INTERNSHIP REPORT

------ Darren Ye

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Company: Haitong securities Ltd

Duration: 1 month (2013.7-2013.8)

Position: Account manager assistant

Catalogue

1. Company & work place description

2. Job obligations

3. Gains & Summarization

4. Supplemental information

5. Colleague evaluation

Company description

Haitong securities Ltd was founded in 1988 in Shanghai, China. It is one of the earliest and

largest securities companies which involve investment banking, asset management, securities margin

trading, funds, futures, PE investment, etc. And the company has featured in investment

banking， especially in issuance and underwriting for finance and high-tech companies, mergers and

acquisitions（M&A） . As one of the first companies that started private equity fund, Haitong has

earned abundant experience and made huge profit for its shareholders. Also, it is renowned for its

advisory service for the cultural and media enterprise’s M&As. Now, more than 200 securities sales

department have been established all over the country, which absorbed over 4 million investors to

register securities trading accounts.

According to Haitong’s global strategy, Haitong is presently enjoying high growth at its key

international businesses, such as QFII, cross-borders M&As, RMB fund, oversea ETF, etc. And

according to Htsec.com, “Haitong International, which successfully launched the first RMB-

denominated public fund in August 2010, has maintained a leading position in the sector of RMB

products in Hong Kong, and is one of first companies obtaining a RQFII qualification to provide the

investment channel for the offshore RMB.” (Company profile, 2013)

As for company culture, Haitong has been consistently following the operation philosophy of

“Practicability, Innovation, Prudence and excellence” and the operation principle of Standardized

management, Proactive Innovation, Prudent Operation and Earning Focus”. In accordance with the

operation philosophy and principle, Haitong has formed a standardized, scientific, precise management

system that maintains the company to develop steadily and safely, while the reward system works

effectively. These systems motivate the employees to work wholeheartedly and promote the sales as a

result.

Work place description

I worked in one of the most successful sales departments in Guangdong province. It is located in

the center of a hot business area where a large number of potential customers live nearby. There are 20

employees working here. Inside, investors can get various services such as open securities trading

accounts, trade stock，futures, funds on equipped computers with internet, and get investment advices

from professionals.

Every sales department consists of three parts— front desk(Marketing department) , middle

office, back office. Marketing director, who is responsible in achieving sales target assigned by

headquarter, is in charge of front desk. And chief operator, who takes care of internal operation of the

sales departmentt, leads back office.

Front desk, which can also be described marketing department, consists of sales managers lead

by sales supervisor. Sales managers work in different banks where they will introduce services to the

customers and ask them to open securities back to the sales department. But every morning, before they

go to the banks, marketing supervisor will gather the managers to either provide training programs or

hold an internal meeting.

Middle office contains customer service department, investment adviser. Customer service

department will inform the investors in terms of the problems related to their accounts. For example,

CSRC regulates the investors to do risk evaluation every two years. If it expires, the customer service

department will need to notice the investors to finish the risk evaluation either on the internet or come to

the sales department in person. In addition, investment advisers analyze the information gathered from

various sources and give investment advices to investors in terms of the trend that the market will go in

the next few days or which stock is recommended to pick and so on.

Back office is composed by front counter, finance department and technology support

department. Counter is operated by account managers. Accounts managers obligate to help investors to

register or cancel trading accounts, open or close up services, set up securities clearing banks, change

passwords, etc. In the lobby, Duty manager will assist the customers to fill in tables which are required

prior to going to the front counter. Technology support department accounts for maintenance of inner

system and computers.

Job obligation s

Job position: Assistant Account manager

Job skills required: Detail-oriented personality, strong communication skills, problem solving

skills, computer skills

As stated above, accounts managers is responsible for securities accounts. Any individual

account activities which mostly required customer to come in person such as change passwords, change

clearing banks, add in account information will go through the managers. To achieve the tasks, the

managers need to work in a group which is led by executive supervisor while utilizing the intelligent,

well-organized accounts management system. In the meantime, accounts managers are also authorized

to block accounts with the system if the number of stocks owned by one specific investor exceeds 5% of

total outstanding shares of a listed company and unblock the accounts if number of stocks fall below

limit. Moreover, they need to organize all the documents like the filled tables, securities borrowing and

lending agreement with private information from each investor will be collected and reserved in

storeroom by account managers behind the front counter. All of these documents labeled by numbers

will be put in folders that are divided into different intervals and then reserved in certain cabinets.

Gains and summarization

This is my very first time to get real work experience in security industry. As a finance major

student, this chance would be really significant for me to catch on to my future career and understand

what this industry exactly does. So, I treasured this opportunity a lot and utilized it to enhance my

professional know-how of security and strengthen communication skills such as teamwork skills,

customer service skills by collaborating with my co-workers and communicating with customers.

To begin with, I get a comprehensive overview of what one of the most prosperous security

companies does through the conversation with internal staff and research on the documents given by my

co-workers which comprehensively describe the company’s businesses. Haitong covers 8 areas of

businesses, which are Brokerage Business, Investment banking, M&A and Corporate Financing, Bond

Financing, International Business, Derivatives, and Fixed Income.

Brokerage Business is divided by Sales Trading Department, Institutional Services department,

and Margin Trading & Short Selling. Sales Trading department provides market information and

investment advices through daily SMS, daily investment strategy for VIP clients. One-on one asset

management services offer professional advices based on individual clients’ investment preferences and

risk appetites, real time monitoring clients, and risk analysis and investment recommending in time.

While the clients can get various services such as E-commerce, Call center, Channel service and IB

management. Institutional Services Department promote strategic cooperation with institution such as

containing fund management companies, Social Securities Fund, insurance companies to develop

Haitiong’s innovative business while enhancing competitive edge and innovative ability. Inside

institutional Services Department, there are two branches—Vip clients services and Research sales

which meet needs for diverse customers. Being among the first to gain trial qualification, margin

Trading & Short selling department was founded in December 2008, which earned Haitong the first

mover advantage in this field. Through this department, stock investors who have over 100 thousand

RMB financial assets and have the accounts opened for more than 6 months can either borrow stock or

capital from the securities company. Then, they can sell the borrowed stock at higher price and buy

them back at lower price to earn the price difference before the deadline when they have to return the

equal amount of stock or fund. As a explorer and leader n this market, Haitong has capital advantage and

supplies of securities advantage, which enable them to provide various and sufficient supplies of

securities for the investors. Furthermore, Haitong has applied a pre-model in which the unsecured credit

is granted with the credit line determined by customers’ credit rating, total assets within their accounts

and other financial assets, which makes the whole process become more flexible and simplified compare

to their competitors.

According to Careers-in-investment-banking .com, “investment banks help companies and

governments issue securities, help investors purchase securities, manage financial assets, trade

securities, and provide financial advice.” With nearly 10 year’s efforts, Haitong investment bank has

established a own brand, especially in the financial and high-tech enterprise underwritings. The

department comprises of over 210 high-caliber staffs with average age at 32 and average experience

over 3 years. Master and Ph.D degree holders account accounts for 71% of the total professionals. There

are 60 sponsor representatives and other 34 passing the sponsor representative exams and applying for

the qualification. With approval, the number of sponsors will reach roughly 94, ranking the top among

domestic securities houses.

M&A and Corporate Financing department is an investment banking unit. The main scope of its

businesses includes advisory services for acquisition, anti-takeover, merger, spin-off and repurchase of

listed companies, as well as financial advisory services such as assets restructuring, equity based

incentives, PE financing and so on. In the past three years the department has led tens of M&A and

assets restructuring projects for listed companies.

The client Asset Management Department is the business unit of Haitong securities destined to

carry out asset management of the company. Currently, the department offers a comprehensive series of

different products and customized investment service to different types of clients. According to Haitong

securities official website, the business scope of the company includes: directional business, collective

business, special-purpose business, QDII business and innovation business. Directional asset

management business is based on customized needs, provide high-end specialty customized service for

high net value institutional and individual asset. Collective Asset Management Business provides high-

quality asset management services for institutions and individual clients with a medium net value. Based

on investors with different risk preference, the company also launches classification collective plan, in

order to meet the needs of investors with low risk preferences or high risk preferences. Special purpose

asset management business designs asset management services for clients with special objectives. QDII

business invests in global market through collective plan, and special purpose plan. Asset securitization

business is backed by those fundamental assets with stable cash flows from enterprises or financial

institutions. Securities companies design special purpose plan to sell beneficiary certificates to

institutional investors and offer publicly and circulate those certificates in securities exchange.

Bond Financing Department focuses on the issue of fix income products including corporate

bond, financial bond and ABS. By the end of 2010, the department has successfully finished 12 projects

of corporate bonds as lead underwriter, raising RMB 12 billion, and one project of sub-prime bond,

raising RMB 3bn. It also accomplished other 200 or so projects of corporate bond, short-term bill, mid-

term not as lead underwriter or distributor. And based on the rich product mix, the department has built

an improved distribution network and maintained close long-term relationship with institutional clients,

including large commercial banks, insurances, mutual funds, and rural credit cooperatives.

For international business, Haitong has achieved significant progresses in international business

in recent years. It focuses on developing QFII, institutional B-share, cross-border M&A advisory

services to build its international network. The QDII team consists of nearly 30 professionals with rich

experience in Chinese market and foreign language skills. By the end of 2012, the total market cap of

QFII clients amounted to USD 30 billion.

Haitong is also one of the first few domestic innovative securities firms to set up Derivatives

Department. The department is actively preparing the floor derivative business with focus on stock

index futures, ETF, and trading, hedging, market making, and other businesses in relation to potential

exchange-traded financial tools. It also built a highly efficient quantitative strategic analysis platform

and automatic electronic trading platform with core know-how. So far, a professional team with

profound mathematical background has been formed at the Derivative department, all the members

graduate from domestic or oversea top universities with degrees of master or PHD who are also CFA

charter-holder or certified with the title Financial Risk Manager (FRM).

Fixed income department mainly handles the trading of treasury bond, corporate bonds, short-

term or mid-term commercial papers, securitized and innovative fixed income products. The department

has a professional trading team that is committed to using analyzing tools and pricing fixed income

products. It is also one of the most active trader in exchange market.

Besides the company’s businesses, I also learned the ways to analyze a company’s financial

statement to judge whether the data is reasonable or exaggerated. Financial analysis aims to truly

understand and estimate a company’s business performance and financial situation. Generally speaking,

there are four ways of financial analyzing- comparative analysis, trend analysis, factor analysis, and

ratio analysis. The main advantage of ratio analysis is to eliminate the influence of a company’s scale. In

general, we can evaluate the relationship between profit and risk by three aspects of ratios—the ability

to reimburse liability, operation capacity, profitability. The three aspects correspond with each other. For

instance, ability to profit will affect the short-term and long-term flexibility, and the efficiency of asset

management will influence profitability. So, these ratios need to be analyzed comprehensively.

The ratios to reflect ability to reimburse short-term liability are as follows:

Current ratio= Current assets / Current Liabilities

Quick ratio= Current assets – Inventory/ Current Liabilities

Cash ratio= (Cash+ Priced securities)/ Current Liabilities

Current assets can be used to pay for liabilities or daily operation. So, high current ratio implies the

company is capable of paying off the liabilities. But too high current ratio might also affect the

company’s ability to utilize funds efficiently and earn profit. In this case, quick ratio and cash ratio can

be used as supplement. Normally, it is considered safe if current ratio is approximately 2 and quick ratio

is approximately 1.

The ratios to reflect ability to repay long-term liabilities are as follows:

Debt ratio= Total debt/ Total assets

Interest income ratio= EBIT/Interest expense

High debt ratio demonstrates low protection for shareholders. On the other hand, too low debt ratio is

not really good. Reasonable level of debt indicates that the managers are able to utilize capital

effectively. Interest income ratio can inspect whether profit is enough to pay interest expense this year.

Higher this ratio is, stronger the company is in paying off long-term liabilities.

The ratios to display operation capacity are as follows:

Accounts receivable turnover= Net credit sales/ Average accounts receivable

Inventory Turnover= Costs of goods sold/ Average Inventory

Current asset turnover= Net sales/ Average current asset

Fixed asset turnover= Net sales/ Average fixed asset

Total asset turnover= Net sales/ Average total asset

If these ratios are comparably high, it means the efficiency of operation is high. But asset portfolio

should also be noticed during analysis, such as different types of inventories combination, quality of

inventories and applicability.

Ratios to show profitability:

Gross margin= Revenue- Cost of goods sold/ Revenue

Operating profit ratio= EBIT/ Revenue

Return on total asset= EBIT/ Average total asset

Equity ratio= EBIT/ Average total equity

Earnings per share= EBIT/ Weighted average common shares

Among the ratios above, gross margin, operating profit ratio and equity ratio separately show the

profitability of production, operation and the whole company. Higher they are, better profitability the

company has. But in reality we care more about a company’s future profitability, so we use three more

ratios to evaluate a company’s potential to grow.

“Sales growth= Sales in current period- Sales in last period/ sales in last period

Revenue growth= Revenue in current period- Revenue in last period/ Sales in last period

Net profit growth= (Net profit in current period- Net profit in last period/ Net profit in last period”

Last but not least, ratio analysis does not include cash flow. Cash flow is an all-important

element to evaluate a company’s performance which should be put into consideration. There are two

aspects to look into cash flow. One is the number of cash flow, positive cash flow shows that the inflow

cash can guarantee the need of cash outflow. But how can the company satisfy the need of outflow cash?

It depends on how the components of the cash flow coordinate with each other. Another aspect is the

quality of cash flow, which includes fluctuations of the cash flow, management performance such as

whether the inventories are outdated, accounts receivable have been collected. And the overall business

environment in the industry such as the growth potential, competition, products lifespan will also impact

a company’s ability to generate future cash flow.

Not only professional knowledge, I also obtain a lot in terms of how to behave and talk

professionally, communication skills and enhance all other skills which are required for the position. I

started with making some mistakes and being careless some time. By the end, I ended up being more

careful and developing very good relationship with all the co-workers.

This experience is really valuable and memorable.