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Western XX FMC Business Plan(2004-2007). to be further discussed (Confidential). Content. 1 、Profile of Western XX Asset Management Co.,Ltd. 2 、Organizational Structure - PowerPoint PPT Presentation
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1
Western XX FMCBusiness Plan(2004-2007)
to be further discussed
(Confidential)
2
ContentContent
1 、 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 Structure
Registered 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 Scope
Fund 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 Strategy
Vision
One of the leaders in the great China wealth management
Philoshophy
Investors‘ benefits are everything
Strategy
Brand, Service and Product all in one
7
Business Goal
Grow 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)
BODChairman(1)
Trader(2)
FundAccount
-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.
CMO CIO COO
Fund Manage-ment Dept.
Fund dealing
Dept.
R&DDept.
CEO
TA IT
Dept.
HR&Admin. Dept.
FundSales Dept.
Marketing Dept.
Strategy research
Finance engineer
-ing
Industry&
Company research
Centraldealing room
Call center
FundAccount-
ing
Market-ing &
Productdevelop-mentDirect
saleAgency sale OA
Systemmaintain
-ence
Complianceoffice
Auditing&Supervis
-ing
Info.disclosure
Head of Compliance
11
Structure of Governance
Board of directors
Qualification examination and
compensationcommittee
CEO
The shareholders’ meeting
Board of supervisors
The compliance committee
Head of Compliance
12
Structure of Business Operation
CEO
Investment decision committee
Risk control committee
Fund appraisal group
CMO CIO COO
Head of Compliance
13
3 、 Business Development Strategies
14
Adding long-term value
DistributionChannels
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
Productdevelopment
International standard in FM. & research
Organizational Know How;International management team
Fund product innovation& importation
15
Outsourcing
Value-added
business
Market Segmentation
Product Design
Promotion/Fund Distribution
Research and Development
Fund Transaction/ Investment Management
Risk Control/ Performance evaluation
Non value- added
businessCompliance
HR/ Administration
IT Maintenance
Customer Service
TA/ Fund accounting
Internal Audit
Outsourcing to the reliable third-party
16
Market Segmentation
Market 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 Anlysis
Return Safety Liquidation
GovernmentOrganization
Low High Medium
Insurance Company
High Medium Low
State-owned Enterprise
Low High Medium
Private-owned Enterprise
Medium High High
Wealthy Investor High Medium Low
Ordinary Investor Low High Low
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 Fund
Money Market Fund
Bond Fund
Balance FundHigh Risk
Low
Equity Fund
Low
R
eturn
Hig
h
Product Frame
Fund 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 Management
Investment 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 management
IT 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
Compliance
Auditing 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
32-45Beijing,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
60-85Major cities in China mainland & Hongkong
Long-term(8-10 year, top 5)
Mutual funds: 80-100billionPension funds & mandates: 60billionInternational business: 10billionOther 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%
7. 80% 7. 10%8. 00% 7. 30% 7. 80%
9. 10%
0%
2%
4%
6%
8%
10%
1998 1999 2000 2001 2002 2003
Chi nes GDP Growth Rate
0
2, 000
4, 000
6, 000
8, 000
10, 000
12, 000
1998 1999 2000 2001 2002 2003
Chi nese Resi dent Savi ng ( i n RMBbn yuan) (Chi nese Resi dent Savi ng ( i n RMBbn yuan) )线性
• Resident Savings
20% growth annually
- 5%
0%
5%
10%
15%
20%
1995 1996 1997 1998 1999 2000 2001 2002 2003
Chi nese CPI 2 (Chi nese CPI )天移动平均
30
Shareholder Concept
2003 2004 2005 2006 2007
67%
33%M
ain
tain 3
3%
Call O
pti
on
to 4
9%
Or
• Share transfer
• Capital Expansion
31
Earning Distribution Concept
JV-FMC
Share Capital& Resource
Share Capital& Resource
Dividends& Service fee
Dividends& Service fee
Dividends destribution bases on share stuctureService fee based on the shareholders‘ contribution to JVFMC under SLASLA and the payment method are to be discussed under the real legal enviroment
32
Market Share
• Optimistic 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%
ManagementFee
CustodyFee
Subscription Fee(IPO)
Subscription Fee
(after IPO)
Redemption Fee
Equity &HybridFund
Bond Fund
Index Fund
MoneytaryMarket Fund
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 Cost
• Space 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
SETUP 2004.3-2005.3 in RMB yuan Note
Preriod Milestone Item Unit RMB/unit Total Sum
Pre-pararing Before LOI Expenses paid by each party
Preparetory Team(6 months) After LOI
Space 100m2 US$0.7/m2/d aver. Level in Pudong area
Rent 6 months 17,500/month 105,000
Consulting 800,000 R&D,IT,Marketing,HR topics
Payroll 7 persons 10,000/m/p 420,000
Overhead 50,000/m 300,000 staitionary,communication,transport
Travelling and meeting 1,200,000 Overseas and domestic
Training 3 times 100,000/t 300,000 in Frankfurt&Shanghai
Other business activity 500,000 Public relationship
Subtotal 3,625,000
Establishing(6 months) After approval Expenses paid by both parties
Space
Rent 6 months RMB175000/month 1,050,000
Payroll 15 persons 10,000/m/p 900,000
Overhead 75,000/m 450,000
Travelling and meeting 1,800,000
Recruting &Training 600,000
Other business activity 750,000
Subtotal 5,550,000
IT equipment 12,100,000 11 million in equipment,10%installment
Computer&Furniture 32persons 25000/p 800,000 including conference equipments
Decoration m2 1,850,000 including computer center
Automobile 3 400,000/u 1,200,000
Subtotal 15,950,000
Total establishing expense 25,125,000
Depreciation Method Type Years Total Sum Annual Sum
Straight line Initial expense 5 9,175,000 1,835,000
IT ,furniture,Decoration 3 14,750,000 2,950,000
Automobile 5 1,200,000 240,000
25,125,000 5,025,000
constructional 1000m2 , actural 700m2
36
Staff Cost
• 7 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
Position Num. RMB/u Total Num. RMB/u Total Num. RMB/u TotalCHAIRMAN 1 800 800 1 800 800 1 800 800CEO 1 700 700 1 700 700 1 700 700CIO 1 600 600 1 600 600 1 600 600CMO 1 500 500 1 500 500 1 500 500COO 1 450 450 1 450 450 1 450 450HEAD COMPLIANCE 1 250 250 1 250 250 1 250 250
6 3300 6 3300 6 3300
FUND MANAGER 2 500 1000 4 500 2000 4 500 2000HEAD SALES 1 300 300 3 300 900 4 300 1200HEAD RESEARCH 1 280 280 1 280 280 2 280 560HEAD DEALING 1 260 260 2 260 520 2 260 520HEAD IT 1 260 260 1 260 260 1 260 260
6 2100 11 3960 13 4540
RESEARCH ANALYST 2 180 360 4 180 720 6 180 1080SALES&Markting 2 180 360 4 180 720 6 180 1080HEAD HR ADMIN 1 180 360 1 180 180 1 180 180HEAD FINANCE/ACCOUNTING 1 180 180 1 180 180 1 180 180
6 1260 10 1800 14 2520Other OPERATION STAFFSales 5 100 500 8 100 800 10 100 1000Rearch 2 100 200 2 100 200 3 100 300Finance/Accounting 3 80 240 4 80 320 4 80 320IT 2 80 160 2 80 160 2 80 160Admin 2 50 100 2 50 100 3 50 150
14 1200 18 1580 22 1930
TOTAL STAFF COST 32 7860 45 10640 55 12290
TOTAL EXPENSE 43, 506 55,086 65, 416See costbreakdown worksheet
% OF TOTAL STAFF COST 18% 19% 19%OVER TOTAL EXPENSE
BONUS 30%-120% OF BASE SALARY ACCORDING TO Annual Performance
JV STAFF BASE SALARY BUDGET (IN RMB1,000yuan)
2005 2006 2007
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
2005 2006 2007 NOTEItem Month RMB/unit
Depreciation 5,025,000 5,025,000 5,025,000
Operating expenseRent 12 175,000/month 2,100,000 2,100,000 2,100,000Payroll 12 7,860,000 10,640,000 12,290,000 See JV STAFF BASE PAY WORKSHEETBonus 3,144,000 4,256,000 4,916,000 Aver. 40% PAYROLLOverhead 12 3000/m/p 1,152,000 1,620,000 1,980,000 32,45,55 persons in 2005,2006,2007
Travelling&meeting 3,200,000 4,800,000 6,240,000
IT service/ maintainence 1,100,000 1,100,000 1,100,000 10% OF IT INSTALLMENTSubtotal 18,556,000 24,516,000 28,626,000
Marketing expenseAdvertisement 4,500,000 5,500,000 6,500,000 1 million increasing annuallyDistribution Channels 50,000/u 3,000,000 5,000,000 7,500,000 60-150 in 3 yearsMaterials 50/u 500,000 1,000,000 1,500,000 10,000-30,000 in 3 yearsBinding promotion 500,000/u 2,000,000 3,000,000 4,000,000 Flight ticket,credit card,insurance,lottery etc.Other promotion activity 200,000/u/y 1,000,000 1,500,000 2,000,000
Subtotal 11,000,000 16,000,000 21,500,000Rearch expense
Software service 300,000 300,000 300,000Rearch report 800,000 1,000,000 1,200,000Product development 1,000,000 1,200,000 1,500,000
Subtotal 2,100,000 2,500,000 3,000,000Legal affairs
Auditing expense 700,000 700,000 700,000Information disclosure 350,000 450,000 550,000
Subtotal 1,050,000 1,150,000 1,250,000Consulting Consulting 5,175,000 5,175,000 5,175,000 under SLA. , to be further discussed
Subtotal 5,175,000 5,175,000 5,175,000Admininstration Recruiting&Training 12 10,000/m 120,000 120,000 120,000
Public relationship 12 10,000/m 120,000 120,000 120,000Administrative expense 12 360,000 480,000 600,000
Subtotal 600,000 720,000 840,00043,506,000 55,086,000 65,416,000
Tax Sales tax rate 5% of revenueIncome tax rate 15% of income
In Million Euros 1 Euro=¥10.35 4.20 5.32 6.32
Total expense
BUSINESS STARTING PERIOD (in RMB YUAN)
40
Revenue,Profit and Cashflow Forecast
Optimistic Scenario
Year
Note
Number of Funds 1 Umbrella Fund Total
Equity(<=80% ) Hybrid(50% :50% ) Monetary Market Bond Fund
Fee Rate 1.50% 1.00% 0.33% 0.75%
Front-load Fee Rate 50% kick back 1.00% 1.00% 0.25% 1.00%
Net AUMs(in Million Units) 2,000 2,000 4,000 0 8,000
Revenue(in Million RMB Yuan) 40.00 30.00 18.20 0.00 88.20
in Million Euro 1 Euro= ¥10.35 3.86 2.90 1.76 8.52
Year
Number of Funds 2 2,400 2,400 4,800 9,600
New Launch 1 Guaranty Fund 5,000 5,000
Net AUMs 7,400 2,400 4,800 14,600
Revenue 111.00 24.00 15.84 150.84
in Million Euro 10.72 2.32 1.53 14.57
Year
Number of Funds 4 7,880 2,880 5,760 16,520
New Launch 1 Bond, 1 Equity fund 3,000 4,000 7,000
Net AUMs 10,880 2,880 5,760 4,000 23,520
Revenue 153.20 28.80 19.01 50.00 251.01
in Million Euro 14.80 2.78 1.84 4.83 24.25
2004 2005 2006 2007
Revenue 0.000 88.200 150.840 251.008
Cost 25.125 43.506 55.086 65.416
- Sale tax 0.000 4.410 7.542 12.550 5%
Income 0 40.284 88.212 173.042
- Income tax 0 6.043 13.232 25.956 15%
Net profit 0 34.241 74.980 147.085
in Million Euro 3.308 7.244 14.211
Cumulated profit (25.13) 9.116 84.097 231.182
in Million Euro (2.43) 0.88 8.13 22.34
Total
Cash Flow to Union (in Million Euro) 0.00 1.59 2.89 5.19 9.67
Cost/Income ratio n.a. 49.33% 36.52% 26.06%
Net yield margin n.a. 1.10% 1.03% 1.07%
Expense margin n.a. 0.54% 0.38% 0.28%
Profit margin n.a. 0.56% 0.66% 0.79%
2005
2006
2007
Fund Type
41
Realistic Scenario
Year
Note
Number of Funds 1 Umbrella Fund Total
Equity(<=80% ) Hybrid(50% :50% ) Monetary Market Bond Fund
Fee Rate 1.50% 1.00% 0.33% 0.75%
Front-load Fee Rate 50% kick off 1.00% 1.00% 0.25% 1.00%
Net AUMs(in Million Units) 1,500 1,500 3,500 0 6,500
Revenue(in Million RMB Yuan) 30.00 22.50 15.93 0.00 68.43
in Million Euro 1 Euro= ¥10.35 2.90 2.17 1.54 6.61
Year
Number of Funds 2 1,800 1,800 4,200 7,800
New Launch 1 guaranty Fund 4,000 4,000
Net AUMs 5,800 1,800 4,200 11,800
Revenue 87.00 18.00 13.86 118.86
in Million Euro 8.41 1.74 1.34 11.48
Year
Number of Funds 4 6,160 2,160 5,040 13,360
New Launch 1 Bond ,1 Equity fund 2,400 3,200 5,600
Net AUMs 8,560 2,160 5,040 3,200 18,960
Revenue 120.40 21.60 16.63 40.00 198.63
in Million Euro 11.63 2.09 1.61 3.86 19.19
2004 2005 2006 2007
Revenue 0.000 68.425 118.860 198.632
Cost 25.125 43.506 55.086 65.416
- Sale tax 0.000 3.421 5.943 9.932
Income 0 21.498 57.831 123.284
- Income tax 0 3.225 8.675 18.493
Net profit 0.000 18.273 49.156 104.792
in Million Euro 0.000 1.766 4.749 10.125
Cumulated profit (25.13) (6.852) 42.304 147.096
in Million Euro (2.43) (0.66) 4.09 14.21
Total
Cash Flow to Union (in Million Euro) 0.00 1.08 2.07 3.84 6.99
Cost/Income ratio n.a. 63.58% 46.35% 32.93%
Net yield margin n.a. 1.05% 1.01% 1.05%
Expense margin n.a. 0.67% 0.47% 0.35%
Profit margin n.a. 0.38% 0.54% 0.70%
2005
2006
2007
Fund Type
42
Pessimistic ScenarioYear
Note
Number of Funds 1 Umbrella Fund Total
Equity(<=80% ) Hybrid(50% :50% ) Monetary Market Bond Fund
Fee Rate 1.50% 1.00% 0.33% 0.75%
Front-load Fee Rate 50% kick off 1.00% 1.00% 0.25% 1.00%
Net AUMs(in Million Units) 1,400 1,000 2,400 0 4,800
Revenue(in Million RMB Yuan) 28.00 15.00 10.92 0.00 53.92
in Million Euro 1 Euro= ¥10.35 2.71 1.45 1.06 0.00 5.21
Year
Number of Funds 2 1,680 1,200 2,880 5,760
New Launch 1 Guaranty Fund 3,000 3,000
Net AUMs 4,680 1,200 2,880 8,760
Revenue 70.20 12.00 9.50 91.70
in Million Euro 6.78 1.16 0.92 8.86
Year
Number of Funds 4 5,016 1,440 3,456 9,912
New Launch 1 Bond,1 equity Fund 1,800 2,400 4,200
Net AUMs 6,816 1,440 3,456 2,400 14,112
Revenue 96.24 14.40 11.40 30.00 152.04
in Million Euro 9.30 1.39 1.10 2.90 14.69
2004 2005 2006 2007
Revenue 0.000 53.920 91.704 152.045
Cost 25.125 43.506 55.086 65.416
- Sale tax 0.000 2.696 4.585 7.602
Income 0 7.718 32.033 79.027
- Income tax 0 0.000 4.805 11.854
Net profit 0 7.718 27.228 67.173
in Million Euro 0 0.746 2.631 6.490
Cumulated profit (25.13) (17.407) 9.821 76.993
in Million Euro (2.43) (1.68) 0.95 7.44
Total
Cash Flow to Union (in Million Euro) 0.00 0.75 1.37 2.64 4.76
Cost/Income ratio n.a. 80.69% 60.07% 43.02%
Net yield margin n.a. 1.12% 1.05% 1.08%
Expense margin n.a. 0.91% 0.63% 0.46%
Profit margin n.a. 0.22% 0.42% 0.61%
2005
2006
2007
Fund Type
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
Banks• Total assets of finance companies are RMB346bn, net assets are RMB32.2bn b
y 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 Companies
• Total 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 2003
ASSUME 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 Package
ASSUME
• 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
Manager
Middle-level Manager
Ordinary
Employee
Total
Shaanxi Provincial
Investment Group
77 365 5489 5931
Shaanxi Provincial
Electri Power Co.
502 3200 36524 40226
Shaanxi High-tech Industry Investment
204 530 4287 5021
Western Securities 9 55 633 697
Total 792 4150 46933 51875
50
Top-level
Manager
Middle-level Manager
Ordinary Employee
Total
Shaanxi Provincial
Investment Group
7.7 18.25 54.89 80.84
Shaanxi Provincial
Electri Power Co.
50.2 160 365.24 575.44
Shaanxi High-tech Industry Investment
20.4 26.5 42.87 89.77
Western Securities 0.9 2.75 6.33 9.98
Total 79.2 207.5 469.33 756.03
Unit: RMB Million yuan
Internal Sales Estimation
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Retail Sales
Fund 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
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Comprehensive Cooperation Contracts
• Western 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
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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.
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Sales Forecast in 2005
Pessimistic % Realistic % Optimistic %
Internal Sales Package 2. 2 4. 58% 3 4. 62% 3. 7 4. 63%State-owned enterprise group 2. 2 4. 58% 3 4. 62% 3. 7 4. 63%Insurance companies 5. 2 10. 83% 7 10. 77% 8. 6 10. 75%Other financial institutions 4 8. 33% 5. 5 8. 46% 6. 8 8. 50%NaCSSeF/Listed companies 1. 5 3. 13% 2 3. 08% 2. 5 3. 13%Housing reserve 1. 9 3. 96% 2. 5 3. 85% 3 3. 75%Non-profit organization 1. 5 3. 13% 2 3. 08% 2. 5 3. 13%Other companies 0. 7 1. 46% 1 1. 54% 1. 2 1. 50%
Subtotal 19. 2 40. 00% 26 40. 00% 32 40. 00%Custody bank 10. 9 22. 71% 15. 4 23. 69% 18. 7 23. 38%Agency bank 10. 4 21. 67% 14. 2 21. 85% 17. 6 22. 00%Securities house 2. 5 5. 21% 3. 2 4. 92% 4. 1 5. 13%Other distributors 5 10. 42% 6. 2 9. 54% 7. 6 9. 50%
Subtotal 28. 8 60. 00% 39 60. 00% 48 60. 00%Total 48 100. 00% 65 100. 00% 80 100%
Unit: in 100 million RMB yuan
Direct Sales
Retail Sales
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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