西部证券2004-2007年商业计划书
- 1. * Western XX FMC Business Plan(2004-2007) to be further discussed (Confidential)
- 2. *Content1、Profile of Western XX Asset Management Co.,Ltd. 2、Organizational Structure 3、Business Development Strategies 4、Roadmap 5、Assumptions and Forecast 6、Sales Breakdown in 2005
- 3. *1、 Profile of Western XX Asset Management Co.,Ltd.
- 4. *Registered Capital and Share StructureRegistered Capital: RMB 100 million Registered Place: Pudong District, Shanghai, China Proposed Share Structure: Western Securities Co., Ltd. RMB 40 million Other foreign sponsor RMB 33 million Shaanxi Investment Group Co.,Ltd. RMB 27 million
- 5. *Business ScopeFund management and investment advisory business in China as permitted by the applicable law. (incl. promotion, sale,issuance and management of investment funds) Other asset management business permitted by the applicable law.
- 6. *Vision, Philosophy and StrategyVisionOne of the leaders in the great China wealth management PhiloshophyInvestors‘ benefits are everything StrategyBrand, Service and Product all in one
- 7. *Business GoalGrow the JV into one of the top 5 FMCs in China, in the following three categories: Profitability Fund Performance Total AUM Professionalism
- 8. *2、Organizational Structure
- 9. *FMC‘s Organization Chart (at the beginning)CEO(1)CMO(1)CIO(1)CEO/COO(1)Sales& Customer Service (5)Marketing &Product development (3)Head of Compliance(1)R&D (5)Fund Manager (2)BOD Chairman(1)Trader (2)Fund Account -ing &TA (3)IT (2)Admin &HR (2)Auditing& Compliance (2)32 persons in the 1st year(proposed)
- 10. *FMC‘s Organizational Chart (in 3 years ) Customer Service Dept.CMOCIOCOOFund Manage -ment Dept.Fund dealing Dept.R&D Dept.CEOTA IT Dept.HR& Admin. Dept.Fund Sales Dept. Marketing Dept. Strategy researchFinance engineer -ingIndustry & Company researchCentral dealing roomCall centerFund Account- ingMarket -ing & Product develop -mentDirect saleAgency saleOASystem maintain -enceCompliance officeAuditing &Supervis -ingInfo. disclosureHead of Compliance
- 11. * Structure of GovernanceBoard of directorsQualification examination and compensation committeeCEOThe shareholders’ meetingBoard of supervisorsThe compliance committeeHead of Compliance
- 12. * Structure of Business OperationCEOInvestment decision committeeRisk control committeeFund appraisal groupCMOCIOCOOHead of Compliance
- 13. *3、Business Development Strategies
- 14. *Adding long-term value Distribution Channels Clients base Local market acknowledgement 22 branches, strategic cooperation with ICBC, CCB etc. 700，000 individual clients, main institutional clients exceed 400 Excellent performance record, good reputation , Strong government support, Opportunities from the development of western China Professionalism International experience Product development International standard in FM. & research Organizational Know How; International management team Fund product innovation& importation
- 15. *Outsourcing Value-added businessMarket SegmentationProduct DesignPromotion/Fund DistributionResearch and DevelopmentFund Transaction/ Investment ManagementRisk Control/ Performance evaluation Non value- added businessComplianceHR/ Administration IT MaintenanceCustomer ServiceTA/ Fund accountingInternal AuditOutsourcing to the reliable third-party
- 16. *Market SegmentationMarket analysis Market volume 182 billion units in 2003 Growth rate Aver. annual growth rate 50% New opportunities QFII,National Security Funds asset allocation Deregulation in fund issuance procedure Customer segmentation Institutional v.s. Individual clients 40%v.s.60%(estimate) Internal sales package A.M. clients transfer into funds holders …
- 17. * Customer Needs AnlysisReturnSafetyLiquidationGovernment OrganizationLowHighMediumInsurance CompanyHighMediumLowState-owned EnterpriseLowHighMediumPrivate-owned EnterpriseMediumHighHighWealthy InvestorHighMediumLowOrdinary Investor LowHighLow
- 18. *Identifying the needs of domestic customers Institutional clients : Fixed income,low risk,cash flow management Individuals clients : Growth,Small and middle cap,active management Fee Structure varies according to client base Institutional clients: Low subscription and redemption fee Individuals clients: Varies according to the period of holding Deciding on distribution channels, depending on target groups Institutional clients : Direct sales/custodian bank recommendation Individuals clients : Agency sales via banks, securities houses etc. Customer Segmentation
- 19. *Product Strategy Present fund products Equity,bond,balance,hybrid,index, money market,guaranty etc. Competition products Deposit, fund biding insurance, asset management, trust, underground fund etc. Development plan Meet the needs of main clients group Product frame Based on capital market environment Image/Brand …
- 20. *Guaranty FundMoney Market FundBond FundBalance FundHigh Risk LowEquity Fund Low Return HighProduct FrameFund Type
- 21. *Distrubution Distribution methods Direct sales to main institutional clients Agency sales through agency banks, securities firms, China Unionpay etc. E-business through website and call center … Distribution channels Present channels banks, securities firms,internet etc. Channels selection 3-4 commercial banks,10 sec. firms Incentive scheme front-load fee kickbacks Binding promotion flight tickets,insurance,credit card,lottery etc.
- 22. *Investment ManagementInvestment Strategies Active / Passive Benchmark Error tracking Performance evaluation/Risk management Reporting system Research Top to down /Bottom up Investment strategies Listed companies research Modeling Stock-based loan …
- 23. *Operational managementIT framework TA (Self-establishment / The third-party supporting) Software and hardware selection Customer service system Company web OA Human resources & General Administration The number of staff Core employees Job description Training Corporate finance and administration
- 24. *ComplianceAuditing and supervising Fund and company assets auditing Behavior supervising Risk evaluation Firewall Emergency event handling scheme … Public relationship Relationship with CSRC, the exchanges and securities association Legal affairs, information disclosure, international business …
- 25. *4、Roadmap
- 26. *Initial Process in Seting up JVFMC Sign the Joint Venture agreement and the article Set up joint preparatory team Prepare application documents required by CSRC Obtain the approval of establishment Recruitment and training Install the equipment and software of JVFMC’s operation Fund product development and key clients contact Setup of contracts with custodian bank and distributors Promotion Fund issuance
- 27. *Short-/Medium-/Long Term Target Setting PeriodThe Number of Fund ,Total AUM (in billion unit)The Number of Staff,Location of Branches Short-term (1-2 year)Num of funds: 1-2 Series funds the first year: 6-8 billion the second year: 9-15biliion 32-45 Beijing,Shanghai、Guangzhou、Shenzhen,Xi’an Medium-term (5 year, top 10) Num of funds: 7-8 funds Mutual funds: 30-50 billion Pension funds: 25 billion Mandates: 25 billion 60-85 Major cities in China mainland & Hongkong Long-term (8-10 year, top 5) Mutual funds：80-100billion Pension funds & mandates：60billion International business：10billion Other asset management business: 10billion 100-120 Taiwan 、Singapore and other Asian countries
- 28. *5、 Assumption and Forecast
- 29. *Macroeconomy GDP growth rate 7%-8% annually Inflation rate Under 1% Resident Savings 20% growth annually
- 30. *Shareholder Concept2003 2004 2005 2006 200767%33%Maintain 33%Call Option to 49%OrShare transfer Capital Expansion
- 31. *Earning Distribution ConceptJV-FMCShare Capital& ResourceShare Capital& ResourceDividends& Service feeDividends& Service feeDividends destribution bases on share stucture Service fee based on the shareholders‘ contribution to JVFMC under SLA SLA and the payment method are to be discussed under the real legal enviroment
- 32. *Market ShareOptimistic Scenario 60% 5% Realistic Scenario 45% 3.5% Pessimistic Scenario 30% 2% Total Mutual Fund The num. Of FMCs The num. Of Funds 182 billion units 47 112 Scenario Growth Rate Market Share (in 3 years) (By the end of 2003)
- 33. *Fee rate Structure 0.25%1-1.5% 1% 1% <=3% 0-1% 0.6-0.75% 0.2% 1% <= 1.5% 0-1% 1% 0.2% 1% <= 1.5% 0-1% 0.33% 0.1% * NA NA* 0.25% sales service fee charged
- 34. *Setup CostSpace 1000 M2 (Constructional area) Rent US$0.70/M2 / D (Aver, standard) Decoration 850 yuan /M2 0.85 million (Aver, standard) Computer Center 1 million Furniture/PCs 32 0.80 million Automobile 3 1.2 million IT costs 11 million (TA,OA,hardware,software etc.) Depreciation method straight line 2004.3-2005.3 12 months
- 35. *
- 36. *Staff Cost7 employees in establishing period aver. RMB10,000 yuan/m per Operational period Number of employee 32,45,55 in 2003-2007 Base salary according to the position Bonus 30%-120% of base salary aver. 40% in BP No compensation for foreign staff by JVFMC
- 37. *
- 38. *Operational Cost(2005-2007)Rent 2.1 million /y IT maintenance 1.1 million/y, 10% of IT costs Traveling and meeting 3.2-6.2 million Marketing and Promotion 11-21.5 million Research and development 2.1-3 million Compliance 1.05-1.25 million Consulting 5.175 million /y Administration 0.6-0.84 million Sales tax 5% Income tax 15%
- 39. *
- 40. *Revenue,Profit and Cashflow ForecastOptimistic Scenario
- 41. *Realistic Scenario
- 42. *Pessimistic Scenario
- 43. *6、 Sales Breakdown in 2005
- 44. * Asset allocation of Chinese insurance Company Direct Sales 1999 2000 2001 2002 2003 Bank Deposits 926 1235.4 1930.6 3026.2 4549.6 Bonds 678.5 956 795.8 1107.8 1409.9 Funds 14.8 133.5 209 307.8 463.3 Other Assets 984.8 1049 1655.9 2052.3 1958.7 Total Assets 2604.1 3373.9 4591.3 6494.1 8378.5 ASSUME that funds invested by insurance companies increase by 50 percent annually and 1 percent market share taken by JVFMC; around RMB0.7bn units will be sold to insurance companies Unit: RMB 100 million yuan
- 45. * Potentials from Other Financial Institutions ex BanksTotal assets of finance companies are RMB346bn, net assets are RMB32.2bn by the end of Jun. 2002 Major finance companies in China : China Electric Power Finance Co., China Petroleum Finance Co., China Petrifaction Finance Co., HuaNeng Finance Co., Zhongwu Finance Co. etc. Trust & Securities Co. owns RMB250bn assets by the end of 2002 Including: Western Trust&Investment Co., JinSin Trust Co., Ping An of China Trust Co., Ai Jian Trust Co., Shangdong Trust Co. ect. ASSUME that 10% of total assets of these institutions are allocated into mutual funds and 1% market share taken by JVFMC; more than RMB0.55bn funds will be sold to these companies
- 46. *NaCSSeF/Houese Reserve/Listed CompaniesTotal assets of National Council for Social Security Fund (NaCSSeF) are around RMB124.1bn by the end of 2003 which of 40 percent is permitted to flow into securities market Total assets of National House Reserve are 346.7bn by the end of 2003, and 1.5% of total sum managed by Shaanxi Provincial House Reserve According to the bulletins of China Securities Journal, trust assets of listed companies managed by securities companies exceed RMB 3bn in 2003ASSUME that around RMB20bn assets of NaCSSeF allocated into mutual funds and 1 percent market share taken by JVFMC; 0.2bn units funds will be sold to NaCSSeF ASSUME 5% share of Shaanxi Provincial House Reserve taken by JVFMC, that is 0.25bn units
- 47. * State-owned Enterpirise Groups (Strategic partners)Shaanxi Provincial Investment Group State-owned investment holding company with a registered capital of RMB3bn; to manage the governmental enterprises, real estate and financial assets more than RMB15bn by the end of 2002 HanNan Airlines Group Listed company invested by American Aviation Ltd., and total assets exceeding around RMB20bn; more than sixty thousand employees Shaanxi Provincial Electric Power Co. Fully held by National Electric Power Co., Ltd; total Assets exceeding RMB 24bn and by the end of 2002; sustained long-term growth and abundant cash China HuaNeng Group, China LuNeng Group, Jiangsu Electric Power Co., Guizhou Electric Power Co., Zhejiang Electric Power Co., China International Traveling Group, Zhong Hai Group … …
- 48. * Non-profit Organization (Good relationship ) Universities and affiliated companies Xi’an Jiaotong University, Northwestern University, Northwestern Polytechnical University, Xi’an Fanyi University, Chang’an University, Tongji University, Shanhai Financial University, Fudan University, Xijing University, Ouya University, Zhejiang University Tianjin University, Nankai University, Nanjing University etc. Hospitals and affiliated institutions Xi Jing Hospital, Xi’an Dianzi Hospital, Xi’an Wujing Hospital, Eastern Hospital, Huaxi University etc. Charity funds association Yanlin Agriculture Development Funds, Yanlin Industry Development funds, Shaanxi Architecture Industry Fund etc.
- 49. *Internal Sales PackageASSUME 100,000 units purchased by each top-level manager 50,000 units purchased by each middle-level manager 10,000 units purchased by each ordinary employee Product package should be well designed for individual investor, and the return should be superior to the market benchmark Employee can purchase JVFMC’s funds at discount front-end fee rate Top-level ManagerMiddle-level ManagerOrdinary EmployeeTotalShaanxi Provincial Investment Group7736554895931Shaanxi Provincial Electri Power Co.50232003652440226Shaanxi High-tech Industry Investment 20453042875021Western Securities955633697Total79241504693351875
- 50. *Top-level ManagerMiddle-level ManagerOrdinary EmployeeTotalShaanxi Provincial Investment Group7.718.2554.8980.84Shaanxi Provincial Electri Power Co.50.2160365.24575.44Shaanxi High-tech Industry Investment 20.426.542.8789.77Western Securities0.92.756.339.98Total79.2207.5469.33756.03Unit: RMB Million yuanInternal Sales Estimation
- 51. *Retail SalesFund Assets under Custody in Chinese Commercial Banks Open-end Funds Closed-end Funds Total Num.of Branch ICBC 278.83 206 484.83 17,000 China Agricultural Bank 114.21 230 344.21 4,200 China Construction Bank 125.52 175 300.52 12,000 Bank of China 202.11 60 262.11 7,064 Bank of Communication 152.10 146 298.10 China Everbright Bank 16.45 16.45 China Merchants Bank 40.87 40.87 Shanghai Pudong Development Bank 25.72 25.72 Unit: RMB 100 million Total 955.81 817 1772.81 40,264
- 52. * Comprehensive Cooperation ContractsWestern Securities signed the comprehensive cooperation contracts with ICBC and CCB in 2001; the contracts will be signed once again after 2004 and become effect continually Following banks have been discussing comprehensive cooperation contract with Western Securities: Nationwide Banks: Bank of Communication, HUA XIA Bank, Shanghai Bank, Shanghai Pudong Development Bank Local Commercial Banks: Xi’an Commercial Bank, Baoji Commercial Bank, Xianyang Commercial Bank, Nanjing Commercial Bank, Tianjin Commercial Bank, Guiyang Commercial Bank, Ji Nan Commercial Bank, Yin Chuan Commercial Bank
- 53. *Distribution Channels ASSUME ICBC,CAB,CCB,COB as JVFMC agency banks,10 securities firms,100branches as agency; Aver. 80,000 units distributed by each branch,total 3.2 billion units distributed through commercial banks; Aver. 3,000,000 units distributed by each branch of agency securities firms,total 0.3 billion units distributed through securities firms ; 5 Direct sales centers in Beijing,Shanghai,Shenzhen,Xi’an,Fuzhou, 0.1billion distributed each center,total 0.5 billion; 0.2 billion units distributed through Call-center,website and other sub-contractors.
- 54. *Sales Forecast in 2005
- 55. *Package Scheme/Saving up Plan Package scheme (for different investors) 80% equity fund, 20% money market fund; 50% equity fund, 50% money market fund 30% equity fund, 30% hybrid fund,40% money market fund 20% hybrid fund, 80% money market fund Saving-up plan 80% initial purchase + 20% saving-up
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