www.cs.ecitic.com 2018 ANNUAL REPORT 2018 ANNUAL REPORT IMPORTANT NOTICE The Board and the Supervisory Committee and the Directors, Supervisors and Senior Management warrant the truthfulness, accuracy and completeness of contents of this report and that there is no false representation, misleading statement contained herein or material omission from this report, for which they will assume joint and several liabilities. This report was considered and approved at the 38th Meeting of the Sixth Session of the Board. All Directors attended this meeting of the Board. No Director raised any objection to this announcement. The Company’s domestic and international financial statements for the year were audited by PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers Hong Kong, respectively. Auditor’s reports with unqualified audit opinions were issued accordingly. Mr. ZHANG Youjun, head of the Company, Mr. GE Xiaobo, the Chief Financial Officer, and Ms. KANG Jiang, head of the Company’s accounting department, warrant that the financial statements set out in this report are true, accurate and complete. The Company’s 2018 profit distribution plan as considered and approved by the Board is to distribute a cash dividend of RMB3.50 (tax inclusive) for every 10 shares. This proposal is subject to the approval of the General Meeting of the Company. Forward looking statements, including future plans and development strategies, contained in this report do not constitute a substantive commitment to investors by the Company. Investors should be aware of investment risks. There was no appropriation of funds of the Company by controlling Shareholder(s) or its/their related parties for non-operating purposes. The Company had made no guarantee to external parties against the stipulated decision-making process. The Company prepared this report in both English and Chinese versions. In the event of any discrepancies between the English version and the Chinese version, the Chinese version shall prevail. Contents Contents Definitions 2 Material Risk Factors 6 Company Information 7 Financial Summary 20 Chairman’s Statement 25 Management Discussion and 28 Analysis Report of the Board 70 Significant Events 81 Changes in Share Capital and 111 Information on Substantial Shareholders Directors, Supervisors, Senior 120 Management and Employees Corporate Governance Report 142 Independent Auditor’s Report and 180 Notes to Financial Statements Documents Available for Inspection 334 Appendix 1: Organization Chart 335 Appendix 2: Index of Information 336 Disclosure Definitions Unless the context otherwise requires, the following expressions have the following meanings in this report: “A Share(s)” the domestic share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange (stock code: 600030) “A Shareholder(s)” holder(s) of A Shares “Board” the board of directors of the Company “China AMC” China Asset Management Company Limited (華夏基金管理有限公司) “China CITIC Bank” China CITIC Bank Corporation Limited (中信銀行股份有限公司) “China Securities” CSC Financial Co., Ltd. (中信建投證券股份有限公司) “CITIC Corporation Limited” CITIC Corporation Limited (中國中信有限公司) “CITIC Futures” CITIC Futures Company Limited (中信期貨有限公司) “CITIC Global Trade” CITIC Global Trade (Shanghai) Co., Ltd. (中信寰球商貿(上海)有限公司) “CITIC Group” CITIC Group Corporation (中國中信集團有限公司) “CITIC Holdings” CITIC Holdings Limited (中信控股有限責任公司) “CITIC Limited” CITIC Limited (中國中信股份有限公司) “CITIC Pacific” CITIC Pacific Limited 中信泰富有限公司( ) “CITIC PE Fund” CITIC Private Equity Funds Management Company Limited (中信產業投資基金管 理有限公司) “CITIC Securities (Shandong)” CITIC Securities (Shandong) Co., Ltd. (中信証券(山東)有限責任公司) “CITIC Securities Finance 2013” CITIC Securities Finance 2013 Co., Ltd. (中信証券財務2013有限公司) “CITIC Securities Finance MTN” CITIC Securities Finance MTN Co., Ltd. “CITIC Securities Investment” CITIC Securities Investment Limited (中信証券投資有限公司) “CITIC Trust” CITIC Trust Co., Ltd. (中信信託有限責任公司) 02 “CLSA” the brand name of the offshore business of the Company “CLSA B.V.” Crédit Agricole Securities Asia B.V., a private limited company incorporated under the laws of the Netherlands and becoming a wholly-owned subsidiary of CSI on 31 July 2013 “Company” or “CITIC Securities” CITIC Securities Company Limited (中信証券股份有限公司) “Company Law” the Company Law of the People’s Republic of China “connected transaction(s)” has the meaning ascribed to it under the Hong Kong Listing Rules currently in effect and as amended from time to time “CSDCC” China Securities Depository and Clearing Corporation Limited “CSI” CITIC Securities International Co., Ltd. (中信証券國際有限公司) “CSRC” China Securities Regulatory Commission “Director(s)” the director(s) of the Company “Financial Holdings Limited” Guangzhou Yuexiu Financial Holdings Group Limited (廣州越秀金融控股集團有限 公司) “GoldStone Investment” GoldStone Investment Co., Ltd. (金石投資有限公司) “GoldStone Zexin” GoldStone Zexin Investment Management Co., Ltd. (金石澤信投資管理有限公司) “Group” the Company and its subsidiaries “Guangzhou Securities” Guangzhou Securities Company Limited (廣州證券股份有限公司) “H Share(s)” the overseas-listed foreign share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on The Stock Exchange of Hong Kong Limited (stock code: 6030) “H Shareholder(s)” holder(s) of H Shares “HKEx” Hong Kong Exchanges and Clearing Limited “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Hong Kong Listing Rules” Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited CITIC Securities Company Limited 2018 Annual Report 03 Definitions “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited “Jiantou Zhongxin” Jiantou Zhongxin Asset Management Co., Ltd. (建投中信資產管理有限責任公司) “Jindingxin Microfinance” Qingdao Jindingxin Microfinance Company Limited 青島金鼎信小額貸款股份有限( 公司) “Kington Securities” Kington Securities Limited Liability Company (金通證券有限責任公司) “Ministry of Finance” the Ministry of Finance of the People’s Republic of China “New OTC” or “NEEQ” National Equities Exchange and Quotations “NSSF” National Social Security Fund of the PRC “PRC” or “China” the People’s Republic of China “PwC” PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers “PwC Hong Kong” PricewaterhouseCoopers “PwC Zhong Tian” PricewaterhouseCoopers Zhong Tian LLP “related party transaction(s)” for the purpose of Section 6 “Significant Events” and Section 9 “Corporate Governance Report” only. has the meaning ascribed to it under the SSE Listing Rules currently in effect and as amended from time to time “Reporting Period” the twelve months ended 31 December 2018 “SAIC” the State Administration for Industry & Commerce of the People’s Republic of China “Securities Law” the Securities Law of the People’s Republic of China “Senior Management” the senior management of the Company “SFC” the Securities and Futures Commission of Hong Kong “Shanghai Clearing House” Interbank Market Clearing House Co., Ltd. “Share(s)” A Share(s) and H Share(s) 04 “Shareholder(s)” holder(s) of the domestic Share(s) or the overseas-listed foreign Share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the SSE and the Hong Kong Stock Exchange, respectively “Shenzhen Bureau of the CSRC” the Shenzhen Securities Regulatory Bureau of the CSRC “SOE” state-owned enterprise “SSE” Shanghai Stock Exchange “SSE Listing Rules” Rules Governing the Listing of Stocks on Shanghai Stock Exchange “Supervisor(s)” the supervisor(s) of the Company “Supervisory Committee” the supervisory committee of the Company “SZSE” Shenzhen Stock Exchange “Wind Info” Wind Information Co., Ltd. “Yuexiu Financial Holdings” Guangzhou Yuexiu Financial Holdings Group Co., Ltd. (廣州越秀金融控股集團股 份有限公司) CITIC Securities Company Limited 2018 Annual Report 05 Material Risk Factors The Group’s business is highly dependent on the macroeconomic and market conditions of China and other areas in which the Company operates its business. Therefore, fluctuation in the Chinese and international capital markets will have material impact on the operating results of the Group. The major risks exposed to by the Group mainly: legal and compliance risk caused by possible failure of the business management and standards to align in a timely manner with changes in national laws and the regulations and rules promulgated by the regulatory authorities; strategic risk where the Group may not be able to determine the strategic plan in response to the profound changes in the domestic and overseas capital markets; internal operations and management risks arising from the transformation of the Company’s business model and the emergence of new businesses and new technologies; market risk that may arise from the fluctuating market price of the securities held by the Group; credit risk that may arise from the default of its borrower or trading counterparty; liquidity risk where the Group may encounter a shortage of fund in fulfillment of payment obligations; operational risk that may arise from the negligence or omission of the internal process management, information system failure or personnel misconduct; risks such as currency exchange risk that may arise from the operation of international businesses and financial innovative businesses. In particular, credit risk and liquidity risk are the major risks currently being faced by the Group. To cope with the above risks, the Group takes preventive measures through its organizational structure, management