Central China Securities Co., Ltd.

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.

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(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)

CONNECTED TRANSACTION

TRANSFER OF 60% EQUITY INTEREST IN ZZKY FUND MANAGEMENT COMPANY

The Board hereby announces that, on 24 October 2016, ZDKY Venture Capital entered into the Equity Interest Transfer Agreement with Equity Exchange Co. in relation to the disposal by ZDKY Venture Capital of its 60% equity interest in ZZKY Fund Management Company to Equity Exchange Co. at the consideration of RMB14,050,805.81.

After ZDKY Venture Capital receives the consideration paid by Equity Exchange Co., parties to the Equity Interest Transfer Agreement and ZZKY Fund Management Company shall complete the industrial and commercial filing procedures for the Equity Interest Transfer, and Completion shall take place on the date when the Henan Administration for Industry and Commerce (河南省工商行政管理局) confirms Equity Exchange Co.’s ownership of 60% equity interest in ZZKY Fund Management Company upon completion of the registration of changes (including but not limited to change of shareholders, and industrial and commercial registration).

LISTING RULES IMPLICATIONS

As at the date of this announcement, Henan Investment Group holds approximately 27.017% of the issued share capital of the Company and is the largest substantial shareholder of the Company within the meaning of the Listing Rules. Pursuant to Rule 14A.07(1) of the Listing Rules, Henan Investment Group is a connected person of the Company. At the same time, Henan Investment Group holds 10% equity interest in Equity Exchange Co., which is a subsidiary of the Company. Therefore, Equity Exchange Co. is a connected subsidiary of the Company under Rule 14A.16 of the Listing Rules, and the transaction contemplated under the Equity Interest Transfer Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) (other than the profits ratio) in respect of the transactions contemplated under the Equity Interest Transfer Agreement are more than 0.1% but less than 5%, the entering into of the Equity Interest Transfer Agreement is subject to the reporting and announcement requirements but exempt from the circular and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

TRANSFER OF 60% EQUITY INTEREST IN ZZKY FUND MANAGEMENT COMPANY

MAJOR TERMS OF ThE EQUITY INTEREST TRANSFER AGREEMENT

The major terms of the Equity Interest Transfer Agreement are set out as follows:

Date: 24 October 2016

Parties: (1) ZDKY Venture Capital (as vendor); and
(2) Equity Exchange Co. (as purchaser)

Subject matter of the Equity Interest Transfer Agreement

Pursuant to the Equity Interest Transfer Agreement, ZDKY Venture Capital has agreed to sell and Equity Exchange Co. has agreed to purchase 60% equity interest in ZZKY Fund Management Company.

Consideration

The consideration of the Equity Interest Transfer is RMB14,050,805.81, which shall be fully paid by Equity Exchange Co. in a lump sum to ZDKY Venture Capital within three days from the date when the Equity Interest Transfer Agreement is signed and becoming effective.

The consideration was determined after arm’s length negotiations between ZDKY Venture Capital and Equity Exchange Co. and taking into account the audited consolidated net asset values, profitability and cash flow of ZZKY Fund Management Company as at 31 December 2015 and 30 June 2016 respectively, and its future capital requirements.

Completion

Upon Completion, ZDKY Venture Capital will no longer hold any equity interest in ZZKY Fund Management Company, while Equity Exchange Co. will hold 60% equity interest in ZZKY Fund Management Company, and therefore ZZKY Fund Management Company will continue to be a subsidiary of the Company upon Completion.

REASONS FOR AND BENEFITS OF ENTERING INTO ThE EQUITY INTEREST TRANSFER AGREEMENT

The business development strategy and direction of the Group includes the establishment and management of direct investment funds, and the use of leverage mechanism of the fund capital for developing investment businesses. Given that Equity Exchange Co. intends to establish a fund management company and the Company intends to restructure the private fund business segment under the Company in accordance with the current status of its business development, the entering into of the Equity Interest Transfer Agreement can satisfy the aforesaid business development needs of both entities at the same time, and bring investment gains to the Company in the future.

As both ZDKY Venture Capital and Equity Exchange Co. are accounted for and consolidated in the audited consolidated accounts of the Company as subsidiaries in accordance with the requirements under IFRS, no gain or loss is expected to accrue to the Group from the Equity Interest Transfer upon Completion. The sale proceeds arising from the Equity Interest Transfer shall be used as the general working capital of the Group.

Based on the above, the Directors (excluding Mr. Li Xingjia who is required to abstain from voting on the relevant Board resolution but including independent non-executive Directors) are of the view that the Equity Interest Transfer Agreement is entered into in the ordinary and usual course of business of the Group. The terms contained therein are normal commercial terms and are fair and reasonable and the entering into of the Equity Interest Transfer Agreement is in the interests of the Company and Shareholders as a whole.

As Mr. Li Xingjia, the non-executive Director, also serves as a director of Henan Investment Group, which is a connected person of the Company, he is regarded as being interested in the transaction contemplated under the Equity Interest Transfer Agreement and thus has abstained from voting on the relevant Board resolution. Save as disclosed above, none of the Directors has any material interest in the transaction contemplated under the Equity Interest Transfer Agreement and thus be required to abstain from voting on the relevant Board resolution.

INFORMATION OF ThE COMPANY, ThE PARTIES ENTERING INTO ThE EQUITY INTEREST TRANSFER AGREEMENT AND ZZKY FUND MANAGEMENT COMPANY

The Company

The Company is a leading securities firm in Henan Province with a full-service business platform and strategic presence in the PRC. It is principally engaged in the brokerage, investment banking, investment management and proprietary trading businesses.

ZDKY Venture Capital

ZDKY Venture Capital is a subsidiary of the Company established to develop direct investment businesses and is principally engaged in (1) using its own fund capital or establishing direct investment funds to make equity or debt investments in enterprises, or investing in other investment funds in relation to equity or debt investments; (2) providing clients with financial advisory services in relation to equity and bond investments; and (3) carrying out other businesses approved by the CSRC.

Equity Exchange Co.

Equity Exchange Co. is the only regional equity exchange approved by the Henan Provincial Government, and is principally engaged in the provision of services related to registration, custodian, listing, transfer and financing of equities, bonds and other equity assets of non-publicly listed companies under the supervision and guidance of Henan Financial Service Office and Henan CSRC.

As at the date of this announcement, the Company holds 35% equity interest in Equity Exchange Co. and the Company can exercise control at the meetings of the board of directors and the general meetings of Equity Exchange Co.. Therefore, in accordance with the requirements under IFRS, as at the date of this announcement, Equity Exchange Co. is regarded as a subsidiary of the Company.

ZZKY Fund Management Company

ZZKY Fund Management Company is a company incorporated under the laws of the PRC with limited liability, and is principally engaged in the management or entrusted management of non-securities equity investment and related consultancy services.

FINANCIAL INFORMATION OF ZZKY FUND MANAGEMENT COMPANY

Set out below are the audited financial information for each of the two years ended 31 December 2014 and 31 December 2015 and the audited financial information for the six months ended 30 June 2016 of ZZKY Fund Management Company prepared in accordance with CASBE:

	For the	For the	For the
	year ended	year ended	six months ended
	31 December	31 December	30 June
	2014	2015	2016
	*RMB*	*RMB*	*RMB*
	(Audited)	(Audited)	(Audited)
Net profits/(losses) before taxation	897,989.53	770,931.56	(2,504,682.87)
and extraordinary items
Net profits/(losses) after taxation	700,471.51	607,049.16	(2,504,682.87)
and extraordinary items

The audited net asset value of ZZKY Fund Management Company as at 30 June 2016 was RMB18,463,066.36.

LISTING RULES IMPLICATIONS

DEFINITIONS

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

“Board”	the Board of Directors
“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
“Completion”	completion of the Equity Interest Transfer
“connected person”	has the same meaning as ascribed to this term under the Listing
	Rules
“connected subsidiary”	has the same meaning as ascribed to this term under the Listing
	Rules
“connected transaction”	has the same meaning as ascribed to this term under the Listing
	Rules
“CASBE”	China Accounting Standards for Business Enterprises, the
	financial reporting standards and interpretations for business
	enterprises issued by the China Accounting Standards Committee
	of the China Ministry of Finance
“CSRC”	China Securities Regulatory Commission
“Director(s)”	director(s) of the Company

“Equity Exchange Co.”	Central China Equity Exchange Co., Ltd.* (中原股權交易中心
	股份有限公司), a joint stock company incorporated in the PRC
	with limited liability, and as at the date of this announcement,
	the Company holds 35% of its equity interest and the Company
	can exercise control at the meetings of its board of directors and
	at its general meetings; and in accordance with the requirements
	under IFRS, as at the date of this announcement, it is regarded as
	a subsidiary of the Company
“Equity Interest Transfer”	the disposal by ZDKY Venture Capital of its 60% equity interest
	in ZZKY Fund Management Company to Equity Exchange Co.
	pursuant to the Equity Interest Transfer Agreement
“Equity Interest	Henan Zhongzheng Kaiyuan Venture Capital Fund Management
Transfer Agreement”	Co., Ltd. 60% Equity Interest Transfer Agreement* (《河南中證開
	元創業投資基金管理有限公司60%股權轉讓合同》) entered into
	on 24 October 2016 between ZDKY Venture Capital (as vendor)
	and Equity Exchange Co. (as purchaser)
“Group”	the Company and its subsidiaries
“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
“Henan CSRC”	the Henan Branch of the CSRC (中國證監會河南監管局)
“Henan Financial	Financial Service Office of the Henan Provincial Government of
Service Office”	the PRC
“Henan Investment Group”	Henan Investment Group Co., Ltd.* (河南投資集團有限公司), a
	limited liability company incorporated in the PRC and, as at the
	date of this announcement, the largest substantial shareholder of
	the Company as defined under the Listing Rules
“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“IFRS”	International Financial Reporting Standards, including standards,
	revisions and interpretations promulgated by International
	Accounting Standards Board, and International Accounting
	Standards and Interpretations promulgated by International
	Accounting Standards Committee
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange

“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
“RMB”	Renminbi, the lawful currency of the PRC
“Shareholder(s)”	shareholders of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary”	has the same meaning as ascribed to this term under the Listing
	Rules
“substantial shareholder”	has the same meaning as ascribed to this term under the Listing
	Rules
“ZDKY Venture Capital”	Zhongding Kaiyuan Venture Capital Management Co., Ltd.* (中
	鼎開源創業投資管理有限公司), a limited liability company
	incorporated in the PRC, which is a 62.29% owned subsidiary of
	the Company as at the date of this announcement
“ZZKY Fund Management	Henan Zhongzheng Kaiyuan Venture Capital Fund Management
Company”	Co., Ltd.* (河南中證開元創業投資基金管理有限公司), a limited
	liability company incorporated in the PRC owned as to 60% by
	ZDKY Venture Capital as at the date of this announcement
“%”	per cent.

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

Henan, the PRC 24 October 2016

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. WANG Lixin, Mr. ZHANG Qiang, Mr. ZHANG Xiaoqi and Mr. YU Zeyang, and independent non-executive Directors Mr. YUAN Dejun, Mr. YUEN Chi Wai, Mr. NING Jincheng and Mr. YU Xugang.

For identification purposes only

AI assistant

Central China Securities Co., Ltd. Capital/Financing Update 2016

49885_rns_2016-10-24_a565897d-ed5e-49f0-a03e-3e22151fd0ba.pdf