HAITONG SECURITIES CO., LTD. 海通證券股份有限公司 Annual Report 2014 年度報告 Annual 2014 Report CONTENTS Chairman’s Statement 3 Section I Definition and Important Risk Warnings 4 Section II Company Profile 7 Section III Summary of Accounting Data and Financial Indicators 18 Section IV Report of The Board of The Directors 24 Section V Significant Events 79 Section VI Changes in Share and Particulars about Shareholders 85 Section VII Preferred Shares 98 Section VIII Particulars about Directors, Supervisors, Senior Management and Employees 99 Section IX Corporate Governance 145 Section X Internal Control 169 Section XI Financial and Accounting Reports 176 Section XII Documents Available for Inspection 177 Section XIII Information Disclosure of Securities Company 178 IMPORTANT NOTICE The Board, the Supervisory Committee, Directors, Supervisors and senior management of the Company represent and warrant that this annual report is true, accurate and complete and does not contain any false records, misleading statements or material omission and jointly and severally take full legal responsibility. This Report was reviewed and passed at the second meeting (the “Board Meeting”) of the sixth session of the Board. The number of Directors to attend the Board Meeting should be 13 and the number of Directors having actually attended the Board Meeting was 12. Director He Jianyong, was unable to attend the Board Meeting in person due to business engagement, and had appointed Chairman Wang Kaiguo to vote on his behalf. None of the Directors or Supervisors has made any objection to this Report. The Company’s annual financial reports, prepared in accordance with the PRC GAAP and IFRS, were audited by BDO China Shu Lun Pan Certified Public Accountants LLP (Special General Partnership) and Deloitte Touche Tohmatsu respectively, whom then issued a standard unqualified audit report thereon. All the financial data in this Report were presented in RMB unless otherwise indicated. Mr. Wang Kaiguo, Chairman of the Company, Mr. Li Chuqian, Chief Financial Officer and Ms. Qiu Xiaping, who is responsible for the accounting affairs, declare that they represent and warrant the truthfulness, accuracy and completeness of the financial report contained in this Report. The profit distribution proposal or proposal on transfer of capital reserve fund into share capital reviewed by the Board for the Reporting Period are as follows: Cash dividend of RMB2.5 per 10 shares (inclusive of tax) will be distributed to all holders of A Shares and H Shares whose names appear on the register of members of the Company on the record date. According to the Proposal on Issue of New H Shares by the Company considered and passed at the first extraordinary general meeting of 2015, the first A shareholders’ class meeting of 2015 and the first H shareholders’ class meeting of 2015 held by the Company on 9 February 2015, the Company proposed to issue 1,916,978,820 new H Shares, and the new H Shares shall rank pari passu in all respects with the H Shares that are already in issue. If the newly issuance of H Shares complete in whole before the record date, the total cash dividends to be distributed would be RMB2,875,425,000.00, including RMB479,244,705.00 on the new H Shares, on the basis of a total share capital of 11,501,700,000 A Shares and H Shares in issue. The retained profits of the parent company of RMB10,369,758,976.60 following the cash dividend distribution will be carried forward to the next year. The specific overall amount of cash dividends under distribution and the retained profits to be carried forward to the next year will be calculated according to the actual number of shares of the Company in issue on the record date for the cash dividend distribution. Forward looking statements, including future plan and development strategy, contained in this Report do not constitute commitment to investors by the Company. Investors should be reminded of such investment risks. No appropriation of funds on a non-operating basis by the Company’s controlling shareholders, and their respective related parties has occurred during the Reporting Period. The Company did not provide external guarantees in violation of any stipulated decision-making procedures during the Reporting Period. HAITONG SECURITIES CO., LTD. 2 Annual Report 2014 (H Share) CHAIRMAN’S STATEMENT Dear shareholders: Building upon the concern and support of shareholders and the society, the Company capitalized on the development momentum and accomplished related works well, and was able to continually improve its level of operation and management, further expand its financing channels, significantly enhance its scale of assets, achieve rapid growth in its business indicators, constantly accelerate the pace of innovation, persistently optimize its revenue structure and further reinforce its four “pillars” which are R&D, talents, IT and risk management and compliance, in 2014. The Company managed to remain dominated in the industry in respect of its over-the-counter market business, achieved fast growth in the scale of its capital intermediary businesses, and orderly developed innovative businesses including online securities business, custody, market making on the New OTC Board, quantitative investment, return swap, FICC, asset securitization and financing lease. The Company saw amazing achievements in overseas business and significant breakthroughs in internationalization strategies. In particular, the successful entering into contracts for acquisitions of Banco Espírito Santo de Investimento, S.A. of Portugal (“BESI”) and Japaninvest Group plc (”JapanInvest”) significantly enhanced our international influence and competitiveness. 2015 will be a year of vital importance to the comprehensive deepening of reform, since China’s economic development is entering into a new normal stage, whereby great opportunities for development will emerge in the capital market, room for innovation of the securities industry will be unfolded gradually and basic functions of the securities companies, such as investment, leverage, custody, trade and payment, will be perfected in a constant manner. Under the new situation, the Company will further emancipate the mind, deepen the reform and optimize the mechanism. By adhering to the development strategy of “One Body, Two Wings (一體兩翼)”, the Company will adopt its strategy of being customer-oriented with brokerage, investment banking, asset management, and other intermediary businesses at the core, capital intermediary business and investment at the wings, and innovation and internalization as driving forces, so as to reinforce the building of five capacities, i.e. investment, asset and wealth management, investment banking, underwriting and pricing, institutional brokerage and sales, and online securities services. The Company will persistently reinforce its customer base and service capacities, and intensify business synergy and cross-border interaction. Also, it will enhance risk prevention and control, strengthen the construction of information system, gather excellent talent in the industry and build a harmonious enterprise culture, with a view of enhancing the Company’s core competitiveness constantly and making it a benchmark investment bank of China. Wang Kaiguo Chairman 27 March 2015 HAITONG SECURITIES CO., LTD. Annual Report 2014 (H Share) 3 SECTION I DEFINITION AND IMPORTANT RISK WARNINGS I. DEFINITION In this Report, unless the context otherwise requires, the following terms and expressions have the meanings set forth below: “A Share(s)” domestic shares of the Company, with a nominal value of RMB1.00 each, which are listed and traded on the Shanghai Stock Exchange “Articles of Association” or “Articles” the articles of association of Haitong Securities “Board” the board of Directors of Haitong Securities “China” or “PRC” the People’s Republic of China excluding, for the purpose of this Report, Hong Kong, the Special Administrative Region of Macau and Taiwan “Code” The Corporate Governance Code and Corporate Governance Report set out in Appendix 14 to the Listing Rules “Company” or “Haitong Securities” Haitong Securities Co., Ltd. “CSRC” the China Securities Regulatory Commission “Director(s)” the director(s) of Haitong Securities “Group” the Company and its subsidiaries “H Share(s)” ordinary shares in the share capital of the Company with nominal value of RMB1.00 each, which are subscribed for and traded in HK dollars and are listed on the Hong Kong Stock Exchange “HK$”, “HKD” or “HK dollars” the lawful currency of the Hong Kong HAITONG SECURITIES CO., LTD. 4 Annual Report 2014 (H Share) SECTION I DEFINITION AND IMPORTANT RISK WARNINGS “Hong Kong” the Special Administrative Region of Hong Kong, the PRC “Hong Kong Stock Exchange” the Stock Exchange of Hong Kong Limited “IFRS” the International Financial Reporting Standards “IPO” initial public offering “Hong Kong Listing Rules” or the Rules Governing the Listing of Securities on the Hong Kong “Listing Rules” Stock Exchange “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules “NSSF” the National Council for Social Security Fund of the PRC “PRC GAAP” generally accepted accounting principles in the PRC “QFII” Qualified Foreign Institutional Investor “Reporting Period” from 1 January 2014 to 31 December 2014 “RMB” or “Renminbi” the lawful currency of the PRC “RQFII” Renminbi Qualified Foreign Institutional Investor “SFO” the Securities and Futures Ordinance (Chapter 571