2017Annual Report CONTENTS
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(A joint stock company incorporated in the People’s Republic of China with limited liability) Stock Code: 6066 2017 Annual2017 Report 2017Annual Report CONTENTS Definitions ................................ 2 Chairman’s Statement ....................... 6 Section 1 Important Notice ................. 9 Section 2 Material Risk Factors ............. 10 Section 3 Company Information ............. 11 Section 4 Financial Summary ............... 26 Section 5 Management Discussion and Analysis .................... 32 Section 6 Report of Directors ............... 84 Section 7 Other Significant Events ........... 96 Section 8 Changes in Shares and Information on Substantial Shareholders .......... 108 Section 9 Directors, Supervisors, Senior Management and Employees ....... 114 Section 10 Corporate Governance Report ...... 150 Section 11 Environmental, Social and Governance Report ............... 177 Annex Independent Auditor’s Report and Notes to the Consolidated Financial Statements ..................... 205 Annual Report 2017 1 DEFINITIONS Unless the context otherwise requires, the following expressions have the following meanings in this annual report: “A Share(s)” the ordinary shares with a nominal value of RMB1.00 each proposed to be issued by the Company under the A Share Offering, to be listed on the Shanghai Stock Exchange and traded in RMB “A Share Offering” the proposed initial public offering of not more than 400,000,000 A Shares in the PRC by the Company “Articles of Association” or “Articles” the articles of association of CSC Financial Co., Ltd. “AUM” assets under management “Board” or “Board of Directors” the Board of Directors of our Company “BSCOMC” Beijing State-owned Capital Operation and Management Center (北京國有資本經營管理中心) “Company Law” Company Law of the People’s Republic of China “Central Huijin” Central Huijin Investment Limited (中央匯金投資有限責任公司) “Century Jinyuan” Century Jinyuan Investment Group Limited (世紀金源投資集團有 限公司) “China Jianyin” China Jianyin Investment Limited (中國建銀投資有限責任公司) “China Securities Capital” China Capital Management Limited (中信建投資本管理有限公司) “China Securities Funds” China Securities Funds Management Limited (中信建投基金管理 有限公司) “China Securities Futures” China Futures Co., Ltd. (中信建投期貨有限公司) “China Securities International” China Securities (International) Finance Holding Company Limited (中信建投(國際)金融控股有限公司) “China Securities Investment” China Securities Investment Limited (中信建投投資有限公司) 2 CSC Financial Co., Ltd. DEFINITIONS (Continued) “CITIC Group” CITIC Group Corporation Ltd. (中國中信集團有限公司) “CITIC Limited” CITIC Limited (中國中信股份有限公司) “CITIC Securities” CITIC Securities Co., Ltd. (中信證券股份有限公司) “connected transaction(s)” has the meaning ascribed thereto under the Listing Rules of the HKEX “CSC”, “Company” or CSC Financial Co., Ltd. (中信建投証券股份有限公司) “our Company” “CSRC” the China Securities Regulatory Commission (中國證券監督管理 委員會) “CSRF” China Structural Reform Fund Co., Ltd. (中國國有企業結構調整基 金有限公司) “Director(s)” director(s) of our Company “Domestic Shareholders” holders of Domestic Shares “Domestic Shares” ordinary Shares issued by our Company in the Share capital of our Company, with a nominal value of RMB1.00 each, which are subscribed for or credited as paid in Renminbi “FICC” Fixed income securities, currencies and commodities “Glasslake Holdings” Glasslake Holdings Limited (鏡湖控股有限公司) “Group” CSC Financial Co., Ltd. and its subsidiaries “H Share(s)” overseas listed foreign Shares in the Share capital of our Company with a nominal value of RMB1.00 each, listed on the HKEX and traded in HK dollars “H Shareholders” holders of H Shares “HKEX” The Stock Exchange of Hong Kong Limited Annual Report 2017 3 DEFINITIONS (Continued) “Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC “Hong Kong Listing Rules” the Rules Governing the Listing of Securities on The Stock or “Listing Rules” Exchange of Hong Kong Limited (as amended from time to time) “IPO” initial public offering “Latest Practicable Date” 16 April 2018, being the latest practicable date prior to the printing of this annual report for the purposes of ascertaining the information contained herein “Listing Date” 9 December 2016, being the date on which the H Shares of the Company are listed and from which dealings therein are permitted to take place on the HKEX “NEEQ Company” National Equities Exchange and Quotations Co., Ltd. “PRC” the People's Republic of China “PwC” PricewaterhouseCoopers “PwC Zhong Tian” PricewaterhouseCoopers Zhong Tian LLP “QDII” Qualified Domestic Institutional Investor (合格境內機構投資者) “QFII” Qualified Foreign Institutional Investor (合格境外機構投資者) “Reporting Period” from 1 January 2017 to 31 December 2017 “RMB” or “Renminbi” the lawful currency of the PRC “RQFII” Renminbi Qualified Foreign Institutional Investor (人民幣合格境外 機構投資者), a pilot program launched in the PRC which allows Hong Kong subsidiaries of PRC securities and funds companies to facilitate investments of offshore Renminbi into PRC capital markets “SFO” Securities and Futures Ordinance (with subsidiary legislation) (as amended from time to time) 4 CSC Financial Co., Ltd. DEFINITIONS (Continued) “Shanghai and Shenzhen Stock Shanghai Stock Exchange and Shenzhen Stock Exchange Exchanges” “Shanghai Shangyan” Shanghai Shangyan Investment Center (Limited Partnership) (上 海商言投資中心(有限合夥)) “Shannan Jinyuan” Xizang Shannan Century Jinyuan Investment Management Limited (西藏山南世紀金源投資管理有限公司) “Share(s)” ordinary Shares in the share capital of our Company with a nominal value of RMB1.00 each, comprising Domestic Shares and H Shares “Shareholder(s)” holder(s) of the Share(s) “Supervisor(s)” the supervisor(s) of the Company “Supervisory Committee” the supervisory committee of the Company “the end of the Reporting Period” 31 December 2017 “US$” United States dollar, the lawful currency of the United States “Wind Info” or “Wind” Wind Information Co., Ltd. (上海萬得信息技術股份有限公司), a joint-stock company with limited liability incorporated in the PRC and a service provider of financial data, information and software Annual Report 2017 5 CHAIRMAN’S STATEMENT Dear Shareholders: In 2017, global economic growth had seen noticeable acceleration, and domestic economy had been steadily improving in the process of structural adjustment. Although domestic capital market presented fluctuations, the secondary stock market showed steady growth, and IPO issuances were at an accelerated pace, while there was a substantial decline in the scale of equity and debt financings. During the past year, the successive introduction and implementation of various rules and regulations had imposed more stringent supervision and punishment to the securities industry. The stringent review of IPO transactions has become normal. The National Financial Work Conference proposed to strive to achieve the stable operation of the capital market, and stick to the bottom line of preventing systemic financial risks with the core task of “serving the real economy, preventing and controlling financial risks and further implementing financial reform”. This indicates that stringent and comprehensive supervision in accordance with the laws will become the main theme of the capital market for a long time to come. Faced with the complex and ever-changing external environment, CSC strengthened its foundation to improve quality and efficiency. On the basis of strictly guarding the bottom line for compliance, the Company adhered to the strategy of developing of major customers and vigorously explored with intensive efforts, hence achieving satisfactory operating results for all businesses. In 2017, the Group recorded total revenue and other income of RMB16,421 million in aggregate, net profit attributable to equity holders of the Company of RMB4,015 million, and the return on weighted average net assets of 9.92%, maintaining its leading position in the industry. In 2017, the Company was rated “Class A Grade AA” for eight consecutive years, and has newly established China Securities Investment Limited, 77 securities business branches and two futures business branches. In 2017, the investment banking business of the Company continued to maintain the leading position in the industry. According to Wind Info, the Company ranked third and second in the industry in terms of the number of equity financing offerings and bond offerings underwritten by us as lead underwriter respectively, and remained the top three in the industry for five consecutive years. The number of projects in the refinancing business, M&A business and corporate bond underwriting business ranked first in the industry. The Group summarized and formulated the “316 Common Guidelines” for the investment banking business to continuously enhance and deepen the business development and service concepts of employees, and made new progress in the development of major customers with an increase in the income from the investment banking business much higher than that of the industry level. The Group attaches great importance to and has been proactively developing the brokerage and wealth management business. In 2017, the Company ranked ninth in the industry in terms of the trading volume of stocks and funds, ranked tenth in terms of net income from the securities brokerage business, and ranked fifth in terms of net income from third-party financial products and market value of entrusted securities, respectively. The Group promoted the transformation of the wealth management business, 6 CSC Financial Co., Ltd. CHAIRMAN’S STATEMENT (Continued) and achieved remarkable results in the construction of