Central China Securities Co., Ltd.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your securities broker or other registered securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Central China Securities Co., Ltd. (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, securities broker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

(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)

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND THE EXTENSION OF THE VALIDITY PERIOD OF THE PROPOSAL FOR THE PUBLIC ISSUANCE OF THE A SHARE CONVERTIBLE CORPORATE BONDS AND THE GRANT OF AUTHORIZATION TO THE BOARD AND THE RELEVANT PERSONS TO HANDLE MATTERS IN RELATION TO THE PUBLIC ISSUANCE OF THE A SHARE CONVERTIBLE CORPORATE BONDS

Letter from the Board is set out on pages 5 to 19 of this circular.

The annual general meeting (the “ AGM ”), the A Share class meeting (the “ A Share Class Meeting ”) and the H Share class meeting (the “ H Share Class Meeting ”) of the Company will be held at 9:30 a.m., 11:00 a.m. or immediately after the conclusion of the AGM or any adjournment thereof (whichever is the later) and 11:30 a.m. or immediately after the conclusion of the A share class meeting or any adjournment thereof (whichever is the later) respectively on 17 May 2018 (Thursday) at Skyland GDH Hotel, No. 41 Nong Ye Road, Jin Shui District, Zhengzhou, Henan Province, the PRC.

The proxy forms for the AGM and the H Share Class Meeting have been posted to you on 29 March 2018. Whether or not you are able to attend the AGM and the H Class Meeting in person, you are requested to complete and return the applicable proxy forms in accordance with the instructions printed thereon. In case of holders of H Shares, the proxy forms shall be lodged with the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong; but in any event, not less than 24 hours before the time scheduled for holding the relevant meetings (or any adjournment thereof) or the time appointed for the taking of the poll. Completion and delivery of the proxy forms will not preclude you from attending and voting in person at the relevant meetings or any adjournment if you so desire.

2 May 2018

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Proposed Amendments to the Articles of Association . . . . . . . . . . . . . . . . . . . .	6
The Extension of the Validity Period of the Proposal for the Public Issuance of
the A Share Convertible Corporate Bonds and the Grant of Authorization to
the Board and the Relevant Persons to Handle Matters in relation to the
Public Issuance of the A Share Convertible Corporate Bonds . . . . . . . . . . . .	10
APPENDIX I – Preliminary Proposal for the Public Issuance of A Share
Convertible Corporate Bonds (Revised Version). . . . . . .	20

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the expressions below have the meanings assigned:

“2016 Annual General Meeting”
the annual general meeting of the Company held on 22 May 2017
“2016 Meetings”

the 2016 Annual General Meeting, the A Share class meeting and the H Share class meeting of the Company held on 22 May 2017, respectively, pursuant to which, inter alia , the resolutions in respect of the proposal for the public issuance of the A Share Convertible Corporation Bond and the authorisation granted to the Board and the Relevant Persons to handle the matters in relation to the public issuance of the A Share Convertible Corporate Bonds with a validity period of 12 months from the date of the passing of such resolutions were passed

“A Share(s)”

domestic listed ordinary shares with a nominal value of RMB1.00 each in the share capital of the Company, which are listed and traded on the main board of the Shanghai Stock Exchange

“A Share Class Meeting”

the A Share class meeting to be held at 11:00 a.m. on 17 May 2018 (Thursday) or immediately after the conclusion of the AGM or any adjournment thereof (whichever is the later) for the A Shareholders to consider and approve, inter alia , the resolutions regarding the proposed amendments to the Articles of Association and the extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds and the grant of authorization to the Board and the Relevant Persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds

“A Share Convertible Corporate Bonds”

the A Share convertible corporate bonds in the total amount of not more than RMB2.55 billion (inclusive) which are convertible into new A Shares, proposed to be issued by the Company in the PRC

“A Share Convertible Corporate Bonds Holder(s)”
holder(s) of the A Share Convertible Corporate Bonds
“A Shareholder(s)”

holder(s) of A Shares

– 1 –

DEFINITIONS

“AGM”
“Articles of Association”
“Board”
“Bohai Fund”
“Bohai Fund Management”
“Class Meetings”
“Company”
“connected transaction”

the annual general meeting (or any adjournment thereof) of the Company to be convened and held at 9:30 a.m. on 17 May 2018 (Thursday) at Skyland GDH Hotel, No. 41 Nong Ye Road, Jin Shui District, Zhengzhou, Henan Province, the PRC for the Shareholders to consider and approve, inter alia , the resolutions regarding the proposed amendments to the Articles of Association and the extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds and the grant of authorization to the Board and the Relevant Persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds

the articles of association of the Company as amended from time to time
the board of Directors
Bohai Industrial Investment Fund (渤海產業投資基金), a fund established upon approval by the National Development and Reform Commission of the PRC (中國發展和改革委員會), on whose behalf Bohai Fund Management holds 608,000,000 A Shares, representing approximately 15.495% equity interest in the Company as at the Latest Practicable Date
Bohai Industrial Investment Fund Management Co., Ltd. (渤海產業投資基金管理有限公司), a company incorporated in the PRC with limited liability, which holds on behalf of Bohai Fund approximately 15.495% equity interest in the Company as at the Latest Practicable Date

the A Share Class Meeting and the H Share Class Meeting

Central China Securities Co., Ltd. (中原証券股份有限公司) (carrying on business in Hong Kong as “中州証券”, a joint stock company incorporated on 8 November 2002 in Henan Province, the PRC with limited liability, the H Shares and A Shares of which are listed on the Main Board of the Stock Exchange (stock code: 01375) and the Shanghai Stock Exchange (stock code: 601375), respectively)
has the meaning as ascribed to it under the Listing Rules

– 2 –

DEFINITIONS

“Conversion Price”

the price at which the new A Shares will be issued upon conversion of the A Share Convertible Corporate Bonds, as may be adjusted from time to time

“CSRC”

the China Securities Regulatory Commission

“Dahe Paper”

Dahe Paper (Hong Kong) Co., Limited, a limited company incorporated in Hong Kong, which holds 46,733,000 H Shares as at the Latest Practicable Date (representing approximately 1.191% of the Company’s share capital in issue as at the Latest Practicable Date) and is also an indirect wholly-owned subsidiary of Henan Investment Group

“Director(s)” director(s) of the Company
“H Share Class Meeting”
the H Share class meeting to be held at 11:30 a.m. on 17 May 2018 (Thursday) or immediately after the conclusion of the A Share Class Meeting or any adjournment thereof (whichever is the later) for the H Shareholders to consider and approve, inter alia , the resolutions regarding the proposed amendments to the Articles of Association and the extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds and the grant of authorization to the Board and the Relevant Persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds
“H Shareholders”
holders of H Shares
“H Shares”
overseas listed foreign ordinary shares with a nominal value of RMB1.00 each in the share capital of the Company, which are listed and traded on the Main Board of the Hong Kong Stock Exchange
“Henan Investment Group”
Henan Investment Group Co., Ltd. (河南投資集團有限公司), a joint stock company incorporated in the PRC with limited liability, which holds 822,983,847 A Shares at the Latest Practicable Date (representing approximately 20.975% equity interest in the Company as at the Latest Practicable Date)
“HKD”
“Hong Kong”

Hong Kong Dollars, the lawful currency of Hong Kong Hong Kong Special Administrative Region of the PRC

“IT”

abbreviation of “information technology”

– 3 –

DEFINITIONS

“Latest Practicable Date”
30 April 2018, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“New Third Board” abbreviation for “National Equities Exchange and Quotations System” (全國中小企股份轉讓系統), a national securities trading venue established upon approval by the State Council, subject to operation and management of National Equities Exchange Quotations Co., Ltd.
“Offering Document”
the offering memorandum in relation to the proposed issuance of the A Share Convertible Corporate Bonds
“PRC” or “State”
the People’s Republic of China (excluding, for the purpose of this circular, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan)
“Relevant Persons” the Chairman of the Board, the President of the Company and the Secretary to the Board, persons to which the authorisation was granted to handle the matters in relation to the public issuance of the A Share Convertible Corporate Bonds pursuant to the resolutions passed at the 2016 Meetings with a validity period of 12 months from the date of the passing of such resolutions
“RMB”
the lawful currency of the PRC, Renminbi, the basic unit of which is “yuan”
“Share(s)”
ordinary share(s) with a nominal value of RMB1.00 each in the share capital of the Company, including A Shares and H Shares
“Shareholders” the shareholders of the Company
“State Council” The State Council of the People’s Republic of China
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiary”
has the meaning ascribed to it under the Listing Rules
“%”
per cent

– 4 –

LETTER FROM THE BOARD

Central China Securities Co., Ltd.

(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)

Executive Director: Mr. JIAN Mingjun (Chairman)

Non-executive Directors: Mr. LI Xingjia Mr. WANG Lixin Mr. ZHANG Qiang Mr. ZHANG Xiaoqi Mr. YU Zeyang

Independent Non-executive Directors: Mr. YUAN Dejun Mr. YUEN Chi Wai Mr. NING Jincheng Mr. YU Xugang

Registered Address in the PRC: No. 10 Shangwu Waihuan Road Zhengdong New District Zhengzhou, Henan Province China

Headquarters/Principal Place of Business in the PRC: No. 10 Shangwu Waihuan Road Zhengdong New District Zhengzhou, Henan Province China

Principal Place of Business in Hong Kong: 18/F, Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong

To the Shareholders,

INTRODUCTION

Reference is made to the notices of the AGM and the H Share Class Meeting and the announcement of the Company dated 29 March 2018 in relation to, inter alia , the proposed amendments to the Articles of Association and the extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds and the grant of authorization to the Board and the relevant persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds.

The purpose of this circular is to provide you with details of the aforementioned matters.

– 5 –

LETTER FROM THE BOARD

(I) Proposed Amendments to the Articles of Association

Pursuant to the requirements of the Administrative Measures on Compliance of Securities Companies and Securities Investment Fund Management Companies (《證券公司和證券投資基金管理公司合規管理辦法》) issued by the CSRC, the Board proposed to make the following amendments to the Articles of Association:

Existing Articles Amended Articles Impact of the Amendments Article 223 The Company shall have Article 223 The Company shall have (1) Addition of the requirement one chief compliance officer, who one chief compliance officer, who for the Company to submit the shall be the compliance officer as shall be the compliance officer as biography and relevant well as senior management of the well as senior management of the certificates of the chief Company, and appointed or removed Company, and appointed or removed compliance officer candidate by the Board. The appointment and by the Board. The appointment and to the securities regulatory removal of the chief compliance removal of the chief compliance authorities before the officer shall comply with Company officer shall comply with Company Company deciding to employ Law, Securities Law and relevant Law, Securities Law and relevant the candidate as its chief regulations of CSRC. The chief regulations of CSRC. The chief compliance officer; compliance officer shall not compliance officer shall not concurrently hold positions which are concurrently hold positions which are (2) Addition of the requirement in conflict with the duties of in conflict with the duties of for the Company to have compliance management, and shall compliance management, and shall proper reasons for removal of not be in charge of departments not be in charge of departments its chief compliance officer conflicting with the duties of conflicting with the duties of and to report such reasons to compliance management. compliance management. the securities regulatory authorities within 10 working Where the Board decides to employ Where the Board decides to employ days prior to the date of the the chief compliance officer, he the chief compliance officer, the relevant Board meeting; and should be approved by securities biography and relevant certificates of regulatory authority at the place the officer to be appointed should be (3) Specification of the content of where the Company’s is registered, submitted to the securities regulatory such proper reasons for the before the chief compliance officer authorities at the place where the removal of the chief holds office. Company is registered, and the compliance officer appointment of the chief compliance When the Board removes a chief officer shall be subject to the compliance officer, the Board shall, approval from the securities within 3 working days from the day of regulatory authority at the place such removal, report facts and where the Company is registered. reasons of the removal to the securities regulatory authority at the place where the Company’s is registered.

– 6 –

LETTER FROM THE BOARD

	Existing Articles	Existing Articles	Existing Articles		Amended Articles		Impact of the Amendments
					When the Board removes a chief
					compliance officer prior to the expiry
					of his/her term of office, the Board
					shall have proper reasons and shall,
					within 10 working days prior to the
					date of relevant Board meeting, report
					reasons of the removal in writing to
					the securities regulatory authority at
					the place where the Company is
					registered.
					The proper reasons as set out under
					the previous clause shall include the
					application made by the chief
					compliance officer, or change of chief
					compliance officer under the order of
					the securities regulatory authority at
					the place where the Company is
					registered, or there is evidence
					showing that such person is unable to
					perform normal duties or fails to be
					diligent and responsible, etc.
Article 224 The		main	duties of	the	Article 224 The main duties of the	(1)	Addition of the main duties of
chief	compliance	officer are:			chief compliance officer are:		the chief compliance officer;
							and
(I)	reviewing whether the internal				(I) reviewing whether the internal
	system and regulations of			the	system and regulations, major	(2)	Provision of the authority of
	Company	comply with		the	businesses, major decisions,		the chief compliance officer to
	laws,		administrative		new products and new		engage external professional
	regulations and		departmental		business proposals of the		institutions or personnel where
	rules;				Company comply with the		necessary
					requirements of the laws,
(II)	reviewing	whether the major			administrative regulations and
	businesses	and decisions of		the	departmental rules, and issuing
	Company	comply with		the	written compliance review
	laws,		administrative		opinion. In the event that the
	regulations and		departmental		Company does not adopt the
	rules; Reviewing before			the	compliance review opinion of
	decisions on major businesses				the chief compliance officer,
	are made; reporting to			the	the relevant matter shall be
	Board	and	securities		submitted to the Board for
	regulatory	authority if		the	decision-making;
	business departments insist in
	spite of the objection of			the
	chief compliance officer;

– 7 –

LETTER FROM THE BOARD

	Existing Articles	Existing Articles	Existing Articles					Amended Articles
(III)	responsively	finding				and	(II)	reporting promptly to both the
	urging to solve		compliance					Board and chief operating and
	problems in		the			daily		managing officer upon
	operations of	the		Company,				discovery of the conduct of the
	preparing compliance				report			Company violating the laws
	and reporting to the			Board of				and regulations or of hidden
	the Company	and		securities				risks of compliance, and
	regulatory authority;							presenting opinions to handle
								such conduct and hidden risks
(IV)	organizing		compliance					of compliance and supervising
	training on senior management							the rectification; supervising
	and employees			of		the		the Company to report to the
	Company so	as		to		build		securities regulatory authority
	compliance culture;							at the place where the
								Company is registered in a
(V)	providing		compliance					timely manner at the same
	consulting	for				other		time; directly reporting to the
	departments and staff				of the			securities regulatory authority
	Company; and							at the place where the
								Company is registered in case
(VI)	communicating					and		of failure of timely reporting
	coordinating with		the		CSRC			by the Company; in the case of
	and industry	self-discipline						involving violation of the
	organizations.							normative and self-discipline
								rules of the industry, reporting
								to the relevant self-discipline
								organization as well;
							(III)	organizing compliance
								training on senior management
								and employees of the
								Company so as to build
								compliance culture;
							(IV)	providing compliance
								consulting for other
								departments and staff of the
								Company;
							(V)	communicating and
								coordinating with the CSRC
								and industry self-discipline
								organizations;

– 8 –

LETTER FROM THE BOARD

	Existing Articles	Existing Articles	Existing Articles	Existing Articles						Amended Articles	Impact of the Amendments
									(VI)	exercising other functions and
										powers as stipulated by laws,
										regulations, department rules,
										regulatory documents or the
										Articles of Association.
									In the	event that he/she considers
									necessary, the chief compliance
									officer	may engage external
									professional institutions or personnel
									to assist his/her work on behalf of the
									Company at the expense of the
									Company.
Article		244	The	supervisory					Article 244 The supervisory		Addition of the functions and powers
committee		shall exercise					the		committee shall exercise the		of the supervisory committee of the
following		functions and		powers:					following functions and powers:		Company to exercise those stipulated
											by laws, regulations, department rules
(I)	to	examine			financial				(I)	to examine financial	and regulatory documents
	operations of the			Company;						operations of the Company;
��									��
(IX)	to formulate remuneration						plan		(IX)	to formulate remuneration plan
	and	distribution			plan		for			and distribution plan for
	supervisors		and			submit				supervisors and submit
	specific		reports					on		specific reports on
	performance evaluation						and			performance evaluation and
	remuneration of supervisors							to		remuneration of supervisors to
	the	general	meeting.							the general meeting.
(X)	to exercise		other functions				and		(X)	to exercise other functions and
	powers specified				in		the			powers as stipulated by laws,
	Articles of		Association.							regulations, department rules,
										regulatory documents or the
										Articles of Association.

The English version of the Articles of Association is an unofficial translation of the Chinese version. In the event of any inconsistency, the Chinese version shall prevail.

The proposed amendments to the Articles of Association are subject to the approval by the Shareholders at the AGM by way of special resolution and the approval of the relevant governmental authorities of the PRC.

– 9 –

LETTER FROM THE BOARD

(II) The Extension of the Validity Period of the Proposal for the Public Issuance of the A Share Convertible Corporate Bonds and the Grant of Authorization to the Board and the Relevant Persons to Handle Matters in relation to the Public Issuance of the A Share Convertible Corporate Bonds

Reference is made to the circular of the Company dated 5 May 2017 (the “ Circular ”) and the announcements of the Company dated 6 April 2017, 22 May 2017, 14 November 2017 and 15 January 2018 (the “ Announcements ”) in relation to the specific mandate for the proposed issuance of the A Share Convertible Corporate Bonds as approved by the Shareholders at the 2016 Meetings.

Pursuant to the Circular and the Announcements, the validity period of the resolutions in relation to the specific mandate for the public issuance of the A Share Convertible Corporate Bonds and the authorization granted to the Board and the Relevant Persons for handling matters in relation to the issuance of the A Share Convertible Corporate Bonds was twelve months from the date of passing the relevant resolutions at the 2016 Meetings. For details of the proposal for the public issuance of the A Share Convertible Corporate Bonds, please refer to the Circular.

Further, as disclosed in the Announcements, the Company received the Investigation Notice (Ji Cha Zong Dui Diao Cha Tong Zi No.171577) (《調查通知書》(稽查總隊調查通字 171577號)) issued by the CSRC on 30 November 2017, and submitted an application to the CSRC for suspension of the review process of the application documents in relation to the public issuance of the A Share Convertible Corporate Bonds of the Company on 13 December 2017. The Company received the Notice of the Application for Administrative Permission for Suspension of Review Process of the CSRC (No. 171415) (《中國證監會行政許可申請中止審查通知書》(171415號)) on 12 January 2018, pursuant to which the CSRC agreed to approve the application for suspension of the review process.

In view of the expiry of the validity period of the resolutions in relation to the public issuance of the A Share Convertible Corporate Bonds and the authorization granted to the Board and the Relevant Persons for handling matters in relation to the issuance of the A Share Convertible Corporate Bonds and the fact that it will take time for the Company to obtain the approval from the CSRC in respect of resumption of the review process of the application documents in relation to the public issuance of the A Share Convertible Corporate Bonds and implement the subsequent issuance upon completion of the investigation by the CSRC as mentioned above, the Board passed a resolution on 29 March 2018 to propose to the AGM and the Class Meetings for consideration and approval of the extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds and the grant of authorization to the Board and the Relevant Persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds for 12 months from the date of expiry of the resolutions passed at the 2016 Meetings (i.e. from 22 May 2018 to 21 May 2019 (both days inclusive)).

– 10 –

LETTER FROM THE BOARD

Amendment of the Proposal for the Public Issuance of the A Share Convertible Corporate Bonds

On 31 October 2017, the Board passed a resolution in respect of the amendment of the preliminary proposal for the public issuance of the A Share Convertible Corporate Bonds (as approved by the Shareholders in the 2016 Meetings), pursuant to which the total amount of the A Share Convertible Corporate Bonds proposed to be issued was reduced to be no more than RMB2.55 billion. As a result, the preliminary proposal for the public issuance of the A Share Convertible Corporate Bonds was amended accordingly with adjustments mainly on the specific use of the proceeds from the public issuance of the A Share Convertible Corporate Bonds and addition of the financial information and indicators of the Company for the period of the six months ended 30 June 2017 or as at 30 June 2017 (as the case may be) and the relevant management discussions and analysis. The dilution of current returns and remedial measures for the issuance of the A Share Convertible Corporate Bonds were updated accordingly with adjustments on the total issue size of the A Share Convertible Corporate Bonds and the assumed Conversion Price based on the average trading price of A Shares of the Company for the 30 trading days preceding the 44th meeting of the 5th Board of Directors (or 31 October 2017), the average trading price of A Shares for the 20 trading days preceding the aforementioned meeting and the average trading price of A Shares for the trading day immediately before the aforesaid meeting. Such adjustments were made pursuant to the authorisations granted to the Board and the Relevant Persons by the Shareholders’ resolutions passed at the 2016 Meetings.

Details of the aforementioned amendments had been disclosed in the announcements of the Company dated 31 October 2017. The full text of the announcement in respect of the revised version of the preliminary proposal for the public issuance of the A Share Convertible Corporate Bonds is reproduced in Appendix I to this circular for the Shareholders’ reference.

Use of Proceeds from the Public Issuance of the A Share Convertible Corporate Bonds

Based on the revised issue size of the A Share Convertible Corporate Bonds to be no more than RMB2.55 billion, the amount of proceeds arising from the public issuance of the A Share Convertible Corporate Bonds for each of the specific purposes of the proceeds was adjusted to be as follows:

(i) an amount not exceeding RMB1.6 billion is proposed to be used in capital intermediary businesses;
(ii) an amount not exceeding RMB0.8 billion is proposed to be used in investment and market making businesses;
(iii) an amount not exceeding RMB0.05 billion is proposed to be used in securities brokerage and investment banking businesses and information system building; and
(iv) an amount not exceeding RMB0.1 billion is proposed to be used in asset management business.

Save as disclosed above, there is no change to the use of proceeds from the public issuance of the A Share Convertible Corporate Bonds.

– 11 –

LETTER FROM THE BOARD

Subscription arrangement for the existing A Shareholders

As disclosed in the Circular, the existing A Shareholders shall have pre-emptive rights to subscribe for the A Share Convertible Corporate Bonds to be issued. The actual amount to be preferentially allocated to such existing A Shareholders shall be determined by the Board or other authorised persons with reference to the market conditions before issuance, in accordance with the authorization, as extended, at the AGM and Class Meetings, and shall be disclosed in the Offering Document of the A Share Convertible Corporate Bonds. The exercise of such preferential allocation is subject to the Securities Law of the PRC (《中華人民共和國證券法》) and the Listing Rules (including the requirements in relation to connected transactions under Chapter 14A of the Listing Rules) or all other applicable laws, rules and regulations of the government or regulatory bodies.

If the Company enters into a subscription agreement with a connected person for the subscription of the A Share Convertible Corporate Bonds, the subscription of the A Share Convertible Corporate Bonds would then constitute a connected transaction of the Company under Chapter 14A of the Listing Rules, upon which the Company shall comply with the relevant requirements under Chapter 14A of the Listing Rules including the announcement, circular and independent shareholders’ approval requirements.

As at the Latest Practicable Date, to the best knowledge of the Directors having made all reasonable enquiries, no connected person of the Company had expressed any intention to subscribe for the A Share Convertible Corporate Bonds.

Equity Fund Raising Activities in the Past Twelve Months

The Company has not conducted any equity fund raising activities in the past twelve months immediately preceding the Latest Practicable Date.

Changes in Shareholding Structure

Following the conversion of the A Share Convertible Corporate Bonds, the number of A Shares will be increased. Equity interests in the Company held by existing Shareholders will be diluted as a result of the exercise of rights to convert the A Share Convertible Corporate Bonds. The actual number of increase of A Shares will be determined by the finalized terms of the A Share Convertible Corporate Bonds, including the issue size of the A Share Convertible Corporate Bonds and the Conversion Price, etc.

The shareholding structure of the Company as at the Latest Practicable Date, as well as the expected shareholding structure of the Company immediately before the completion of issuance of A Share Convertible Corporate Bonds/immediately following the completion of issuance of A Share Convertible Corporate Bonds but before conversion and immediately following the completion of issuance of A Share Convertible Corporate Bonds are as follows:

– 12 –

LETTER FROM THE BOARD

As at the Latest Practicable Date / immediately before the Immediately following the completion of issuance of the A completion of issuance of the A Share Convertible Corporate Share Convertible Corporate Bonds / immediately following Bonds and assuming that the A the completion of issuance of the Share Convertible Corporate A Share Convertible Corporate Bonds are fully converted at the Bonds but before Conversion Price of RMB9.21[#] Shareholders the conversion per Share

A Shares Non-public Shares Of which: Henan Investment Group Bohai Fund Management (on behalf of Bohai Fund)/Bohai Fund Public Shares No. of public Shares Total No. of A Shares H Shares Non-public Shares Of which: Dahe Paper Public Shares No. of public Shares Total No. of H Shares A + H Shares Total No. of Shares of the Company*	No. of Shares 1,973,705,700 822,983,847 608,000,000 700,000,000 2,673,705,700 46,733,000 46,733,000 1,203,296,000 1,250,029,000 3,923,734,700	Approximate percentage of the total number of shares in issue of the Company 50.302% 20.975% 15.495% 17.840% 68.142% 1.191% 1.191% 30.667% 31.858% 100%	No. of Shares 1,973,705,700 822,983,847 608,000,000 976,872,964 2,950,578,664 46,733,000 46,733,000 1,203,296,000 1,250,029,000 4,200,607,664	Approximate percentage of the total number of shares in issue of the Company as enlarged then 46.986% 19.592% 14.474% 23.256%
				70.242% 1.113% 1.113% 28.646%
				29.758%
				100%

* Dahe Paper is an indirect wholly-owned subsidiary of Henan Investment Group.

The Conversion Price of RMB9.21 is determined to be the highest of the average trading price of A Shares of the Company for the 30 trading days preceding the 44th meeting of the 5th Board of Directors (i.e. 31 October 2017), the average trading price of A Shares for the 20 trading days preceding the aforementioned meeting and the average trading price of A Shares for the trading day immediately before the aforesaid meeting, or RMB9.34 per Share. Upon the implementation of the profit distribution plan of the Company in 2016 and 2017, assuming the adjustment of the Conversion Price is completed before the share conversion registration date, the adjusted Conversion Price is RMB9.21 per Share. Such Conversion Price is only used to illustrate the impact of the change in the shareholding structure of the Company upon full conversion of the A Share Convertible Corporate Bonds. The ultimate initial Conversion Price shall be determined by the Board of Directors before issuance with reference to market conditions, subject to the authorization at the general meeting, and the Conversion Price may be subject to ex-rights or ex-dividend or downward adjustments.

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LETTER FROM THE BOARD

No adverse effect will occur to the minimum number of Shares and of H Shares respectively to be held by the public as required by the Listing Rules as a result of the issuance of A Share Convertible Corporate Bonds. Furthermore, pursuant to the requirements set out in Paragraph 2, Article 1 of the Circular on Matters Relating to the Issuance of Convertible Corporate Bonds by State-owned Financial Enterprises (《關於國有金融企業發行可轉換公司債券有關事宜的通知》 (財金[2013]116號)) (Cai Jin [2013] No. 116) issued by the Ministry of Finance of the PRC, “Principle of controlling ability. Where state-owned financial enterprises issue convertible corporate bonds, they shall practically protect the rights and interests of state-owned capital contributors and maintain state-owned controlling ability. After exercising the right of convertible corporate bonds, the state-owned controlling status shall remain the same in principle”, after the full conversion of issued A Share Convertible Corporate Bonds, no change in controlling interests shall occur as a result thereof. The Company will make further announcement upon determination of the terms of the A Share Convertible Corporate Bonds and issuance of relevant statements on fund raising.

Save as disclosed above, there is no change to the details of the proposal for the public issuance of the A Share Convertible Corporate Bonds as approved at the 2016 Meetings.

Authorization granted to the Board to handle matters in relation to the public issue of the A Share Convertible Corporate Bonds

Pursuant to the Company Law of the PRC (《中華人民共和國公司法》), the Securities Law of the PRC (《中華人民共和國證券法》) and other relevant laws and regulations as well as the relevant provisions of the Articles of Association, and in view of the need for extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds as mentioned above, it was proposed by the Board to the AGM and the Class Meetings for consideration and approval of the extension of the validity period for the authorization granted to the Board to handle matters regarding the issuance of the A Share Convertible Corporate Bonds under the framework and principles as approved at the 2016 Meetings, the AGM and the Class Meetings. The validity period of the authorization shall be extended for 12 months from the date of expiry of the resolutions passed at the 2016 Meetings (i.e. from 22 May 2018 to 21 May 2019 (both days inclusive)). The Board will, according to the actual conditions of the A Share Convertible Corporate Bonds issuance, seek a new mandate from a general meeting and shareholders’ class meetings of the Company before the expiry of such authorization period when necessary.

The actual content and scope of the authorization shall include, among other matters, the following:

(i) in accordance with the PRC laws and regulations and the relevant requirements of securities regulatory authorities and in view of the specific conditions of the Company, to formulate and implement the specific plan of the issuance, appropriately amend, adjust and supplement the terms of the issuance of the A Share Convertible Corporate Bonds, determine the specific terms and proposal of issuance before the issuance, formulate and implement the final proposal of the issuance,

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LETTER FROM THE BOARD

including but not limited to, confirming the issue size, method of issuance, target investors, proportion of preferential allotment to existing A Shareholders, the determination of the initial Conversion Price, adjustment to the Conversion Price, redemption, interest rate, the A Share Convertible Corporate Bonds Holders’ rights to meetings and procedures for convening the meetings and conditions for the resolutions to become effective, determine the timing of the issuance, open a new account for the proceeds from the issuance of the A Share Convertible Corporate Bonds, and execute tripartite monitoring agreements for the account and any other matters in relation to the issuance proposal;

(ii) to approve, sign, amend, supplement, submit, present, effect all the agreements, disclosure documents and other documents regarding the issuance and to deal with all relevant procedural requirements such as applications, approvals, registrations and filings;
(iii) to engage relevant intermediaries and sign relevant agreements with them to handle the matters relating to the issuance; to prepare, amend and issue disclosure materials relevant to the issuance and listing pursuant to the requirements of the regulatory authorities and reply to the comments of the securities regulatory authorities with full discretion;
(iv) to deal with relevant matters in relation to the utilization of proceeds from the issuance and to adjust the utilization and specific arrangements of proceeds from the issuance within the scope as approved by the 2016 Meetings;
(v) upon the completion of the issuance, to complete the relevant registration and listing matters in relation to the issuance of the A Share Convertible Corporate Bonds with the Shanghai Stock Exchange and the Shanghai Branch of China Securities Depository and Clearing Corporation Limited;
(vi) to appropriately amend the relevant provisions of the Articles of Association based on the conditions of issuance and conversion of the A Share Convertible Corporate Bonds and to deal with matters in relation to the business and industrial filings and registration of changes in registered share capital etc.;
(vii) subject to compliance with the then applicable laws of the PRC, if new requirements were introduced by laws, regulations and other regulatory documents as well as relevant regulatory authorities to the policy of the issuance of the A share convertible corporate bonds by listing companies and the market conditions changed, to adjust the issuance plan and the utilization of proceeds and continue to deal with relevant matters of the issuance in accordance with relevant provisions and requirements of the securities regulatory authorities (including reviews and feedback for the issuance application) as well as market conditions, save and except those matters which are required to be re-voted at a general meeting and the Shareholders’ class meetings and authorization of which is not permitted pursuant to requirements of relevant laws and regulations as well as the Articles of Association;

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LETTER FROM THE BOARD

(viii) if as a result of force majeure or other matters that the issuance plan cannot be implemented or if implemented may lead to adverse consequences to the Company, or if the policy in relation to the issuance of the A Share Convertible Corporate Bonds changes, to decide to postpone or terminate the issuance plan in advance at its discretion;
(ix) to conduct all other necessary, appropriate and proper matters in relation to the issuance insofar as permitted by relevant laws and regulations on behalf of the Company; and
(x) authorization and delegation in connection with the issuance by the Board.

There is no change to the actual content and scope of authorization to be granted to the Board as disclosed above with those of the authorization granted to the Board pursuant to the resolutions passed at the 2016 Meetings.

Authorization granted to Relevant Persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds

In order to seize market opportunities, streamline internal approval procedures and improve decision-making efficiency, and in view of the need for extension of the validity period of the proposal for the public issuance of the A Share Convertible Corporate Bonds as mentioned above, pursuant to relevant laws and regulations and relevant provisions of the Articles of Association, it was proposed by the Board to the AGM and Class Meetings for consideration and approval of the extension of the validity period for the authorization granted to the Board, which would then delegate to the Relevant Persons the power to, jointly or individually, handle matters regarding the issuance of the A Share Convertible Corporate Bonds under the framework and principles approved at the 2016 Meetings, the AGM and the Class Meetings. The validity period of the authorization shall be extended for 12 months from the date of expiry of the resolutions passed at the 2016 Meetings, that is, from 22 May 2018 to 21 May 2019 (both days inclusive). The Board will, according to the actual conditions of the A Share Convertible Corporate Bonds issuance, seek a new mandate from a general meeting and Shareholders’ class meetings of the Company before the expiry of such authorization period when necessary.

The actual content and scope of the authorization shall include, among other matters, the following:

(i) in accordance with the PRC laws and regulations and the relevant requirements of securities regulatory authorities and in view of the specific conditions of the Company, to formulate and implement the specific plan of the issuance, appropriately amend, adjust and supplement the terms of the issuance of the A Share Convertible Corporate Bonds, determine the specific terms and proposal of issuance before issuance, formulate and implement the final proposal of the issuance, including but not limited to, confirming the issue size, method of issuance, target

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LETTER FROM THE BOARD

investors, proportion of preferential allotment to existing A Shareholders, the determination of the initial Conversion Price, adjustment to the Conversion Price, redemption, interest rate, the A Share Convertible Corporate Bonds Holders’ rights to meetings and procedures for convening the meetings and conditions for the resolutions to become effective, determine the timing of the issuance, open a new account for the proceeds from the issuance of the A Share Convertible Corporate Bonds, and execute tripartite monitoring agreements for the account and any other matters in relation to the issuance proposal;

(ii) to approve, sign, amend, supplement, submit, present, effect all the agreements, disclosure documents and other documents regarding the issuance and to deal with all relevant procedural requirements such as applications, approvals, registrations and filings;
(iii) to engage relevant intermediaries and sign relevant agreements with them to handle the matters relating to the issuance; to prepare, amend and issue disclosure materials relevant to the issuance and listing pursuant to the requirements of the regulatory authorities and reply to the comments of the securities regulatory authorities with full discretion;
(iv) to deal with relevant matters in relation to the utilization of proceeds from the issuance and to adjust the utilization and specific arrangements of proceeds from the issuance within the scope as approved by the 2016 Meetings;
(v) upon the completion of the issuance, to complete the relevant registration and listing matters in relation to the issuance of the A Share Convertible Corporate Bonds with the Shanghai Stock Exchange and the Shanghai Branch of China Securities Depository and Clearing Corporation Limited;
(vi) to appropriately amend the relevant provisions of the Articles of Association based on the conditions of issuance and conversion of the A Share Convertible Corporate Bonds and to deal with matters in relation to the business and industrial filings and registration of changes in registered share capital etc.;
(vii) subject to compliance with the then applicable laws of the PRC, if new requirements were introduced by laws, regulations and other regulatory documents as well as relevant regulatory authorities to the policy of the issuance of the A share convertible corporate bonds by listing companies and the market conditions changed, to adjust the issuance plan and the utilization of proceeds and continue to deal with relevant matters of the issuance in accordance with relevant provisions and requirements of the securities regulatory authorities (including reviews and feedback for the issuance application) as well as market conditions, save and except those matters which are required to be re-voted at a general meeting and the Shareholders’ class meetings and authorization of which is not permitted pursuant to requirements of relevant laws and regulations as well as the Articles of Association;

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LETTER FROM THE BOARD

(viii) if as a result of force majeure or other matters that the issuance plan cannot be implemented or if implemented may lead to adverse consequences to the Company, or if the policy in relation to the issuance of the A Share Convertible Corporate Bonds changes, to decide to postpone or terminate the issuance plan in advance at its discretion; and
(ix) to conduct all other necessary, appropriate and proper matters in relation to the issuance insofar.

There is no change to the actual content and scope of authorization to be granted to the Board as disclosed above with those of the authorization granted to the Relevant Persons pursuant to the resolutions passed at the 2016 Meetings.

AGM and Class Meetings

The AGM, the A Share Class Meeting and the H Share Class Meeting will be held at 9:30 a.m., 11:00 a.m. or immediately after the conclusion of the AGM or any adjournment thereof (whichever is the later) and 11:30 a.m. or immediately after the conclusion of the A Share Class Meeting or any adjournment thereof (whichever is the later) respectively on 17 May 2018 (Thursday) at Skyland GDH Hotel, No. 41 Nong Ye Road, Jin Shui District, Zhengzhou, Henan Province, the PRC.

No Shareholder is required to abstain from voting in connection with the matters to be resolved at the AGM or Class Meetings.

The proxy forms for the AGM and the H Share Class Meeting have been posted to you on 29 March 2018. Whether or not you are able to attend the AGM and the H Share Class Meeting in person, you are requested to complete and return the accompanying applicable proxy forms in accordance with the instructions printed thereon. In case of holders of H Shares, the proxy forms shall be lodged with the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, but in any event, not less than 24 hours before the time scheduled for holding the relevant meetings (or any adjournment thereof) or the time appointed for the taking of the poll as soon as possible. Completion and delivery of the proxy forms will not preclude you from attending and voting in person at the relevant meetings or any adjournment thereof if you so desire.

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LETTER FROM THE BOARD

VOTING

According to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. Therefore, the respective resolutions as stated in the notice of AGM and notice of Class Meetings will be taken by way of a poll under the Article 124 of the Articles of Association.

During the poll, every Shareholder present in person or by proxy (or in case of Corporation, its duly authorised representative) at the AGM or Class Meetings shall have one vote for each share registered in his/her name in the register of members. A Shareholder entitled to more than one vote needs not use all his/her votes or cast all the votes he/she uses in the same manner.

RECOMMENDATION

The Board considered that all resolutions to be proposed at the AGM and Class Meetings are in the interests of the Company and the Shareholders as a whole. Therefore, the Board recommends the Shareholders to vote in favour of all resolutions to be proposed at the meetings.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

ADDITIONAL INFORMATION

Your attention is drawn to the other information set out in the Appendix to this circular.

Yours faithfully, By order of the Board Central China Securities Co., Ltd.

JIAN Mingjun

Chairman

2 May 2018

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

The English version of this appendix is an unofficial translation of the Chinese version, should there be discrepancies, the Chinese version shall prevail.

The full text of the announcement in respect of the revised version of the preliminary proposal for the public issuance of the A Share Convertible Corporate Bonds is set out as follows: Central China Securities Co., Ltd. Preliminary Proposal for the Public Issuance of A Share Convertible Corporate Bonds (Revised Version)

The Board and all Directors of the Company warrant that in respect of the information contained in this report, there are no misrepresentations or misleading statements, or material omission, and individually and collectively accept full responsibility for the authenticity, accuracy and completeness of the information contained in this report.

Important Tips:

Name and issuance method of the securities: A Share Convertible Corporate Bonds with an amount not more than RMB2.55 billion (inclusive) for issuance (hereinafter referred to as the “issuance”).

Participation of related parties in the issuance: The existing holders of A Shares of the Company shall have pre-emptive rights to subscribe for the A Share Convertible Corporate Bonds to be issued. The actual amount to be preferentially allocated to the existing holders of A Shares shall be determined by the Board or other authorized persons with reference to the market conditions before issuance, according to the authorization at the general meeting, and shall be disclosed in the Offering Document for the issuance. The exercise of such preferential allocation is subject to the Securities Law of the PRC (《中華人民共和國證券法》) and the Listing Rules or all other applicable laws, rules and regulations (including but not limited to the regulations and requirements related to connected transactions) of government or regulatory bodies.

I. THE ISSUANCE SATISFIES THE REQUIREMENTS IN RELATION TO THE ISSUANCE OF THE SECURITIES SPECIFIED IN THE ADMINISTRATIVE MEASURES FOR THE ISSUANCE OF SECURITIES BY LISTED COMPANIES

Pursuant to the relevant requirements under the Company Law of the PRC (《中華人民共和國公司法》), the Securities Law of the PRC (《中華人民共和國證券法》), the Administrative Measures for the Issuance of Securities by Listed Companies (《上市公司證券發行管理辦法》) and other laws and regulations and normative legal documents, Central China Securities Co., Ltd. (“Central China Securities” or the “Company”) deems that it has satisfied the relevant qualifications and requirements in relation to the issuance of the A Share Convertible Corporate Bonds by reference to the qualifications and requirements for the issuance of A Share Convertible Corporate Bonds by Listed Companies by carefully checking individual items.

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

II. OVERVIEW OF THE ISSUANCE

(I) Type of Securities to be Issued

The type of securities to be issued by the Company are the A Share Convertible Corporate Bonds which can be converted into the A Shares. The A Share Convertible Corporate Bonds and the A Shares to be converted therefrom in the future will be listed on the Shanghai Stock Exchange.

(II) Issue Size

The total amount of the A Share Convertible Corporate Bonds proposed to be issued will be not more than RMB2.55 billion (inclusive). The actual size of the issuance shall be determined by the Board or other authorized persons within the above range, subject to the authorization at the general meeting.

(III) Par Value and Issue Price

The A Share Convertible Corporate Bonds will be issued at par with a nominal value of RMB100 each.

(IV) Term of Bond

The term of the A Share Convertible Corporate Bonds will be six years from the date of issuance.

(V) Interest rate of Bond

The manner of determining the interest rate of the A Share Convertible Corporate Bonds and the final interest rate of each interest accrual year shall be determined by the Board or other authorized persons after discussion and agreement with the sponsor institution (the lead underwriter) in accordance with the PRC policies, market conditions and the actual conditions of the Company prior to the issuance of the A Share Convertible Corporate Bonds, according to the authorization at the general meeting.

If prior to the completion of the issuance of A Share Convertible Corporate Bonds, the bank deposit interest rate is adjusted, subject to the authorization at the general meeting and class meetings, the Board or other authorized persons shall make adjustments to the interest rate of the A Share Convertible Corporate Bonds accordingly.

(VI) Method and Timing of Interest Payment

Interest on the A Share Convertible Corporate Bonds for the issuance will be paid once a year and the principal amount and the interest for last year of all outstanding A Share Convertible Corporate Bonds will be repaid at maturity.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

1. Calculation of the Annual Interest

The annual interest means the interest accrued to the A Share Convertible Corporate Bonds Holders in each year on each anniversary of the date of issuance of the A Share Convertible Corporate Bonds, calculated based on the aggregate nominal value of the A Share Convertible Corporate Bonds.

The formula for calculating the annual interest is: I=B×i

I: denotes the annual interest;
B: denotes the aggregate nominal value of the A Share Convertible Corporate Bonds held by a A Share Convertible Corporate Bonds Holder as at the record date for interest payment in an interest accrual year (“ that year ” or “ each year ”);
i: denotes the interest rate of the A Share Convertible Corporate Bonds of that year.

2. Method of Interest Payment

(1) Interest of the A Share Convertible Corporate Bonds will be paid annually, accruing from the date of issuance of the A Share Convertible Corporate Bonds.
(2) Interest payment date: The interest is payable annually on each anniversary of the date of issuance of the A Share Convertible Corporate Bonds. If such day falls on a statutory holiday or rest day, the interest payment date shall be postponed to the first working day immediately thereafter, provided that no additional interest will be accrued during the period of postponement. The period between an interest payment date and the immediately following interest payment date will be an interest accrual year.
(3) Record date for interest payment rights: The record date for interest payment rights in each year will be the last trading day preceding the interest payment date. The Company will pay the interest accrued in that year within five trading days from the interest payment date. The Company will not pay any interest for that year and subsequent interest accrual years to the A Share Convertible Corporate Bonds Holders whose A Share Convertible Corporate Bonds have been applied to be converted into the A Shares on or before the record date for interest payment rights.
(4) Tax payable on the interest income of a A Share Convertible Corporate Bonds Holder shall be borne by such A Share Convertible Corporate Bonds Holder.

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

(VII) Conversion Period

The conversion period of the A Share Convertible Corporate Bonds commences on the first trading day immediately following the expiry of the six-month period after the date of issuance of the A Share Convertible Corporate Bonds and ends on the maturity date of the A Share Convertible Corporate Bonds.

(VIII) Determination and Adjustment of the Conversion Price of the A Share Convertible Corporate Bonds

1. Basis for Determining the Initial Conversion Price

The initial Conversion Price of the A Share Convertible Corporate Bonds for the issuance shall not be lower than the highest of the average trading prices of A Shares of the Company for the 30 and 20 trading days preceding the date of publication of the Offering Document (in the event that during such 30 or 20 trading days, the share price has been adjusted due to ex-rights or ex-dividend, the closing price of each of these trading days before adjustment shall be adjusted with reference to the ex-rights or ex-dividend share price) and the average trading price of A Shares of the Company on the trading day preceding the date of publication of the Offering Document of the A Share Convertible Corporate Bonds. The actual initial Conversion Price shall be determined by the Board or other authorized persons after discussion and agreement with the sponsor institution (the lead underwriter) with reference to the market conditions, according to the authorization at the general meeting and class meetings.

The average trading price of A Shares of the Company for the 30 trading days preceding the date of publication of the Offering Document means the total trading price of A Shares of the Company for the 30 trading days preceding the date of publication of the Offering Document divided by the total trading volume of A Shares of the Company for those 30 trading days; the average trading price of A Shares of the Company for the 20 trading days preceding the date of publication of the Offering Document means the total trading price of A Shares of the Company for the 20 trading days preceding the date of publication of the Offering Document divided by the total trading volume of A Shares of the Company for those 20 trading days; the average trading price of A Shares of the Company for the trading day preceding the date of publication of the Offering Document means the total trading price of A Shares of the Company for the trading day preceding the date of publication of the Offering Document divided by the total trading volume of A Shares of the Company for that day.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

2. Adjustments to the Conversion Price and Calculation Formula

Upon the occurrence of distribution of scrip dividend, capitalization issue, issuance of new shares, rights issue or distribution of cash dividend (excluding any increase in the share capital as a result of conversion of the A Share Convertible Corporate Bonds) after the issuance, the Company will adjust the Conversion Price in accordance with the following formulas (the adjusted value shall be rounded off to two decimal places):

Distribution of scrip dividend or capitalization issue: P1 = P0/(1+n);

Issuance of new shares or rights issue: P1 = (P0+A×k)/(1+k);

Two items above implemented simultaneously: P1 = (P0+A×k)/(1+n+k);

Distribution of cash dividend: P1= P0-D;

Three items above implemented simultaneously: P1 = (P0-D+A×k)/(1+n+k).

Where: P0 is the Conversion Price before adjustments; n is the ratio of the scrip dividend or capitalization; k is the ratio of issuance of new shares or rights issue; A is the price of issuance of new shares or rights issue; D is the cash dividend per share and P1 is the adjusted Conversion Price.

Where the abovementioned changes in shareholding and/or Shareholder’s interests occur, the Conversion Price will be adjusted accordingly and an announcement will be published on the media designated by the CSRC for disclosing information of listed companies. The announcement will indicate the date of adjustment to the Conversion Price, adjustment method and suspension period of share conversion (if necessary). An announcement will also be published in the Hong Kong market in accordance with laws, rules and regulations such as the Listing Rules (if necessary). If the Conversion Price adjustment date is on or after the A Share Convertible Corporate Bonds Holder’s application for conversion, and before the share registration date for the issuance, then such conversion will be based on the Conversion Price adjusted by the Company.

In the event that the rights and benefits of the A Share Convertible Corporate Bonds Holders derived from the issuance are affected by the change in the Company’s share class, quantity and/or Shareholders’ interest due to the possible share repurchase, consolidation, subdivision or any other circumstances which may occur, the Company will adjust the Conversion Price based on the actual situation and in accordance with the principles of fairness, justice, equality and full protection of the A Share Convertible Corporate Bonds Holders’ interests. The Conversion Price will be adjusted based on the relevant PRC laws and regulations and the relevant provisions of the securities regulatory authorities of that time.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

(IX) Downward Adjustment to the Conversion Price

1. Adjustment Authorization and Permitted Adjustment Magnitude

The Conversion Price may be subject to downward adjustments if, during the term of the A Share Convertible Corporate Bonds, the closing prices of the A Shares in 15 trading days out of any 30 consecutive trading days are lower than 90% of the prevailing Conversion Price. The Board may propose any such adjustments for the Shareholders to consider and seek their approval at a general meeting and class meetings of the Company. The above-mentioned proposal is subject to approval of more than two-thirds of the participating Shareholders with voting rights present at the general meeting and class meetings. Shareholders holding the A Share Convertible Corporate Bonds should abstain from voting at the general meeting and class meetings. The adjusted Conversion Price shall not be lower than the highest of the average trading price of A Shares of the Company for the 30 trading days preceding the aforementioned general meeting, the average trading price of A Shares of the Company for the 20 trading days preceding the aforementioned general meeting and class meetings and the average trading price of A Shares of the Company for the trading day immediately before the aforesaid general meeting.

In the event that another adjustment of Conversion Price has been implemented in the aforementioned 30 trading days, the Conversion Price will be calculated based on the unadjusted Conversion Price and closing price of Shares during the trading days prior to adjustment, and the adjusted Conversion Price and closing price of Shares during the trading days on which the adjustment was made or the trading day afterwards.

2. Procedure of adjustment

If the Company decides to make a downward adjustment to the Conversion Price, the Company will publish an announcement on the media designated by the CSRC for disclosing information of listed companies. The information disclosed will cover the magnitude of the adjustment, the registration date of Shares, the suspension period of share conversion, etc (if necessary). An announcement will also be published in the Hong Kong market in accordance with laws, rules and regulations such as the Listing Rules (if necessary). Share conversion will be restored for application based on the adjusted Conversion Price on the first trading day after the registration date (i.e. the effective date of the adjustment to the Conversion Price).

If the adjustment date is on or after the share conversion application date and prior to the registration date, the share conversion application should be executed based on the price after the adjustment.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

(X) Method for Determining the Number of Shares for Conversion and Method on Handling Fractional Shares upon Conversion

Where a A Share Convertible Corporate Bonds Holder applies to convert the A Share Convertible Corporate Bonds held by him/her/them during the conversion period, the formula for calculating the number of the Shares to be issued upon conversion: Q=V/P. Any fractional Share shall be rounded down to the nearest whole number. In the aforesaid formula:

“Q” denotes the number of convertible Shares;
“V” denotes the aggregate nominal value of the A Share Convertible Corporate Bonds in respect of which the A Share Convertible Corporate Bonds Holders apply for conversion;
“P” denotes the prevailing Conversion Price as at the date of application for conversion.

Within five trading days from the conversion of the A Share Convertible Corporate Bonds by the A Share Convertible Corporate Bonds Holders, the Company will pay the A Share Convertible Corporate Bonds Holders in cash an amount equal to the nominal value of the remaining balance of such A Share Convertible Corporate Bonds which are insufficient to be converted into one A Share and the interest accrued on such balance in accordance with the relevant requirements of the Shanghai Stock Exchange and such other authorities.

(XI) Terms of Redemption

1. Terms of Redemption at Maturity

Within five trading days after the maturity of the A Share Convertible Corporate Bonds in the issuance, the Company will redeem all the A Share Convertible Corporate Bonds which have not been converted into Shares. The actual redemption price shall be determined by the Board or other authorized persons after discussion and agreement with the sponsor institution (the lead underwriter) according to the authorization at the general meeting and Class Meetings with reference to the market conditions at the time of issuance.

2. Terms of Conditional Redemption

During the term of the A Share Convertible Corporate Bonds, if the closing price of the A Shares of the Company is equal to or not lower than 130% (130% inclusive) of the prevailing Conversion Price in at least 15 trading days out of any 30 consecutive trading days, or when the balance of the outstanding A Share Convertible Corporate Bonds issued hereunder is less than RMB30 million, the Company has the right to redeem all or part of the A Share Convertible Corporate Bonds which have not been converted into shares based on the par value plus the accrued interest then.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

Formula for calculating the interest accrued then is: IA=B × i × t/365

IA: Accrued interest for the current period;
B: Aggregate nominal value of the A Share Convertible Corporate Bonds issued hereunder that are held by the A Share Convertible Corporate Bonds Holders;
i: Interest rate of the A Share Convertible Corporate Bonds for current year;
t: Number of days on which interest is accrued, meaning the actual number of calendar days from the last interest payment date to the redemption date (excluding the redemption date) of current year.

(XII) Terms of Sale Back

If the actual usage of the proceeds from the issuance of the A Share Convertible Corporate Bonds by the Company differs from the undertaking of the use of proceeds set out by the Company in the Offering Document, and such difference is considered by the CSRC as a deviation from the use of the proceeds, the A Share Convertible Corporate Bonds Holders will have a one-off right to sell all or part of the A Share Convertible Corporate Bonds held by them back to the Company at the nominal value plus the interest accrued then. Under this scenario, the A Share Convertible Corporate Bonds Holders may sell their A Share Convertible Corporate Bonds back to the Company during the sale back declaration period. If the A Share Convertible Corporate Bonds Holders do not exercise their sale back rights during the sale back declaration period, the rights to sell back the A Share Convertible Corporate Bonds shall automatically lapse.

(XIII) Dividend Rights of the Year of Conversion

The new A Shares of the Company to be issued as a result of the conversion of the A Share Convertible Corporate Bonds shall rank pari passu with all the existing A Shares, and are entitled to dividend of that period for all ordinary Shareholders (including Shareholders derived from the conversion of the A Share Convertible Corporate Bonds) registered on the date of Share registration for dividend distribution.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

(XIV) Method of Issuance and Target Investors

The actual method of the issuance of the A Share Convertible Corporate Bonds will be determined by the Board or other authorized persons with the sponsor institution (the lead underwriter), according to the authorization at the general meeting. The target investors are natural persons, legal persons, securities investment funds and other investors that meet the conditions prescribed by the laws who have maintained securities accounts with the Shanghai Branch of China Securities Depository and Clearing Corporation Limited, except those prohibited by the state laws and regulations.

(XV) Subscription Arrangement for the Existing A Shareholders

The existing holders of A Shares of the Company shall have pre-emptive rights to subscribe for the A Share Convertible Corporate Bonds to be issued. The actual amount to be preferentially allocated to the existing holders of A Shares shall be determined by the Board or other authorized persons with reference to the market conditions before issuance, according to the authorization at the general meeting, and shall be disclosed in the Offering Document of the A Share Convertible Corporate Bonds. The exercise of such preferential allocation is subject to the Securities Law of the PRC (《中華人民共和國證券法》) and the Listing Rules or all other applicable laws, rules and regulations (including but not limited to the regulations and requirements related to connected transactions) of government or regulatory bodies.

(XVI) Relevant Matters on Meetings of A Share Convertible Corporate Bonds Holders

1. The Rights and Obligations of A Share Convertible Corporate Bonds Holders

(1) Rights of A Share Convertible Corporate Bonds Holders
① Entitlement to agreed interests in accordance with the number of the A Share Convertible Corporate Bonds held by the A Share Convertible Corporate Bonds Holders;
② Rights to convert the A Share Convertible Corporate Bonds held into A Shares of the Company according to the agreed conditions;
③ Entitlement to exercise right of sale back on agreed conditions;
④ Assignment, bestowal or pledge of the A Share Convertible Corporate Bonds held in accordance with the laws, administrative regulations and the Articles of Association;
⑤ Access to relevant information in accordance with the laws and the Articles of Association;
⑥ Claim to the Company for principal and interests of the A Share Convertible Corporate Bonds in accordance with the agreed period and manner;

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

⑦ Rights to participate in or appoint agencies to participate in the meetings with A Share Convertible Corporate Bonds Holders and exercise voting rights in accordance with the laws, administrative regulations and other relevant requirements;
⑧ Other rights granted by the laws, administrative regulations and Articles of Association as creditors of the Company.
(2) Obligations of the A Share Convertible Corporate Bonds Holders
① Compliance with the relevant terms of the A Share Convertible Corporate Bonds of the Company;
② Making due payment of the subscription amount;
③ Compliance with the valid resolutions of a A Share Convertible Corporate Bonds Holders’ meeting;
④ Except as specified in laws, regulations, or the agreement of the Offering Document of the A Share Convertible Corporate Bonds, the A Share Convertible Corporate Bonds Holders shall not request the Company to make prepayment of the principal and interests of the A Share Convertible Corporate Bonds;
⑤ Compliance with other obligations undertaken by the A Share Convertible Corporate Bonds Holders in accordance with the laws, administrative regulations and the Articles of Association.

2. Meetings of the A Share Convertible Corporate Bonds Holders

The Board shall convene an A Share Convertible Corporate Bonds Holders’ meeting when any of the following circumstances arises during the term of the A Share Convertible Corporate Bonds for the issuance:

(1) the Company’s proposal for changes of the agreements of the Offering Document;
(2) the Company’s default in paying principal and interests of the A Share Convertible Corporate Bonds on time;
(3) reduction of the Company’s capital, merger, separation, dissolution or bankruptcy of the Company;
(4) the occurrence of other matters which may substantially affect the interests of the A Share Convertible Corporate Bonds Holders.

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

The Company will set out the method of protecting the interest of the A Share Convertible Corporate Bonds Holders and the rights, procedures and effective conditions of resolutions of the A Share Convertible Corporate Bonds Holders’ meeting in the Offering Document.

(XVII) Use of Proceeds

The total proceeds from the issuance of the A Share Convertible Corporate Bonds will not exceed RMB2.55 billion (inclusive), all of which will be used to replenish the working capital and develop the principal business of the Company after deducting the issue cost and the amount received after the conversion of the A Share Convertible Corporate Bonds will be used to replenish the capital of the Company.

(XVIII) Guarantee and Securities

There is no guarantee or security in relation to the proposed issuance of the A Share Convertible Corporate Bonds.

(XIX) Deposit of Proceeds

The Company has established its Administrative System of Proceeds, according to which proceeds from the issuance of the A Share Convertible Corporate Bonds will be deposited into a special account determined by the Board, and specific matters related to the account opening will be determined by the Board before the issuance.

(XX) The Validity Period of the Resolution

The resolution of the issuance of the A Share Convertible Corporate Bonds will be valid for 12 months from the date of the passing of the relevant resolutions at the AGM and Class Meetings.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

III. FINANCIAL INFORMATION AND THE MANAGEMENT’S DISCUSSION AND ANALYSIS

The financial statements for the years ended 31 December 2014, 2015, 2016 and for the six months ended 30 June 2017 of the Company have been audited by ShineWing Certified Public Accountants (Special General Partnership), which has issued the standard unqualified audit reports XYZH/2016BJA10669 and XYZH/2017BJA10391 for the Company.

(I) Consolidated Financial Statements

1. Consolidated Balance Sheet

Unit: Yuan

	30 June	31 December	31 December	31 December
Assets	2017	2016	2015	2014
Assets:
Cash and cash equivalents	8,829,068,014.76	12,090,415,132.84	12,707,460,600.77	8,682,415,845.44
Including: Customer deposit	7,117,379,453.39	7,720,676,538.03	10,739,355,587.37	7,225,908,380.13
Deposit reservation for balance	2,300,881,951.53	3,096,957,086.10	4,455,615,703.22	2,620,867,294.28
Including: Customer reserves	1,914,484,906.46	2,353,173,197.34	3,356,888,084.19	2,271,018,557.10
Lendings to banks and other financial
institutions	–	–	–	–
Financing funds	5,555,592,896.91	6,119,265,370.45	8,158,803,094.69	7,331,517,309.15
Financial assets measured at fair and
changes of which included in current
profit and loss	7,591,541,318.61	8,037,095,626.37	5,045,128,204.70	4,099,282,492.37
Derivative financial assets	–	–	–	–
Redemptory monetary capital for sale	11,612,420,765.15	5,911,696,190.30	6,826,689,334.44	2,889,714,967.29
Receivables	51,352,593.17	43,496,697.92	27,587,801.49	17,409,000.48
Interest receivable	431,561,243.80	397,345,286.70	257,757,840.45	173,998,005.45
Refundable deposit	345,164,034.84	490,078,050.96	422,906,511.10	727,404,219.54
Classified as assets held for sale	–	–	39,428,945.46	–
Available-for-sale financial assets	3,089,552,742.96	2,581,937,630.58	2,443,599,475.10	751,235,010.28
Held-to-maturity investment	–	–	–	–
Long-term equity investment	308,011,118.29	370,421,607.85	106,705,532.33	49,684,441.40
Investment real estate	22,354,978.81	22,953,353.76	21,225,064.10	23,066,429.75
Fixed assets	234,758,629.22	238,033,229.01	235,552,941.92	217,045,958.96
Construction in progress	4,074,080.75	4,051,439.24	543,150.00	100,000.00
Intangible assets	151,177,020.33	155,559,401.13	155,960,703.60	153,742,738.81
Goodwill	21,902,088.42	21,466,082.83	7,268,756.37	7,268,756.37
Deferred income tax assets	143,401,276.20	117,928,755.39	209,334,510.90	104,468,520.25
Other assets	628,197,078.93	685,871,695.61	529,680,445.78	420,021,343.45
Total assets	41,321,011,832.68	40,384,572,637.04	41,651,248,616.42	28,269,242,333.27

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	30 June	31 December	31 December	31 December
Liabilities and owners’ equity	2017	2016	2015	2014
Liabilities:
Short-term borrowings	1,088,011,493.20	661,118,923.35	–	–
Short-term financing payable	260,970,000.00	3,809,755,009.59	5,106,960,000.00	1,441,280,000.00
Borrowings from banks and other
financial institutions	850,000,000.00	400,000,000.00	–	2,373,000,000.00
Financial liabilities measured and
changes of which included in current
profit and loss	1,096,671,631.44	1,208,177,431.99	1,144,170,407.34	791,073,957.93
Derivative financial liabilities	557,147.00	131,955.20	–	–
Financial assets sold for repurchase	11,047,853,876.54	5,607,978,821.81	4,712,964,571.21	5,587,234,329.83
Receiving from vicariously traded
securities	8,374,981,090.60	9,426,088,091.08	13,281,216,869.23	8,863,873,220.48
Receiving from vicariously traded
securities in credit trade	909,578,244.94	942,002,264.58	1,586,034,162.71	795,959,787.78
Receiving from vicariously sold
securities	–	–	–	–
Payroll Payable	348,744,660.11	472,060,797.32	711,032,900.34	375,914,561.22
Taxes payable	74,950,844.78	96,475,098.96	267,155,238.02	239,670,103.73
Payables	140,397,970.83	207,332,187.36	152,466,664.69	92,165,449.54
Interest payable	97,775,970.46	354,923,124.12	327,496,490.03	111,765,349.00
Classified as liabilities held for sale	–	–	11,695,776.24	–
Estimated liabilities	–	–	–	–
Long-term borrowings	53,682,629.50	55,327,275.46	51,818,408.77	–
Bonds payable	5,495,255,502.86	5,494,298,598.03	5,291,078,013.77	1,490,027,198.49
Deferred income tax liabilities	2,265,390.21	28,707,013.93	49,157,422.62	27,836,514.57
Other liabilities	74,256,855.28	73,427,210.85	81,547,942.18	222,646,742.26
Total liabilities	29,915,953,307.75	28,837,803,803.63	32,774,794,867.15	22,412,447,214.83
Owner’s equity:
Capital stock	3,923,734,700.00	3,923,734,700.00	3,223,734,700.00	2,631,615,700.00
Capital reserve	3,818,150,306.48	3,842,379,808.39	1,865,166,967.63	504,887,745.32
Less: Treasury share	–	–	–	–
Other comprehensive income	2,867,790.58	63,826,190.55	36,261,558.91	26,508,007.42
Surplus reserve	697,014,082.63	697,014,082.63	604,796,786.78	399,282,433.40
Generic risk reserve	599,107,697.29	599,107,697.29	531,481,680.34	380,771,154.53
Trade risk reserve	564,870,336.92	564,870,336.92	503,392,139.69	366,382,570.77
Retained earnings	549,785,126.83	891,183,507.88	1,396,746,640.39	1,477,258,852.53
Total owners’ equity attributable to
parent company	10,155,530,040.73	10,582,116,323.66	8,161,580,473.74	5,786,706,463.97
Minority shareholders’ equity	1,249,528,484.20	964,652,509.75	714,873,275.53	70,088,654.47
Total owners’ equity	11,405,058,524.93	11,546,768,833.41	8,876,453,749.27	5,856,795,118.44
Total liabilities and owners’ equity	41,321,011,832.68	40,384,572,637.04	41,651,248,616.42	28,269,242,333.27

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

2. Consolidated Income Statement

Unit: Yuan

	January to
Item	June 2017	2016	2015	2014
I. Operating revenue	842,268,632.17	2,026,810,960.79	4,004,355,251.90	1,808,216,779.12
Fee and commission income	393,891,620.04	1,259,619,100.49	2,716,354,159.22	1,072,655,213.61
Including: Securities brokerage service
income	258,508,928.98	715,338,829.85	2,128,093,353.37	794,863,348.77
Investment banking income	34,874,401.59	304,410,665.01	209,363,864.17	100,757,994.55
Investment consulting service
income	41,025,382.26	123,506,393.84	285,424,405.67	130,642,404.47
Asset management service
income	30,372,318.92	63,173,935.35	53,079,392.97	9,106,315.59
Fund management service
income	1,145,251.95	3,506,499.60	554,972.67	403,163.07
Interest income	231,423,994.75	318,306,944.02	561,575,861.59	274,986,314.16
Investment income (loss stated with “-”)	175,490,563.10	477,944,617.68	599,018,351.30	376,441,950.15
Including: Income from investment to
joint ventures and cooperative
enterprises	853,032.71	12,706,868.44	1,725,476.63	-315,558.60
Income from fair value variation
(loss stated with “-”)	-68,315,446.73	-60,751,105.21	56,061,634.06	73,245,007.16
Exchange gain (loss stated with “-”)	603,412.21	-3,442,833.21	62,062,152.53	3,529,031.51
Other operating income	109,174,488.80	35,134,237.02	9,283,093.20	7,359,262.53
II. Operating expenses	606,401,785.01	1,067,838,746.83	2,093,232,661.80	1,078,677,482.41
Taxes and surcharges	7,844,774.79	57,418,589.52	255,484,062.30	103,517,886.25
Business and administration expenses	483,299,369.96	1,009,437,684.55	1,709,009,930.66	946,477,300.28
Assets impairment loss	13,584,251.12	-27,005,101.48	127,631,057.07	27,716,089.32
Other operating costs	101,673,389.14	27,987,574.24	1,107,611.77	966,206.56
III. Operating profits	235,866,847.16	958,972,213.96	1,911,122,590.10	729,539,296.71
Add: Non-operating revenue	3,097,329.16	39,621,993.23	21,225,594.03	32,364,428.98
Less: Non-operating expenses	12,518,929.21	6,064,619.74	6,957,329.28	7,132,217.08
Add: Total profits held in the
subsidiaries to be sold	–	-17,962,957.50	-34,421,696.14	–
IV. Total profits	226,445,247.11	974,566,629.95	1,890,969,158.71	754,771,508.61
Less: Income tax expenses	58,476,379.84	227,841,848.25	488,588,592.72	204,788,774.47
V. Net Profits	167,968,867.27	746,724,781.70	1,402,380,565.99	549,982,734.14
Net profits attributable to parent
company owners	133,373,517.65	718,646,243.11	1,405,500,406.97	562,290,151.78
Minority shareholders’ profits
and losses	34,595,349.62	28,078,538.59	-3,119,840.98	-12,307,417.64

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

		January to
Item		June 2017	2016	2015	2014
VI.	Net amount of other
	comprehensive income
	after tax	-59,042,187.52	33,449,696.04	11,475,235.64	30,326,501.00
(I)	Other comprehensive income that
	cannot be reclassified into profit
	and loss	–	–	–	–
1.	Re-measured variation of net
	assets or liabilities of defined
	benefit plan	–	–	–	–
2.	Share in other comprehensive
	income that cannot be classified
	into profit and loss in the invested
	enterprises under equity method	–	–	–	–
(II)	Other comprehensive income that
	will be reclassified into the profit
	and loss	-59,042,187.52	33,449,696.04	11,475,235.64	30,326,501.00
1.	Share in other comprehensive
	income that will be reclassified
	into profit and loss in the invested
	enterprises under equity method	–	–	–	–
2.	Changes in fair value through
	profit and loss of available-for-
	sale financial assets	-36,130,760.61	6,168,845.75	5,679,745.67	30,326,501.00
3.	Held-to-maturity investment
	reclassified into available-for-sale
	financial assets	–	–	–	–
4.	Effective part of cash-flow hedge
	profit and loss	–	–	–	–
5.	Balance arising from the
	translation of foreign currency
	financial statements	-22,911,426.90	27,280,850.29	5,795,489.97	–
VII.	Total comprehensive income	108,926,679.75	780,174,477.74	1,413,855,801.63	580,309,235.14
Total	comprehensive income attributable
to parent company owners		72,415,117.68	746,210,874.75	1,415,253,958.46	592,616,652.78
Total	comprehensive income attributable
to minority shareholders		36,511,562.07	33,963,602.99	-1,398,156.83	-12,307,417.64
VIII.	Earnings per share
(I)	Basic earnings per share	0.03	0.22	0.49	0.24
(II)	Diluted earnings per share	0.03	0.22	0.49	0.24

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

3. Consolidated Cash Flow Statement

Unit: Yuan

	January to
Item	June 2017	2016	2015	2014
I. Cash flow arising from
operating activities
Net increase in disposal of financial
assets measured at fair value and
changes of which included in current
profit and loss	358,759,472.02	–	–	–
Cash receipts from interest, fees and
commission	885,985,289.88	2,248,941,692.88	4,376,472,945.35	1,703,680,477.16
Net increase in borrowings from banks
and other financial institutions	450,000,000.00	400,000,000.00	–	1,973,000,000.00
Net increase in repurchasing business
funds	–	1,897,800,233.23	–	1,358,062,836.15
Net decrease in financing funds	563,672,473.54	2,035,131,099.49	–	–
Net cash receipts from vicariously
traded securities	–	–	5,207,408,247.63	4,665,762,485.54
Other cash receipts relating to operating
activities	423,480,046.93	327,240,285.44	889,889,915.95	169,731,992.97
Total cash inflows from operating
activities	2,681,897,282.37	6,909,113,311.04	10,473,771,108.93	9,870,237,791.82
Net increase in disposal of financial
assets measures at fair value and
changes of which included in current
profit and loss	–	2,476,003,106.91	340,561,399.39	167,724,502.36
Net increase in borrowings from banks
and other financial institutions	–	–	2,373,000,000.00	–
Net increase in repurchasing business
funds	177,469,088.11	–	4,591,805,624.81	–
Net increase in financing funds	–	–	826,850,479.80	5,082,571,990.27
Net cash payments from vicariously
traded securities	1,083,531,020.12	4,499,160,676.28	–	–
Cash payments for interest, fees and
commission	147,933,037.65	315,644,037.60	747,949,451.62	224,164,643.67
Cash payments to and on behalf of
employees	437,174,104.63	950,258,167.20	1,060,272,767.63	515,699,389.36
Cash payments for taxes	160,943,422.46	583,123,607.72	695,208,790.43	257,861,277.21
Other cash payments relating to
operating activities	306,490,621.08	786,914,139.38	900,263,888.55	976,845,378.62
Total cash outflows from operating
activities	2,313,541,294.05	9,611,103,735.09	11,535,912,402.23	7,224,867,181.49
Net cash flows from operating
activities	368,355,988.32	-2,701,990,424.05	-1,062,141,293.30	2,645,370,610.33
II. Cash flow arising from
investment activities
Cash receipts from investment
withdrawal	126,773,657.36	–	–	83,000,000.00
Cash receipts from return on
investments	40,731,081.49	58,854,693.11	74,850,323.19	36,443,070.09
Net cash receipts from disposal of
subsidiaries and other business units	–	43,877,593.48	–	–
Other cash receipts relating to
investment activities	–	2,842,141.18	591,592.60	501,430.63
Total cash inflows from investment
activities	167,504,738.85	105,574,427.77	75,441,915.79	119,944,500.72

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	January to
Item	June 2017	2016	2015	2014
Cash payments to acquire investments	718,676,383.28	186,017,665.63	1,842,205,732.47	383,510,055.57
Net payments to acquire fixed assets,
intangible assets and other long-term
assets	38,161,692.86	92,276,469.83	92,125,002.56	51,703,903.63
Net cash payments to acquire any
subsidiaries and other business units	–	14,616,100.12	–	–
Other cash payments relating to
investment activities	299,089.87	–	–	–
Total cash outflows from investment
activities	757,137,166.01	292,910,235.58	1,934,330,735.03	435,213,959.20
Net cash outflows from investment
activities	-589,632,427.16	-187,335,807.81	-1,858,888,819.24	-315,269,458.48
III. Cash flows arising from
financing activities
Cash receipts from investments by
others	807,977,789.00	2,906,257,373.49	2,441,880,999.89	1,259,448,654.27
Including: Cash receipts from subsidiary
investments from minority
shareholders	807,977,789.00	236,445,631.07	670,792,000.00	–
Cash receipts from borrowings	425,247,924.70	664,627,790.04	51,818,408.77	–
Cash receipts from issuance of bonds	388,180,000.00	4,013,245,593.85	14,043,482,000.00	6,333,280,000.00
Other cash receipts relating to financing
activities	–	–	–	–
Total cash inflows from financing
activities	1,621,405,713.70	7,584,130,757.38	16,537,181,408.66	7,592,728,654.27
Cash payments of amounts borrowed	3,937,210,000.00	5,107,230,000.00	6,579,480,000.00	4,200,000,000.00
Cash paid for distribution of dividends
or profits or cash payments of
interests	960,108,791.55	1,559,835,777.36	1,238,940,284.38	52,770,120.89
Including: Dividends and profits paid to
minority shareholders from
subsidiaries	22,775,591.97	15,837,669.90	–	–
Other cash payments relating to
financing activities	560,836,148.17	–	–	8,317,327.00
Total cash outflows from financing
activities	5,458,154,939.72	6,667,065,777.36	7,818,420,284.38	4,261,087,447.89
Net cash flows from financing
activities	-3,836,749,226.02	917,064,980.02	8,718,761,124.28	3,331,641,206.38
IV. Effect of exchange rate changes
on cash and cash equivalents	603,412.21	-3,442,833.21	62,062,152.53	3,529,031.51
V. Net increase in cash and cash
equivalents	-4,057,422,252.65	-1,975,704,085.05	5,859,793,164.27	5,665,271,389.74
Plus: Beginning balance of cash and
cash equivalents	15,187,372,218.94	17,163,076,303.99	11,303,283,139.72	5,638,011,749.98
VI. Closing balance of cash and
cash equivalents	11,129,949,966.29	15,187,372,218.94	17,163,076,303.99	11,303,283,139.72

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

			Minority	shareholders’ Total owners’	equity equity	964,652,509.75 11,546,768,833.41	– –	– –	– –		964,652,509.75 11,546,768,833.41	284,875,974.45 -141,710,308.48	34,595,349.62 167,968,867.27	1,916,212.45 -59,042,187.52	36,511,562.07 108,926,679.75		271,297,016.71 247,141,640.86	807,977,789.00 814,591,640.86		– –		– –	-536,680,772.29 -567,450,000.00
					Others	–	–	–	–		–	–	–	–	–		–			–		–	–
				Retained	earnings	891,183,507.88	–	–	–		891,183,507.88	-341,398,381.05	133,373,517.65	–	133,373,517.65		–	–		–		–	–
4. *Consolidated Statement of Changes in Owners’ Equity*	(1) Consolidated Statement of Changes in Owners’ Equity from January to June 2017	Owners’ equity attributable to parent company	Less: Other	Treasury comprehensive Surplus Generic risk Trade risk	Item Share stock Capital reserve share income reserve reserve reserve	I. Balance at the end of previous year 3,923,734,700.00 3,842,379,808.39 – 63,826,190.55 697,014,082.63 599,107,697.29 564,870,336.92	Plus: Accounting policy changes – – – – – – –	Early error correction – – – – – – –	Others – – – – – – –	II. Balance at the beginning of current	year 3,923,734,700.00 3,842,379,808.39 – 63,826,190.55 697,014,082.63 599,107,697.29 564,870,336.92	III. Increase/decrease in current year – -24,229,501.91 – -60,958,399.97 – – –	(I) Net profits – – – – – – –	(II) Other comprehensive income – – – -60,958,399.97 – – –	Total of (I) and (II) – – – -60,958,399.97 – – –	(III) Capital contributed by shareholders and	capital decrease – -24,155,375.85 – – – – –	1. Capital contributed by shareholders – 6,613,851.86 – – – – –	2. The amount of share-based payments	recorded in owners’ equity – – – – – – –	3. Equity transaction with minority	shareholders – – – – – – –	4. Others – -30,769,227.71 – – – – –

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

Minority	shareholders’ Total owners’	equity equity Others	-22,775,591.97 -497,547,490.67	– – –	– – –	– – –	– -22,775,591.97 -497,547,490.67	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– -157,012.36 -231,138.42	– 1,249,528,484.20 11,405,058,524.93
	Retained	earnings	-474,771,898.70	–	–	–	-474,771,898.70	–	–	–	–	–	–	–	–	–	–	549,785,126.83
	Trade risk	reserve	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	564,870,336.92
Other	comprehensive Surplus Generic risk	income reserve reserve	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	2,867,790.58 697,014,082.63 599,107,697.29
Less:	Treasury	share	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
		Share stock Capital reserve	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– -74,126.06	3,923,734,700.00 3,818,150,306.48
		Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’ equity	1. Capital transferred from capital reserves	2. Capital transferred from surplus reserves	3. Recovery of losses by surplus reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Minority	shareholders’ Total owners’	equity equity	714,873,275.53 8,876,453,749.27	– –	– –	– –		714,873,275.53 8,876,453,749.27	249,779,234.22 2,670,315,084.14	28,078,538.59 746,724,781.70	5,885,064.40 33,449,696.04	33,963,602.99 780,174,477.74		236,445,631.07 2,906,257,373.49	236,445,631.07 2,906,257,373.49		– –		– –	– –
			Others	–	–	–	–		–	–	–	–	–		–	–		–		–	–
		Trade risk Retained	reserve earnings	503,392,139.69 1,396,746,640.39	– –	– –	– –		503,392,139.69 1,396,746,640.39	61,478,197.23 -505,563,132.51	– 718,646,243.11	– –	– 718,646,243.11		– –	– –		– –		– –	– –
Owners’ equity attributable to parent company	Other	comprehensive Surplus Generic risk	income reserve reserve	36,261,558.91 604,796,786.78 531,481,680.34	– – –	– – –	– – –		36,261,558.91 604,796,786.78 531,481,680.34	27,564,631.64 92,217,295.85 67,626,016.95	– – –	27,564,631.64 – –	27,564,631.64 – –		– – –	– – –		– – –		– – –	– – –
	Less:	Treasury	share	–	–	–	–		–	–	–	–	–		–	–		–		–	–
			Share stock Capital reserve	3,223,734,700.00 1,865,166,967.63	– –	– –	– –		3,223,734,700.00 1,865,166,967.63	700,000,000.00 1,977,212,840.76	– –	– –	– –		700,000,000.00 1,969,811,742.42	700,000,000.00 1,969,811,742.42		– –		– –	– –
			Item	I. Balance at the end of previous year	Plus: Accounting policy changes	Early error correction	Others	II. Balance at the beginning of current	year	III. Increase/decrease in current year	(I) Net profits	(II) Other comprehensive income	Total of (I) and (II)	(III) Capital contributed by shareholders and	capital decrease	1. Capital contributed by shareholders	2. The amount of share-based payments	recorded in owners’ equity	3. Equity transaction with minority	shareholders	4. Others

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

	Minority	shareholders’ Total owners’	equity equity	-15,837,669.90 -1,015,195,426.90	– –	– –	– –	-15,837,669.90 -1,015,195,426.90	– –	– –	– –	– –	– –	– –	– –	– –	– –	-4,792,329.94 -921,340.19	964,652,509.75 11,546,768,833.41
			Others	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
		Trade risk Retained	reserve earnings	61,478,197.23 -1,220,679,267.03	– -92,217,295.85	– -67,626,016.95	61,478,197.23 -61,478,197.23	– -999,357,757.00	– –	– –	– –	– –	– –	– –	– –	– –	– –	– -3,530,108.59	564,870,336.92 891,183,507.88
Owners’ equity attributable to parent company	Other	comprehensive Surplus Generic risk	income reserve reserve	– 92,217,295.85 67,626,016.95	– 92,217,295.85 –	– – 67,626,016.95	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	63,826,190.55 697,014,082.63 599,107,697.29
	Less:	Treasury	share	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
			Share stock Capital reserve	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– 7,401,098.34	3,923,734,700.00 3,842,379,808.39
			Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’ equity	1. Capital transferred from capital reserves	2. Capital transferred from surplus reserves	3. Recovery of losses by surplus reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

– 40 –

PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Minority	shareholders’ Total owners’	equity equity	70,088,654.47 5,856,795,118.44	– –	– –	– –		70,088,654.47 5,856,795,118.44	644,784,621.06 3,019,658,630.83	-3,119,840.98 1,402,380,565.99	1,721,684.15 11,475,235.64	-1,398,156.83 1,413,855,801.63		670,792,000.00 2,623,190,222.31	670,792,000.00 2,623,190,222.31		– –		– –	– –
			Others	–	–	–	–		–	–	–	–	–		–	–		–		–	–
		Trade risk Retained	reserve earnings	366,382,570.77 1,477,258,852.53	– –	– –	– –		366,382,570.77 1,477,258,852.53	137,009,568.92 -80,512,212.14	– 1,405,500,406.97	– –	– 1,405,500,406.97		– –	– –		– –		– –	– –
Owners’ equity attributable to parent company	Other	comprehensive Surplus Generic risk	income reserve reserve	26,508,007.42 399,282,433.40 380,771,154.53	– – –	– – –	– – –		26,508,007.42 399,282,433.40 380,771,154.53	9,753,551.49 205,514,353.38 150,710,525.81	– – –	9,753,551.49 – –	9,753,551.49 – –		– – –	– – –		– – –		– – –	– – –
	Less:	Treasury	share	–	–	–	–		–	–	–	–	–		–	–		–		–	–
			Share stock Capital reserve	2,631,615,700.00 504,887,745.32	– –	– –	– –		2,631,615,700.00 504,887,745.32	592,119,000.00 1,360,279,222.31	– –	– –	– –		592,119,000.00 1,360,279,222.31	592,119,000.00 1,360,279,222.31		– –		– –	– –
			Item	I. Balance at the end of previous year	Plus: Accounting policy changes	Early error correction	Others	II. Balance at the beginning of current	year	III. Increase/decrease in current year	(I) Net profits	(II) Other comprehensive income	Total of (I) and (II)	(III) Capital contributed by shareholders and	capital decrease	1. Capital contributed by shareholders	2. The amount of share-based payments	recorded in owners’ equity	3. Equity transaction with minority	shareholders	4. Others

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Minority	shareholders’ Total owners’	equity equity	– -992,778,171.00	– –	– –	– –	– -992,778,171.00	– –	– –	– –	– –	– –	– –	– –	– –	– –	-24,609,222.11 -24,609,222.11	714,873,275.53 8,876,453,749.27
			Others	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
		Trade risk Retained	reserve earnings	137,009,568.92 -1,486,012,619.11	– -205,514,353.38	– -150,710,525.81	137,009,568.92 -137,009,568.92	– -992,778,171.00	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	503,392,139.69 1,396,746,640.39
Owners’ equity attributable to parent company	Other	comprehensive Surplus Generic risk	income reserve reserve	– 205,514,353.38 150,710,525.81	– 205,514,353.38 –	– – 150,710,525.81	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	36,261,558.91 604,796,786.78 531,481,680.34
	Less:	Treasury	share	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
			Share stock Capital reserve	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	3,223,734,700.00 1,865,166,967.63
			Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’ equity	1. Capital transferred from capital reserves	2. Capital transferred from surplus reserves	3. Recovery of losses by surplus reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Minority	shareholders’ Total owners’	equity equity	83,940,165.60 4,175,281,322.52	– –	– –	– –		83,940,165.60 4,175,281,322.52	-13,851,511.13 1,681,513,795.92	-12,307,417.64 549,982,734.14	– 30,326,501.00	-12,307,417.64 580,309,235.14		– 1,102,748,654.27	– 1,102,748,654.27		– –		– –	– –
			Others	–	–	–	–		–	–	–	–	–		–	–		–		–	–
		Retained	earnings	1,119,117,840.01	–	–	–		1,119,117,840.01	358,141,012.52	562,290,151.78	–	562,290,151.78		–	–		–		–	–
		Trade	risk reserve	310,090,449.69	–	–	–		310,090,449.69	56,292,121.08	–	–	–		–	–		–		–	–
Owners’ equity attributable to parent company	Other	comprehensive Surplus Generic	income reserve risk reserve	-3,818,493.58 314,844,251.79 317,352,317.96	– – –	– – –	– – –		-3,818,493.58 314,844,251.79 317,352,317.96	30,326,501.00 84,438,181.61 63,418,836.57	– – –	30,326,501.00 – –	30,326,501.00 – –		– – –	– – –		– – –		– – –	– – –
	Less:	Treasury	share	–	–	–	–		–	–	–	–	–		–	–		–		–	–
		Capital	reserve	239,091.05	–	–	–		239,091.05	504,648,654.27	–	–	–		504,648,654.27	504,648,654.27		–		–	–
		Share	stock	2,033,515,700.00	–	–	–		2,033,515,700.00	598,100,000.00	–	–	–		598,100,000.00	598,100,000.00		–		–	–
			Item	I. Balance at the end of previous year	Plus: Accounting policy changes	Early error correction	Others	II. Balance at the beginning of current	year	III. Increase/decrease in current year	(I) Net profits	(II) Other comprehensive income	Total of (I) and (II)	(III) Capital contributed by shareholders and	capital decrease	1. Capital contributed by shareholders	2. The amount of share-based payments	recorded in owners’ equity	3. Equity transaction with minority	shareholders	4. Others

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

		Total owners’	equity	-1,544,093.49	–	–	–	-1,544,093.49	–	–	–	–	–	–	–	–	–	–	5,856,795,118.44
	Minority	shareholders’	equity	-1,544,093.49	–	–	–	-1,544,093.49	–	–	–	–	–	–	–	–	–	–	70,088,654.47
			Others	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
		Trade Retained	risk reserve earnings	56,292,121.08 -204,149,139.26	– -84,438,181.61	– -63,418,836.57	56,292,121.08 -56,292,121.08	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	– –	366,382,570.77 1,477,258,852.53
Owners’ equity attributable to parent company	Other	comprehensive Surplus Generic	income reserve risk reserve	– 84,438,181.61 63,418,836.57	– 84,438,181.61 –	– – 63,418,836.57	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	26,508,007.42 399,282,433.40 380,771,154.53
	Less:	Treasury	share	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
		Capital	reserve	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	504,887,745.32
		Share	stock	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	2,631,615,700.00
			Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’ equity	1. Capital transferred from capital reserves	2. Capital transferred from surplus reserves	3. Recovery of losses by surplus reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

(II) Financial Statements of the Parent Company

1. Balance Sheet of the Parent Company

Unit: Yuan

	30 June	31 December	31 December	31 December
Assets	2017	2016	2015	2014
Assets:
Cash and cash equivalents	7,645,784,415.80	10,906,368,493.26	11,457,340,401.40	7,990,225,464.93
Including: Customer deposit	6,746,217,186.02	7,374,121,594.90	10,427,087,870.49	7,006,583,932.33
Deposit reservation for balance	2,095,707,958.51	2,861,279,822.91	4,229,637,630.04	2,354,883,475.09
Including: Customer reserves	1,654,854,053.79	2,031,159,961.17	3,067,436,655.14	1,967,214,237.50
Lendings to banks and other financial
institutions	–	–	–	–
Financing funds	5,133,671,757.37	5,873,865,210.42	8,095,545,444.73	7,331,517,309.15
Financial assets measured at fair and
changes of which included in current
profit and loss	6,032,636,940.35	5,633,991,564.70	3,408,279,450.37	2,841,018,782.98
Derivative financial assets	–	–	–	–
Redemptory monetary capital for sale	11,392,440,615.15	5,569,169,690.51	6,796,689,334.44	2,869,314,967.29
Receivables	42,979,336.29	37,744,827.45	27,727,443.35	24,089,681.65
Interest receivable	397,880,838.28	350,720,629.73	225,861,868.53	156,117,688.84
Refundable deposit	67,420,600.43	153,314,654.39	126,996,046.28	507,135,406.17
Classified as assets held for sale	–	–	102,000,000.00	–
Available-for-sale financial assets	1,120,857,540.99	2,206,904,169.42	2,492,219,724.16	894,874,793.49
Held-to-maturity investment	–	–	–	–
Long-term equity investment	3,009,917,961.01	1,976,973,001.74	1,258,021,592.08	611,561,592.08
Investment real estate	32,797,726.56	33,547,229.79	32,121,196.67	30,506,028.53
Fixed assets	213,617,686.36	217,025,434.60	216,739,162.10	206,188,560.26
Construction in progress	4,074,080.75	4,051,439.24	543,150.00	100,000.00
Intangible assets	147,447,101.29	151,913,078.20	152,894,136.21	145,347,083.87
Goodwill	–	–	–	–
Deferred income tax assets	122,334,429.98	105,280,666.29	205,857,043.12	100,844,910.15
Other assets	126,438,526.70	100,553,253.47	84,430,975.06	147,959,342.51
Total assets	37,586,007,515.82	36,182,703,166.12	38,912,904,598.54	26,211,685,086.99

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	30 June	31 December	31 December	31 December
Liabilities and owners’ equity	2017	2016	2015	2014
Liabilities:
Short-term borrowings	–	–	–	–
Short-term financing payable	260,970,000.00	3,809,755,009.59	5,106,960,000.00	1,441,280,000.00
Borrowings from banks and other
financial institutions	850,000,000.00	400,000,000.00	–	2,373,000,000.00
Financial liabilities measured at fair
value and changes of which included
in current profit and loss	666,320,460.00	–	–	–
Derivative financial liabilities	557,147.00	131,955.20	–	–
Financial assets sold for repurchase	11,044,853,876.54	5,313,078,821.81	4,568,564,571.21	5,189,434,329.83
Receiving from vicariously traded
securities	7,697,229,956.91	8,659,499,538.04	12,616,675,912.75	8,241,142,589.97
Receiving from vicariously traded
securities in credit trade	830,020,256.12	924,703,379.22	1,580,445,192.56	795,959,787.78
Receiving from vicariously sold
securities	–	–	–	–
Payroll Payable	324,408,926.27	440,892,284.86	694,688,726.76	358,658,098.32
Taxes payable	46,894,210.93	80,816,232.69	261,981,469.33	235,723,471.46
Payables	130,606,249.32	206,752,599.23	151,036,473.96	92,165,449.54
Interest payable	97,321,873.72	354,310,519.57	327,486,881.86	111,765,349.00
Estimated liabilities	–	–	–	–
Long-term borrowings	–	–	–	–
Bonds payable	5,495,255,502.86	5,494,298,598.03	5,291,078,013.77	1,490,027,198.49
Deferred income tax liabilities	3,285,813.04	17,076,060.34	46,764,785.19	22,155,414.59
Other liabilities	42,725,222.43	49,772,669.96	65,174,355.30	36,820,467.05
Total liabilities	27,490,449,495.14	25,751,087,668.54	30,710,856,382.69	20,388,132,156.03
Owner’s equity:
Capital stock	3,923,734,700.00	3,923,734,700.00	3,223,734,700.00	2,631,615,700.00
Capital reserve	3,845,437,880.01	3,838,825,951.77	1,865,166,967.63	504,887,745.32
Less: Treasury share	–	–	–	–
Other comprehensive income	9,573,312.42	44,727,315.54	74,957,872.01	26,178,327.65
Surplus reserve	697,014,082.63	697,014,082.63	604,796,786.78	399,282,433.40
Generic risk reserve	595,102,127.73	595,102,127.73	527,476,110.78	376,765,584.97
Trade risk reserve	564,870,336.92	564,870,336.92	503,392,139.69	366,382,570.77
Retained earnings	459,825,580.97	767,340,982.99	1,402,523,638.96	1,518,440,568.85
Total owners’ equity attributable to
parent company	10,095,558,020.68	10,431,615,497.58	8,202,048,215.85	5,823,552,930.96
Liabilities and minority shareholders’
equity	37,586,007,515.82	36,182,703,166.12	38,912,904,598.54	26,211,685,086.99

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

2. Income Statement of the Parent Company

Unit: Yuan

		January to
Item		June 2017	2016	2015	2014
I.	Operating revenue	641,326,604.78	1,675,470,543.09	3,830,667,870.00	1,719,882,113.74
Fee and commission income		350,711,069.83	1,167,829,229.77	2,674,977,424.98	1,052,228,889.37
Including: Securities brokerage service
	income	251,505,025.27	715,952,414.77	2,139,063,004.45	804,245,778.30
	Investment banking income	25,094,776.26	265,115,836.09	206,884,614.17	100,757,994.55
	Investment consulting service
	income	40,261,537.85	122,209,779.91	269,915,506.82	128,578,967.58
	Asset management service
	income	30,271,481.66	64,551,199.00	59,114,299.54	18,646,148.94
Interest income		170,414,928.62	227,783,168.24	494,786,640.45	246,988,167.13
Investment income (loss stated with “-”)		158,218,828.71	352,346,572.34	549,515,991.11	353,916,845.79
Including: Income from investment to
joint ventures and cooperative
enterprises		-55,040.73	-8,506,839.76	–	–
Income from fair value variation
(loss stated with “-”)		-43,631,510.30	-78,447,490.81	39,295,953.79	53,897,596.19
Exchange gain (loss stated with “-”)		786,282.09	-3,719,786.18	62,040,935.35	5,156,987.49
Other	operating income	4,827,005.83	9,678,849.73	10,050,924.32	7,693,627.77
II.	Operating expenses	414,787,461.55	878,133,176.47	1,997,794,031.23	985,795,420.88
Taxes	and surcharges	5,366,884.40	53,783,791.80	250,225,051.11	100,422,717.82
Business and administration expenses		405,848,849.25	877,980,916.52	1,618,839,535.74	858,871,244.37
Assets impairment loss		2,825,842.14	-55,481,838.54	127,389,387.78	25,334,449.37
Other	operating costs	745,885.76	1,850,306.69	1,340,056.60	1,167,009.32
III.	Operating profits	226,539,143.23	797,337,366.62	1,832,873,838.77	734,086,692.86
Add:	Non-operating revenue	3,092,220.11	34,574,908.89	10,223,964.59	29,987,878.93
Less:	Non-operating expenses	12,518,194.56	6,050,208.91	6,952,760.58	7,080,613.82
IV.	Total profits	217,113,168.78	825,862,066.60	1,836,145,042.78	756,993,957.97
Less:	Income tax expenses	49,856,672.10	211,080,094.31	466,049,353.56	194,072,747.22
V.	Net Profits	167,256,496.68	614,781,972.29	1,370,095,689.22	562,921,210.75
VI.	Net amount of other
	comprehensive income after tax	-35,154,003.12	-30,230,556.47	48,779,544.36	35,212,940.36
(I)	Other comprehensive income that
	cannot be reclassified into profit
	and loss	–	–	–	–
1.	Re-measured variation of net
	assets or liabilities of defined
	benefit plan	–	–	–	–
2.	Share in other comprehensive
	income that cannot be classified
	into profit and loss in the invested
	enterprises under equity method	–	–	–	–

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

		January to
Item		June 2017	2016	2015	2014
(II)	Other comprehensive income that
	will be reclassified into the profit
	and loss	-35,154,003.12	-30,230,556.47	48,779,544.36	35,212,940.36
1.	Share in other comprehensive
	income that will be reclassified
	into profit and loss in the invested
	enterprises under equity method	–	–	–	–
2.	Changes in fair value through
	profit and loss of available-for-
	sale financial assets	-35,154,003.12	-30,230,556.47	48,779,544.36	35,212,940.36
3.	Held-to-maturity investment
	reclassified into available-for-sale
	financial assets	–	–	–	–
4.	Effective part of cash-flow hedge
	profit and loss	–	–	–	–
5.	Balance arising from the
	translation of foreign currency
	financial statements	–	–	–	–
VII.	Total comprehensive income	132,102,493.56	584,551,415.82	1,418,875,233.58	598,134,151.11

3. Cash Flow Statement of the Parent Company

				Unit: Yuan
	January to
Item	June 2017	2016	2015	2014
I. Cash flow arising from
operating activities
Net increase in disposal of financial
assets measured at fair value and
changes of which included in current
profit and loss	271,283,420.55	–	–	531,971,360.43
Cash receipts from interest, fees and
commission	744,794,716.17	2,124,166,428.03	4,255,917,119.83	1,635,459,963.73
Net increase in borrowings from banks
and other financial institutions	450,000,000.00	400,000,000.00	–	1,973,000,000.00
Net increase in repurchasing business
funds	–	2,066,126,123.69	–	858,911,683.01
Net decrease in financing funds	742,942,908.30	2,224,429,689.56	–	–
Net increase in vicariously traded
securities	–	–	5,160,018,727.56	4,577,714,868.67
Other cash receipts relating to operating
activities	18,655,817.41	73,174,993.65	472,322,445.65	130,486,992.37
Total cash inflows from operating
activities	2,227,676,862.43	6,887,897,234.93	9,888,258,293.04	9,707,544,868.21

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	January to
Item	June 2017	2016	2015	2014
Net decrease in disposal of financial
assets measures at fair value and
changes of which included in current
profit and loss	–	2,087,961,941.68	27,796,369.44	–
Net increase in borrowings from banks
and other financial institutions	–	–	2,373,000,000.00	–
Net increase in repurchasing business
funds	15,135,924.66	–	4,581,084,299.10	–
Net increase in financing funds	–	–	763,592,829.84	5,082,571,990.27
Net decrease in vicariously traded
securities	1,056,952,704.23	4,612,918,188.05	–	–
Cash payments for interest, fees and
commission	153,166,199.39	351,643,086.88	731,952,605.35	270,159,853.10
Cash payments to and on behalf of
employees	395,074,155.77	881,414,678.84	1,003,590,174.59	459,476,042.50
Cash payments for taxes	141,981,463.26	421,480,877.05	678,048,546.87	247,174,748.24
Other cash payments relating to
operating activities	139,485,727.98	196,939,739.60	424,959,538.75	572,522,618.06
Total cash outflows from operating
activities	1,901,796,175.29	8,552,358,512.10	10,584,024,363.94	6,631,905,252.17
Net cash flows from operating
activities	325,880,687.14	-1,664,461,277.17	-695,766,070.90	3,075,639,616.04
II. Cash flow arising from
investment activities
Cash receipts from investment
withdrawal	55,230,606.87	–	–	–
Cash receipts from return on
investments	98,506,744.35	82,412,044.27	107,592,751.99	55,107,417.91
Net cash receipts from disposal of
subsidiaries and other business units	–	43,877,593.48	–	–
Other cash receipts relating to
investment activities	–	–	578,254.92	495,378.33
Total cash inflows from investment
activities	153,737,351.22	126,289,637.75	108,171,006.91	55,602,796.24
Cash payments to acquire investments	–	335,063,972.17	2,287,610,100.46	925,108,514.33
Net payments to acquire fixed assets,
intangible assets and other long-term
assets	31,575,803.96	85,666,131.85	137,073,042.45	49,330,623.80
Other cash payments relating to
investment activities	299,089.87	467,977.88	–	–
Total cash outflows from investment
activities	31,874,893.83	421,198,081.90	2,424,683,142.91	974,439,138.13
Total cash flows from investment
activities	121,862,457.39	-294,908,444.15	-2,316,512,136.00	-918,836,341.89

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	January to
Item	June 2017	2016	2015	2014
III. Cash flows arising from
financing activities
Cash receipts from investments by
others	–	2,669,811,742.42	1,999,435,210.50	1,102,748,654.27
Cash receipts from borrowings	–	–	–	–
Cash receipts from issuance of bonds	388,180,000.00	4,013,245,593.85	14,045,160,000.00	6,333,280,000.00
Other cash receipts relating to financing
activities	–	–	–	–
Total cash inflows from financing
activities	388,180,000.00	6,683,057,336.27	16,044,595,210.50	7,436,028,654.27
Cash payments of amounts borrowed	3,937,210,000.00	5,107,230,000.00	6,579,480,000.00	4,200,000,000.00
Cash paid for distribution of dividends
or profits or cash payments of
interests	925,655,368.48	1,532,067,544.04	1,173,008,847.53	51,226,027.40
Other cash payments relating to
financing activities	–	–	–	8,317,327.00
Total cash outflows from financing
activities	4,862,865,368.48	6,639,297,544.04	7,752,488,847.53	4,259,543,354.40
Net cash flows from financing
activities	-4,474,685,368.48	43,759,792.23	8,292,106,362.97	3,176,485,299.87
IV. Effect of exchange rate changes
on cash and cash equivalents	786,282.09	-3,719,786.18	62,040,935.35	5,156,987.49
V. Net increase in cash and cash
equivalents	-4,026,155,941.86	-1,919,329,715.27	5,341,869,091.42	5,338,445,561.51
Add: Beginning balance of cash and
cash equivalents	13,767,648,316.17	15,686,978,031.44	10,345,108,940.02	5,006,663,378.51
VI. Closing balance of cash and
cash equivalents	9,741,492,374.31	13,767,648,316.17	15,686,978,031.44	10,345,108,940.02

– 50 –

PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

		Unit: Yuan		Total owners’	equity		10,431,615,497.58	–	–	–		10,431,615,497.58	-336,057,476.90	167,256,496.68	-35,154,003.12	132,102,493.56			6,613,851.86	6,613,851.86			–	–
				Retained	earnings		767,340,982.99	–	–	–		767,340,982.99	-307,515,402.02	167,256,496.68	–	167,256,496.68			–	–			–	–
4. *Statement of Changes in Owners’ Equity of the Parent Company*	(1) Statement of Changes in Owners’ Equity of the Parent Company from January to June 2017		Other	Less: Treasury comprehensive Generic risk Trade risk	Item Share stock Capital reserve share income Surplus reserve reserve reserve	I. Balance at the end of previous	year 3,923,734,700.00 3,838,825,951.77 – 44,727,315.54 697,014,082.63 595,102,127.73 564,870,336.92	Plus: Accounting policy changes – – – – – – –	Early error correction – – – – – – –	Others – – – – – – –	II. Balance at the beginning of	current year 3,923,734,700.00 3,838,825,951.77 – 44,727,315.54 697,014,082.63 595,102,127.73 564,870,336.92	III. Increase/decrease in current year – 6,611,928.24 – -35,154,003.12 – – –	(I) Net profits – – – – – – –	(II) Other comprehensive income – – – -35,154,003.12 – – –	Total of (I) and (II) – – – -35,154,003.12 – – –		(III) Capital contributed by shareholders	and capital decrease – 6,613,851.86 – – – – –	1. Capital contributed by shareholders – 6,613,851.86 – – – – –	2. The amount of share-based	payments recorded in owners’	equity – – – – – – –	3. Others – – – – – – –

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Total owners’	equity	-474,771,898.70	–	–	–	-474,771,898.70	–		–		–		–		–	–	–	–	-1,923.62		10,095,558,020.68
	Retained	earnings	-474,771,898.70	–	–	–	-474,771,898.70	–		–		–		–		–	–	–	–	–		459,825,580.97
	Trade risk	reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	–		564,870,336.92
	Generic risk	reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	–		595,102,127.73
		Surplus reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	–		697,014,082.63
Other	comprehensive	income	–	–	–	–	–	–		–		–		–		–	–	–	–	–		9,573,312.42
	Less: Treasury	share	–	–	–	–	–	–		–		–		–		–	–	–	–	–
		Capital reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	-1,923.62		3,845,437,880.01
		Share stock	–	–	–	–	–	–		–		–		–		–	–	–	–	–		3,923,734,700.00
		Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’	equity	1. Capital transferred from capital	reserves	2. Capital transferred from surplus	reserves	3. Recovery of losses by surplus	reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

– 52 –

APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

	Total owners’	equity		8,202,048,215.85	–	–	–		8,202,048,215.85	2,229,567,281.73	614,781,972.29	-30,230,556.47	584,551,415.82		2,669,811,742.42	2,669,811,742.42			–	–
	Retained	earnings		1,402,523,638.96	–	–	–		1,402,523,638.96	-635,182,655.97	614,781,972.29	–	614,781,972.29		–	–			–	–
	Trade risk	reserve		503,392,139.69	–	–	–		503,392,139.69	61,478,197.23	–	–	–		–	–			–	–
	Generic risk	reserve		527,476,110.78	–	–	–		527,476,110.78	67,626,016.95	–	–	–		–	–			–	–
	Surplus	reserve		604,796,786.78	–	–	–		604,796,786.78	92,217,295.85	–	–	–		–	–			–	–
Other	comprehensive	income		74,957,872.01	–	–	–		74,957,872.01	-30,230,556.47	–	-30,230,556.47	-30,230,556.47		–	–			–	–
	Less:	Treasury share		–	–	–	–		–	–	–	–	–		–	–			–	–
	Capital	reserve		1,865,166,967.63	–	–	–		1,865,166,967.63	1,973,658,984.14	–	–	–		1,969,811,742.42	1,969,811,742.42			–	–
	Share	stock		3,223,734,700.00	–	–	–		3,223,734,700.00	700,000,000.00	–	–	–		700,000,000.00	700,000,000.00			–	–
		Item	I. Balance at the end of previous	year	Plus: Accounting policy changes	Early error correction	Others	II. Balance at the beginning of	current year	III. Increase/decrease in current year	(I) Net profits	(II) Other comprehensive income	Total of (I) and (II)	(III) Capital contributed by shareholders	and capital decrease	1. Capital contributed by shareholders	2. The amount of share-based	payments recorded in owners’	equity	3. Others

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Total owners’	equity	-999,357,757.00	–	–	–	-999,357,757.00	–		–		–		–		–	–	–	–	–	-25,438,119.51	10,431,615,497.58
	Retained	earnings	-1,220,679,267.03	-92,217,295.85	-67,626,016.95	-61,478,197.23	-999,357,757.00	–		–		–		–		–	–	–	–	–	-29,285,361.23	767,340,982.99
	Trade risk	reserve	61,478,197.23	–	–	61,478,197.23	–	–		–		–		–		–	–	–	–	–	–	564,870,336.92
	Generic risk	reserve	67,626,016.95	–	67,626,016.95	–	–	–		–		–		–		–	–	–	–	–	–	595,102,127.73
	Surplus	reserve	92,217,295.85	92,217,295.85	–	–	–	–		–		–		–		–	–	–	–	–	–	697,014,082.63
Other	comprehensive	income	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	44,727,315.54
	Less:	Treasury share	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	–
	Capital	reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	–	3,847,241.72	3,838,825,951.77
	Share	stock	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	3,923,734,700.00
		Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’	equity	1. Capital transferred from capital	reserves	2. Capital transferred from surplus	reserves	3. Recovery of losses by surplus	reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

– 54 –

APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

	Total owners’	equity		5,823,552,930.96	–	–	–		5,823,552,930.96	2,378,495,284.89	1,370,095,689.22	48,779,544.36	1,418,875,233.58		1,952,398,222.31	1,952,398,222.31			–	–
	Retained	earnings		1,518,440,568.85	–	–	–		1,518,440,568.85	-115,916,929.89	1,370,095,689.22	–	1,370,095,689.22		–	–			–	–
	Trade	risk reserve		366,382,570.77	–	–	–		366,382,570.77	137,009,568.92	–	–	–		–	–			–	–
	Generic	risk reserve		376,765,584.97	–	–	–		376,765,584.97	150,710,525.81	–	–	–		–	–			–	–
	Surplus	reserve		399,282,433.40	–	–	–		399,282,433.40	205,514,353.38	–	–	–		–	–			–	–
Other	comprehensive	income		26,178,327.65	–	–	–		26,178,327.65	48,779,544.36	–	48,779,544.36	48,779,544.36		–	–			–	–
	Less:	Treasury share		–	–	–	–		–	–	–	–	–		–	–			–	–
	Capital	reserve		504,887,745.32	–	–	–		504,887,745.32	1,360,279,222.31	–	–	–		1,360,279,222.31	1,360,279,222.31			–	–
	Share	stock		2,631,615,700.00	–	–	–		2,631,615,700.00	592,119,000.00	–	–	–		592,119,000.00	592,119,000.00			–	–
		Item	I. Balance at the end of previous	year	Plus: Accounting policy changes	Early error correction	Others	II. Balance at the beginning of	current year	III. Increase/decrease in current year	(I) Net profits	(II) Other comprehensive income	Total of (I) and (II)	(III) Capital contributed by shareholders	and capital decrease	1. Capital contributed by shareholders	2. The amount of share-based	payments recorded in owners’	equity	3. Others

– 55 –

PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	Total owners’	equity	-992,778,171.00	–	–	–	-992,778,171.00	–		–		–		–		–	–	–	–	–	–	8,202,048,215.85
	Retained	earnings	-1,486,012,619.11	-205,514,353.38	-150,710,525.81	-137,009,568.92	-992,778,171.00	–		–		–		–		–	–	–	–	–	–	1,402,523,638.96
	Trade	risk reserve	137,009,568.92	–	–	137,009,568.92	–	–		–		–		–		–	–	–	–	–	–	503,392,139.69
	Generic	risk reserve	150,710,525.81	–	150,710,525.81	–	–	–		–		–		–		–	–	–	–	–	–	527,476,110.78
	Surplus	reserve	205,514,353.38	205,514,353.38	–	–	–	–		–		–		–		–	–	–	–	–	–	604,796,786.78
Other	comprehensive	income	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	74,957,872.01
	Less:	Treasury share	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	–
	Capital	reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	1,865,166,967.63
	Share	stock	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	3,223,734,700.00
		Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’	equity	1. Capital transferred from capital	reserves	2. Capital transferred from surplus	reserves	3. Recovery of losses by surplus	reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

	Total owners’	equity		4,122,670,125.58	–	–	–		4,122,670,125.58	1,700,882,805.38	562,921,210.75	35,212,940.36	598,134,151.11		1,102,748,654.27	1,102,748,654.27			–	–
	Retained	earnings		1,158,170,993.97	–	–	–		1,158,170,993.97	360,269,574.88	562,921,210.75	–	562,921,210.75		–	–			–	–
	Trade	risk reserve		310,090,449.69	–	–	–		310,090,449.69	56,292,121.08	–	–	–		–	–			–	–
	Generic	risk reserve		314,844,251.79	–	–	–		314,844,251.79	61,921,333.18	–	–	–		–	–			–	–
	Surplus	reserve		314,844,251.79	–	–	–		314,844,251.79	84,438,181.61	–	–	–		–	–			–	–
Other	comprehensive	income		-9,034,612.71	–	–	–		-9,034,612.71	35,212,940.36	–	35,212,940.36	35,212,940.36		–	–			–	–
	Less:	Treasury share		–	–	–	–		–	–	–	–	–		–	–			–	–
	Capital	reserve		239,091.05	–	–	–		239,091.05	504,648,654.27	–	–	–		504,648,654.27	504,648,654.27			–	–
	Share	stock		2,033,515,700.00	–	–	–		2,033,515,700.00	598,100,000.00	–	–	–		598,100,000.00	598,100,000.00			–	–
		Item	I. Balance at the end of previous	year	Plus: Accounting policy changes	Early error correction	Others	II. Balance at the beginning of	current year	III. Increase/decrease in current year	(I) Net profits	(II) Other comprehensive income	Total of (I) and (II)	(III) Capital contributed by shareholders	and capital decrease	1. Capital contributed by shareholders	2. The amount of share-based	payments recorded in owners’	equity	3. Others

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APPENDIX I PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

	Total owners’	equity	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	5,823,552,930.96
	Retained	earnings	-202,651,635.87	-84,438,181.61	-61,921,333.18	-56,292,121.08	–	–		–		–		–		–	–	–	–	–	–	1,518,440,568.85
	Trade	risk reserve	56,292,121.08	–	–	56,292,121.08	–	–		–		–		–		–	–	–	–	–	–	366,382,570.77
	Generic	risk reserve	61,921,333.18	–	61,921,333.18	–	–	–		–		–		–		–	–	–	–	–	–	376,765,584.97
	Surplus	reserve	84,438,181.61	84,438,181.61	–	–	–	–		–		–		–		–	–	–	–	–	–	399,282,433.40
Other	comprehensive	income	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	26,178,327.65
	Less:	Treasury share	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	–
	Capital	reserve	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	504,887,745.32
	Share	stock	–	–	–	–	–	–		–		–		–		–	–	–	–	–	–	2,631,615,700.00
		Item	(IV) Profit distribution	1. Appropriation of surplus reserves	2. Withdrawal of generic risk reserves	3. Withdrawal of trade risk reserves	4. Distribution to shareholders	5. Others	(V) Transfers within shareholders’	equity	1. Capital transferred from capital	reserves	2. Capital transferred from surplus	reserves	3. Recovery of losses by surplus	reserves	4. Others	(VI) Special reserves	1. Withdrawal in current year	2. Utilization in current year	(VII) Others	IV. Balance at end of current year

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

(III) Scope of Financial Statements and Its Changes

1. Changes in the Scope of Financial Statements of the Company

	January
	to June
Company Name	2017	2016	2015	2014
Subsidiaries included in the scope of
consolidation
Central China Futures Co., Ltd.	Yes	Yes	Yes	Yes
Yuxin Investment Management (Shanghai)
Co., Ltd.	Yes	Yes	Yes	No
Zhongding Kaiyuan Entrepreneurial
Investment Management Co., Ltd.	Yes	Yes	Yes	Yes
Zhongzhou Jishi Capital Management
Co., Ltd.	Yes	Yes	Yes	No
Zhongzhou Hefu (Beijing) Investment
Management Co., Ltd.	Yes	Yes	Yes	No
Central China Blue Ocean Investment
Management Co., Ltd.	Yes	Yes	Yes	No
Henan Central China Micro-lending
Company Limited	Yes	Yes	No	No
Central China Equity Exchange Co., Ltd.(1)	Yes	Yes	Yes	No
Henan Zhongzheng Kaiyuan Venture Capital
Fund Management Co., Ltd.	Yes	Yes	Yes	Yes
Central China International Financial
Holdings Company Limited	Yes	Yes	Yes	No
Central China International Holdings
Co., Ltd.	Yes	Yes	No	No
Central China Consulting Service
(Shenzhen) Co., Ltd.	Yes	Yes	No	No
Central China International Financial
Group Limited	Yes	Yes	No	No
Central China Financial Holdings Co., Ltd.	Yes	Yes	No	No
Central China International Securities
Co., Ltd.	Yes	Yes	Yes	No
Central China International Futures
Co., Ltd.	Yes	Yes	Yes	No
Central China International Finance
Co., Ltd.	Yes	Yes	Yes	No
Central China International Investment
Co., Ltd.	Yes	Yes	Yes	No
Central China International Asset
Management Co., Ltd.	Yes	Yes	No	No
Central China International Capital Limited	Yes	Yes	No	No
Taiping Fund Management Co., Ltd.(2)	No	No	Yes	Yes

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	January
	to June
Company Name	2017	2016	2015	2014
Structural entities included in the scope of	consolidation
Tianhong-Central China Robust No. 1 Asset
Management Plan	No	Yes	Yes	Yes
Tianhong-Central China Robust No. 2 Asset
Management Plan	No	Yes	Yes	Yes
Yanhuang No. 1 Premium Fund Family
Asset Management Plan of Central China
Securities	No	Yes	Yes	Yes
Yanhuang No.2 Premium Fund Family Asset
Management Plan of Central China
Securities	Yes	Yes	Yes	Yes
Zhongyuan Yingshi-ICBC-Quantitative
Dynamic Multi-strategy Alpha Phase I
Asset Management Plan	No	No	Yes	Yes
Henan Zhongzheng Kaiyuan Venture
Investment Fund (Limited Partnership)	Yes	Yes	Yes	Yes
Tianhong-Central China Robust No. 3 Asset
Management Plan	No	Yes	Yes	No
Tianhong-Central China Robust No. 4 Asset
Management Plan	No	Yes	Yes	No
Zhongyuan Yingshi Flexibly Configured
Hybrid Securities Investment Fund	No	No	Yes	No
Central China Securities Panshi No. 1 Asset
Family Management Plan	Yes	Yes	Yes	No
CITIC-Prudential Fund Overseas Premium
No. 1 Designated Asset Management Plan	Yes	Yes	Yes	No
Henan Technology Venture Capital Fund
(Limited Partnership)	Yes	Yes	Yes	No
Central China Securities Changsheng No. 2
Quantitative Asset Family Management
Plan	No	Yes	No	No
Central China Futures – Qilin No. 2 Asset
Management Plan	Yes	No	No	No

(1) Three shareholders of Central China Equity Exchange Co., Ltd., namely Henan Investment Group Co., Ltd., Li Xinfeng and Tianming City Construction and Development Company Limited, each of which contributed 16% of the registered capital of Central China Equity Exchange Co., Ltd., signed a Letter of Commitment with the Company. They agreed that they would make the same votes on all important matters of Central China Equity Exchange Co., Ltd and the Company shall have the actual right to control.

(2) On May 13, 2015, the 48th meeting of the 4th Board of Directors of the Company was held. At the meeting, the Proposal of Central China Securities Co., Ltd. on the Listing Transfer of 34% Shares of Zhongyuan Yingshi Fund Management Co., Ltd. was approved through deliberation. After the share transfer, the Company had its shareholding percentage in Zhongyuan Yingshi Fund Management Co., Ltd. from the original 51% to 17%. Meanwhile, Taiping Asset Management Co., Ltd, the transferee of the shares, contributed a capital of RMB27 million, after which the Company had its shareholding percentage in Zhongyuan Yingshi from the previous 17% to 14.98%. On July 27, 2015, the Company completed the bidding, auction and listing procedures in relation to the transferred shares at the Property Rights Trading Center in Henan Province in accordance with the laws, regulations and policies concerning the administration of State-owned asset transfer of financial enterprises, which was approved by China Insurance Regulatory Commission (CIRC) and China Securities Regulatory Commission (CSRC) earlier on February 15 and July 26, 2016 respectively. The aforementioned share transfer and capital increase had been completed. On August 22, 2016, Zhongyuan Yingshi completed its industrial and commercial registration of changes and renamed itself as Taiping Fund Management Co., Ltd.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

2. Overview of the Company Included in the Scope of Consolidation

As of 30 June 2017, the overview of the Company included in the scope of consolidation is shown as follows:

					Shareholding	Shareholding
	Place of	Business		Registered	percentage (%)
Company Name	registration	nature		capital	Direct	Indirect
Subsidiaries acquired through business combinations under common				control
Central China Futures	Zhengzhou	Futures	RMB330 million		51.36
Co., Ltd.		brokerage
Central China International	Hong Kong	Investment	HKD10 million			48.00
Capital Limited		banking
Subsidiaries acquired by means of incorporation or investment, etc.
Yuxin Investment Management	Shanghai	Investment	RMB100 million			51.36
(Shanghai) Co., Ltd.		management
Zhongding Kaiyuan	Beijing	Equity	RMB1.38 billion		100.00
Entrepreneurial Investment		investment,
Management Co., Ltd.Note		etc.
Zhongzhou Jishi Capital	Zhengzhou	Asset	RMB50 million			100.00
Management Co., Ltd.		management
Zhongzhou Hefu (Beijing)	Beijing	Investment	RMB10 million			51.00
Investment Management		management
Co., Ltd.
Central China Blue Ocean	Zhengzhou	Alternative	RMB500 million		100.00
Investment Management		investment
Co., Ltd.
Henan Central China Micro-	Kaifeng	Financial	RMB1 billion			65.00
lending Company Limited		intermediary
		services
Central China Equity Exchange	Zhengzhou	Equity	RMB350 million		35.00
Co., Ltd.		investment,
		etc.
Henan Zhongzheng Kaiyuan	Luoyang	Equity	RMB100 million			21.00
Venture Capital Fund		investment
Management Co., Ltd.		management
Central China International	Hong Kong	Investment	HKD500 million		100.00
Financial Holdings Company		holding
Limited
Central China International	British Virgin	Holding		USD50,000		100.00
Holdings Co., Ltd.	Islands	company

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

				Shareholding	Shareholding	Shareholding
	Place of	Business	Registered	percentage		(%)
Company Name	registration	nature	capital	Direct	Indirect
Central China Consulting	Shenzhen	Consulting	RMB10 million			100.00
Service (Shenzhen) Co., Ltd.		service
Central China International	Cayman	Investment	HKD1 billion			48.00
Financial Group Limited	Islands	holding
Central China Financial	British Virgin	Holding	USD1			48.00
Holdings Co., Ltd.	Islands	company
Central China International	Hong Kong	Securities	HKD200 million			48.00
Securities Co., Ltd.		brokerage
Central China International	Hong Kong	Finance	HKD1			48.00
Futures Company Limited		consultancy
Central China International	Hong Kong	Finance	HKD1			48.00
Finance Co., Ltd.		consultancy
Central China International	Hong Kong	Investment	HKD10 million			48.00
Investment Co., Ltd.		consulting
Central China International	Hong Kong	Asset	HKD10 million			48.00
Asset Management Co., Ltd.		management

Note: ZDKY Venture Capital was originally held as to 64.86% equity interests by Central China Securities. On the general meeting held by ZDKY Venture Capital on 28 June 2017, it was agreed that the company’s registered capital shall be reduced by RMB485 million and an audited refund shall be made to its shareholders other than Central China Securities at a price of RMB1.17/registered capital of RMB1. As of 30 June 2017, the formalities in relation to the change of registration with the Administration of Industry & Commerce for the capital reduction of ZDKY Venture Capital have not been completed. However, the payment of relevant refund has been completed. Central China Securities has 100% effective control over ZDKY Venture Capital and the financial audit was conducted on this basis.

(IV) The Management’s Discussion and Analysis

1. Major Financial Indicators of the Company for the Last Period and the Previous Three Years

	January to
Item	June 2017	2016	2015	2014
Basic earnings per share(1)
(RMB per share)	0.03	0.22	0.49	0.24
Diluted earnings per share
(RMB per share) (1)	0.03	0.22	0.49	0.24
Basic earnings per share
after reduction of non-
recurring gains and
losses(1) (RMB per share)	0.04	0.21	0.49	0.23
Weighted average return on
equity(1)	1.27%	8.89%	20.54%	11.41%

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

	January to
Item	June 2017	2016	2015	2014
Weighted average return on
equity after reduction of
non-recurring gains and
losses(1)	1.33%	8.23%	20.43%	11.06%
Equity of shareholders per
share attributable to parent
company (2)(RMB per
share)	2.59	2.70	2.53	2.20

(1) The earnings per share and the return on equity shall be calculated in accordance with the provisions of the Compilation Rules for Information Disclosures by Companies Offering Securities to the Public No. 9-Calculation and Disclosure of Return on Equity and Earnings per Share (2010 Revision).
(2) Equity per share=equity attributable to shareholders of parent company at the end of year/total amount of share stock at the end of year.

2. Net Capital and Risk Control Indicators of the Parent Company

Pursuant to the Measures on Management of the Risk Control Indexes of Securities Companies (《證券公司風險控制指標管理辦法》), the Provisions on Adjusting the Calculation Standards for the Net Capital of Securities Companies (《關於調整證券公司淨資本計算標準的規定》) and the Decision on Amending the Provisions on the Calculation Standards for the Risk Capital Reserves of Securities Companies (《關於修改<關於證券公司風險資本準備計算標準的規定>的決定》) issued by the CSRC, the Company’s various risk control indexes (on parent company basis) as at the end of 2014 and 2015 were as follows:

	Regulatory	Pre-alert
Item	Standard	Standard	Risk Control	Index
			31 December	31 December
			2015	2014
Net capital (RMB0,000)	–	–	701,080.14	400,104.14
Equity (RMB0,000)	–	–	820,204.82	582,355.29
Net capital/sum of venture
capital reserves	>100%	>120%	648.51%	423.08%
Net capital/equity	>40%	>48%	85.48%	68.70%
Net capital/liabilities	>8%	>9.6%	42.45%	35.25%
Equity/liabilities	>20%	>24%	49.67%	51.30%
Self-operated equity securities
and securities derivatives/net
capital	<100%	<80%	42.42%	17.41%
Self-operated securities of fixed
income type/net capital	<500%	<400%	43.71%	78.41%

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

On 16 June 2016, CSRC issued the Decision on Amending the Measures on Management of the Risk Control Indexes of Securities Companies (《關於修改<證券公司風險控制指標管理辦法>的決定》) and the Provisions on Calculation Standards for the Risk Control Indexes of Securities Companies (《證券公司風險控制指標計算標準規定》), which are effective from 1 October 2016. The Company calculated its major risk control indexes as at the end of June 2017 and end of 2016 according to the revised measures and made retrospective adjustments to the data as at the end of 2015, the details of which were as follow:

Item				Risk Control Index
	Regulatory	Pre-alert	30 June	31 December	31 December
	Standard	Standard	2017	2016	2015
Net capital (RMB0’000)	–	–	835,034.58	1,021,717.78	781,406.40
Net assets (RMB0’000)	–	–	1,009,555.80	1,043,161.55	820,204.82
Risk coverage ratio(1)	�100%	�120%	415.93%	444.34%	347.11%
Capital leverage ratio(2)	�8%	�9.6%	22.10%	29.26%	24.73%
Liquidity coverage
ratio(3)	�100%	�120%	532.52%	2,053.26%	538.25%
Net stable funding
ratio(4)	�100%	�120%	172.21%	158.58%	138.49%
Net capital/net assets	�20%	�24%	82.71%	97.94%	95.27%
Net capital/liabilities	�8%	�9.6%	44.03%	63.20%	47.32%
Net assets/liabilities	�10%	�12%	53.24%	64.52%	49.67%
Proprietary equity
securities and its
derivatives/net capital	�100%	�80%	10.86%	22.34%	28.78%
Proprietary non-equity
securities and its
derivatives/net capital	�500%	�400%	75.23%	55.29%	47.54%

(1) Risk coverage ratio = Net Capital/Sum of various risk capital reserves*100%;
(2) Capital leverage ratio = Core net capital/Total on-and off-balance sheet assets*100%, in which no adjustment in respect of risk of contingent liabilities, such as guarantee, was deducted for the core net capital;
(3) Liquidity coverage ratio = High quality liquid asset/Net cash outflow in the next 30 days*100%;
(4) Net stable funding ratio = The available amount of stable funding/The required amount of stable funding*100%.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

3. Brief Analysis of Financial Position of the Company

(1) Composition of assets

The composition of the assets of the Company in the last period and the previous three years is shown as follows:

Unit: RMB0,000

Item	30 June 2017	30 June 2017	31 December 2016	31 December 2016	31 December 2015	31 December 2015	31 December 2014	31 December 2014
	Amount	Percentage	Amount	Percentage	Amount	Percentage	Amount	Percentage
Cash and cash
equivalents	882,906.80	21.37%	1,209,041.51	29.94%	1,270,746.06	30.51%	868,241.58	30.71%
Including: Customer
deposit	711,737.95	17.22%	772,067.65	19.12%	1,073,935.56	25.78%	722,590.84	25.56%
Deposit reservation
for balance	230,088.20	5.57%	309,695.71	7.67%	445,561.57	10.70%	262,086.73	9.27%
Including: Customer
reserves	191,448.49	4.63%	235,317.32	5.83%	335,688.81	8.06%	227,101.86	8.03%
Lendings to banks and
other financial
institutions	555,559.29	13.44%	611,926.54	15.15%	815,880.31	19.59%	733,151.73	25.93%
Financial assets
measured at fair and
changes of which
included in current
profit and loss	759,154.13	18.37%	803,709.56	19.90%	504,512.82	12.11%	409,928.25	14.50%
Redemptory monetary
capital for sale	1,161,242.08	28.10%	591,169.62	14.64%	682,668.93	16.39%	288,971.50	10.22%
Receivables	5,135.26	0.12%	4,349.67	0.11%	2,758.78	0.07%	1,740.90	0.06%
Interest receivable	43,156.12	1.04%	39,734.53	0.98%	25,775.78	0.62%	17,399.80	0.62%
Refundable deposit	34,516.40	0.84%	49,007.81	1.21%	42,290.65	1.02%	72,740.42	2.57%
Classified as assets held
for sale	–	–	–	–	3,942.89	0.09%	–	–
Available-for-sale
financial assets	308,955.27	7.48%	258,193.76	6.39%	244,359.95	5.87%	75,123.50	2.66%
Long-term equity
investment	30,801.11	0.75%	37,042.16	0.92%	10,670.55	0.26%	4,968.44	0.18%
Investment real estate	2,235.50	0.05%	2,295.34	0.06%	2,122.51	0.05%	2,306.64	0.08%
Fixed assets	23,475.86	0.57%	23,803.32	0.59%	23,555.29	0.57%	21,704.60	0.77%
Construction in progress	407.41	0.01%	405.14	0.01%	54.32	0.00%	10.00	0.00%
Intangible assets	15,117.70	0.37%	15,555.94	0.39%	15,596.07	0.37%	15,374.27	0.54%
Goodwill	2,190.21	0.05%	2,146.61	0.05%	726.88	0.02%	726.88	0.03%
Deferred income tax
assets	14,340.13	0.35%	11,792.88	0.29%	20,933.45	0.50%	10,446.85	0.37%
Other assets	62,819.71	1.52%	68,587.17	1.70%	52,968.04	1.27%	42,002.13	1.49%
Total assets	4,132,101.18	100.00%	4,038,457.26	100.00%	4,165,124.86	100.00%	2,826,924.23	100.00%

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

The assets of the Company are divided into client assets and self-owned assets, among which the former includes the part of cash and cash equivalents, deposit reservation for balance and refundable deposit attributable to clients; the latter mainly refers to cash and cash equivalents, financing funds, financial assets measured at fair value and changes of which included in current profit and loss, redemptory monetary capital for sale and available-for-sale financial assets, etc.

As at the end of 2014, 2015, 2016 and June 2017, the Company has total assets of RMB28,269,242,300, RMB41,651,248,600, RMB40,384,572,600 and RMB41,321,011,800, including client assets of RMB9,659,833,000, RMB14,867,251,000, RMB10,368,090,400 and RMB9,284,559,300 and self-owned assets of RMB18,609,409,300, RMB26,783,997,600, RMB30,016,482,200 and RMB32,036,452,500. As at the end of 2015, the total assets of the Company had a huge increase compared to the end of 2014, which was mainly derived from active trading in the securities market and increase in client deposits in 2015. Also, the Company witnessed a growth of its self-owned assets to a large extent due to the expansion of margin trading and short selling, share pledge type repurchase, direct investment and other businesses as well as continuous improvement of its profitability by means of debt and equity financing. However, as at the end of 2016, the total assets of the Company saw a slight decrease compared to the end of 2015, which was mainly derived from the prolonged sluggish securities market in 2016 and huge decrease in client assets. Nevertheless, in December 2016, the Company made an initial offering of its proceeds out of A shares equivalent to RMB2.8 billion and the increase in self-owned assets, which made up for the impact of the decrease in clients’ asset scale on the total assets of the Company. As at the end of June 2017, the total assets of the Company were basically the same as that of the end of 2016.

During the reporting periods, the client assets of the Company were derived from monetary assets of securities and futures businesses. Monetary and nonmonetary financial assets with high liquidity dominate in self-owned assets, in which long-term and other assets shared low proportions and enjoy a high liquidity. Thus, the asset structure of the Company conforms to the characters of industry operation.

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PRELIMINARY PROPOSAL FOR THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE CORPORATE BONDS (REVISED VERSION)

APPENDIX I

(2) Composition of liabilities

The composition of liabilities of the Company in the last period and the previous three years is as follows:

Unit: RMB0,000

Item	30 June 2017	30 June 2017	31 December 2016	31 December 2016	31 December 2015	31 December 2015	31 December 2014	31 December 2014
	Amount	Percentage	Amount	Percentage	Amount	Percentage	Amount	Percentage
Short-term borrowings	108,801.15	3.64%	66,111.89	2.29%	–	–	–	–
Short-term financing
payable	26,097.00	0.87%	380,975.50	13.21%	510,696.00	15.58%	144,128.00	6.43%
Borrowings from banks
and other financial
institutions	85,000.00	2.84%	40,000.00	1.39%	–	–	237,300.00	10.59%
Financial liabilities
measured at fair value
and changes of which
included in current
profit and loss	109,667.16	3.67%	120,817.74	4.19%	114,417.04	3.49%	79,107.40	3.53%
Derivative financial
liabilities	55.71	0.00%	13.20	0.00%	–	–	–	–
Financial assets sold
for repurchase	1,104,785.39	36.93%	560,797.88	19.45%	471,296.46	14.38%	558,723.43	24.93%
Receiving from
vicariously traded
securities	837,498.11	28.00%	942,608.81	32.69%	1,328,121.69	40.52%	886,387.32	39.55%
Receiving from
vicariously traded
securities in credit
trade	90,957.82	3.04%	94,200.23	3.27%	158,603.42	4.84%	79,595.98	3.55%
Payroll Payable	34,874.47	1.17%	47,206.08	1.64%	71,103.29	2.17%	37,591.46	1.68%
Taxes payable	7,495.08	0.25%	9,647.51	0.33%	26,715.52	0.82%	23,967.01	1.07%
Payables	14,039.80	0.47%	20,733.22	0.72%	15,246.67	0.47%	9,216.54	0.41%
Interest payable	9,777.60	0.33%	35,492.31	1.23%	32,749.65	1.00%	11,176.53	0.50%
Classified as liabilities
held for sale	–	–	–	–	1,169.58	0.04%	–	–
Long-term borrowings	5,368.26	0.18%	5,532.73	0.19%	5,181.84	0.16%	–	–
Bonds payable	549,525.55	18.37%	549,429.86	19.05%	529,107.80	16.14%	149,002.72	6.65%
Deferred income tax
liabilities	226.54	0.01%	2,870.70	0.10%	4,915.74	0.15%	2,783.65	0.12%
Other liabilities	7,425.69	0.25%	7,342.72	0.25%	8,154.79	0.25%	22,264.67	0.99%
Total liabilities	2,991,595.33	100.00%	2,883,780.38	100.00%	3,277,479.49	100.00%	2,241,244.72	100.00%

The liabilities of the Company mainly include short-term financing payable, Borrowings from banks and other financial institutions, financial liabilities measured at fair value and changes of which included in profit and loss, receiving from vicariously traded securities, financial assets sold for repurchase, bonds payable, etc. As at the end of 2014, 2015, 2016 and June 2017, the Company had total liabilities of RMB22,412,447,200, RMB32,774,794,900, RMB28,837,803,800 and RMB29,915,953,300.

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During the reporting periods, receiving from vicariously traded securities and receiving from vicariously traded securities in credit trade shared the most in the liabilities of the Company, representing 43.10%, 45.36%, 35.95% and 31.04% respectively as at the end of 2014, 2015, 2016 and June 2017. Both items are the receipts arising from securities transaction by the Company on behalf of clients, subject to the authorization by clients. The items were kept by third parties and independent from self-owned assets of the Company. They would not substantially cause major influence over the solvency of the Company but would be impacted by client transaction activities, market situation and other external factors beyond the control of other companies.

During the reporting periods, the Company gradually expanded its financing channels and financing scale and raised capital through corporate debt, secondary debt, gain certificate, repurchase, refinancing and inter-bank market so as to satisfy the development requirements of various businesses. As at the end of reporting periods, the Company had an increase in the total liabilities after reduction of receiving from vicariously traded securities and receiving from vicariously traded securities in credit trade, namely RMB12,752,614,200, RMB17,907,543,800, RMB18,469,713,400 and RMB20,631,394,000.

(3) Solvency analysis

The major solvency indicators of the Company in the last period and the previous three years are shown as follows:

	30 June 2017/
	January to	31 December	31 December	31 December
Item	June 2017	2016/2016	2015/2015	2014/2014
Asset liability ratio
(as per the
standards of
parent company)	65.26%	60.78%	66.81%	66.09%
Loan repayment
ratio	100.00%	100.00%	100.00%	100.00%
Interest payment
ratio	100.00%	100.00%	100.00%	100.00%

Note: Asset liability ratio= (total liabilities-receiving from vicariously traded securitiesreceiving from vicariously traded securities in credit trade)/(total assets-receiving from vicariously traded securities-receiving from vicariously traded securities in credit trade).

As at the end of 2014, 2015, 2016 and June 2017, the Company had asset liability ratios (as per the standards of parent company) of 66.09%, 66.81%, 60.78% and 65.26% respectively, which maintained stable on the whole. There is no problem

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with insufficient long-term solvency. As at the end of 2016, the Company had a decrease in asset liability ratio of 6.03% (as per the standards of parent company), which was mainly due to the following facts: the Company returned some short-term financing including short-term financing bonds, secondary debt and income certificates, leading to the decrease in liabilities; and the asset scale kept relatively stable. As at the end of June 2017, the asset liability ratio of the Company (on parent company basis) increased by 4.48 percentage points as compared with the end of last year, which is mainly attributable to the increase in liabilities as a result of the increase in financial assets sold under repurchase agreements.

The Company’s assets mainly comprise of cash and cash equivalents, financing funds, financial assets at fair value through profit or loss, financial assets held under resale agreements and available-for-sale financial assets, hence the Company enjoys high asset liquidity. Meanwhile, the Company has sufficient collateral for financing funds, and its financial assets at fair value through profit or loss and available-forsale financial assets were mainly fixed income securities with low risk. Hence, the Company has high risk resistance capacity. The Company’s liabilities mainly comprise of short-term liabilities (such as short-term financing payable, borrowings from banks and other financial institutions and financial assets sold under repurchase agreements) and long term liabilities (which are mainly corporate bonds and subordinated bonds). The Company has a rational structure of asset and liability and the solvency of the Company is guaranteed.

(4) Profitability analysis

The major profitability indicators of the Company in the last period and the previous three years are shown as follows:

Unit: 0,000

	January to
Item	June 2017	2016	2015	2014
Operating income	84,226.86	202,681.10	400,435.53	180,821.68
Operating cost	60,640.18	106,783.87	209,323.27	107,867.75
Operating profits	23,586.68	95,897.22	191,112.26	72,953.93
Total profits	22,644.52	97,456.66	189,096.92	75,477.15
Net profits	16,796.89	74,672.48	140,238.06	54,998.27
Owners’ net profits attributable to
parent company	13,337.35	71,864.62	140,550.04	56,229.02

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During the reporting periods, the Company actively facilitated the transformation of brokerage service towards securities investment, accelerated strategic arrangement and business innovation and promoted international layout, further increasing its comprehensive competitiveness. However, the operating income of the Company was mainly derived from capital intermediary services such as securities brokerage, futures brokerage and margin trading and short selling and its profitability was highly associated with factors including macroeconomic environment, fluctuation of securities market and investors’ behavior, with a strong periodicity and fluctuation.

In 2015, the securities market first went up and then down with active trading. Innovative businesses including margin trading and short selling witnessed a sustained rapid growth and the overall profitability of the securities industry was improved to a large extent. In this context, the Company witnessed a huge growth of business income on a year-on-year basis and further improved comprehensive competitiveness. During the year, the Company recorded operating income of RMB4,004,355,300, operating profit of RMB1,911,122,600 and net profit of RMB1,402,380,600, representing increases of 121.45%, 161.96% and 154.99% over 2014 respectively.

In 2016, the overall securities market was sluggish and the transaction volume of both Shanghai and Shenzhen Stock Exchanges dropped significantly year-onyear. Against this backdrop, the income from the Company’s businesses such as securities brokerage, margin financing and securities investment which were affected by the fluctuation of the securities market to a larger extent has decreased. However, on the other hand, with the Company’s continuous efforts in optimizing income structure, the income from investment banking business, direct investment business and overseas business have increased significantly. During the year, the Company recorded operating income of RMB2,026,811,000, operating profit of RMB958,972,200 and net profit of RMB746,724,800, representing decreases of 49.38%, 49.82% and 46.75% over 2015 respectively.

During January to June 2017, the Company recorded operating income of RMB842,268,600, operating profit of RMB235,866,800 and net profit of RMB167,968,900.

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IV. USE OF THE PROCEEDS

The total expected proceeds from the issuance of the A Share Convertible Corporate Bonds will not exceed RMB2.55 billion (inclusive), all of which will be used to replenish the working capital of the Company after deducting the issue cost. The proceeds of the Company will be increased after share conversion by the A Share Convertible Corporate Bonds Holders so as to support future business development, improve its market competitiveness and risk resistance capacity and promote the realization of its strategic development goals. The specific use is described as follows:

An amount not exceeding RMB1.6 billion is proposed to be used in capital intermediary businesses, including but not limited to margin trading and short selling, agreed repurchased securities transaction, share pledge type repurchase transaction and other over-the-counter and non-over-the-counter capital intermediary businesses;
An amount not exceeding RMB0.8 billion is proposed to be used in investment, overseas business and market making, including but not limited to self-operated investment, capital increase to subsidiaries and market making;
An amount not exceeding RMB0.05 billion is proposed to be used in securities brokerage, investment banking and information system building;
An amount not exceeding RMB0.1 billion is proposed to be used in asset management.

V. DILUTION OF CURRENT RETURNS AND REMEDIAL MEASURES

(I) Impact of the Issuance on the Major Financial Indicators of the Company

The total expected proceeds from the issuance of the A Share Convertible Corporate Bonds will not exceed RMB2.55 billion (inclusive), all of which will be used to replenish the working capital of the Company after deducting the issue cost. The proceeds of the Company will be increased after share transfer by the A Share Convertible Corporate Bonds Holders so as to support future business development, improve its market competitiveness and risk resistance capacity and promote the realization of its strategic development goals.

1. Major Assumptions

(1) Assuming that no major adverse change occurs to the macroeconomic environment and securities industry;

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(2) Assuming that that the issuance will be completed by December 2017 and all holders of the A Share Convertible Corporate Bonds will complete share conversion by June 2018. The complete dates are only estimates by the Company. The completion date of issuance approved by CSRC and the actual date of share conversion completion by the Holders of the A Share Convertible Corporate Bonds shall prevail. This assumption does not represent the commitment made by the Company on the actual completion date. Investors shall not make determinations on investment based on the assumption. Where any loss is caused to any investor in its investment due to reliance on the assumption, the Company will bear no liability for compensation;
(3) Assuming that the proceeds from the Issuance is RMB2.55 billion, without regard to the impact of from the Issuance expenses. The proceeds actually generated from the Issuance shall be determined on the basis of such factors as per the approval of the regulatory authorities, the subscription of the Issuance and the Issuance expenses;
(4) Considering the fact that corporate performance is impacted by macro economy, industry cycle and business development conditions, it seems difficult to predict the overall gains of the Company in the future. Assume the owners’ net profits attributable to the parent company after reduction of non-recurring gains and losses in 2017 remain the same as 2016; and the owners’ net profits attributable to the parent company after reduction of non-recurring gains and losses in 2018 remain the same, have 10% increase and 10% decrease on the basis of 2017 for calculation. The above assumptions are only used to predict the impact of the dilution of current returns in the issuance. Neither of them shall neither represent the adjustment of the Company on the future operation conditions and trend nor constitute profitability prediction. Investors shall not make determinations on investment based on the assumptions. Where any loss is caused to any investor in its investment due to reliance on the assumptions, the Company will bear no liability for compensation;
(5) The profits for the year of 2016 have been allocated. Assume the amount of cash dividend in 2017 is the same as 2016. And a total of cash dividends of RMB797,145,368.70 are issued;
(6) The Conversion Price of the A Share Convertible Corporate Bonds in the issuance is the highest of the average trading price of A Shares of the Company for the 30 trading days preceding the 44th meeting of the 5th board of directors (or 31 October 2017), the average trading price of A Shares of the Company for the 20 trading days preceding the aforementioned meeting and the average trading price of A Shares of the Company for the trading day immediately before the aforesaid meeting, or RMB9.34 per share. Upon the implementation

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of the profit distribution plan of the Company in 2016 and 2017, assume the adjustment of the Conversion Price is completed before the share conversion registration date and the adjusted Conversion Price is RMB9.21 per share. The Conversion Price is only used to calculate the impact of the dilution of the current returns in the issuance on major financial indicators. And the final initial Conversion Price shall be determined by the Board of Directors before issuance with reference to market conditions, subject to the authorization at the general meeting. And the Conversion Price may be subject to ex-rights or ex-dividend or downward adjustments;

(7) Assuming that no other factors that may affect or potentially affect the total share capital of the Company are not considered except for the issuance;
(8) Assuming that no impact of the proceeds generated from the issuance on the Company’s production, operation and financial condition (such as financial costs and investment revenue) and no impact from the interest cost of the A Share Convertible Corporate Bonds are considered.

2. Impact on the Major Financial Indicators of the Company

Based on the above assumptions, the Company calculated the impact of the impact of the issuance on the major financial indicators of the Company, specifically:

		2018/31 December 2018	2018/31 December 2018
	2017/	Fully	Fully
	31 December	unconverted	converted
Item	2017	shares	shares
Total share capital	3,923,734,700	3,923,734,700	4,200,607,664
Assumption: The net profits of the
Company in 2017 and 2018 remain
the same as 2016
Net profits of ordinary shareholders
attributable to parent company after
reduction of non-recurring gains and
losses (RMB)	665,312,398.19	665,312,398.19	665,312,398.19
Basic earnings per share of ordinary
shareholders attributable to parent
company after reduction of non-
recurring gains and losses
(RMB per share)	0.17	0.17		0.16

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		2018/31 December 2018	2018/31 December 2018
	2017/	Fully	Fully
	31 December	unconverted	converted
Item	2017	shares	shares
Diluted earnings per share of ordinary
shareholders attributable to parent
company after reduction of non-
recurring gains and losses
(RMB per share)	0.17	0.16		0.16
Assumption: The net profits of the
Company in 2017 are the same with
2016 and those in 2018 has an
increase of 10% compared to 2017.
Net profits of ordinary shareholders
attributable to parent company after
reduction of non-recurring gains and
losses (RMB)	665,312,398.19	731,843,638.01	731,843,638.01
Basic earnings per share of ordinary
shareholders attributable to parent
company after reduction of non-
recurring gains and losses
(RMB per share)	0.17	0.19		0.18
Diluted earnings per share of ordinary
shareholders attributable to parent
company after reduction of non-
recurring gains and losses
(RMB per share)	0.17	0.17		0.17
Assumption: The net profits of the
Company in 2017 are the same with
2016 and those in 2018 has an
decrease of 10% compared to 2017.
Net profits of ordinary shareholders
attributable to parent company after
reduction of non-recurring gains and
losses (RMB)	665,312,398.19	598,781,158.37	598,781,158.37
Basic earnings per share of ordinary
shareholders attributable to parent
company after reduction of
non-recurring gains and losses
(RMB per share)	0.17	0.15		0.15
Diluted earnings per share of ordinary
shareholders attributable to parent
company after reduction of non-
recurring gains and losses (RMB per
share)	0.17	0.14		0.14

Note: The basic earnings per share and the diluted earnings per share shall be calculated in accordance with the provisions of the Compilation Rules for Information Disclosures by Companies Offering Securities to the Public No. 9-Calculation and Disclosure of Return on Equity and Earnings Per Share (《公開發行證券的公司信息披露編報規則第9號–淨資產收益率和每股收益的計算及披露》). Also, the impact of the non-recurring gains and losses is ignored.

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Upon the issuance, the number of all outstanding ordinary shares and potential diluted ordinary shares of the Company will be increased accordingly. It will take some time and efforts for the Company to replenish its working capital and develop principal business for interest earning by use of the proceeds. Thus, the basic earnings per share and diluted earnings per share after reduction of non-recurring gains and losses may be subject to drop. Also, the clauses on the downward adjustment of the A Share Convertible Corporate Bonds are formulated. After the clauses are triggered, the Company may apply for downward adjustment of the Conversion Price, which may lead to the increase in the newly increased stock capital due to the share conversion of A Share Convertible Corporate Bonds, thus expanding the potential dilution effect of the A Share Convertible Corporate Bonds on the existing shareholders of the Company.

Investors are hereby warned against any risk of slight dilution of current returns that may be caused by such issuance.

(II) Necessity and Rationality of the Issuance

1. Necessity of the Issuance

(1) Seizing the development opportunities of the Central Plains Economic Zone, tapping the potential of securities industry in Henan

The Company is the sole incorporated securities company registered in Henan. Henan, as a major province in the central part of China, has ranked the top among 18 provinces in the middle and western regions of China and the 5th for 13 consecutive years, in the whole country in terms of GDP. In 2014, 2015 and 2016, Henan had a GDP of RMB3,493.824 billion, RMB3,701.025 billion and RMB4,016.001 billion respectively. Currently, the province is making all efforts to implement four major national strategies, namely Central Plains Economic Zone, Zhengzhou Airport Economy Zone, planning and construction of National Core Grain Growing Area National Central City. On April 1, 2017, the new pilot free trade zone set up by the State Council was established, giving a strong momentum to the development of real economy. However, Henan has a relatively backward financial industry. As at the end of 2016, the province had a securitization ratio of only 22.5%, far below the average 68.2% level of the whole country. Although the Company has provided intensive services in Henan for years, it remains to have some gaps with leading domestic securities traders in terms of business scale and competition status.

Thus, it is urgently necessary for the Company to increase its capital strength through the issuance of the A Share Convertible Corporate Bonds, further improve its market competitiveness, tap the development potential of securities industry of Henan based on its unique regional strength and seize the flooding business opportunities following the rapid growth of China’s capital market.

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(2) Further increasing net capital strength, expanding business scale, optimizing business structure and improving the ability to hedge against risks.

Within the regulatory system centered on net capital and fluidity, the development of securities companies has something to do with their capital scale, which in turn determines the market status, profitability and final competitiveness of these companies. Securities companies are in need of potential capital scale support in order to increase the strength of their traditional businesses and develop innovative businesses. Net capital has become a key factor to decide the future development of securities companies.

① Increased net capital will facilitate the Company to expand its business scale and improve its competition status

Sufficient net capital represents the key for securities enterprises to expand their business scale and their improve competitiveness. Specific requirements are proposed for the capital scale of businesses of securities companies in the Measures for the Risk Control Indicators of Securities Companies (《證券公司風險控制指標管理辦法》). The business qualification acquisition, risk resistance capacity and business scale of a securities company directly links to its net capital strength. Traditional businesses including brokerage, self-operated businesses, distribution, underwriting and asset management, and innovative businesses including investment and margin trading and short selling are closely associated with the net capital scale of the Company. A securities company must have sufficient capital support in order to expand its business scale and improve its competitiveness.

According to the statistical data from the Securities Association of China, as at 31 December 2016, the Company had an equity and net capital of RMB10.432 billion and 10.217 billion by contrast to the RMB74.211 billion and 66.323 billion, the average of the top 10 securities companies in terms of capital scale during the same period. It can be seen that there remains a large gap between the Company and leading securities companies in the industry. For the recent years, in the great era featuring active innovation and rapid growth of China’s securities sector, securities companies are striving to improve its capital level through financing in the capital market, which pose further threat to the industry status of the Company. Therefore, it is urgently necessary for the Company to increase net capital, expand business scale, enhance competitiveness strength and improve market competitiveness through the issuance of the A Share Convertible Corporate Bonds.

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② Increased net capital can contribute to further optimized business structure and improved profitability of the Company.

The profit-making model of the securities sector is under gradual transition, from the previous single channel charging to diversified modes. The former dominated in the past among the profit-making models. With successively promulgation of a series of new policies in the capital market and encourage of industry innovation, capital intermediary and innovation businesses including margin trading and short selling, share pledge type repurchase, agreed repurchase type securities trade and market making have become new profit growth points of securities companies. Also, the establishment of multi-layered capital market in China as well as the increase in the type and scale of securities financing also mean better development opportunities for securities investment. The profit-making model of securities companies is starting to transform towards the diversified profit-making model attaching equal importance to channel and non-channel charging and capital intermediary income.

In this context, the Company actively develops non-channel businesses including capital intermediary business, innovative business and self-operated securities, constructs a diversified business structure and cultivates new profit growth points, as well as begin to been fruit. However, constrained by net capital and working capital, the Company is constrained in the scale of the abovementioned non-channel businesses and remains to have some gap with leading brokers of the industry. It is urgent that the Company should replenish its capital to completely optimize its business structure, develop innovative businesses and lay a solid foundation for its increase in business income and improvement of profitability.

③ Increased net capital can increase the ability of the Company to hedge against risks

Risk control remains the priority of securities companies in developing businesses. As innovative products are being promoted in the securities industry, the risk management of both traditional and innovative businesses should be further enhanced. And the risk resistance capacity of a securities company also has a direct impact on its sustained profitability, survivability and development. In light of its intensive capital, such capacity of a securities company is directly associated with its capital scale. Only by maintaining the capital scale matching business scale can we better prevent and solve various risks arising from market, credit, operation and liquidity. Thus, upon the issuance and share transfer of the A Share Convertible Corporate Bonds, the net capital scale of the Company may be further enhanced, so will the risk resistance capacity.

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(3) Need for achieving the strategic development goals of the Company

The accelerated transition of development modes for China’s economy and profound changes in China’s capital market environment are followed by successive promulgation of a series of new policies in the capital market. Under the background, the securities market of China is witnessing rapid growth, featuring significantly improved overall strength of the industry, further improved basic functions, enhanced ability of serving real economy, expanded business scope, diversified product types, improved profitability of securities industry, accelerated arrangement of online securities arrangement and pace of internationalization for securities business. The current days are a key period for transition of China’s securities industry and also for breaking and reshaping of market patterns.

In this instance, powered by the A+H listing, the Company commits itself to building a first-class large-scale modern financial holdings group covering securities, futures, investment and funds, making it rank among the top in China’s securities industry in terms of overall strength and financial performance. As for business development pattern, the Company will vigorously develop capital intermediary businesses with margin trading and short selling and stock pledging as focus and innovative businesses with shares, equity, OTC market and market maker as representatives while consistently facilitating securities brokerage, investment banking, self-operated investment, asset management and futures business. At the same time, the Company actively develops other new business and profit growth points, mainly accelerating the building of a “six in one” industry chain with Central China Equity Exchange as source and actively developing internet finance and overseas businesses, etc.

In order to realize the strategic goals of the Company as early as possible, the Company should further accelerate its income restructuring and increase its capacity of sustained profitability, all of which cannot do without the support of potential capital strength. Upon the issuance and share transfer of the A Share Convertible Corporate Bonds, the Company will increase its net capital scale and working capital strength, thus laying a foundation for realization of its strategic goals as early as possible.

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2. Rationality of the issuance

In terms of issuance conditions, the Company has a complete organization structure, sound operation, sustainable profitability and sound financial position. There is no false information contained in the financial documents. The amount and use of the proceeds raised conforms to relevant provisions. No major legal violations are made. Thus, The Company has satisfied the requirements in relation to the public issuance of the A Share Convertible Corporate Bonds under the Company Law of the PRC (《中華人民共和國公司法》), the Securities Law of the PRC (《中華人民共和國證券法》), the Administrative Measures for the Issuance of Securities by Listed Companies (《上市公司證券發行管理辦法》) and other laws and regulations and owned the qualifications and conditions for the public issuance of the A Share Convertible Corporate Bonds.

In terms of national policy, a lot of industry policies and normative documents issued in China in recent years gives a strong support to the securities industry and helps to create a better policy environment for the development of securities companies. The Company proposes to replenish its working capital and support future business development using the A Share Convertible Corporate Bonds issued, which conforms to the national industry policy orientation.

In terms of market conditions, the securities industry is experiencing recovery, especially in asset scale and profitability. The replenished capital enjoys favorable market conditions.

Also, the amount and use of the proceeds in the issuance is compatible with the current production and operation scale, business level and management capability of the Company.

Overall, the public issuance of the A Share Convertible Corporate Bonds is rational.

(III) Relationship between Use of Proceeds and the Current Businesses of the Company, Reserves of Personnel, Technology and Market

All of the proceeds from the issuance of the A Share Convertible Corporate Bonds will be used to replenish the working capital of the Company after deducting the issue cost. The capital of the Company will be increased after share transfer by the A Share Convertible Corporate Bonds Holders so as to support future business development, improve its market competitiveness and risk resistance capacity and promote the realization of its strategic development goals.

(1) Personnel reserves

The Company has been attaching great importance to talent training and introduction for years. Currently, the Company has set up a set of perfect personnel deployment system in years’ operation. Also, it has developed overseas business in Hong

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Kong, etc. Current, the Company has been listed at the Hong Kong Stock Exchange and set up its subsidiaries based in Hong Kong. Also, necessary personnel are allocated to accelerate the development of its overseas business. Since its founding, the Company has owned stable high-end talents and management teams. As at 30 June 2017, the Company had 2,699 employees, including 620 personnel with educational background of master degrees and above. The personnel reserves lay a solid foundation for business development upon capital raising. Also, upon the raising of the capital, the Company will expand its scale in brokerage, capital intermediary service, self-operation, investment banking, asset management and innovative business and will introduce more talents accordingly so as to satisfy the demand for business scale development.

(2) Technical reserves

As a key strategic resource for corporate development, IT relates to the strategic deployment, business development and brand image of the Company. The Company has built a central transaction system, online securities transaction system, asset management related systems, financial system and risk control system to deal with transactions, data storage and risk control. And the Company attaches great importance to the application of IT in securities brokerage. There is advanced online authorization system and phone authorization system available. In the early 2014, the internet finance platform of Central China Securities (up.ccnew.com) was launched online. The platform offers diversified types of spot and non-spot transactions and provides a fast, convenient and efficient information service channel for investors.

In the future, in combination with the IT development trend of the industry, corporate business and management informatization demand, the Company will further improve IT infrastructure, increase the input into new business information system building and enhance the efforts to build the international system building. Also, the Company will increase its support to back-office service following the rapid development of its fore-office service.

(3) Market reserves

The Company is the sole incorporated securities company based in Henan. Over ten years, it has built itself into a comprehensive securities company with unique regional strength. As at 30 June 2017, the Company has set up 66 offices in the province, with a good client base. Also, 19 securities offices are set up in overseas developed cities or middle and western cities such as Beijing, Shanghai, Hangzhou, Guangzhou, Shenzhen, Wuhan, Changsha, Jishou, Zhangjiagang, Jinan, Qingdao, Shijiazhuang, Tianjin, Xi’an, Suzhou, Yuncheng and Jinhua. Also, the Company has the qualification to deal with futures and fund transactions, further expanding its business scale and market coverage of comprehensive services. Currently, the principal businesses of the Company have occupied a leading position in Henan market. The huge economic scale, population dividend and low securitization ratio of the province provides an enormous market space

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for the Company. The Company set up its management headquarters in Shanghai, with focused research and investment efforts here. The Company ranks among the top in terms of the quantity of listing in the New Third Board of China, with projects sourced from different regions of the country. After being listed in Hong Kong, the Company has set up Central China International Financial Holdings Co., Ltd. and other holding subsidiaries here so as to accelerate the development of the Company towards conglomeration and internationalization. The pattern featuring basing in Central Plains, radiation towards the whole country and going global has taken into shape.

The Company will accelerate the development of other traditional businesses including underwriting, sponsoring and securities self-operation and innovative businesses including alternative investment, margin trading and short selling. Meanwhile, new businesses of the Company including New Third Board, Agreed repurchase transaction, proxy sale of financial products as well as funds and share pledge type repurchase transactions are breaking the ice. In the future, the revenue structure of the Company will become further diversified. All these provide good market reserves for the capital raising this time.

(IV) Measures on Filling the Return on Capital Formulated by the Company

1. Operation Status of the Current Business Segments, Development Trend, Major Risks and Improvement Measures

(1) Operation status of the current business segments

Over years, the Company has expanded its business scope into diversified development patterns including securities brokerage, investment banking, securities investment, margin trading and short selling, asset management and futures brokerage, etc. The operation status of the current business segments is described as follows:

① Brokerage

Investment brokerage represents an advantageous business of the Company and maintains a leading position in China. Through new outlet arrangement and strategic layout adjustment all over the country, the Company has set up 19 securities business offices in overseas developed countries or middle and western countries. The strategic framework of brokerage business featuring “Henan based, China oriented” has gradually formed.

② Investment banking

The investment banking of the Company mainly covers securities underwriting and sponsoring, bonds underwriting, financial consulting and the business for sponsoring brokers of the National Equities Exchange and

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Quotations. In recent years, the Company has made all of its efforts to develop the capital market of Henan based on rich resources of the province and gradually perfect its business layout oriented towards the whole country, striving to build a investment banking brand of Central China Securities.

③ Self-operated investment

As a comprehensive broker approved by CSRC, the Company has obtained the qualifications for securities self-operation since its founding. The Company has followed the principles of value investment, flexible configuration and robust operation in the development of its self-operated securities business, which effectively controls investment risks and receives sound investment gains.

④ Capital intermediary business

The Credit Headquarters (the former Margin trading and short selling Headquarters) was set up in the Company, which is responsible for development planning, business management and innovation of capital intermediary business including margin trading and short selling, share pledge type repurchase transactions and agreed repurchase type securities transactions. In June 2012, the Company obtained the qualifications of margin trading and short selling. In April 2013, the Company obtained the qualifications of margin trading conversion and got involved in such business. In June 2014, the Company also obtained the qualifications of short selling conversion. Later, in July 2013, the Company obtained the authority for share pledge type repurchase transactions at the Shenzhen Stock Exchange and Shanghai Stock Exchanges. And in October 2012 and April 2013, the Company obtained the authority for repurchase type securities transaction at both exchanges above.

⑤ Asset management

The Company provides all-round professional and personalized investment services for clients by following the principles of “professionalism, standardization and market orientation”. While effectively controlling risks, the Company is building four business modules, namely collective investment, targeted investment, trust consulting and market value management through processional management and scientific investment operation. Currently, a perfect product development system, marketing system, investment management system, risk control system and service system has been built for asset management of the Company.

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⑥ Futures brokerage

The Company conducts futures business via its subsidiary Central China Futures Company Limited During the process of its development and transition, Central China Futures has attached great importance to marketing team building and research and development service capability. Through active introduction of excellent talents from the outside, optimization of marketing incentive assessment system, enhanced marketing personnel training, improvement of situation research and judgment ability and increased efforts of research and development support has further accelerated the development of futures business and brought about a sound momentum for business development.

⑦ Private fund business and alternative investment business

Pursuant to the Notice on the Promulgation of the Management Rules for the Private Investment Funds Subsidiaries of Securities Companies and the Management Rules for the Alternative Investment Subsidiaries of Securities Companies (Zhong Zheng Xie Fa [2016] No. 253) (《關於發佈<證券公司私募投資基金子公司管理規範>及<證券公司另類投資子公司管理規範>的通知》 (中證協發[2016]253號)) of the Securities Association of China, Zhongding Kaiyuan Venture Capital Management Co., Ltd. was transformed into a private fund subsidiary of the Company engaging in private equity investment fund business and other private fund businesses upon approval by the Association in May 2017. Meanwhile, alternative investment business including financial products other than those listed under the List of Investment Products of Proprietary Securities Trading of Securities Companies (《證券公司證券自營投資品種清單》) and equity was carried out by Central China Blue Ocean Investment Management Company Limited, a subsidiary of the Company. Central China Blue Ocean Investment Management Company Limited principally engaged in financial products investment and securities investment with its own funds and equity investment management. For private fund business and alternative investment business, the Company has formulated rules and regulations, enhanced in-house management and controlled risks strictly in accordance with corporate governance and regulation requirements on one hand, while actively exploring market and continuously reserving feasible quality projects according to the requirements of professionalism, standardization and market orientation on the other hand.

⑧ Overseas business

Approved by CSRC, the Company set up Central China International Financial Holdings Company Limited (中州國際金融控股有限公司). in Hong Kong, which conducts overseas securities business via its affiliates. Currently,

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business licenses including Type 1 Dealing in securities, Type 2 Dealing in futures contracts, Type 4 Advising on securities, Type 5 Advising on futures contracts, Type 6 Advising on corporate finance and Type 9 Asset management have been issued by Securities & Futures Commission of Hong Kong. Also, the money lender’s license has been issued by the court of Hong Kong. Current, the business scope covers securities brokerage, development financing, investment banking, asset management, securities research and share pledge financing, etc.

(2) Overall development trend of the Company

The Company is the sole incorporated securities company based in Henan. Over ten years, it has built itself into a comprehensive securities company with unique regional strength. It has witnessed obviously quickened development pace and listed in A+H. In recent years, the Company has conducted operations by following regulations in terms of securities brokerage, securities investment, investment banking, capital intermediary service and futures brokerage, etc. and witnessed a robust development. The Company has formed its competitive competition strength and market brand strength and all of its businesses have maintained a trend of steady growth. In the future, the Company will continue to follow the robust operation style, further develop the market of Henan and surrounding regions, enhance its regional strength and increase its market share in the country. It will vigorously develop Hong Kong and overseas market. Meanwhile, it will further improve its business management and risk control capacity so as to facilitate the successful achievement of the Company’s strategic development goals.

(3) Risks facing business operation of the Company and improvement measures

Affected by particular operation risks, the securities operation of the Company is influenced by industry and business characteristics, including possible adverse market risks caused to the business and operation performance, financial position and liquidity of the Company due to the changes in macroeconomic environment and securities market; risks hidden in innovative business or services such as securities brokerage, investment banking, self-operation, asset management, futures, alternative investment, funds, margin trading and short selling; as well as credit, operation and liquidity risks, etc.

In response to the above risks, the Company has built a set of effective risk management and in-house control systems. The Company will, according to business operation characters, development requirements and risk features, consistently improve the risk management modes and methods of the Company so as to ensure the realization of the Company’s strategic development goals and maximization of shareholders’ and the Company’s benefits.

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2. Increasing Daily Operating Efficiency, Reducing Operating Costs and Improving Corporate Business Performance

In order to ensure effective use of the capital raised, effectively prevent the risks of current returns from being diluted and improve the ability of the Company to gain continuous return in the future, upon the issuance of the A Share Convertible Corporate Bonds, the Company will accelerate the development of its principal business and improve its overall operating efficiency. Also, it will accelerate the use of the capital raised and make future gains increased so as to reduce the impact of the dilution of shareholders’ current returns in the issuance. The proposed specific measures are as follows:

(1) Fully developing businesses and accelerating the development of principal business, with innovation as drive

The Company will, based on the continuous facilitation of securities brokerage, investment banking, self-operated investment, asset management and futures business, vigorously develop capital intermediary business and innovative businesses with share options, over-the-counter market and market maker as representatives. Also, it will actively exploit new business and profit growth points, accelerate the building of “six in one” industry chain with Central China Equity Exchange as source, develop international finance and expand overseas business so as to accelerate the development of the principal business of the Company.

(2) Enhancing the support from middle-and back-office departments, increasing overall operating efficiency

The Company will make more efforts to build middle-and back-office departments by enhancing business research, risk control and compliance management, human resources management, IT management and planned financial management so as to improve overall operating efficiency and play a supporting role in the development of the fore-office business of the Company. Also, the Company will enhance strategic costs management research and continue to perfect whole cost management and increase cost management capability.

(3) Accelerating the use of the capital raised and improving the utilization efficiency of the capital

The capital raised in the issuance will be used in capital intermediary service, investment, overseas business, market making, securities brokerage, investment banking, IT system building and asset management. Upon the capital raised is in place, the Company will accelerate the use of the capital raised and improve the utilization efficiency of the capital so as to increase the operation and risk resistance capacity of the Company, promote the development of businesses, improve the operational performance of the Company, increase the return to shareholders in subsequent years and reduce the risk of dilution of shareholders’ current returns caused by the issuance.

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(4) Strictly implementing the dividend policy and guaranteeing the return to shareholders of the Company

In accordance with the Notice on Issues Relating to Further Implementation of Cash Dividends by Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》), Guidelines No. 3 on the Supervision and Administration of Listed Companies – Distribution of Cash Dividends of Listed Companies (《上市公司監管指引第3號–上市公司現金分紅》) and Guidelines on the Cash Dividends of the Companies Listed at Shanghai Stock Exchange (《上海證券交易所上市公司現金分紅指引》), the Company formulated and perfected relevant clauses concerning profit distribution in the Articles of Association, which specifies the requirements, percentage and forms of the Company’s profit distribution especially cash dividends as well as distribution requirements for shares and dividends, perfects the decision-making procedures and mechanisms for profit distribution and principles for adjusting profit distribution policies and enhances the interest guarantee mechanism of small-and medium-investors. Upon the issuance, the Company will, in accordance with relevant laws and regulations, strictly implement the dividend policy of the Company, practically maintain the lawful rights and interest of investors and guarantee the return to its shareholders.

(V) Commitments of Controlling Shareholders, Directors and Senior Management on Practical Filling of Return

The Controlling Shareholders, Directors and Senior Management of the Company make the following commitments on the practical filling of return in accordance with the Guidance Opinion on Matters Pertaining to dilution of return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Restructuring (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) issued by CSRC.

1. Controlling Shareholders

Henan Investment Group Company Limited as Controlling Shareholder of the Company, commits that it will neither intervene in the business management activities of the Company nor infringe the interests of the Company without authorization.

The Controlling Shareholder shall assume relevant liabilities specified by law if it causes any loss to the Company or any shareholder due to the violation of the above commitments.

2. Directors and Senior Management

(1) They will neither convey any interest to any other unit or individual based on unpaid or unfair conditions nor harm the interests of the Company by other means.

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(2) They will bind their consumption behavior by the convenience of their titles.
(3) They will not get involved in any investment or consumption activity that has nothing to do with their responsibility fulfillment by using the assets of the Company.
(4) The remuneration system formulated by the Board of Directors or the remuneration committee will link the implementation of the return filling measures taken by the Company.
(5) If any equity incentive policy is promulgated by the Company, the right exercise conditions for equity incentive of the Company proposed to be issued will link the implementation of the return filling measures taken by the Company.

The Director or Executive Officer shall assume relevant liabilities specified by law if it causes any loss to the Company or any shareholder due to the violation of the above commitments.

This Announcement is hereby issued.

Board of Directors of Central China Securities Co., Ltd. 1 November 2017

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AI assistant

Central China Securities Co., Ltd. — Proxy Solicitation & Information Statement 2018

49885_rns_2018-05-03_a4138d62-cf84-4805-b766-1998251465df.pdf

Central China Securities Co., Ltd.

DEFINITIONS

DEFINITIONS

DEFINITIONS

Central China Securities Co., Ltd.

(Stock Code: 01375)

INTRODUCTION

(I) Proposed Amendments to the Articles of Association

LETTER FROM THE BOARD

Amendment of the Proposal for the Public Issuance of the A Share Convertible Corporate Bonds

Use of Proceeds from the Public Issuance of the A Share Convertible Corporate Bonds

Subscription arrangement for the existing A Shareholders

Equity Fund Raising Activities in the Past Twelve Months

Changes in Shareholding Structure

LETTER FROM THE BOARD

Authorization granted to the Board to handle matters in relation to the public issue of the A Share Convertible Corporate Bonds

LETTER FROM THE BOARD

Authorization granted to Relevant Persons to handle matters in relation to the public issuance of the A Share Convertible Corporate Bonds

LETTER FROM THE BOARD

AGM and Class Meetings

VOTING

RECOMMENDATION

RESPONSIBILITY STATEMENT

ADDITIONAL INFORMATION

Important Tips:

I. THE ISSUANCE SATISFIES THE REQUIREMENTS IN RELATION TO THE ISSUANCE OF THE SECURITIES SPECIFIED IN THE ADMINISTRATIVE MEASURES FOR THE ISSUANCE OF SECURITIES BY LISTED COMPANIES

II. OVERVIEW OF THE ISSUANCE

(I) Type of Securities to be Issued

(II) Issue Size

(III) Par Value and Issue Price

(IV) Term of Bond

(V) Interest rate of Bond

(VI) Method and Timing of Interest Payment

1. Calculation of the Annual Interest

2. Method of Interest Payment

(VII) Conversion Period

(VIII) Determination and Adjustment of the Conversion Price of the A Share Convertible Corporate Bonds

1. Basis for Determining the Initial Conversion Price

2. Adjustments to the Conversion Price and Calculation Formula

(IX) Downward Adjustment to the Conversion Price

1. Adjustment Authorization and Permitted Adjustment Magnitude

2. Procedure of adjustment

(XI) Terms of Redemption

1. Terms of Redemption at Maturity

2. Terms of Conditional Redemption

(XII) Terms of Sale Back

(XIII) Dividend Rights of the Year of Conversion

(XIV) Method of Issuance and Target Investors

(XV) Subscription Arrangement for the Existing A Shareholders

(XVI) Relevant Matters on Meetings of A Share Convertible Corporate Bonds Holders

1. The Rights and Obligations of A Share Convertible Corporate Bonds Holders

2. Meetings of the A Share Convertible Corporate Bonds Holders

(XVII) Use of Proceeds

(XVIII) Guarantee and Securities

(XIX) Deposit of Proceeds

(XX) The Validity Period of the Resolution

III. FINANCIAL INFORMATION AND THE MANAGEMENT’S DISCUSSION AND ANALYSIS

(I) Consolidated Financial Statements

1. Consolidated Balance Sheet

2. Consolidated Income Statement

3. Consolidated Cash Flow Statement

(II) Financial Statements of the Parent Company

1. Balance Sheet of the Parent Company

2. Income Statement of the Parent Company

3. Cash Flow Statement of the Parent Company

(III) Scope of Financial Statements and Its Changes

1. Changes in the Scope of Financial Statements of the Company

2. Overview of the Company Included in the Scope of Consolidation

(IV) The Management’s Discussion and Analysis

1. Major Financial Indicators of the Company for the Last Period and the Previous Three Years

2. Net Capital and Risk Control Indicators of the Parent Company

3. Brief Analysis of Financial Position of the Company

(2) Composition of liabilities

(3) Solvency analysis

APPENDIX I

(4) Profitability analysis

IV. USE OF THE PROCEEDS

Central China Securities Co., Ltd. Proxy Solicitation & Information Statement 2018