As of 30 June 2009, the Group’s net asset value was HK$22.1 billion, and cash on hand amounted to HK$3.25 billion. Aside from trade liabilities in the ordinary course of business, the Group did not experience any major liabilities. Gearing ratio for the period under review was 15.1% (31 December 2008: nil). After accounting for the repayment of short-term bank loans of HK$2.32 billion, gearing ratio was reduced to 1.3%.

 

China Everbright Securities (“Everbright Securities”; stock code: 601788) was listed on Shanghai Stock Exchange on 18 August 2009 and issued 520 million new shares of A shares, raising approximately RMB 11 billion. 

 

Operations Review 

Everbright said, “During the reporting period, we continued to expand and complement our 3+2 Macro Asset Management business structure. The core businesses achieved remarkable progress in the first half of 2009. Our Direct Investments Division successfully expanded its RMB-denominated fund in China; the Asset Investment Division established China infrastructure funds with Macquarie, which extended the Division’s investment focus; and we launched a new Hong Kong stock trading platform “Golden Sunshine 165”, which is tailored for mainland China investors. Moreover, we remain conscious and pragmatic in minimizing risks presented by market volatility, aiming to provide sufficient funding for the development of various investment funds and remain in a low-gearing and capital-rich position for Everbright’s future development.” 

 

The Direct Investment Division reported HK$81 million in pre-tax profit for the first half-year, representing a decrease of 83% compared with the same period last year. The decline was primarily attributable to the absence of income from the divestments recorded last year. The Direct Investment Division currently comprises three management teams and five investment funds. During the period, Everbright further expanded the RMB fund business in China, entering into agreements with the municipal government and certain local enterprises in Jiangyin, Jiangsu Province, for the joint venture formation of CEL Venture Capital (Jiangyin) Limited (光大創業投資江陰有限公司) with capital of RMB 500 million. The joint venture will focus on investment in hi-tech industrial projects. 

 

The Asset Investment Division reported pre-tax profit of HK$6 million for the first half of 2009 as it stepped up the establishment of investment funds linked to the real estate, infrastructure and energy sectors in response to certain core elements of the country’s development strategies. The real estate fund has identified potential investment projects in China while making good progress in its fund raising activities. With regard to the infrastructure sector, the Group recently announced the joint establishment of two infrastructure investment funds with Macquarie, with capital contributions of US$50 million from each party. Fund offering has commenced with a target size of US$1.5 billion. In addition, the Group was also actively involved in the preparation and management of an energy fund in Shanxi. CEL Haoding Asset Investment Fund Management Limited (光大灝鼎產業投資基金管理公司) was set up as a joint venture with local enterprises, and a fundraising exercise will commence in the second half of the year. 

 

The Dragon Fund managed by the Asset Management Division adopted a relatively conservative approach during the reporting period to minimize investment risks. It held more than 50% of its investment portfolio in cash to report a return rate of -3.8% for the period. The Asset Management Division reported a loss of HK$26 million for the first six months of 2009 (1H 2008: loss of HK$107 million). 

 

As market sentiments improved, the Brokerage Division saw a gradual recovery in client trading volume, though participation from retail investors was less active compared to the first half of last year. Pre-tax profit for the reporting period amounted to HK$27.08 million, a decrease of 56% year-on-year. The Group also launched the “Golden Sunshine 165” Hong Kong stock trading platform in August, which is especially designed for Mainland investors. With web pages and functions similar to those featured in mainstream online trading systems in the Mainland, the trading platform is expected to attract new clientele comprising Mainland investors who are accustomed to conducting online trading of Hong Kong stocks. 

 

The Investment Banking Division reported a profit of HK$21.46 million, representing a turnaround from the approximate HK$1 million loss recorded during the same period last year. During the reporting period, the Division completed sponsorships for the main-board listings of Strong Petrochemical and Qinfa Group on the Hong Kong Stock Exchange. It also took part in the underwriting and placing of two corporate exercises, and acted as the financial advisor in 13 projects. 

 

The total income of Everbright Securities Company Limited, a 39.31% associated company of the Group, amounted to RMB 2.73 billion. Profit after tax in accordance 

with Hong Kong Financial Reporting Standards amounted to RMB 1.24 billion, representing a 15.3% increase over the same period last year. During the period, Everbright Securities’ brokerage business ranked 10th in China with a 3.14% market share. With the successful launch of “Everbright Sunshine 5”, a collective asset management product, its investment banking business continues to develop as a leader among brokerage houses in this area. As of 30 June 2009, Everbright Securities had 79 sales offices and 15 securities services offices nationwide. Following the IPO, the percentage of the Group’s shareholdings in Everbright Securities was diluted to 33.33%, and no less than HK$3 billion equivalent is expected to be booked as “profit from the non-substantial disposal of interests in an associated company”. 

Everbright Bank, 6.23% of which is held by the Group, reported positive developments in all of its business segments as well as ongoing improvements in its asset quality for the first half of the year. Based on the unaudited accounts prepared under Mainland accounting standards (same hereinafter), Everbright Bank’s total assets and loan balance amounted to RMB 1,028.1 billion and RMB 616.5 billion respectively as of 30 June 2009, representing growth of 20.7% and 31.6% compared with the beginning of the year. Pre-tax profit for the period amounted to RMB 3.43 billion. The balance of non-performing loans was reduced to RMB 8.73 billion with the non-performing loan ratio standing at 1.42%, which was 0.58 percentage points lower than the beginning of the year. The credit provisioning coverage ratio was 179.5%, representing an increase of 29.4% compared with the beginning of the year.