China Galaxy Securities Co., Ltd. — Capital/Financing Update 2016

Dec 27, 2016

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

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(A joint stock company incorporated in the People’s Republic of China with limited liability) (Stock code: 06881)

PRELIMINARY PRICE CONSULTATION PERIOD OF A SHARE OFFERING AND

SUMMARY OF PRINCIPAL PROVISIONS OF A SHARE PROSPECTUS

This announcement is made by China Galaxy Securities Co., Ltd. (the “ Company ”) pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).

References are made to the announcements of the Company dated 1 March 2014, 25 April 2014, 29 August 2014, 20 January 2015, 26 March 2015, 15 January 2016, 24 March 2016, 2 December 2016, 7 December 2016 and 27 December 2016, and the circulars dated 11 March 2014, 9 February 2015 and 4 February 2016, in relation to (among others) the Company’s proposed A Share Offering (the “ A Share Offering ” or “ Offering ”) and relevant matters. Unless otherwise defined, capitalised terms used herein shall have the same meanings as defined in the circular of the Company dated 4 February 2016.

(I) Preliminary Price Consultation Period of the A Share Offering

As disclosed in the announcement of the Company dated 27 December 2016, the CSRC has officially approved the A Share Offering of the Company in a written notice on 23 December 2016. As required by the applicable PRC laws and regulations, the Company and the sponsors (lead underwriters) of the A Share Offering will conduct preliminary price consultations among qualified participants in the PRC who meet the requirements of the PRC laws and regulations on 5 January 2017 and 6 Janaury 2017 (each trading day from 9:30 a.m. to 3:00 p.m.) to determine the issue price. The Company will make further announcement(s) once the final issue size and issue price of the A Share Offering have been determined.

(II) Principal Provisions of the A Share Prospectus

The full text of the prospectus in relation to the A Share Offering (the “ A Share Prospectus ”), a summary of the A Share Prospectus and the relevant appendices were published by the Company on the website of the Shanghai Stock Exchange (www.sse.com.cn) in Chinese only on 26 December 2016. The summary of the A Share Prospectus was also published on various PRC newspapers

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including China Securities Journal, Shanghai Securities News, Securities Times and Securities Daily on the same date.

The summary of the principal provisions of the A Share Prospectus is as follows:

1. Summary of the A Share Offering

Class of shares: Ordinary shares in RMB (A Shares)

Nominal value per A Share: RMB1.00 Number of A Shares to be Up to 600,000,000 A Shares, representing up to 5.92% of the issued: total share capital of the Company after the Offering Issue price per A Share: RMB[ ]

• Price earnings ratio of the [ ] times (calculated by dividing the issue price per share by Offering: the earnings per share which is calculated by dividing the audited net profit attributable to the shareholders of the parent company for 2015 before or after deduction of non-operating profit or loss (whichever is lower) by the total share capital of the Company after the Offering)

• Net asset value per A Share RMB5.74 (calculated by dividing the audited equity attributable before the Offering: to the shareholders of the parent company as at 30 June 2016 by the total share capital of the Company before the Offering)

• Net asset value per A Share RMB[ ] (calculated by dividing the sum of audited equity after the Offering: attributable to the shareholders of the parent company as at 30 June 2016 and the net proceeds raised from the Offering by the total share capital of the Company after the Offering)

Price-to-book ratio:

• [ ] times (calculated by dividing the issue price per A Share by the net asset value per A Share after the Offering)

Issuing method:

• By a combination of placing of shares to participants through offline price consultation and public offering of shares through online subscription

• Target persons of the The target persons of the Offering are eligible natural persons Offering: and institutional investors

• Underwriting method: The Offering is underwritten by an underwriting syndicate organised by the joint lead underwriters by way of standby underwriting

Gross and net proceeds raised: RMB[ ] and RMB[ ]

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Estimated Offering expenses:

Total Offering expenses are RMB131.7860 million, of which, underwriting and sponsor fees are RMB115.6415 million; auditing, capital verification and assessment fees are RMB6.8794 million; legal expenses are RMB1.6798 million; information disclosure expenses are RMB3.7736 million; and issuing fees are RMB3.8117 million.

The stock exchange for the the Shanghai Stock Exchange listing:

2. Use of proceeds

According to the A Shares Offering plan of the Company, the proceeds raised from the A Share Offering of approximately RMB3,954.2140 million will be used for stengthening the capital base of the Company and replenishing the working capital of the Company. The final issue size of the A Share Offering will be determined by the Company and the joint lead underwriters in accordance with the relevant regulations and the actual circumstances.

The business development goal of the Company is to become a major comprehensive financial services provider that leads the development trend of China’s securities industry with international competitiveness. The Company has established the business model with “Big Transaction” as the core supported by investment banking and investment management as “Two Wings”. The Company has adpoted the customer-oriented and innovation-driven strategy, with a focus on balanced and synergistic development of various business lines, so as to seize the development opportunities arising from the domestic securities market, and achieve rapid growth in profit. According to the aforesaid business model and development strategy, the proceeds raised from the A Share Offering of the Company will be mainly utilised in the following aspects:

1. The Company will further develop its margin financing and securities lending business. Leveraging on the advantages of its customer base and network in traditional brokerage business, the Company can improve the penetration rate of the qualified margin financing and securities lending customers, continue to broaden financing channels by product innovation and refinancing, and raise its market position in margin financing and securities lending.

2. The Company will further strengthen its brokerage and wealth management business, mainly including the upgrade of sales outlets, construction of wealth management centres and small-scale sales networks etc., so as to strengthen the traditional brokerage business and enhance the wealth management service capability of the Company. Meanwhile, the Company will promote the development of futures brokerage and related business, increase the scale of futures business, and seize opportunities brought about by the launch of new products, the participation of institutional clients in market expansion, and the rapid development of the domestic futures market. Furthermore, the Company will steadily improve its institutional sales capability and investment research business capability.

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1. The Company will develop its capital-based intermediary securities transaction business to satisfy the investing, financing and liquidity demand of its customers. In particular, the Company will increase the business scale of dealer-quoted bond repurchase transactions, dealer-quoted class A fund repurchase transactions, securities-based lending transactions, dealer-quoted securities repurchase transactions and liquidity service, gradually start trading in OTC market, and actively explore the business of other new capital-based intermediary securities transactions as may be permitted in the future.

2. With effective risk management measures, the Company will enlarge the scale of capital investment businesses (mainly through the expansion of scale of fixed income investment business with relatively low risk and high returns), expand the scale and scope of investment in derivative products, and properly expand the scale of equity investment.

3. The Company will put more efforts in its investment management business, further expand the scales of collective and targeted asset management businesses, develop alternative investment related financial products, steadily invest in seed money, and enhance the private equity investment management business through establishing, investing in and managing private equity funds.

4. The Company will enhance the underwriting capabilities of investment banking business.

5. The Company will promote its overseas business development, expand the platform of overseas business, and build up all-rounded operating capability.

3. Share capital before and after the A Share Offering

Before the A Share Offering, the total number of shares of the Company is 9,537,258,757 shares. If 600,000,000 A Shares are issued under the A Share Offering, the total number of shares of the Company after the A Share Offering will be 10,137,258,757 shares. The shareholding structure before the A Share Offering is based on the information as at the signing date of the A Share Prospectus. The following is the shareholding structure of the Company before and after the A Share Offering:

Name of Shareholders Class of share Before the A Share Offering Number of shares Percentage of shareholding China Galaxy Financial Holdings Company Limited (“Galaxy Financial Holdings”) Domestic Shares 5,217,743,240 54.71% PICC Property and Casualty Company Limited Domestic Shares 114,381,147 1.20% Shanghai Rural Commercial Bank Co., Ltd. Domestic Shares 110,000,000 1.15% Bank of Lanzhou Co., Ltd. Domestic Shares 90,514,398 0.95% National Council for Social Security Fund (“NSSF”) Domestic Shares – – Other Shareholders of Domestic Shares Domestic Shares 313,635,339 3.29% Shareholders of H SharesNote 2 H Shares 3,690,984,633 38.70% Total 9,537,258,757 100.00%

After the A Share OfferingNote 1 Number of shares Percentage of shareholding 5,160,610,864 50.91% 114,381,147 1.13% 110,000,000 1.09% 90,514,398 0.89% 58,726,267 0.58% 912,041,448 9.00% 3,690,984,633 36.41% 10,137,258,757 100.00%Note 3

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Note 1: The number of shares after the A Share Offering as stated above refers to the number of shares after deduction of those shares transferred to the NSSF from the state-owned Shareholders. The number of shares to be deducted is calculated based on the latest information of state-owned shares as at the signing date of the A Share Prospectus. Galaxy Financial Holdings, the largest state-owned Shareholder of the Company, has submitted the updated application to the Ministry of Finance of the PRC for the proposal of management and the proposal of transfer of state-owned shares. The specific numbers of shares to be transferred and deducted are subject to the approval by the Ministry of Finance of the PRC.

Note 2: The number of shares held by Shareholders of H Shares include those H Shares held by the NSSF.

Note 3: In the “percentage of shareholding” column of the table above, the discrepancy between the total figure and the sum of individual items is due to the rounding of decimal place.

The above English version of the summary of the principal provisions of the A Share Offering is an unofficial translation of its Chinese version. In case of any discrepancies, the Chinese version shall prevail.

The Company will keep the Shareholders and potential investors informed of any further development in relation to the A Share Offering in accordance with the Listing Rules and applicable laws and regulations.

By order of the Board China Galaxy Securities Co., Ltd. Chen Gongyan Chairman and Executive Director

Beijing, the PRC 27 December 2016

As at the date of this announcement, the executive Directors of the Company are Mr. CHEN Gongyan (Chairman), Mr. GU Weiguo (Vice Chairman) and Mr. WU Chengming; the non-executive Directors are Mr. DU Ping, Mr. SHI Xun, Mr. ZHANG Jinghua and Mr. LI Chaoyang; and the independent non-executive Directors are Mr. LIU Feng, Mr. LUO Lin, Mr. WU Yuwu and Mr. CHI Fulin.

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