hysan Development Company Limited – The report was well-balanced with a mixed usage of sketches, drawings and photos, and an understated yet effective and well-considered design which was comfortable to read. The Sustainability Report was also engaging and well-designed.

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Link Real Estate Investment Trust – The report was excellently designed with attractive pictures. It included a very informative Strategic Report.

MTR Corporation Limited – Despite the clear setbacks for this company during 2019/2020, it achieved consistent excellence in design, with its “Keep Moving” message being inherent throughout the inspirational design.

Shui On Land Limited – The report was well-designed and presented with comprehensive market updates.

Swire Pacific Limited – The report was well-designed with good highlighting on both fi nancial and non-fi nancial performances by each division.

Swire Properties Limited – The report was well-prepared and very attractive for readers.

3b. Understandability, Clarity and Conciseness

Overall we had very strong entries for this year’s competition. Significant improvements were observed over previous years, as most entries were able to present the information with depth and clarity. Companies not only spent efforts on contents, but also on design and layout of the reports which enhanced the readability of reports. Most of them had good drawn charts and graphical illustrations to explain the operating and fi nancial results to help readers understand lengthy explanations. More companies used infographics to present core information. Apart from the use of appropriate charts and diagrams, all companies provided an overview of structure of report or page reference, the arrangement allowed readers to make reference to a particular section of the report easily. The arrangement apparently served as a common standard in nowadays’ annual reports. Some companies also managed to highlight the key strategies and business results at the forefront and leave the detailed financial information at the back, which greatly improved the quality of presentation.

It was encouraging to note that most entries did well in providing corporate information with vision and mission, and incorporating sections related to their corporate strategies and core competence. Many of them also linked the core competence to their business operations, and quite a number to the companies’ sustainable growth. They included useful information such as fi nancial highlights and summaries of operating statistics in the corporate overview section.

Another area where most entries excelled was the Chairman’s Statement and the Directors’ Report; most provided complete and concise information. Historical analysis on the companies’ business operation was well-presented. Some companies also mentioned about the business disruptions caused by the outbreak of coronavirus pandemic and the impact on their financial results in 2020. In addition, all of them provided detailed information about impact of their activities on the environment, on society and on the economy in the Corporate Social Responsibility (CSR) Report. Readers could get insightful information which would help them understand the operation of a company. This area was very well-achieved.

On the other hand, only 60% of the companies provided information on milestones and major events. Only 70% of the companies mentioned honours and awards they received in their annual reports. It was noted that it was not specific to a particular type of company, there was no material difference between companies incorporated in Hong Kong or H-share companies. It appeared that this area was not a common reporting element for many companies.

Furthermore, 96% of companies provided glossary of terms and abbreviations, and defi nitions and formulae in the reports. There was an improvement as compared with the fi nding in 2019, which was 82%. Technical jargons and basis of calculations were in no doubt important for readers to understand and compare with other companies in the same industry or trade.

Although most companies generally maintained a high standard in the presentation of their materials, there were weaknesses which need further improvements. Similar to last year, disclosure on relevant market or industry performance/data and their bases of calculation or formulae remained relatively weak. Incomplete explanation or excessive details reduced understandability of some reports. There were still some companies which relied too much on tables and charts rather than graphical illustration in the presentation of information or ideas, and spread relevant information of a subject out in the report, causing readers to overlook the important information. Many of the reports still chose to use lengthy description which was hard to follow. Companies are recommended to pay more attention to and improve these areas.

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Outstanding companies deserving special mention are:

Chow Tai Fook Jewellery Group Limited, CLP Holdings Limited, Hang Lung Properties Limited, Hong Kong Exchanges and Clearing Limited, The Hongkong and Shanghai Hotels, Limited, Hysan Development Company Limited, Link Real Estate Investment Trust, NWS Holdings Limited, Sa Sa International Holdings Limited, Shui On Land Limited, Techtronic Industries Company Limited and The Wharf (Holdings) Limited.

4. Summary of Past Results and Highlights

The overall quality of presentation in this area was high. Most companies were able to present a good summary of their past financial results as well as clear reports of their business activities, with the use of good drawn charts, graphical illustrations and ratios. Some of them used infographics to help readers understand the lengthy explanations, and provided relevant and useful market data. Green financing also got a wider coverage this year. More companies emphasized on green fi nancing being one of their key sustainable developments.

However, discussion on relevant market or industry performance and data remained relatively weak. Companies could also expand the number of ratios being presented to make it easier for users to develop a better understanding of their past performance.

Organizations which are particularly outstanding in this aspect include:

Bank of China Limited, Chow Tai Fook Jewellery Group Limited, CLP Holdings Limited, Hang Seng Bank Limited, Hong Kong Exchanges and Clearing Limited, The Hongkong and Shanghai Hotels, Limited, MTR Corporation Limited, Swire Pacifi c Limited and Swire Properties Limited.

5. Management Discussion and Analysis

Companies continued to perform well in the area of Management Discussion and Analysis by using diagrams, photos, pictures, maps and other illustrations. Most companies provided in-depth discussions and analyses of their business operations and performances including (i) discussion of the general business environment, (ii) analysis of their business operations by segments, major product lines and/or geographic locations, (iii) analysis of the assets/liabilities and income/expenses items, (iv) risk management, and (v) future prospects. Some companies grouped the relevant information under different headings and scattered them within the annual report, while some of them simply grouped the information under two headings, namely, Business/Operational Review and Financial Review. Nonetheless, the discussion of future prospects and risk factors affecting future operation still has room for improvements.

5.1 General description of business

Most companies did well in providing a comprehensive review of the factors that influenced their operations in the reporting year including the general economy, the industry and company specific factors. Many companies also indicated that the fi nancial results of their companies in 2019 had been aff ected by the US-China tensions and the social unrest in Hong Kong.

5.2 Analysis of assets / liabilities

Entries spent great efforts on this aspect. Many companies included detailed analyses of their assets/liabilities positions as well as their plans of identifying, assessing and controlling threats to their capital and earnings.

5.3 Analysis of income / expenses

Reviews of the income/expenses items were in-depth and the standard was high. Explanations of the changes in the income/expenses items were presented by segments, product lines and/or geographic locations.

Companies which deserve mention for extensive and informative management discussion and analysis include:

Agricultural Bank of China Limited, Bank of China Limited, Bank of Communications Co., Ltd., CLP Holdings Limited, Hang Seng Bank Limited, Hong Kong Exchanges and Clearing Limited, The Hongkong and Shanghai Hotels, Limited, Lenovo Group Limited, MTR Corporation Limited, Swire Pacific Limited, Swire Properties Limited and Television Broadcasts Limited.

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6. Indications of Prospects / Forward Looking Statements

The standard of presentation of the future outlook varied. More companies only provided general phrases in this respect, probably due to the current macro environment and the prolonged pandemic. Companies in a business with stable recurrent income were more confident in providing forward looking information. Only a few provided a real insight into the ambitions, or useful market data or analyses to support the statements presented. It was particularly impressive to note that some companies had very specific outlook description for each of their business segments. This is particularly important as investors would very much look for future potential for the companies’ current value.

Companies deserving special mention in this area include:

Bank of China Limited, Champion REIT, Chow Tai Fook Jewellery Group Limited, CLP Holdings Limited, Hang Lung Properties Limited, Link Real Estate Investment Trust, MTR Corporation Limited, Swire Pacifi c Limited, Swire Properties Limited and VPower Group International Holdings Limited.

7. Sustainability Reporting

7.1 Overall standards and comments

The overall standard of sustainability reporting has improved compared to previous years. Most companies adopted the Hong Kong Stock Exchange’s Environmental, Social and Governance Reporting Guide in preparing the sustainability reports. Apart from the compliance with the listing guidelines, few companies also took sustainability reporting seriously and transformed the purpose from compliance or reporting to strategy or vision aligning with corporate future development. Many companies invested significant resources in areas of CSR, sustainable development, health and safety, and environment and community. Some companies had also put a lot of thoughts and resources in preparing the sustainability report which was either included in the annual report or as a separate booklet.

While it was not easy to quantify the financial value of committing to ESG, some companies especially those outstanding ones did perform a comprehensive assessment of economic value contributed or generated by different ESG initiatives. Having such practice might better align business strategies and corporate initiatives from financial perspectives, which enhanced management’s assessment of the effectiveness of ESG initiatives and implementation.

However, there were still a number of reports which simply presented a description of the list of social events in which the company had engaged in during the past year. The reports could be improved by presenting a clear strategy of sustainability with measurable targets and tracking the performance of these targets, identifying all relevant stakeholders in the reports, and prioritizing the issues based on signifi cance.

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

Some of the reports were really excellent. It was observed that there was an increased number of companies publishing standalone sustainability reports/ CSR reports/ ESG reports, in additions to the annual reports, which justifi ed the extent of eff orts that the companies committed to environmental, social, and governance issues. This practice also highlighted corporate emphasis to enhance business objectives beyond merely financial concerns. Hopefully, more and more companies would acknowledge the merit of ESG commitments and demonstrate their eff orts in response to the sustainability concerns.

It was also observed that more and more companies formally elevated CSR committee to one of the Board committees. It is a good practice of having senior management to be involved in steering the committees. This demonstrates corporate attitudes towards commitment and emphasis of ESG concerns, as well as highlighting accountability of sustainability issues. Some companies even discussed their corporate practices to cope with COVID-19 or special measures taken in response to such pandemic, which addressed the sustainability concerns.

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

Some companies merely presented a list of social events in which they took part in during the past year. Companies need to pay more attention to analyzing and reporting a comprehensive view of ESG reporting, ranging from management approach, risk assessment and materiality, all-round aspects surrounding business, extent of compliance with standards, oversights and assurance, stakeholder views to economic value generations, distributions, and contributions.

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Some companies did not fully grasp the motivation and merit of reporting ESG activities, and failed to use the sustainability reports to reveal the strategic plan and capture the future business development. Only a few companies engaged external review panels or peer experts comprising commercial peers to evaluate and advise on sustainability matters. An external assurance is advised to improve credibility of reporting. Stakeholders’ views could also be more highlighted. For example, selected sharing or comments by various stakeholders could be incorporated into the reports to enhance readership and improve credibility.

7.4 Companies to be commended on their sustainability reporting

AAC Technologies Holdings Inc., China Everbright Greentech Limited, Chow Tai Fook Jewellery Group Limited, CLP Holdings Limited, Hang Seng Bank Limited, Hong Kong Exchanges and Clearing Limited, The Hongkong and Shanghai Hotels, Limited, Hysan Development Company Limited, MTR Corporation Limited, New World Department Store China Limited and NWS Holdings Limited.

8. Promptness of Reporting

This year, over 75% of companies published their annual reports 91 days or more after their fi nancial year end, and only one company was able to release the report within 60 days, showing decrease in promptness of reporting when compared to 2019. Delay in publishing the reports might be due to operational difficulties and travel restrictions posed by COVID-19 pandemic, which affected the audit of financial statements of some companies in Hong Kong and the Mainland China. However, companies are still highly encouraged to strive to publish timely annual reports for stakeholders to enhance the value and usefulness of information disclosed and meet market expectations.

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

The accessibility of annual reports (a new assessment dimension since 2018) has signifi cantly improved, where the annual reports of most of the entries being assessed were located at the “Investor Relations” or “Report” section of the companies’ home pages. Both existing and potential stakeholders could easily locate the reports, with a generally high speed of downloading. Such improvement should enhance stakeholders’ interest in gathering complete corporate or entity information via browsing annual reports online.

10. Conclusion

The assessment of annual reports mainly focused on the adequacy, relevancy, and presentation of the content. The overall standard of the annual reports submitted for this year’s review was good with regard to compliance with the financial disclosure requirements, in-depth summary of past financial results, wide coverage of green fi nancing, and use of attractive and clear visual presentations, which highly improved the understandability, clarity and conciseness of reports. It was gratifying to observe that despite the unprecedented and challenging times of 2019/2020, many companies managed to publish their audited results announcements and annual reports in accordance with the requirements of the Listing Rules, and continued to uphold their high standard of report presentation. Discussion on the impact of recent uncertain and volatile business environment also enabled readers to obtain insightful information and better understand the operation of a company.

On the contrary, quality of ESG reports and elaboration on future outlook remained areas of concerns. Many companies only maintained a section in their annual reports with limited information that was not too well-integrated into their business strategies and operations. Most of them remained light on social and environmental sustainability issues, remained insufficient on stakeholders’ engagement and materiality assessment related disclosures, and lacked forward looking information and strategic plans. Companies are advised to provide comprehensive coverage of sustainability issues to add credibility to reporting, and give more insight to the outlook of business performance and longer term strategies which are particularly important for investors to assess the companies’ current value and future potential.

This year’s Best Report Award and HKMA 60th Anniversary Judges’ Special Award winner, CLP Holdings Limited, consistently produces very high quality annual reports throughout the years. Its report continued to be innovative and all-round with integrated communication of sustainability initiatives, demonstrating professionalism in terms of design, disclosure and value creation for stakeholders. Other medal winners have also attained a high standard, and again set good examples for next year’s entries to follow.

Winners of the lead award categories and those receiving Honourable Mentions have already attained an outstanding level in each of the judging criteria. As in previous years, they are deemed ineligible for consideration for an award in Citation for Design, and Citation for Environmental, Social and Governance Disclosure this year.

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NON-PROFIT MAKING AND CHARITABLE ORGANIZATIONS CATEGORY

1. General Presentation of Financial Statements

In general, the annual reports of organizations under this category were well-prepared with provision of relevant information about organizations’ operating environment over the reporting year, reflecting that the organizations acutely understood stakeholders’ expectation about their roles and responsibilities, and were inclined to provide useful information.

It was observed that there was increased disclosure of full sets of financial statements. Most of these organizations provided full sets of financial statements with cash flow statements, supplementary notes and comparative figures, which were similar to listed companies. Most organizations did well in giving proper disclosures on the fi rst time adoption and impact on HKFRS 16 “Leases” for accounting year beginning on or after 1 January 2019. Most of them also attached separate financial statements and audit reports, which are essential for readers to understand the income, expenditure, and resources possessed by the organizations. The level of information provided was proportional to the size of the organizations.

On the contrary, there were still a few charitable organizations that selectively disclosed financial information in forms of summary statistics or just few narratives. Few of them failed to disclose if their financial information was audited, which was the same problem found last year. Also, only a few organizations included the nomination policy and procedures for the appointment of executives, which remained in-transparent, and only a few of them included a review of their fi nancial viability or effi ciency.

In addition, organizations are advised to include board evaluation and analysis of board diversity in annual reports, which are good corporate governance practices. A more detailed description and analysis of the income and expenditure are also required as readers would be interested in understanding how effi cient the organizations have deployed the resources. Attendance record and breakdown of top management compensations are also important areas for public monitoring of the operating and fi nancial eff ectiveness. Especially, many of the members on the councils or committees of these organizations serve on a voluntary basis, and thus their participation, contributions, and rewards shall be of concern to public.

Furthermore, it was noted that most organizations solicited funding or support from the society or government,

thus having good governance on how the resources are allocated is needed. Having public scrutiny might also be beneficial for maintaining a good operating and governance environment for these organizations. Key financials could be highlighted and further analyzed in addition to the regular financial reporting. For example, presenting how the funding has been used in different servicing areas using breakdown by percentage with comparative figures would be very helpful for readers to understand how the organizations are operated and how the money raised has been used.

Outstanding organizations which deserve special mention are:

Construction Industry Council, Hong Kong Housing Society, The Hong Kong Jockey Club, Hong Kong Monetary Authority, The Hong Kong Polytechnic University, Hospital Authority, Mandatory Provident Fund Schemes Authority andSecurities and Futures Commission.

2. Provision of Information Relating to Environmental, Social and Governance (ESG)

Many organizations in this category performed well in providing information on ESG especially on corporate governance. It was commendable that some of the relatively smaller ones made good attempts in their disclosures despite limited resources. It appeared that the organizations took the liberty in developing their own framework of ESG reporting with respect to the underlying materiality. A few of them even provided a standalone report on ESG. The outstanding entries were believed to be led by management with a social and service centric mindset.

All organizations were obviously concerned to eff ectively communicate their ESG messages to their audience and most of them successfully did so. Like in previous years, most organizations clearly presented their corporate governance and corporate social responsibility with varying degree of depth. Almost all the organizations included the management or governance structure with adequate details on the various sub-committees’ members and functions. Most of them included their management hierarchy with the use of organizational charts. Describing the link between the board and successful achievement of the organizational goals, and explaining the role of the board in achieving the success of the organizations would also be helpful. Moreover, it was pleased to note that many organizations prepared a section on ESG to cover achievements on environmental protection, caring for the community and the employees. Performance pledges were disclosed and analysis on enquiries and complaints handled were provided in some reports, facilitating readers’ understanding on the corporate governance aspects of an organization.

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However, disclosure on social sustainability performance was an area that seemed to fall short of expectation for the sizable non-profitable organizations. Unlike those listed companies primarily striving for financial performance while balancing their sustainability performance, non-profit making and charitable organizations are expected to provide strong emphasis on their ESG performance pertinent to their mission as a priority in their disclosures. Coverage of the basics of board oversight structures and attendance records of board and member committees were also inadequate in a number of reports. It is necessary to elaborate the basic grounds as to how organizations implement good governance which would enrich several of the reports significantly. Another important aspect is that an organization should consider, holistically, the risks that it faces when implementing its strategies, since discussion relating to risk management helps highlight an issue that needs to be addressed.

Apart from the above, there is still need to further improve disclosures on environmental issues as some entries just provided a general policy regarding environmental protection while most disclosed basic information without additional materials relevant to their particular operations. Those organizations which involve allocation of donations should also disclose detailed information regarding approval procedures and oversight to the public to enhance transparency in reporting.

Organizations which are particularly outstanding in this aspect include:

Drainage Services Department, Estate Agents Authority, Habitat for Humanity Hong Kong,Hong Kong Housing Society, Hong Kong Monetary Authority, The Hong Kong Polytechnic University, The Land Registry, Mandatory Provident Fund Schemes Authority, Oxfam Hong Kong, Securities and Futures Commission and Urban Renewal Authority.

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

Diagrams and Indexing

While most organizations operated with limited manpower and resources, this category was still able to maintain high standard in design.

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Organizations deserving a special mention for their striking front cover and highlights pages include:

Competition Commission, Heep Hong Society, Hospital Authority, Mandatory Provident Fund Schemes Authority, Oxfam Hong Kong and Securities and Futures Commission.

Organizations which receive overall design and presentation commendations are:

Drainage Services Department – One of the few reports which used landscape format, an understated yet eff ective and engaging design.

Fu Hong Society – A thoughtful design, beautifully crafted, with its pottery theme and well-integrated and coordinated graphics.

Hong Kong Housing Society – In both the main report and sustainability report, there was a good all-round and eff ective design balance, creating a concise yet comprehensive and easy to read presentation.

The Hong Kong Jockey Club – A smart, lively, bright and colourful report, with its design being appropriate for the organization’s corporate identity.

Investor and Financial Education Council – This report employed contrasting colour combination as one of the main design tools, and together with its carefully considered layout, demonstrating eff ective design.

3b. Understandability, Clarity and Conciseness

In general, the annual reports of organizations were in a high standard for understandability with good details and clarity. Significant improvements over previous years were observed, as most of the entries were able to present the information in a more digestible format. This is important as the stakeholders of non-profit organizations do not necessarily possess the relevant expertise to understand various governance and fi nancial information.

The organizations had marvellous performance in a few areas. Most organizations described their mission and values, as well as the overall performance during the year relative to those mission and values. Readers could have a clear picture of the target and achievements of the organizations through summarized statistics and the service overview provided. It was gratifying to note a lot more use of colourful tables, infographics, photos and charts, instead of mere texts and figures. Such attractive visual presentation helped enhance readability. Some also included case studies and real-life stories to illustrate the importance of the services rendered by them to the community. Almost all of the organizations presented their corporate activities clearly by dividing into diff erent segments using well-designed divider pages with different colours for the ease of locating different topics which readers were interested in. Furthermore, most of the organizations included abbreviations for ease of reading and understanding of the reports.

Nevertheless, many of the entries failed to provide a balanced view about the organizations. Some organizations focused on the interest of a particular group of stakeholders such as service users, and did not target their reports well at all relevant stakeholders, thus decreasing the effectiveness of messages delivered to the readers. Very often, the reports did not provide much information about how the organizations operated and whether they had achieved optimal efficiency. It was also noted that some entries used pictures excessively and included lengthy description of activities, making the reports hard to follow.

Outstanding organizations deserving special mention are:

Companies Registry, Construction Industry Council, Drainage Services Department, Hong Kong Housing Society, The Hong Kong Jockey Club, Hong Kong Monetary Authority, The Hong Kong Polytechnic University, Investor and Financial Education Council, Mandatory Provident Fund Schemes Authority and Securities and Futures Commission.

4. Purpose, General Description of Activities and Performance

Most organizations continued to demonstrate excellence in this area. All organizations provided statements from top management such as Chairman, Chief Executive Officer and General Manager to enable readers to obtain overviews of the organizations’ operations and strategic planning. All of them included milestones, organizations’ mission and vision statements or values, event highlights, awards and recognitions to showcase their achievements in the past year. In addition, they made good use of performance pledge tables and graphics to support actual results, showing improvements in reporting of results. Disclosure of comprehensive reviews of key performances of various departments and the contribution of their initiatives to the overall organization in some reports were also commendable.

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However, some organizations used lengthy description of activities in their reports and lacked information showing how they had achieved optimal efficiency. Organizations are encouraged to adopt measurements of non-financial performance and benchmark them against their mission, and include information around the objectives of the organizations to facilitate readers’ assessment of their performance.

Organizations which are particularly outstanding in this aspect include:

Construction Industry Council, Hong Kong Housing Society, The Hong Kong Jockey Club, Hong Kong Monetary Authority, The Hong Kong Polytechnic University, Hospital Authority, Mandatory Provident Fund Schemes Authority,Securities and Futures Commission, Tung Wah Group of Hospitals and Urban Renewal Authority.

5. Indications of Prospects / Forward Looking Statements

Some of the organizations included future plans and outlook in the reports and disclosure in this area was satisfactory. To enable stakeholders to comprehend strategic directions and values of the organizations, many entries disclosed explicit organizations’ goals and future plans, some of which were quite in-depth. Outstanding organizations managed to put in forward looking statements in each of their sections. They did not only provide in-depth forward looking statements, but also delivered an overall high standard of quality in their reports, which were very impressive.

Nevertheless, provision of forward looking information was still inadequate in general. Most entries missed such information. Even if this was provided, it was in the form of one to two paragraphs of the Chairman/ CEO Statement/ Report. Some of them were unable to address issues regarding their challenges and risk management plans or had only given generic statements. A shortage of information about the future need for their services or expected increase in expenditure was also observed. Organizations are advised to provide more detailed elaboration on their risk management plans and financial forecasts to help the general public better understand the organizations’ remedial actions taken, viability and performance.

Organizations which are particularly outstanding in this aspect include:

Drainage Services Department, Hong Kong Housing Society, Hong Kong Monetary Authority, The Land Registry, Mandatory Provident Fund Schemes Authority and Securities and Futures Commission.

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6. Sustainability Reporting

6.1 Overall standards and comments

The overall standard of sustainability reporting varied substantially among the “Non-profit” entries. Some organizations prepared a very comprehensive Sustainability Report to highlight their effort in promoting and implementing sustainability within the organizations, but there were still a number of entries which ignored sustainability issues.

The credibility of the report on sustainability was affected by the incomplete coverage of the issues. Although some entries might cover all of the essential elements, their credibility was decreased by lack of content and discussion about some items. Many of the underachievers failed to provide a convincing message about the sustainability of their operations. In addition, the entries as a group fell behind the listed companies in terms of communication skills related to sustainability reporting. This could be a result of management overlooking the importance of sustainability issues.

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

Most of the entries achieved a good per formance in the reporting of social responsibility. Some of them published a thorough Sustainability Report with strategy and measurable targets of sustainability, inclusion of all relevant stakeholders, and were able to identify and present the issues with reference to signifi cance.

Most entries were effective in communicating mission and services provided by the organizations, and some of them were able to convince readers of the important contribution of their services to the society. The use of key event tables and the display of service pledge information also supported reinforcement of the message of social responsibility, while a strong governance structure and the inclusion of famous committee members helped convince people about their sustainability.

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

Organizations remained weak in disclosure of environmental issues and supply chain management. To add credibility to the reporting, extra information on key performance indicators and a report reference table should be provided. In addition, organizations are encouraged to provide a separate section on sustainability to differentiate the related issues from the organizations’ main business of providing social services to the community and draw readers' attention. A wider use of graphical illustrations might also provide a clearer picture of how the sustainability issues are related to the organizations.

6.4 Organizations to be commended on their sustainability reporting

Drainage Services Department, Hong Kong Housing Society, The Hong Kong Jockey Club, The Land Registry, Mandatory Provident Fund Schemes Authority, Securities and Futures Commission, Tung Wah Group of Hospitals and Urban Renewal Authority.

7. Promptness of Reporting

This year, only 15% of the organizations published their reports within 90 days after their year end. Among 73% of the entries which released their reports 181 days or more after their balance sheet date, over 20% released their reports after 250 days, which was much more than previous years. Delay in publishing the reports might be due to operational difficulties and travel restrictions posed by COVID-19 pandemic, which affected the audit of financial statements of some organizations in Hong Kong and the Mainland China. However, organizations are still recommended to make every eff ort to report on a timely basis so as to maximize the value of the information provided for public interest.

-y

y

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8. Accessibility of the Annual Report on the Organization’s Website

It was encouraging to note that almost all entries had their annual reports easily obtained from their websites, with most reports being uploaded under the “Report” or “Publication” section, which was a great improvement from last year. The speed of downloading the reports was also quick, raising readers’ interest in viewing organizations’ information online.

9. Conclusion

Overall speaking, the annual reports under this category were nicely prepared and served well the purpose of providing the relevant information of how the organizations had performed and provided services to their target groups during the reporting year. Most of the essential elements were used to help readers understand the organizations’ operations. Communicating with the readers about the vision and mission was one of the strengths demonstrated in the reports. Organizations continued to perform well in comprehensive fi nancial reporting and clear disclosure of corporate governance and CSR with varying degree of depth. They also made good use of attractive visual presentation and infographics to illustrate the activities taking place during the year in a delightful way, and included performance pledge tables to support actual results, showing transparency in reporting.

Nevertheless, the provision of forward looking information was still inadequate in general. Some organizations lacked information about how they operated and whether they had achieved optimal efficiency, and were unable to address issues regarding their challenges and risk management plans. Environmental issues and supply chain management also remained the weakest areas in disclosure. To add credibility to reporting, organizations are advised to provide extra information on key performance indicators and thorough discussion of the sustainability issues reported. More detailed elaboration on risk management plans and fi nancial forecasts are also required to help the general public better evaluate the organizations’ remedial actions taken, performance and future development.

r

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ACKNOWLEDGEMENTS

The Hong Kong Management Association would like to off er its heartfelt gratitude to the Lead Sponsor, Island Shangri-LaHong Kong, as well as to all award sponsors for their generosity in supporting the Awards.

APPRECIATION

The Hong Kong Management Association would like to express its appreciation to the Panel of Adjudicators, including Mr Patrick Wu from Duff & Phelps, Mr David Chau from Hong Kong Securities and Investment Institute, Ms Jill Cheshire from Jill Cheshire Design, Mr Edward Chiu from Centennial College, Mr Steve Chiu from Institute of Financial Planners of Hong Kong, Ms Ashley Khoo from CFA Society Hong Kong, Dr Keith Lam from HKU SPACE Po Leung Kuk Stanley Ho Community College, Mr Julian Leung from ACCA Hong Kong, Dr Artie Ng from The Hong Kong Polytechnic University, Mr Steve Ong from Hong Kong Exchanges and Clearing Limited, Ms May Tsue from CNOOC Limited and Dr Raymond Wong from City University of Hong Kong, for their efforts and time given to judging the entries.

The Association would also like to thank ACCA Hong Kong, CFA Society Hong Kong, Hong Kong Exchanges and Clearing Limited, The Hong Kong Institute of Chartered Secretaries, Hong Kong Securities and Investment Institute and Institute of Financial Planners of Hong Kong for nominating their representatives to serve on the Panel.

Hyperlinks in footnotes can be found in online Judges’ Report

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THE PANEL OF ADJUDICATORS WISHES TO RECORD ITS THANKS

TO THE FOLLOWING COMPANIES AND ORGANIZATIONS WHICH

HAVE SUBMITTED THEIR REPORTS FOR JUDGING

AAC Technologies Holdings Inc.

Action Care International Limited

Agile Group Holdings Limited

Agricultural Bank of China Limited

Air China Limited

Airport Authority Hong Kong

Aoyuan Healthy Life Group Company Limited

Bank of China Limited

Bank of Communications Co., Ltd.

Bank of Jiujiang Co., Ltd.

Champion REIT

China Everbright Greentech Limited

China Literature Limited

China Minsheng Banking Corp., Ltd.

China Mobile Limited

China Telecom Corporation Limited

China Tower Corporation Limited

Chow Tai Fook Jewellery Group Limited

CITIC Securities Company Limited

CK Hutchison Holdings Limited

CLP Holdings Limited

Companies Registry

Competition Commission

Construction Industry Council

COSCO SHIPPING International (Hong Kong) Co., Ltd.

COSCO SHIPPING Ports Limited

Country Garden Holdings Company Limited

Drainage Services Department

Equal Opportunities Commission

Estate Agents Authority

Far East Consortium International Limited

Federation of Hong Kong Industries

First Pacifi c Company Limited

Fu Hong Society

Habitat for Humanity Hong Kong

Hang Lung Properties Limited

Hang Seng Bank Limited

Heep Hong Society

Hong Kong Exchanges and Clearing Limited

Hong Kong Housing Society

The Hong Kong Jockey Club

Hong Kong Monetary Authority

The Hong Kong Polytechnic University

The Hongkong and Shanghai Hotels, Limited

Hospital Authority

Hysan Development Company Limited

Investor and Financial Education Council

JY Grandmark Holdings Limited

Kerry Logistics Network Limited

Kerry Properties Limited

The Land Registry

Legend Holdings Corporation

Lenovo Group Limited

Link Real Estate Investment Trust

Mandatory Provident Fund Schemes Authority

ManpowerGroup Greater China Limited

MTR Corporation Limited

New World Department Store China Limited

NWS Holdings Limited

The Open University of Hong Kong

Oxfam Hong Kong

Po Leung Kuk

Sa Sa International Holdings Limited

Securities and Futures Commission

Sheng Kung Hui St. Christopher's Home Limited

Shui On Land Limited

Swire Pacifi c Limited

Swire Properties Limited

Techtronic Industries Company Limited

Television Broadcasts Limited

Town Ray Holdings Limited

Tung Wah Group of Hospitals

Urban Renewal Authority

Vinda International Holdings Limited

VPower Group International Holdings Limited

The Wharf (Holdings) Limited

Wharf Real Estate Investment Company Limited

Yuzhou Group Holdings Company Limited (previously named as "Yuzhou Properties Company Limited")

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Organizer

Lead Sponsor

Grand Sponsors

Sponsors Airport Authority Hong KongCompanies RegistryHong Kong Exchanges and Clearing LimitedHysan Development Company Limited