Securities abbreviation: China Greatwall Securities Co.Ltd(002939) securities code: 002939 China Greatwall Securities Co.Ltd(002939)
On the use of funds raised by non-public offering of shares
Feasibility analysis report
(Revised Version)
February, 2002
China Greatwall Securities Co.Ltd(002939)
On the use of the funds raised by this non-public offering of shares
Feasibility analysis report (Revised Version)
In recent years, with the deepening of China’s capital market reform, the development of stratification and differentiation in the securities industry has intensified, the monopoly of large securities companies on high-quality issuers has been further strengthened, and the industry concentration is accelerating. At the same time, the opening-up of the capital market has been further improved, and the layout of foreign securities companies has been accelerated, further intensifying the industry competition. The proportion of traditional capital light brokerage business has continued to decline. Chinese securities companies have begun to get rid of the asset light mode of relying only on license sector and channel business. The expansion of balance sheet has gradually become the main source of profit. The importance of capital strength for securities companies has increased. Many listed securities companies have completed A-share non-public offering in recent years. Under the regulatory system with net capital as the core, capital strength is the key factor determining the core competitiveness of securities companies. This issuance will enhance the company’s capital strength, help the company improve its market competitiveness and gain an advantage in the fierce industry competition.
In order to promote the sustainable and stable development of China Greatwall Securities Co.Ltd(002939) (hereinafter referred to as “the company” or ” China Greatwall Securities Co.Ltd(002939) “), grasp the development opportunities of the capital market, further expand and strengthen the company’s core business and enhance the company’s core competitiveness, the company plans to raise funds through non-public offering of shares, increase the company’s capital, supplement working capital and repay debts, so as to expand the business scale, Enhance the company’s anti risk ability and market competitiveness. In order to ensure the reasonable, safe and efficient use of the funds raised in this non-public offering, the feasibility analysis report on the use of the funds raised in this non-public offering of A-Shares is as follows:
1、 Use plan of the raised funds
The total amount of funds raised in this non-public offering does not exceed 8.464 billion yuan (including this amount). After deducting the issuance expenses, it is planned to be used to increase the company’s capital, supplement working capital and repay debts, so as to expand the business scale and improve the company’s anti risk ability and market competitiveness. The raised funds are mainly used for the following aspects:
No. the raised funds are invested in the amount to be invested
1. The investment in capital intermediary business shall not exceed 5 billion yuan
2. The investment in securities investment business shall not exceed 2.5 billion yuan
No. the raised funds are invested in the amount to be invested
3. The debt repayment shall not exceed 964 million yuan
Total no more than 8.464 billion yuan
Before the raised funds are in place, the company can invest with self raised funds according to the actual progress of the project, and replace the self raised funds with the raised funds after the raised funds are in place. If the actual raised funds after deducting the issuance expenses in this non-public offering are less than the total amount of funds to be invested in the above projects, the company will adjust and finally determine the priority of the investment of the raised funds and the specific use arrangement of the investment amount of the raised funds according to the actual net amount of the raised funds, and the insufficient part of the raised funds will be solved by the company’s self raised funds. The board of directors or the person authorized by the board of directors shall make corresponding adjustments to the investment projects and use arrangements of the raised funds within the scope authorized by the general meeting of shareholders, changes in market conditions and the actual situation of the company.
The company has established a special storage system for the raised funds, and the funds raised in this non-public offering will be deposited in a special account approved by the board of directors.
2、 Necessity of this non-public offering
(I) this issuance will help the company improve its market competitiveness
In recent years, with the deepening of China’s capital market reform, the development of stratification and differentiation in the securities industry has intensified, the monopoly of large securities companies on high-quality issuers has been further strengthened, and the industry concentration is accelerating. At the same time, the opening-up of the capital market has been further improved, and the layout of foreign securities companies has been accelerated, further intensifying the industry competition. The proportion of traditional capital light brokerage business has continued to decline. Chinese securities companies have begun to get rid of the asset light mode of relying only on license sector and channel business. The expansion of balance sheet has gradually become the main source of profit. The importance of capital strength for securities companies has increased. Many listed securities companies have completed A-share non-public offering in recent years. Under the regulatory system with net capital as the core, capital strength is the key factor determining the core competitiveness of securities companies. This issuance will enhance the company’s capital strength, help the company improve its market competitiveness and gain an advantage in the fierce industry competition.
(II) this issuance is conducive to the company’s strategic objectives
During the 14th Five Year Plan period, the company will take “safety” and “leading” as the strategic guiding ideology, build a comprehensive Xiandai Investment Co.Ltd(000900) bank with the goal of “digital brokerage, smart investment and scientific innovation finance”, and adhere to the dual track drive of transformation (i.e. optimizing growth mode and improving corporate governance) and innovation (i.e. gathering strategic customer base and establishing scientific innovation financial port), Achieve intrinsic safety and high-quality development, and strive to create a characteristic first-class securities company specializing in the field of electric power and energy. During the 14th Five Year Plan period, the positioning of the company’s wealth management business is to focus on customers, continue to be the core business and revenue cornerstone of the company through fine operation and scientific and technological empowerment, and become a first-class wealth management service provider in the industry; The positioning of investment banking business is to become the core driving force of the company’s characteristic development in the future, and build a professional investment bank with the characteristics of energy and science and innovation industries; The orientation of institutional business is to coordinate and promote the common development of proprietary business, wealth management and investment banking; The asset management business is positioned as the waist strength connecting the company’s capital end and asset end. Based on the results of active management transformation, it has become an important internal product center supporting the wealth management business and an important external customer center of the company; Self operated business is configuration oriented, combined with market research and judgment, liquidity, risk preference, capital situation, financial objectives, strategic selection and other framework requirements, and carries out scientific capital allocation planning based on the risk return characteristics of different self operated business varieties.
In the context of comprehensively deepening reform, with the introduction of a series of incentive policies and the further opening of the capital market, the current capital market has ushered in a golden period of development. Judging from the competition in the securities industry in recent years, the company’s comprehensive strength is closely related to its capital strength. Replenishing capital will give the company a stronger competitive advantage in business development.
In the process of building “digital brokerage, smart investment and scientific innovation finance”, the company needs more capital investment to develop wealth management, self operated investment, investment banking and asset management. It also needs to invest more capital to strengthen the construction of information technology and carry out international layout. In order to actively grasp the development opportunities of the capital market and achieve the company’s strategic objectives, through this non-public offering, on the one hand, the company will supplement the capital, which is conducive to gaining advantages in the industry competition, on the other hand, it can correspondingly increase the investment in various businesses, so as to cultivate new profit growth points and promote the company to achieve the strategic objectives.
(III) this issuance is conducive to the company’s ability to resist risks
The securities industry is a capital intensive industry, and capital strength is an important guarantee for securities companies to improve their risk resistance and achieve sustainable and healthy development. Taking “safety” and “leading” as the strategic guiding ideology, the company has always firmly built the foundation of risk control and stable operation since its establishment, attached great importance to risk control and compliance management, established a comprehensive risk management system and continuously improved its risk resistance. For securities companies, their capital strength not only determines the business scale, but also has an important impact on their risk resistance. In case of unexpected loss, sufficient capital is an effective buffer against risk. According to the measures for the administration of risk control indicators of securities companies and the provisions on the calculation standards of risk control indicators of securities companies, the regulatory authorities put forward higher requirements for the net capital strength of securities companies. Under the risk control index system of securities companies with net capital and liquidity as the core, net capital is an important factor affecting the risk resistance of securities companies. This non-public offering will help the company improve its capital level and reduce liquidity risk, so as to improve its risk management ability and risk resistance ability, and effectively ensure the steady operation and sustainable and healthy development of the company.
3、 Feasibility of this non-public offering
(I) this non-public offering meets the conditions specified in relevant laws, regulations and normative documents
The company has a sound corporate governance structure, a sound internal control system, a relatively complete risk control system and strong risk control ability. The company has excellent asset quality, good financial condition and sustainable profitability. The company meets the requirements of the company law, the securities law, the measures for the administration of securities issuance by listed companies (revised in 2020) and the detailed rules for the implementation of non-public offering of shares by listed companies (revised in 2020) of the CSRC The conditions of non-public offering of A-shares in laws, regulations and normative documents such as Q & A on issuance supervision – regulatory requirements on guiding and standardizing the financing behavior of listed companies (Revised Version) and guidelines for the examination of administrative licenses of securities companies No. 10 – capital increase and share expansion and equity change of securities companies.
(II) the raised funds conform to the guidance of national industrial policies
In May 2014, the State Council issued several opinions on further promoting the healthy development of the capital market, proposing to promote the differentiated, professional and characteristic development of securities operating institutions and promote the formation of a number of Xiandai Investment Co.Ltd(000900) banks with international competitiveness, brand influence and systemic importance. In May 2014, the CSRC issued the opinions on further promoting the innovation and development of securities operating institutions, which defined the main tasks and specific measures to promote the innovation and development of securities operating institutions from three aspects: Construction Xiandai Investment Co.Ltd(000900) bank, supporting business product innovation and promoting regulatory transformation, and clearly proposed to support securities operating institutions to broaden financing channels. In September 2014, the China Securities Regulatory Commission and the China Securities Association issued the notice on encouraging securities companies to further replenish capital and the guidelines for capital replenishment of securities companies respectively, requiring securities companies to pay full attention to capital management and capital replenishment to ensure that the business scale is commensurate with the capital strength. In June 2016, the CSRC revised the measures for the management of risk control indicators of securities companies and supporting rules, combined with the new situation of industry development, improved the calculation formula of net capital and venture capital reserve, improved the leverage ratio, liquidity supervision and other indicators, and clarified the counter cyclical adjustment mechanism to improve the effectiveness of risk control indicators, Promote the sustained, stable and healthy development of the securities industry. Under the risk control index system of securities companies with net capital and liquidity as the core and the supervision mode with net capital supervision as the core, policies support securities companies to broaden financing channels and encourage securities companies to further supplement capital. This non-public offering complies with the positive measures taken by the regulatory authorities to encourage securities companies to further supplement capital, and is in line with the guidance of national industrial policies.
4、 Investment direction of funds raised in this non-public offering
The total amount of funds raised in this non-public offering does not exceed 8.464 billion yuan (including this amount). After deducting the issuance expenses, it is planned to be used to increase the company’s capital, supplement working capital and repay debts, so as to expand the business scale and improve the company’s anti risk ability and market competitiveness. The specific investment direction of the raised funds is as follows:
(I) increase investment in capital intermediary business
Providing capital intermediary services (including margin trading, stock pledge and other businesses) to customers is one of the company’s main businesses. In recent years, it has become the main revenue composition of the company. It is also an important way for the company to serve core customers, enhance customer stickiness and provide comprehensive financial services. In the future, the company will focus on the “300959}” integration and customer layered operation, accelerate the transformation of wealth management by using platform technology, and consolidate the company’s core business and revenue cornerstone position. Capital intermediary business is a capital consuming business, and its business scale and profitability mainly depend on the improvement of the company’s capital scale.
The company plans to invest no more than 5 billion yuan to raise funds for capital intermediary business, so as to seize market opportunities, expand business scale and improve profitability and comprehensive financial services.
(II) increase investment in securities investment business
The investment business of securities companies is changing to de directionalization and increasing diversified transactions. The overall investment strategy is more mature and stable, and the market competitiveness is increasing day by day. In line with the development trend of the industry, the positioning of the company’s securities investment business is to carry out scientific capital allocation planning based on the risk return characteristics of different self operated business varieties in combination with market research and judgment, liquidity, risk preference, capital situation, financial objectives, strategic selection and other framework requirements. In the future, we will adhere to the development path of “low volatility, high synergy and stable income”, further consolidate our advantages, upgrade the investment and research system of major asset allocation, deepen the construction of investment capacity, and build a China Greatwall Securities Co.Ltd(002939) self operated investment brand. Compared with head securities companies, the proportion of self operated investment scale of the company is relatively small, and there is a large room for improvement. The company plans to invest no more than 2.5 billion yuan to raise funds for securities investment business, adhere to the development path of “low volatility, high synergy and stable income”, further improve the business scale, enhance the investment capacity and improve the contribution of securities investment business income.
(III) debt repayment
With the gradual expansion of the company’s business scale in recent years, the company’s debt scale has also increased, and continues to be at a high level; As of September 30, 2021, the asset liability ratio of the company’s consolidated statements is 70.26% (the total assets and liabilities are deducted from the funds for buying and selling securities and underwriting securities). The company plans to invest no more than 964 million yuan to raise funds for debt repayment.
After the completion of this non-public offering, the company’s consolidated asset liability ratio will decline, which can not only reduce the company’s short-term financial risk, but also improve the company’s flexibility in the selection of financing instruments, promote the company’s long-term healthy and stable development, and maximize the use effect of raised funds.
5、 Impact of this non-public offering on the company
(I) changes in the company’s business, articles of association, shareholder structure, senior management structure and business income structure after the issuance
The business scope of the company includes: securities brokerage; Securities investment consulting; Financial advisers related to securities trading and securities investment activities; Securities underwriting and recommendation; Self operated securities
