Central China Securities Co., Ltd. — Capital/Financing Update 2014

Dec 5, 2014

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.

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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)

PROPOSED A SHARE ISSUE AND

FINANCIAL INFORMATION OF THE PROSPECTUS (APPLICATION VERSION) RELATING TO A SHARE ISSUE

This announcement is made pursuant to Rule 13.09 of the Listing Rules and requirements of Part XIVA of the Securities and Futures Ordinance.

References are made to the announcements of the Company dated 29 September 2014, 14 November 2014 and 1 December 2014, and the circular of the Company dated 29 October 2014 relating to, among other things, the proposed A Share Issue.

The Company has submitted the Prospectus (application version) to the CSRC in connection with its application for the A Share Issue. The Prospectus (application version) contains the consolidated financial information of the Group for the Relevant Periods prepared in accordance with the PRC GAAP and other significant information and was published on the CSRC’s website (www.csrc.gov.cn) and the website of the Stock Exchange (www.hkexnews.hk) on 5 December 2014.

The proposed A Share Issue is subject to approval by the CSRC and may or may not proceed to completion. Investors are advised to exercise caution in dealings in the H Shares. The Company will disclose the updates or further development about the proposed A Share Issue on the websites of the Company and the Stock Exchange in accordance with the Listing Rules at time appropriate.

PROPOSED A SHARE ISSUE

This announcement is made pursuant to Rule 13.09 of the Listing Rules and requirements of Part XIVA of the Securities and Futures Ordinance.

References are made to the announcements of the Company dated 29 September 2014, 14 November 2014 and 1 December 2014, and the circular of the Company dated 29 October 2014 relating to, among other things, the proposed A Share Issue.

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The Board is pleased to announce that the Company has submitted the Prospectus (application version) to the CSRC in connection with its application for the A Share Issue. The Prospectus (application version) was published on the CSRC’s website (www.csrc.gov.cn) and the website of the Stock Exchange (www.hkexnews.hk) on 5 December 2014. The Prospectus (application version) does not, and is not intended to constitute an offer of securities of the Company for sale in Hong Kong. The Prospectus (application version) has not been and will not be registered under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong).

Subject to approval by the CSRC, the A Shares will be issued by the Company pursuant to the authority granted by the Shareholders to the Board at the extraordinary general meeting of the Company to be held on 14 November 2014. The proposed A Share Issue will comprise the issue of not more than 877,205,000 A Shares to natural persons, legal entities and other institutional investors within the PRC that have maintained RMB ordinary shares (A Shares) holder accounts with the Shanghai Branch of China Securities Depository and Clearing Corporation Limited (except those prohibited by the PRC laws, administrative regulations, other applicable regulatory instruments and other regulatory requirements to which an issuer is subject to). The proposed A Share Issue will be conducted by a combination of offline price consultations to target placees and the online subscription of shares under the initial public offering or other methods as recognized by the CSRC. Cumulative bidding price consultations will be conducted within the price range where the issue price of the proposed A Share Issue will be determined based on the results of the cumulative bidding price consultations and market conditions; or other methods of pricing as recognized by the CSRC.

FINANCIAL INFORMATION OF THE GROUP PREPARED UNDER THE PRC GAAP

Subject to the CSRC’s approval, the Prospectus (application version) will be published in the PRC in Chinese only and will contain business and financial information of the Group, including but not limited to the consolidated statement of financial position and the consolidated statement of comprehensive income of the Group for the Relevant Periods prepared in accordance with the PRC GAAP.

Set out below is a summary of the consolidated financial statements of the Group for the Relevant Periods prepared in accordance with the Group’s accounting policies under the PRC GAAP audited by Shinewing Certified Public Accountants (Special General Partnership).

The following summary of the consolidated financial statements prepared in accordance with the PRC GAAP do not have any significant difference between those prepared in accordance with the International Financial Reporting Standards.

The English version of the following summary of the consolidated financial statements is an unofficial translation of its Chinese version. In case of any discrepancies, the Chinese version shall prevail.

The Group’s audited consolidated statement of financial position and consolidated statement of comprehensive income for each of the years ended 31 December 2011, 31 December 2012 and 31 December 2013 and the nine months ended 30 September 2014 prepared in accordance with the PRC GAAP:

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Prepared by: Central China Securities Co., Ltd.

Unit: RMB

	30 September		31 December
Assets	2014	2013	2012	2011
ASSETS:
Cash and bank balances	7,124,111,768.66	4,533,167,616.72	5,367,418,381.13	5,026,138,941.48
Including: Cash held for
brokerage clients	6,239,376,623.82	3,956,037,862.39	4,369,765,464.28	4,593,041,850.37
Clearing settlement funds	1,175,487,339.79	1,104,844,133.26	662,316,464.44	511,729,408.76
Including: Clearing settlement
funds held for clients	947,681,680.25	849,674,591.26	614,761,269.63	497,429,270.25
Due from other financial
institutions
Margin accounts receivable	4,570,321,509.55	2,259,463,140.17	210,816,728.79
Financial assets designated at fair value
through profit or loss	3,892,527,034.23	3,438,993,990.41	3,399,539,375.79	3,358,049,339.29
Derivative financial assets
Financial assets held under resale
agreements	2,078,867,721.78	793,085,868.77	498,349,540.16	860,000,000.00
Including: margin accounts receivable
under securities repurchase	158,644,343.91	72,114,500.00	44,662,197.70
Accounts receivable	15,731,527.31	18,289,698.70	3,309,187.59	3,280,948.42
Interest receivable	166,964,550.75	80,757,480.01	95,387,164.83	113,365,598.47
Refundable deposits	487,950,749.33	412,987,575.88	272,742,503.69	199,694,324.25
Available-for-sale financial assets	1,004,154,848.19	429,770,692.01	170,519,216.24	427,868,302.85
Held-to-maturity investments
Long-term equity investments	51,288,875.89	1,400,000.00	1,400,000.00	1,400,000.00
Investment properties	22,317,836.32	30,818,831.27	30,290,114.71	26,557,562.40
Property, plant and equipment	217,336,211.13	225,807,951.07	242,039,921.69	252,565,478.06
Construction-in-progress	280,000.00	448,000.00
Intangible assets	42,477,326.96	46,805,003.60	32,394,173.41	26,372,097.77
Including: trading rights	479,166.65		697.61	168,632.31
Goodwill	7,268,756.37	7,268,756.37	7,268,756.37	7,268,756.37
Deferred income tax assets	60,753,494.16	71,236,980.48	57,076,021.05	47,288,824.32
Other assets	402,365,236.68	194,459,533.45	152,617,486.48	125,740,735.14
Total assets	21,320,204,787.10	13,649,605,252.17	11,203,485,036.37	10,987,320,317.58

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	30 September		31 December
Liabilities and Equity	2014	2013	2012	2011
LIABILITIES:
Short-term borrowings
Short-term notes payable	800,000,000.00	800,000,000.00
Due to other financial institutions	1,116,000,000.00	400,000,000.00
Financial liabilities designated at fair
value through profit or loss	1,066,391,795.39	707,436,700.43
Derivative financial liabilities
Financial assets sold under repurchase
agreements	3,240,996,383.55	2,096,288,041.10	1,758,904,625.29	1,903,940,000.00
Accounts payable to brokerage clients	6,958,355,559.22	4,851,803,819.53	5,191,715,072.79	5,249,765,528.76
Accounts payable to margin trading
brokerage clients	321,653,786.85	142,266,703.19	16,853,068.15
Funds payable to securities issuers			43,244,602.83
Salaries, bonus, allowances and benefits	208,615,697.29	221,318,974.97	143,621,500.63	78,583,782.57
Tax payable	142,121,248.40	87,953,344.36	139,869,237.30	45,546,216.77
Other payables	166,649,818.26	109,896,347.08	28,827,068.41	40,814,352.34
Interest payable	55,914,840.08	17,390,231.33	2,734,450.26	2,553,448.90
Provisions			1,500,000.00
Long-term borrowings
Bonds payable	1,489,528,886.36
Deferred income tax liabilities	14,629,591.57	252,360.00	2,754,262.08
Other liabilities	66,116,280.75	39,717,407.66	34,803,236.72	39,272,559.59
Total liabilities	15,646,973,887.72	9,474,323,929.65	7,364,827,124.46	7,360,475,888.93
EQUITY:
Share capital	2,631,615,700.00	2,033,515,700.00	2,033,515,700.00	2,033,515,700.00
Capital reserve	504,887,745.32	239,091.05	239,091.05	239,091.05
Less: Treasury shares
Other comprehensive income	9,271,292.67	-3,818,493.58	-16,725,212.54	-41,289,489.67
Surplus reserve	314,844,251.79	314,844,251.79	288,018,523.25	269,945,179.05
General reserve	314,844,251.79	314,844,251.79	288,018,523.25	269,945,179.05
Transaction risk reserve	310,090,449.69	310,090,449.69	283,264,721.15	265,191,376.95
Retained earnings	1,516,425,578.72	1,121,625,906.18	949,168,745.92	820,605,906.17
Exchange differences from retranslation
of financial statements
Equity attributable to shareholders
of the Company	5,601,979,269.98	4,091,341,156.92	3,825,500,092.08	3,618,152,942.60
Non-controlling interests	71,251,629.40	83,940,165.60	13,157,819.83	8,691,486.05
Total equity	5,673,230,899.38	4,175,281,322.52	3,838,657,911.91	3,626,844,428.65
Total liabilities and equity	21,320,204,787.10	13,649,605,252.17	11,203,485,036.37	10,987,320,317.58

Legal representative: Jian Mingjun Person-in-charge of accounting affairs: Zhu Junhong Head of accounting department: Li Xiaoqiang

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Unit: RMB

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Prepared by: Central China Securities Co., Ltd.

	Nine months ended
	30 September	Year	ended 31 December
Items	2014	2013	2012	2011
1. Operating revenue	1,141,761,393.33	1,165,234,691.42	1,007,875,475.42	710,025,727.79
Net commission and fee income	614,320,220.06	842,354,747.41	605,830,700.56	675,298,914.50
Including: net income from securities brokerage	448,545,029.10	568,232,234.70	383,343,649.82	578,873,838.98
net income from investment banking	59,669,888.86	148,613,330.50	152,033,339.64	59,554,420.98
net income from investment advisory	72,912,806.57	62,563,998.12	29,861,803.75	9,688,965.45
net income from asset management	7,511,892.40	9,244,699.42	1,661,615.50	-157,673.02
net income from fund management	250,240.54	808,377.96
Net interest income	173,785,271.72	159,223,011.95	75,357,478.84	91,328,552.59
Net investment gains/losses (loss denoted by “-”)	211,376,681.25	169,597,367.64	302,281,157.66	38,297,263.11
Including: I nvestment income from associates and
joint ventures	-111,124.11
Gains/losses arising from changes in fair
value (loss denoted by “-”)	133,926,564.00	-10,969,915.68	19,075,306.53	-100,441,162.10
Gains/losses arising from foreign exchange
(loss denoted by “-”)	4,746,804.38	-1,529,392.36	-18,494.67	-404,455.51
Other operating income	3,605,851.92	6,558,872.46	5,349,326.50	5,946,615.20
2. Operating expenses	656,228,008.23	852,963,471.80	758,369,975.37	638,635,156.58
Business tax and surcharges	64,286,133.05	63,685,423.32	58,221,962.10	40,987,316.01
Business and administrative expenses	582,738,125.41	780,089,936.12	690,969,834.14	601,786,388.47
Impairment reversal/losses	8,523,741.98	7,938,498.65	7,909,309.99	-5,088,409.02
Other operating expenses	680,007.79	1,249,613.71	1,268,869.14	949,861.12
3. Operating profit	485,533,385.10	312,271,219.62	249,505,500.05	71,390,571.21
Add: Non-operating income	28,971,893.11	29,425,248.05	11,733,478.05	66,560,349.06
Less: Non-operating expenses	226,279.41	3,462,426.24	4,134,610.16	927,412.02
4. Profit before income tax	514,278,998.80	338,234,041.43	257,104,367.94	137,023,508.25
Less: Income tax expense	132,410,293.35	99,806,580.74	73,855,161.81	44,241,685.89
5. Net profit	381,868,705.45	238,427,460.69	183,249,206.13	92,781,822.36
Net profit attributable to shareholders
of the Company	394,799,672.54	252,934,345.88	182,782,872.35	92,702,108.39
Non-controlling interests	-12,930,967.09	-14,506,885.19	466,333.78	79,713.97

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		Nine months ended
		30 September	Year	ended 31 December
Items		2014	2013	2012	2011
6. Net other comprehensive income after tax		13,089,733.51	12,906,718.96	24,564,277.13	-42,417,598.03
(1)	Other comprehensive income that may not be
	reclassified to profit or loss subsequently
	I. Changes in net liabilities or net assets
	arising from the re-measurement of defined
	benefit plans
	II. Shares of other comprehensive income of
	investees that may not be reclassified to
	profit or loss under the equity method
(2)	Other comprehensive income that may be
	reclassified to profit or loss subsequently	13,089,733.51	12,906,718.96	24,564,277.13	-42,417,598.03
	I. Shares of other comprehensive income
	of investees that may be reclassified to
	profit or loss under the equity method
	subsequently
	II. Gains or losses from changes in fair value
	of available-for-sale financial assets	13,089,733.51	12,906,718.96	24,564,277.13	-42,417,598.03
	III. Gains or losses from reclassifying held-to-
	maturity investments to available-for-sale
	financial assets
	IV. Effective portion of cash flow adjusted for
	hedging gains or losses
	V. Exchange differences from retranslation of
	financial statements
7. Total comprehensive income		394,958,438.96	251,334,179.65	207,813,483.26	50,364,224.33
8. Earnings per share
(1)	Basic	0.18	0.12	0.09	0.05
(2)	Diluted	0.18	0.12	0.09	0.05

Legal representative: Jian Mingjun Person-in-charge of accounting affairs: Zhu Junhong Head of accounting department: Li Xiaoqiang

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For more details of the proposed A Share Issue, please refer to the Prospectus (application version) which was published on the CSRC’s website (www.csrc.gov.cn) and the website of the Stock Exchange (www.hkexnews.hk) on 5 December 2014. Shareholders and investors will be notified in due course of any progress in connection with the proposed A Share Issue.

The proposed A Share Issue is subject to approval by the CSRC and may or may not proceed to completion. Investors are advised to exercise caution in dealings in the H Shares. The Company will disclose the updates or further development about the proposed A Share Issue on the websites of the Company and the Stock Exchange in accordance with the Listing Rules at time appropriate.

DEFINITIONS

In this announcement, unless the context requires otherwise, the following terms shall have the following meanings:

“A Share(s)”	the ordinary share(s) subscribed for in RMB, which are proposed
	to be issued by the Company in connection with the A Share Issue
“A Share Issue”	the proposed initial public offering of no more than 877,205,000
	A Shares by the Company, which will be listed on Shanghai Stock
	Exchange
“Board”	the Board of Directors of the Company
“Company”	Central China Securities Co., Ltd. (中原證券股份有限公司)
	(carrying on business in Hong Kong as “中州證券”), a joint stock
	company incorporated on 8 November 2002 in Henan Province,
	the PRC with limited liability, the H Shares of which are listed on
	the Main Board of the Stock Exchange
“CSRC”	China Securities Regulatory Commission
“Director(s)”	director(s) of the Company
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“H Share(s)”	overseas listed foreign ordinary share(s) in the share capital of
	the Company, with a nominal value of RMB1.00 each, which are
	listed on the Main Board of the Stock Exchange
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange

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“PRC” the People’s Republic of China, excluding, for the purpose of this announcement only, Hong Kong, Macau Special Administrative Region of the PRC and Taiwan “PRC GAAP” Accounting rules and regulations governing the Chinese companies “Prospectus the prospectus to be issued by the Company in relation to (application version)” the proposed A Share Issue, the application version of which was published on the CSRC’s website (www.csrc.gov.cn) and the website of the Stock Exchange (www.hkexnews.hk) on 5 December 2014. “Relevant Periods” the years ended 31 December 2011, 31 December 2012 and 31 December 2013, and the nine months ended 30 September 2014 “RMB” Renminbi, the lawful currency of the PRC “Securities and Futures Securities and Futures Ordinance, Chapter 571 of the Laws of Ordinance” Hong Kong “Shareholder(s)” shareholders of the Company “Share(s)” the shares of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “%” per cent.

By order of the Board of Central China Securities Co., Ltd. JIAN Mingjun Chairman

Henan, the PRC 5 December 2014

As at the date of this announcement, the Board comprises executive Directors Mr. JIAN Mingjun and Mr. ZHOU Xiaoquan, non-executive Directors Mr. LI Xingjia, Mr. ZHANG Qiang, Mr. ZHU Jie, Mr. WANG Lixin and Mr. YU Zeyang, and independent non-executive Directors Mr. ZHU Shanli, Mr. YUAN Dejun, Ms. SHI Dan and Mr. YUEN Chi Wai.

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