Information Disclosure of NCCB 2010
Contents
Chapter 1 Important Notes 2 Chapter 2 Brief Introduction to NCCB 3 Chapter 3 Financial Highlights 3 Chapter 4 Report of the Board of Directors 6 Chapter 5 Risk Management 12 Chapter 6 Shareholders and Related Party Transactions 16 Chapter 7 Information on Directors, Supervisors, Senior Management and Staff 18 Chapter 8 Corporate Governance 19 Chapter 9 Report of Supervisory Board 23 Chapter 10 Significant Events 27 Chapter 11 Audit Report 28
1 Chapter 1 Important Notes
The Board of Directors of Nanchong City Commercial Bank, the Supervisory Board, all their members and the Senior Management hereby acknowledge and warrant that the report contains no false records, misleading statements or major omissions, and assume joint and several liabilities as to the authenticity, accuracy and integrity of the content.
Relative contents have been approved by 11th Meeting of the Third Board of Directors on March 12, 2011.
Tianjian (Chongqing) Certified Public Accountants Co., Ltd has audited the Financial Report according to Independent Auditing Standards for CPAs in China and issued its Audit Report without reservation.
Mr. Huang Guangwei, the Chairman of the Board, Mr. Xing Min, the President, and Mr. Guo Yue, the Chief Financial Officer, declare and guarantee the authenticity and completeness of the financial statements in this report.
Board of Directors
Nanchong City Commercial Bank Co., Ltd.
2 Chapter 2 Brief Introduction to NCCB
南充市商业银行股份有限公司 Legal Chinese Name Nanchong City Commercial Bank Co., Ltd. (Abbreviation: NCCB, hereinafter referred to as “the Bank”) Legal Representative Huang Guangwei Secretary to the Board Jian Ting Registered Office No.1 Fujiang Road, Shunqing District, Nanchong, Sichuan, China Business Address No. 301 Wenhua Road, Shunqing District, Nanchong, Sichuan, China Telephone 86-817-2228870 Fax 86-817-2220889 Website www.cgnb.cn E-mail [email protected]
Business Development 2006-2010
Unit: RMB 10 thousand Yuan
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0 2006 2007 2008 2009 2010
Loans Assets Deposits
3 Chapter 3 Financial Highlights
1. Key profit indicators （from the consolidated financial statements） Unit: Million Yuan Net interest income 984.77 Net intermediary business income 121.99 Other business income 0.98 Investment gains 47,83 Net amount of non-operating revenue and expenditure 11.31 Profit before capital loss reserve being raised 792.83 Gross profit 699.80 Net profit 572.38 Net cash flow Generated from operating activities 6,562.75 Net increase from cash and cash equivalents 4,273.99
2. Key financial data and indicators（from the consolidated financial statements） Unit: Million Yuan, % Total assets 43,113.33 Total liabilities 41,620.26 Shareholders equity 1,493.06 Deposits(including due from other banks) 37,662.24 Loans 12,976.42 including: bank notes business 15.71 NPL 69.70 Excess reserves ratio (%) 13.54 Capital adequacy (%) 11.17 NPL ratio (%) 0.54 Loan loss provision adequacy (%) 383.42 Provision coverage ratio (%) 379.84 Loan-to-deposit ratio (%) 46.45 Liquidity ratio (%) 91.93 Inter-bank borrowing ratio (%) 0.00 Inter-bank lending ratio (%) 0.09 Loan Concentration ratio to top ten clients (%) 35.09 Loan Concentration ratio of a single client (%) 6.63 Loan Concentration ratio of a single group client (%) 6.63 Interest recovery ratio (%) 99.56 Average ROA (%) 1.70 Average ROE (%) 46.61
4 3. Changes in main operating indicators for the past three years （from the consolidated financial statements） Unit: Million Yuan 2010 2009 2008 Total assets 43,113.33 24,155.06 16,418.46 Deposit balance(including due from other 37,662.24 20,162.05 13,178.40 banks) Loan balance 12,976.42 10,049.00 6,466.07 Operating income 1,543.56 947.78 742.01 Shareholders’ equity 1,493.06 963.18 748.49 Earnings per share (Yuan) 0.95 1.01 0.62 Cost to profit ratio (%) 27.40 29.69 33.32
4. The capital structure and its movement for the past three years （from the consolidated financial statements） Unit: Million Yuan 2010 2009 2008 Core capital 1,497.29 955.49 681.15 Paid-in capital 600.00 300.00 300.00 Capital reserve 7.97 7.97 7.97 Surplus reserve and common reserve 307.93 196.21 126.75 Undistributed profit 560.18 434.94 231.52 Minority equity 21.21 16.37 14.91 Supplementary capital 171.32 104.34 98.33 Fair-value variation -4.23 3.85 33.67 Provision for loan loss 175.55 100.49 64.66 Long-term tier II bonds 0 0 0 Convertible bonds 0 0 0 Less: 9.00 0 0 Goodwill 0 0 0 Investment in non-owner-occupied real estate 0 0 0 Capital investment in industrial or commercial 0 0 0 enterprises Unwritten-off part of loan loss 0 0 0 Unconsolidated capital investment in non-banking 0 0 0 financial institutions Unconsolidated capital investment in banking 900 0 0 financial institutions Net capital 1,659.61 1,059.83 779.48
5 Chapter 4 Report of the Board of Directors
In 2010, according to the work plan set up at the beginning of the year of “emancipate the mind, lay down the burden, dare to dream, dare to do and do it right”, Board of Directors led the management team and all employees to further promote the development strategies, strengthen the analysis of macroeconomic and financial situation, optimize the asset structure, reform innovatively, fight with all strength, and achieved rapid, efficient and healthy development.
Ⅰ Main work and achievements in 2010 1.The core decision-making role of the Board was Further enhanced and corporate governance was in good condition
Board of Directors held five meetings throughout the year and hosted one general meeting of shareholders. With a high sense of responsibility , the Directors performed their duties conscientiously and strictly in accordance with company procedures in decision-making to ensure that the bank followed standardized, efficient and safe development of orbit: Firstly, the analysis of macroeconomic and financial trends was targeted and guiding. In the high quality board meetings, the directors used their expertise to express their views freely and debated intensely. Analysis and understanding were moving in the depth and breadth. Professor Ba Shusong provided many economy situation analysis reports and opinions, which offered a very efficient help to development of the bank. Secondly, a consensus on implementation of the strategy of the bank was reached. For instance, market positioning Services for SMEs and specialization was the direction and foundation of the bank’s sustainable development. In the post-financial crisis era, to adapt approaching interest rate liberalization, the bank must insist on the philosophy of “boutique bank, specialization bank, security bank” ；Thirdly, understanding On cross-regional development, and rural financial development was deepened. Establishment of Shanghai village bank was a good example. Fourthly, a consensus on the enterprise culture was reached. Board meetings were getting increasingly standardized, including the conditions of the meeting venue, quality of meeting materials, dress and other participants have significantly improved and changed, indicating while enhancing the bank’s strength, quality was becoming mature. In 2010, under the leadership of the board, management team seriously implemented the resolutions around the objectives and tasks set up by the Board, strengthened management and risk control, promoted specialization, accelerated innovation and development, and reached objectives and tasks of entire year through fruitful and hard work.
2. The bank was under rapid development with good indicators By the end of 2010, total assets of the bank (from the consolidated financial statements) reached 43.113 billion Yuan, up 78.49% over the beginning of this year; the deposit
6 balance was 37.662 billion Yuan, up 86.80% over the beginning, of which basic deposit was 27.940 billion Yuan, an increase of 61.82% over the beginning of this year; the loan balance was 12.976 billion Yuan, up 29.13% over the beginning; owner's equity was 1.493 billion Yuan, a growth of 530 million Yuan over the beginning; after-tax profit was 567 million, an increase of 264 million over the beginning. loan loss reserve adequacy ratio was 383.42 percent; coverage provision was 379.84 percent; capital adequacy ratio was 11.17%; core capital adequacy ratio was 10.07%; liquidity ratio was 91.93%; Non-performing loans accounted for 0.54%; average return on assets was 1.70%, return on average net assets was 46.61%; the proportion of deposits and loans was 46.45%; revenue cost ratio was 27.40%; single loan concentration was 6.63%; single group credit concentration was 6.63%; ten largest customer concentration was 36.09% loans. Data above shows that the bank is experiencing rapid development and healthy operation condition with qualified financial indicators and monitoring indicators.
3. Capital structure optimized, profitability significantly improved In 2010, the bank further adjusted capital structure and optimized asset allocation, assets structure was allocated in accordance with the "5-3-2" ratio as conducting policy, in which interbank financial assets accounted for 50%, credit assets of 30%, bonds of 20%; Revenue structure reached 55:25:20, that is, the credit interests income accounted for the total income 55%;the income from bonds investments accounted for 25%; intermediate business income (including interbank financial income) accounted for 20%. It was the first time that the portion of loan interests income fell below 60%.In expenditure structure, the interest expenses accounted for 40%; the operating expenses accounted for 30%, tax expenses (including corporate income tax) accounted for 20%; various of asset impairment expenses accounted for 10%. Data above illustrated that the bank's profitability was growing, net profit after tax increased from 301 million in 2009 to 562 million in 2010.
4. Specialization was deepened and risk control capacity was enhanced. In 2010, the Bank further promoted the specialization strategy. Firstly, the Bank provied the professional and speacial services to the clients; secondly, combined the speacilization construction, the Bank completed the work of the innovation on bussiness products for clients and the administrative measures and regulations; thirdly, the specialization was not confined in credit business but implemented to all business lines of the bank. Specialization of interbank business, intermediate business, and precious metals investing in investment business are good examples; fourthly, followed the strategy of speacilization, the Bank’s risk-contol capacity was inhanced.
5. “Enter the rural financial market and cities” Strategy achieved new success. In 2010, continued to implement the “Countryside and city” strategy, the Bank accumulated new experiences in the cross-regional development and management. Firstly, the market positioning, corporate culture, mechanism and risk control process of “Services to SMEs” have been copied to cross-regional branches and village banks with innovation. The brand name of NCCB was accepted and praise by broader customers.
7 April 17, 2010, the bank's first inter-provincial branch was opened in Guiyang. The preparatory work of Chongqing branch and Shanghai village bank of NCCB was promoted orderly. October 15, 2010, Zhijing Huimin village bank was opened in Guizhou Province. ; Secondly, In accordance with the "Three Ones" (i.e.: one corporate body, one chain of command system, one set of rules and regulations), the Bank developed tailor-made management mode of cross-regional branches; Thirdly, efficient explorations were made on the cross-regional branches network layout. In November of 2010, the CBRC gave positive feedback in the research of NCCB cross-regional development, the CBRC Chairman Liu Mingkang instructions that the cross-regional development of NCCB is in line with scientific development concept.
6. Innovation capacity was promoted Compared with 2009, the bussiness innovation capacity in 2010 has been greatly enhanced, which could be reflected in three aspects: firstly, the innovation of Credit business has increased. The bank estabished market pricing mechanism which promoted bargaining power and income level; secondly, the innovation work of the branches, departments and business lines was improved. Good models emerged in large numbers, for instance the Jinsha Card of retail banking, high quality financing products published by intermediate business department and bank-trust cooperation and cooperation with industry associations of Chengdu branch in specialization construction; thirdly, after holding the activities of “building up righteousness, strengthening details and encouraging innovation”, many creative ideas and suggestions from staff promoted the atmosphere of innovation.
7. Supporting capacity was improved significantly, which provided efficient help for business development Firstly, political protection and supervision of Party committees, discipline inspection, supervision, and the board of supervisors were deepened evidently. Secondly, IT construction provided strong support for bank tellers business, “three-center in two location” disaster recovery Center and computer room construction achieved initial results. IT management system such as OA system, Video conference system made management work of the Bank more efficient and convenient; Thirdly, comprehensive secretarial support capability was enhanced. The radius and administration costs of the management was reduced by using A number of modern information tools, such as video meeting of credit review, which reducing a number of modern information tools. Meanwhile, paperwork, service works and so forth were all improved. Fourth, financial accounting, auditing and supervision services got improved. Fifth, administrative services, logistics, security, post-supervision and clearing centre, gave full play to protect and ensure the whole year without incident.
8. Corporate culture and core values has been formed fundamentally. The Bank’s corporate culture of "kindness in heart to others as water enriches the world" has been integrated to the development work and reached an consensus with society, customers and staff. The bank raised “Three Bank” slogan, building a "competitive Bank,
8 characteristic Bank, Safe Bank". Take work as career, strive hard and achieve modern competitive bank; Stick to positioning of servicing SMEs, encourage innovation to build a characteristic bank with affinity; Respect to Customers, shareholders, staff and others, to build a safe bank with high esteem. These were penetration of the bank’s corporate culture into community, customers, and employees. Last year, employees got better understanding of core values of the bank which could reflect from daily work, various kinds of advanced characters from many business lines. In addition, social responsibility of the bank reflected further in 2010, the Bank donated funds to the province of Gansu Zhouqu where suffered large debris flow disaster, to Guiyang drought relief and poor college students, street households under poverty.
Ⅱ Plans for 2011 1. Work ideas for 2011 Tackle difficulties, accelerate development, strive for ten years, a hundred times return. 2. Targets for 2011 ①Total assets reach to 70 billion Yuan; ② NPL below 0.5%; ③ increase 14 billion Yuan fundamental deposit ④ Profit reach to 1 billion Yuan ⑤ Ensure no financial criminal cases and no security incidents happened throughout the year.
3. Main measures: ①Strengthening the Function of Strategic Decision of Board Committee to promote the healty and efficient development of the Bank; ② Developing human resources in full spectrum and enhancing staff quality; ③ Encouraging accountability and innovation and dramatically improving services level; ④ Developing communication from all directions and improving development environment thoroughly In internal communication; ⑤ Turning corporate culture into core competitive edge; ⑥ Enhancing internal control and supporting capacity and guarantee a safe and rapid development of the bank.
Chapter 5 Risk Management
Ⅰ. The compliance of main regulatory indicators
As at December 31, 2010, the capital adequacy ratio of the Bank was 11.17%; the assets liquidity ratio was 91.93%; the inter-bank borrowing was 0, the inter-bank lending was 25 million Yuan, and each indicator of the Bank was fully complied with the regulations of supervision authorities.
9 Ⅱ. Major industrial distribution of loan (Top 5)
Industry Proportion (%) Personal loan 21.89 Wholesale and retailing 19.74 Manufacturing 18.74 Realty business 9.73 Construction Industry 6.73
Ⅲ. Top 10 loan clients
Loan Balance Proportion No. Name (million Yuan) (%) 1 Sihuan Yonghe Industry Co., Ltd 110.00 0.85 Nanchong Gaoping District Lidong Land Reserve 2 60.00 0.46 and Development Co., Ltd Chengdu Southwest Agricultural Machinery Market 3 55.00 0.46 Co., Ltd 4 Nanchong Jialing River Harbor Co., Ltd 55.00 0.42 Chengdu Jintang Development and Investment Co., 5 51.33 0.40 Ltd 6 Mianyang Chuanyin Chemical Co., Ltd 51.00 0.39 7 Chengdu Huatao Auto Plastic Ornament Co., Ltd 50.00 0.38 8 Chengdu Juhua Tongda Scientific Co., Ltd 50.00 0.38 9 Chongzhou Land Reserve centre 50.00 0.38 10 Guizhou Gui Wine Co., Ltd 50.00 0.38
Ⅳ. NPL data
NPL as of December 31, 2010 (million Yuan) Proportion (%) 69.70 0.54
Ⅴ. For the opening balance, ending balance and movement of Loss Provisions and Write-off please refer to the table of Changes in Capital Loss Provision.
Ⅵ. Risk management of group clients
1. Strengthening unified management to loan procedure. According to Group Clients Loan Risk Guide of CBRC, the Bank established a series of scientific, prudent and strict loan procedures and policies for group clients and their related parties, in addition, required a detailed and authentic information in loan applications and perfected related client information database system.
10 2. Strengthening after loan management and guarantee management of related group enterprises, specifying duties for each sector of loan risk management procedures and applying sever punishment to enterprises disregard of relevant rules and regulations. The Bank also kept close attention to clients’ operation situation, use of loan funds and related party transactions to prevent the unusual transfer of assets and profits.
Ⅶ. Main capital loss provision data
Changes in Capital Loss Provision
Unit: Million Yuan
Write-off Drawn Beginning New Sold Other Ending Item capital by back balance provision assets change balance provision provision
Normal 100.49 75.06 0 0 0 0 175.55 Loan Loss Program 70.16 20.38 0 0 0 -1.34 89.20 Provision Special 0 0 0 0 0 0 0 Total 170.65 95.44 0 0 0 -1.34 264.75 Other Capital Loss 25.56 -2.41 0 7.56 0 0 15.59 Provision Total 196.21 93.03 0 7.56 0 -1.34 280.34
Ⅷ. The category, balance and proportion of debt assets
Unit: Million yuan, %
Category Balance Proportion House 20.03 98.97 Others 0.21 1.03 Total 20.24 100.00
Ⅸ. Investment in other business
By the end of 2010, the Bank invested 8.82 million in equities and no other entities owned by the Bank.
Ⅹ. Overdue loans management
Adopting the method of “quarterly alert, monthly feedback”, the Bank’s overdue loans achieved good results. By the end of 2010, total overdue loans were 53.55 million Yuan, with a ratio of 0.42%, a decrease of 78.15 mllion Yuan than the beginning of this year, of
11 which nonperforming overdue loans was 2.12 million Yuan.
Ⅺ. Major policies, measures and results of NPL management
1. The major policies and measures
First, the Bank formulated the Assessment Measures of Clearing and Management on Non-performing Loans of Nanchong City Commercial Bank and carried out the principle of “fixing the goal, limiting the balance, assessing branches’ quarterly performance based on their NPL management”.
Second, in the beginning of a calendar year, the Bank made a list of NPL and allocated the major clearing objects to each branch. Moreover, clearing NPL was a main and important task for presidents, vice presidents, chief risk officers and customer managers of branches and closely tied to everyone’s evaluation performance record.
Third, for those borrowers with low credit reputation or repayment willing, the Bank adopted law suit to clear NPLs up, at the same time, followed every step of the law suit procedure to increase its success rate.
Fourth, the Bank appealed for help from local government to solve some tough problems in NPL clearing. The Bank tried to handle issues left over with a long history due to administrational causes in various ways such as clearing, revitalizing assets and assets replacement.
Fifth, a non-performing loan clearing team has been grouped up by those professional lawyers and clerks with rich related experience which directly reported to risk management department of head bank. The team is specialized in cracking “hard nuts”, they integrated the uncollectible loans from branch and sub-branch banks and cope with each case efficiently with professional knowledge and broad social networks.
Sixth, ensuring high quality of new loans comparatively
2. The results of NPL management
With hard work of the Bank, 44.32 million of NPL was taken back already in 2010. By the end of 2010, the NPL balance was 69.70 million with a ratio of 0.54%, an decrease of 3.60 million Yuan than the begning of this year.
Ⅻ. Main off-balance-sheet items and risk management
The main off-balance-sheet items of the Bank include interest receivable, guarantee letter and bank acceptance.
1. The interest receivable on off -balance sheet was 38.62 million Yuan, including 7.06 million Yuan from standard loans. The Bank actively called its return. If receivable interest over due a long period of time and identified as not to be received through strict identification procedure, it was timely written off.
12 2. The guarantee letter was 60.91 million Yuan. The Bank required for 100% margins or deposits pledge to decrease risks.
3. The bank acceptance was 9,640.35 million Yuan. The Bank formulated the Rules on Bank Acceptance Business which regulated all process and management of bank acceptance business, such as customers’ application, examining, approving and discounting. The Bank took much care of the trade background and the deadline of the draft and strictly forbad violation or bank’s cash advance.
Chapter 6 Shareholders and Related Party Transactions
1. According to the capital increase plan of NCCB 2010, the Bank sent the share to all the shareholders with the ratio of 1:1. By the end of 2010, there were no any changes in the amount or structure of share capital structure of the Bank.
2. Shareholders holding 5% shares (including 5%) or above
Name of shareholders Shares (1 share) Proportion (%) DEG 60,000,000 10.00 Sichuan Mingyu Group Co., Ltd 59,940,000 9.99 Nanchong Lianyin Trade Co., Ltd 59,940,000 9.99 Sichuan Jiaxin Trade Co., Ltd 59,940,000 9.99 Chengdu Yunji Real Estate Development Co., 56,000,000 9.33 Ltd
3. Related Parties with transactions
Name of Related Parties Relation
1 Sichuan Mingyu Group Co., Ltd Shareholder
2 Sichuan Jiaxin Trade Co., Ltd Shareholder
3 Sichuan Lianying Industry Co., Ltd Shareholder
Chengdu Yunji Real Estate Development Co., 4 Shareholder Ltd Shareholder’s holding 5 Nanchong Oriental Garden Hotel Co., Ltd company Shareholder’s holding 6 Chengdu Yuhao Golden Bay Hotel Co., Ltd company
7 Sichuan Mingyu Real Estate Development Shareholder’s holding
13 Co., Ltd company
Nanchong Yuhao Property Management Co., Shareholder’s holding 8 Ltd company Shareholder’s holding 9 Sichuan Estin Hotel Management Co., Ltd company Sichuan Taihe Real Estate Development Co., Shareholder’s holding 10 Ltd company Shareholder’s holding 11 Sichuan Ready Trade Co., Ltd company
4. Material related party great transactions
By the end of 2010, there was no any great transaction of related parties
Chapter 7 Information on Directors, Supervisors, Senior
Management and Staff
Ⅰ. Directors, Supervisors and Senior Management
1. Current Directors
Name Gender Age Position Tenure Huang Guangwei Male 46 Chairman April 2009 – April 2012 Xing Min Male 48 Director April 2009 – April 2012 Han Kun Male 42 Director April 2009 – April 2012 Huang Yi Male 44 Director April 2009 – April 2012 Carsten Steffan Male 45 Director April 2009 – April 2012 Zhu Zengjin Male 46 Director April 2009 – April 2012 Hu Xiaoping Male 60 Director April 2009 – April 2012 Zhang Jianming Male 47 Director April 2009 – April 2012 Zhang Bin Male 50 Director April 2009 – April 2012 Wang Renguo Male 38 Director April 2009 – April 2012 Tian Jian Male 58 Director April 2009 – April 2012 Du Jun Male 46 Director April 2009 – April 2012 Huang Shunlai Male 46 Director April 2009 – April 2012 Xiong Zhijian Male 47 Director April 2009 – April 2012
14 Hao Mingwei Male 58 Director April 2009 – April 2012
2. Current Supervisor
Name Gender Age Position Tenure Yuan Yuan Male 48 Chairman April 2009 – April 2012 Li Kelun Male 65 Supervisor April 2009 – April 2012 Yao Hong Female 41 Supervisor April 2009 – April 2012 Ba Shusong Male 43 Supervisor April 2009 – April 2012 Yang Gangcai Male 55 Supervisor April 2009 – April 2012
3. Current Senior Management Team
Name Gender Age Position Tenure Xing Min Male 48 President April 2009 – April 2012 Dong Ke Male 47 Vice President April 2009 – April 2012 Han Kun Male 44 Chief Risk Officer April 2009 – April 2012 Jian Ting Female 35 Secretary to BoD April 2009 – April 2012 Guo Yue Male 34 CFO April 2009 – April 2012 Yang Bing Male 35 Assistant President April 2009 – April 2012
Ⅱ. Staff Information
Up to the end of the year of 2010, NCCB had 830 staff (on-the-job), with an average age of 31, among them: 351 were male accounting for 42.29% of the total, 479 were female accounting for 57.71%; 211 people had professional technical title accounting for 25.41%; 4 had PhD degree accounting for 0.48%; 48 had Master degree accounting for 5.78%; 493 employees had college education accounting for 59.4%; 216 had junior college education accounting for 26.02%; 55 had an educational background of secondary technical school accounting for 6.63%; 12 were with senior high school education accounting for 1.4%.
Chapter 8 Corporate Governance
Ⅰ. The Brief introduction of Corporate Structure
The Board of Directors fully implemented its function as a central decision-maker of the Bank and made efforts in its fast and healthy development. In 2010, the Board held 5
15 Board Meetings and convened 1 Shareholders’ General Meetings. The Board enhanced communication between shareholders, directors and senior management, improved working methods, tried to make different appeals finally balanced. All directors fulfilled their responsibilities in real earnest and proactively participated in deliberating proposals at meetings on the following topics: development strategy, business plan, corporate governance, risk management, reforms and innovation, shareholders’ rights protection and information disclosure. Under the leadership of the Board, the senior management strictly implemented all the resolutions approved by the Board, earnestly worked in business developing and risk controlling and detail management, and fulfilled the tasks well.
In conclusion, in 2010, the Bank improved the meeting procedures and details of managing board and special committee, which kept every department operating effectively in compliance with related regulations.
Ⅱ The Shareholders’ Meeting
The Annual Shareholders’ General Meeting 2009 was convened on March 29, 2010 and approved Work Report of the Board of Directors 2009; Work Report of the Supervisory Board 2009; Financial Report of NCCB 2009; Proposal of Profit Distribution of NCCB 2009; Proposal of Rewarding Directors, Supervisors, Senior Management and Staff of NCCB 2009; Proposal of Share Bonus Distribution of NCCB 2009; Capital Increase Plan of NCCB 2010 (Plan A); Report on Performance Evaluation of Directors and Senior Management 2009; Proposal of Amending the Articles of Association of NCCB; Proposal of Canceling Issuing Subordinated Bond of NCCB; Setting up New Village Bank of NCCB.The Affiliated Transaction Report of NCCB 2009; Work Report of Independent Directors of NCCB 2009; Notice of NCCB’s External Audit Institution Renamed were reported.
Ⅲ. The Meeting of Board of Directors
The 6th Meeting of Third Board of Directors was convened on March 6, 2010 and the following proposals were approved: Work Report of the Board of Directors 2009; Work Report of the Management Team of NCCB 2009; Financial Report of NCCB 2009; Proposal of Profit Distribution of NCCB 2009; Proposal of Rewarding Directors, Supervisors, Senior Management and Staff of NCCB 2009; Proposal of Sending Share to all the Shareholders; Capital Increase Plan of NCCB 2010 (Plan A); Report on Performance Evaluation of Directors and Senior Management 2009; Proposal of Amending the Articles of Association of NCCB; Proposal of Canceling Issuing Subordinated Bond of NCCB; Proposal of Business plan of 2010-2012; Proposal of Relocating Village Bank in Guizhou Province; Measures on Reputation Risk Management of NCCB (Trial); Measures on Information Technology Risk Management of NCCB; Measures on Liquidity Risk Management of NCCB; Information Disclosure of NCCB 2009; Proposal of Convening the Annual Shareholders’ General Meeting of NCCB 2009.
The Audit Report of NCCB 2009, Work Report of Independent Directors of NCCB 2009, Affiliated Transaction Report of NCCB and Notice of NCCB’s External Audit Institution
16 Renamed were reported at this meeting.
The 7th Meeting of Third Board of Directors was convened on August 4, 2010 and the following proposal was approved: Proposal of issuing price of capital increase plan. The 8th Meeting of Third Board of Directors was convened on August 11, 2010 and the following proposal was approved: Proposal of setting up village Bank in Pudong District, Shanghai. The 9th Meeting of Third Board of Directors was convened on October 31, 2010 and the following proposals were approved: issues concerning the Capital Increase of NCCB 2010；Initiating the Establishment of “Sichuan Tianfu Aging Development Foundation”of NCCB; Increasing Investment to Sichuan Yilong Huimin Loan Company; Increasing Investment to Shanghai Pudong Huimin Village Bank. The 10th Meeting of Third Board of Directors was convened on December 26, 2010, and the following proposals were approved: Financial Budget of NCCB 2011; Business Plan of NCCB 2011.
Ⅳ. The Meeting of Supervisory Board
The 4th Meeting of Third Supervisory Board of NCCB was convened on March 6, 2010 and approved Work Report of the Supervisory Board 2009; Proposal of Report on Performance Evaluation of Supervisory Board 2009, attended the 6th Meeting of Third Board of Directors as non-voters.
The 5th Meeting of Third Supervisory Board of NCCB was convened on October 31, 2010 and attended the 9th Meeting of Third Board of Directors as non-voters.
The 6th Meeting of Third Supervisory Board of NCCB was convened on December 26, 2010 and attended the 10th Meeting of Third Board of Directors as non-voters.
Chapter 9 Report of Supervisory Board
Ⅰ. Brief Review of 2010
In 2010, in accordance with the related laws and regulations, as a supervisor and safe-guard of the Bank, the Supervisory Board carefully fulfilled its obligations to ensure the healthy development of the Bank.
1. Operating itself conforming with laws and regulations, fulfilling its supervisory obligations
The Supervisory Board held 3 meetings and attended 3 Board Meetings in 2010. All the meetings held by the Board of Directions in 2010 complied with legal procedures and all the voting resolutions were valid. All the shareholder supervisors, external supervisors and staff supervisors fulfilled obligations earnestly, devoted themselves to improve the functions of Supervisory Board and participated in the meetings actively for making final decisions. In the Supervisory Board meetings, supervisors mainly deliberated and formed
17 resolutions on the following topics: 1) Annual Work Report of Supervisory Board; 2) election of supervisors and 3) setting up of special committees under Supervisory Board.
2. Strengthening supervision and inspection to the operation of the Bank to avoid law-breaking cases
① Strengthening supervision of the formulation and implement of the internal control system with risk management as its soul to perfect various internal control systems. In 2010 the Bank did a lot of effective work in intensifying risk control, establishing comprehensive covering and flowing model and management system of risk control. Firstly, the Bank explored the risk recognizing, forecast-alarming and controlling systems. Secondly, the Bank greatly advanced the construction of risk management system construction. Thirdly, the Bank controlled the credit granting risk severely, implemented credit approval procedures and further improved system of accountability. Fourthly, the Bank enhanced the construction of risk manager’s team. Fifthly, the Bank controlled the affiliated transaction severely. Sixthly, the accountability and responsibility system was working and people who were responsible for NPLs were punished accordingly.
② Strengthening supervision to financial management in the aspects of 1) perfecting financial management system and the financial management auditing procedure; 2) enhancing financial forecast and analysis; 3) completing centralizing system of the chief accounts; 4) promoting the practice of new accounting principles; 5) improving the business system and spreading, promoting the efficiency of settlement and the service; 6） intensifying settlement management and daily business inspection to avoid any rules-breaking accident.
③ Strengthening supervision to internal audit: 1) strengthening audit of high-ranking executives and the improtant positioning people 2) enhancing the special internal audit to new credit granting business, IT systems, the Bank's audit, financial expenditures, the installation of decoration project and supervision. 3) auditing the part of managing branches in all-around way and summarizing the situation of risk management and implement system in these branches; 4) intensifying proactive regulation and supervision so as to find the errors and then revised these timely which avoided settlement accident and reduced financial loss..
3. Strengthening supervision and inspection to senior management
① Supervised to operational statement. The Supervisory Board issued audit opinions to all statements, reports and related narrations of the bank, in addition, ensured to understand development status and operation performance of the Bank timely and concerned about risk control.
② The Supervisory Board attended important operational meetings of the Bank and supervised new and high-risking business
③The Supervisory Board supervised behaviors and actions of senior management and made sure that there was no one who abused their powers.
4. Evaluation on the work performance of the board of directors and management
18 ① The work performance of the directors
In 2010, the board of directors further advanced the bank’s quality and efficiency of operational mechanism, promoted the development of bank in standard, excellent, fast and high effective way. All the executive directors, foreign directors, independent director and corporate shareholder directors fulfilled their obligation earnestly, participating all the meeting for making decisions according to the bank’s operational mechanism. Firstly, the board of directors posed effective suggestions to standardize the bank’s operational structure, promote the work’s quality and the efficiency of operational mechanism. Secondly, the directors discussed the implementation of the bank’s strategic development. Thirdly, the directors discussed the bank’s major financial transactions such as operation program, financial budget and settlement, profit distribution etc and formed the resolution. Fourthly, the directors invited auditing institution to audit the bank annually to guarantee the authenticity and maintain value even appreciation of shareholders’ right and profit. Firth, the special committee strengthened the bank’s internal control management.
② The work performance of senior management
The management carried out all the board of directors’ perceptions, enclosing the goals set up by the board of directions and enhancing the management. They also fulfilled their obligation and completed the goals, guiding all the staff to have fought well. Firstly, the management carried out the transition of business basis and system, promoted the client manager management system growing maturing. Secondly, the management fulfilled the annual management goals set up at very beginning of 2009, promoted the development of all the businesses, extended the market to ensure the bank’s healthy development. Thirdly, the management implemented the board of directions’ risk-avoiding policies and strengthened risk-avoiding systems. Fourthly, the management enhanced financial auditing and management and fulfilled all the operational goals.
③ The statement of accepting the supervision of supervisory board
The members of board of directors and the management could accept the supervisory board’s supervision and cooperate with the supervisory board’s inspection, audit, decisions, implementation and supervision.
5. General evaluation
The Supervisory Board believed what the Bank has done in 2009 was complied with laws and regulations, directors and senior management fulfilled their responsibilities in real earnest and with on one breaking the laws and regulations.
In 2010, the bank competed with others fairly. There is nothing happened to harm the rights of shareholders and depositors or loss the assets. With the help and support of all the shareholders, the bank’s board of directors performed remarkably.
Ⅱ Work Suggestions for 2011
In 2011, complying with the regulation, the Supervisory Board will strengthen supervision
19 to the Bank, further advance the standardization of the bank’s function structure, and further coordinate the operation of authority department, decision-making department and implementing department; and also concern the harmonious relationship between all the share-holders and the bank’s management team.
The Supervisory Board will pay attention to the senior managers’ progress and programs of moral behavior, loyalty and performance. In general, the Supervisory Board will fulfill its obligation faithfully for ever and maintain the rights of shareholders and depositors.
Chapter 10 Significant Events
1. Major events regarding lawsuits, arbitration or criminal cases in the report period
By the end of 2010, all the unfinished cases entailed amount 24.92 million. Big cases refer to:
No. The accused Principal (million Yuan) 1 Nanchong Jitai property Company 1.783 Sichuan Taisheng (group) Hongzhou property 2 1.150 Development company Shangdong Zhongchuang software Engineering 3 0.768 Co.,Ltd Total 3.701
2. There were acquisitions, merger or assets selling during the report period.
Unit: Yuan
No. Address property Paper value Audition price Floor 1,Buiding 1,No 47, Zhongjia 1 7,600,000.00 Lane Shunqing District No 14, Floor 1,Buiding 2,No.25, 2 485,000.00 Zhongjia Lane, Shunqing District No.10, Floor 1,Buiding 2, No.25 Debt 3 5,500,000.00 590,000.00 Zhongjia Lane Shunqing District Assets No 9, Floor 1,Buiding 2, No 25, 4 570,000.00 Zhongjia Lane Shunqing District No 13, Floor 1,Buiding 2, No 25 5 370,000.00 Zhongjia Lane, Shunqing District
20 No 11, Floor 1,Buiding 2, No 25 6 345,000.00 Zhongjia Lane, Shunqing District No 12, Floor 1,Buiding 2, No 25 7 375,000.00 Zhongjia Lane, Shunqing District Floor 2,BUiding 1,No.3, Daxi street 8 298,637.18 780,000.00 Shunqing District Floor 2,Buiding 1, No 181,Gaoping 9 1,373,679.39 3,600,000.00 District The land of west of Changcheng 10 309,453.87 885,525.00 Road, Shunqing District 11 Silk of Jian Silk Company 536,000.00 8,300.00 Own 12 The land of Peng an county 485,000.00 770,000.00 Assets Total 8,502,770.44 16,378,825.00
3. There were no great managing events such as capital trusteeship, guarantee, acceptance and trusteeship during the reporting period.
4. There were no punishment records from CBRC or judicial department of the bank and its directors, supervisors and management members.
Chapter 11 Audit Report
INDEPENDENT AUDITORS’ REPORT
TO the Shareholders of Nanchong Commercial Bank Co., Ltd:
ACPA (2011) JR NO.030013
We have audited the accompanying financial statements of Nanchong Commercial Bank Co., Ltd (“ the bank”) and its subsidiaries, which comprise the consolidated statement of financial position as at 31 December 2010, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s responsibility for the financial statements
The management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility
21 includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
22 In our opinion, the financial statements give a true and fair view of the financial position of the Bank and its subsidiaries as of 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
23 (Signature Page)
Ascenda CPA Registered in P. R. China:
Certified Public Accountants, Ltd. CPA Registered in P. R. China:
Beijing · P. R. China March 12, 2011
24 Consolidated Statement of Comprehensive Income By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2010 RMB '000
Items 2010 2009
Interest income 1,366,759 837,143
Interest expense (381,993) (298,495)
Net interest income 984,766 538,648
Fee and commission income 127,813 23,043
Fee and commission expense (5,821) (3,202)
Net fee and commission income 121,992 19,841
Net loss arising from financial instruments designated at fair value through profit and loss (3,080) (4,154)
Net gain/(loss) arising from foreign exchange 146 472
Other operating income 836 904
Non-interest income/(expense) 119,894 17,063
Operating income 1,104,660 555,711
25 Operating expenses (374,055) (227,004)
Operating profit before impairment losses 730,605 328,707
Impairment losses (93,026) (65,142)
Net gain/(loss) in investments 50,910 91,273
Non-operating income 11,920 1,146
Non-operating expenses (610) (39)
Profit before income tax 699,799 355,945
Income tax (127,415) (51,608)
Net profit for the year 572,384 304,337
Other comprehensive income for the year Net gain/(loss) arising from available-for-sale financial assets designated at fair value through profit (15,893) (79,528) and loss Income tax relating to components of other comprehensive income 3,973 19,882
Total 0ther comprehensive income for the year (11,920) (59,646)
Total comprehensive income for the year 560,464 244,691
26 Profit attributable to
Owners of the Company 567,091 302,879
Non-controlling interests 5,293 1,458
Total comprehensive income attributable to
Owners of the Company 555,171 243,233
Non-controlling interests 5,293 1,458
Earnings per share
Basic 0.95 0.51
Diluted 0.95 0.51
27 Consolidated Statement of Financial Position By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2010 RMB '000
Assets 2010-12-31 2009-12-31
Assets Cash and balances with central banks 6,506,494 5,694,828 Cash and balances with banks and other financial institutions 5,139,490 568,325 Loans to other banks and financial institutions 25,000 Trading assets 144,752 147,832 Advances to customers and other accounts 21,357,857 10,676,070 Available-for-sale financial assets 2,455,926 1,274,918 Held-to-maturity investments 7,187,202 5,553,794 Investment properties 10,639 11,542 Fixed assets 85,747 81,058 Intangible assets 34,754 1,277 Deferred income tax assets 34,450 20,585 Other assets 131,015 124,832 Total assets 43,113,326 24,155,061
Liabilities 2010-12-31 2009-12-31
28 Borrowings from central banks Deposits from banks and other financial institutions 9,722,063 2,894,782 Placements from banks and other financial institutions Deposits from customers 27,940,176 17,267,269 Current income tax liabilities 58,937 45,195 Deferred income tax liabilities 10,942 13,507 Other liabilities 3,888,145 2,971,125 Total liabilities 41,620,263 23,191,878
Equity 2010-12-31 2009-12-31
Share capital 600,000 300,000 Capital surplus 7,974 7,974 Other reserves 303,703 203,905 Retained Profit 560,178 434,939 Equity attributable to owners of the Compan 1,471,855 946,818 Non-controlling interests 21,208 16,365 Total equity 1,493,063 963,183 Total liabilities and equity 43,113,326 24,155,061
29 Consolidated Statement of Changes in Equity By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2010 RMB '000 Other reserves Share Share Regulatory Investment Retained Non-controlling Total Items Surplus capital premium general revaluation Total Profit interests equity reserve reserve reserve
As at 1st January, 2009 300,000 7,974 42,680 84,072 67,341 194,093 231,518 14,907 748,492
Dividends (30,000) (30,000)
Net Profit /(loss) for the year 302,879 1,458 304,337 Other comprehensive income for the (59,646) (59,646) (59,646) year Net gain on available-for-sale (59,646) (59,646) (59,646) financial assets Total comprehensive income for the year (59,646) (59,646) 302,879 1,458 244,691
Transferred to reserves 30,134 39,324 69,458 (69,458)
As at 31st December, 2009 300,000 7,974 72,814 123,396 7,695 203,905 434,939 16,365 963,183
30 Dividends (30,000) (450) (30,450)
Net Profit /(loss) for the year 567,091 5,293 572,384 Other comprehensive income for the (11,920) (11,920) (11,920) year Net gain on available-for-sale (11,920) (11,920) (11,920) financial assets Total comprehensive income for the year (11,920) (11,920) 567,091 5,293 560,464
Transferred to reserves 56,215 55,503 111,718 (111,718) Other (134) (134) Internal carry-over of sharehoulders' 300,000 (300,000) equity
As at 31st December, 2010 600,000 7,974 129,029 178,899 (4,225) 303,703 560,178 21,208 1,493,063
31 Consolidated Cash Flow Statement By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2010 RMB '000 Items 2010 2009
Cash flows from operating activities: Net profit before taxation: 699,799 355,945 Adjustments for: Impairment of loans and advances to customers 95,438 54,532 Write-back of due from banks and financial institutions Reversal of impairment of other receivables Impairment of investment securities (2,412) 10,610 Depreciation of property and equipment 12,489 13,112 Reversal of revaluation deficit of property and equipment Amortization of prepaid staff subsidies Amortization of land use rights 2,013 Amortization of other assets 3,865 7,364 Gains less losses arising from de-recognition of investment securities (50,910) (91,273) Gains on disposal of fixed assets (69) (5) Amortization of investment property 903 901 Accrued interest expense on term debt
32 Fee on debt issue Net increase in mandatory reserve deposits (958,608) (673,553) Net increase in due from other banks and financial institutions (150,231) 4,934 Net increase in financial assets held for trading (7,320,560) (214,400) Net increase in loans and advances to customers (2,927,424) (4,184,515) Net increase in other assets (116,937) (17,202) Net increase in due to other banks and financial institutions 6,827,281 (245,273) Net (decrease)/increase in financial liabilities held for trading (200,000) 1,100,000 Net increase in due to customers 10,672,907 7,228,927 Net increase in other liabilities 94,185 55,142 Net increase in business tax payable 7,150 4,236 Income tax paid (126,128) (51,608) Net cash from operating activities 6,562,751 3,357,874 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired (8,940) Purchase of investment securities (11,751,740) (8,486,128) Disposal or redemption of investment securities 8,518,180 6,916,317 Acquisition of intangible assets Purchase of land use rights (1,290) Purchase of property and equipment (44,583) (67,553)
33 Disposal of property and equipment 528 53 Net cash from/(used in) investing activities (3,286,555) (1,638,601)
Cash flows from financing activities Issue of shares 1,024,634 Debts issued Fee on debt issue Interest paid on debt Dividends paid (26,533) (26,545) Minority interest-capital contribution Dividends paid to minority interest (450) Net cash (used in)/from financing activities 997,651 (26,545) Effect of exchange rate changes on cash and cash equivalents 146 472 Net increase in cash and cash equivalents 4,273,993 1,693,200 Cash and cash equivalents at 1st January 4,716,360 3,023,160 Cash and cash equivalents at 31st December 8,990,353 4,716,360 Supplementary Information Interest received 977,893 584,372 Interest paid 248,753 276,546
34