中州証券 Central China Securities Co., Ltd
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Central China Securities Co., Central 中州証券 Central China Securities Co., Ltd. (a joint stock company incorporated in 2002 in Henan Province, the People's Republic of China with limited liability under the Chinese corporate name “ 中原證券股份有限公司 ” and carrying on business in Hong Kong as “ 中州證券 ”) Stock Code: 01375 Ltd. Ltd. 2016 Annual Report Annual Report 2016 年度報告 TABLE OF CONTENTS Important 2 Material Risk Alert 3 Section 1 Definitions 4 Section 2 Company Profile and Key Financial Indicators 9 Section 3 Summary of the Company’s Business 39 Section 4 Report of the Board of Directors 45 Section 5 Significant Events 99 Section 6 Changes in Ordinary Shares and Shareholders 119 Section 7 Preference Shares 128 Section 8 Directors, Supervisors, Senior Management and Staff 129 Section 9 Corporate Governance 147 Section 10 Corporate Bonds 177 Section 11 Financial Report 188 Section 12 Documents Available for Inspection 189 Section 13 Information Disclosure of Securities Company 190 Independent Auditor’s Report 196 Annual Report 2016 Central China Securities Co., Ltd. Ltd. China Securities Co., Central 1 IMPORTANT The Board, Supervisory Committee and Directors, Supervisors and senior management of the Company undertake that this annual report is true, accurate, complete and without any false record, misrepresentation or material omission and are severally and jointly liable therefor. This report has been deliberated and approved at the 31st meeting of the fifth Board and the 12th meeting of the fifth Supervisory Committee where all directors and supervisors were present respectively. No Directors, Supervisors or senior management declared that they could not guarantee nor had any objection to the truthfulness, accuracy and completeness of this report. The annual financial report for 2016 prepared by the Company in accordance with the International Financial Reporting Standards and China’s Accounting Standard for Business Enterprises has been audited by PricewaterhouseCoopers and ShineWing Certified Public Accountants (Special General Partnership) respectively with respective standard unqualified auditing reports produced for the Company. All amounts set out in this report are stated in RMB unless otherwise stated. The person in charge of the Company Mr. Jian Mingjun, the chief financial officer Mr. Zhou Xiaoquan, Chief Accountant Ms. Zhu Junhong and Officer-in-charge of the accounting institution (the head of financial division) Mr. Guo Liangyong declare that they undertake the financial reports in this report are true, accurate and complete. The Company’s profit distribution plan approved by the Board for 2016 shall be a cash dividend of RMB1.21 for every 10 shares (tax inclusive) which is subject to approval of the general meeting of the Company. The forward-looking statements in this report such as future plans and development strategies do not constitute an actual commitment of the Company to investors. Investors and related persons should understand the difference between plans, forecasts and commitments and be aware of the investment risks. There is no appropriation of fund by the controlling shareholder and its related (connected) parties for non-operating purpose during the Reporting Period. There is no provision of external guarantee in violation of the stipulated decision making procedure during the Annual Report 2016 Reporting Period. This report has been prepared by the Company in both Chinese and English languages. When there are any discrepancies in interpretation between the Chinese version and English version of this report, the Chinese version shall prevail. Central China Securities Co., Ltd. Ltd. China Securities Co., Central 2 MATERIAL RISK ALERT The Company’s business is largely dependent on the Chinese economy and market condition as most assets of the Company are located in China and the income is mainly derived from domestic security market. The operating results of the Company and the performance of the security market are strongly correlated. The security market is relatively cyclical and volatile as it may be affected by a number of factors, including macroeconomic performance and policies, the level of market development, fluctuations in financial market and investors’ actions. In the face of intense competition in China’s securities industry, the Company’s business may be materially and adversely affected if it fails to compete effectively. The challenges from internet finance in recent years have already led to a declining commission rate of the Company’s brokerage business. The commission rates of securities brokerage business may continue to go downward, the trading volume in and the activity of the market can hardly remain at a high level continuously, and the spreads of capital-based intermediary business may further narrow down, all of which may adversely affect the Company’s profit growth. As the capital market reform continues to develop, the Company’s investment banking business will be challenging in terms of customer base expansion, pricing and ability in distribution, which may cause adverse impact on the income of the Company’s investment banking business. Besides, along with the intensified mixed business competition in the asset management industry and deleveraging of the financial sector, the asset under management of the Company may be reduced, which may result in a negative impact on the asset management fees or performance rewards charged by the Company. Since the performance of the Company’s investment and trading business and that of domestic security market are closely related, it may be difficult for the Company to effectively defend itself from market risks in the event of extreme security market condition and inadequate hedging strategies. Against the backdrop of continuous industry innovation, the Company has been committed to providing its customers with new products and services in order to strengthen its competitive position in the industry. However, business innovation also leads to increasing risks following the Company’s entrance into new markets with new product offerings driven by business innovation, resulting in new risk exposures to the Company. Moreover, the Company’s operation relies on the management and professionals. Due to keen market competition for this kind of talents, failure in attracting or retaining these talents may have adverse impact on the Company’s business. The Company has received a Class A regulatory rating from CSRC for two consecutive years. However, the Company does not rule out the possibility of the risks of downward adjustment of regulatory rating in the future, which would result in the limitations of the Company’s ability to commence pilot programs and new businesses. The Company manages risks according to internal risk management framework and procedures, but certain risk management measures are based on historical market data or past experience which may fail to predict future Annual Report 2016 risks accurately, especially those on extreme market events lacking effectiveness. The Company has further exposure to various risks, such as failure of information technologies, which would result in adverse impact on business operation. Any force majeure may have material adverse impact on the Company’s business, financial conditions and operating results. For the risks in the Company’s operation, investors are advised to carefully read the relevant parts in Section 4 III. “(IV) Potential risks and policies” in this report. Central China Securities Co., Ltd. Ltd. China Securities Co., Central 3 SECTION 1 DEFINITIONS 1. DEFINITIONS In this report, unless the context otherwise requires, the following terms and expressions have the meaning set forth below: DEFINITIONS OF COMMON TERMS The Company, Company, Central China Securities Co., Ltd. Parent Company or Central China Securities The Group or Group the Company and its subsidiaries Board the board of Directors of the Company Director(s) director(s) of the Company Supervisory Committee the Supervisory Committee of the Company Supervisor(s) supervisor(s) of the Company Listing Rules the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange Model Code the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules Corporate Governance Code Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules SFC the Securities and Futures Commission of Hong Kong Annual Report 2016 SFO the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) This report this annual report Prospectus the prospectus in connection with the initial public offering of shares (A Shares) of the Company Central China Securities Co., Ltd. Ltd. China Securities Co., Central SSE Composite Index composite stock price index of the SSE 4 SECTION 1 DEFINITIONS Domestic shares ordinary shares in issue of the Company, with a nominal value of RMB1.00 each, which are subscribed for or credited as fully paid in Renminbi Wind Info Wind Info Co., Ltd. (上海萬得信息技術股份有限公司) A shares domestic listed ordinary shares with a nominal value of RMB1.00 each in the share capital of the Company, which are listed and traded on the Main Board of the SSE H shares overseas listed foreign ordinary shares with a nominal value of RMB1.00 each in the share capital of the Company, which are listed and traded on the Main Board of the Hong Kong Stock Exchange Reporting period 1 January 2016 to 31 December 2016 End of the Reporting period