China Galaxy Securities Co., Ltd. - Capital/Financing Update 2021

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

ANNOUNCEMENT PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS

On 30 August 2021, the Board considered and approved, among others, the relevant resolutions on the issuance plan of A Share Convertible Bonds of the Company.

The Company will convene an extraordinary general meeting to consider and, if thought fit, approve, among others, the relevant resolutions on the proposed issuance of A Share Convertible Bonds. A circular containing, among others, details of the proposed issuance of A Share Convertible Bonds will be dispatched to the Shareholders in due course.

On 30 August 2021, the Board considered and approved, among others, the relevant resolutions on the issuance plan of A Share Convertible Bonds of the Company.

I. ISSUANCE PLAN OF A SHARE CONVERTIBLE BONDS

Pursuant to the relevant requirements of the Company Law of the People’s Republic of China (中華人民共和國公司法), the Securities Law of the People’s Republic of China (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), the Administrative Measures for Convertible Corporate Bonds (可轉換公司債券管理辦法), the Notice on Matters Relating to the Issuance of Convertible Corporate Bonds by Stateowned 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) and other laws, regulations and normative documents, the Company has satisfied the qualifications and the requirements in relation to the public issuance of A Share Convertible Bonds. In order to improve its overall competitive strength and enhance its ability of sustainable development, the Company proposed the public issuance of A Share Convertible Bonds, with the specific proposal as follows:

(1) Type of securities to be issued

The type of the securities to be issued is convertible corporate bonds which can be converted into A Shares. A Share Convertible Bonds and the A Shares to be converted will be listed on the Shanghai Stock Exchange.

(2) Size of issuance

The total amount of A Share Convertible Bonds to be issued will not exceed RMB11.0 billion (including RMB11.0 billion). The actual amount of the issuance shall be determined by the Board and its authorized persons within the above range, subject to the authorization by the Shareholders at the Shareholders’ general meeting.

(3) Par value and issue price

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

(4) Term

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

(5) Interest rate

The manner of determining the nominal interest rate of A Share Convertible Bonds and the final interest rate of each interest accrual year shall be determined by the Board and its authorized persons upon negotiation with the sponsor (the lead underwriter) in accordance with the national policies, market conditions and the actual conditions of the Company before the issuance, subject to the authorization by the Shareholders at the Shareholders’ general meeting.

(6) Timing and method of principal and interest payments

The interest of A Share Convertible Bonds will be paid annually, and the principal of A Share Convertible Bonds that have not been converted into Shares and the interest for the final year will be paid upon maturity.

1. Calculation of annual interest

Annual interest refers to the current interest available to the holders of A Share Convertible Bonds for each full year from the date of issuance of the A Share Convertible Bonds according to the aggregate nominal value of the A Share Convertible Bonds held by them.

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 Bonds held by a holder of A Share Convertible Bonds as at the record date for interest payment in an interest accrual year;
i: denotes the nominal interest rate of the A Share Convertible Bonds of that year.

2. Method of interest payment

(1) The interest of A Share Convertible Bonds will be paid annually, accruing from the date of issuance of the A Share Convertible Bonds.
(2) Interest payment date: The interest is payable annually on each anniversary of the date of issuance of the A Share Convertible Bonds. Where such date falls on a statutory holiday or rest day, the interest payment date shall be postponed to the next trading day, with no additional interest to 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.

Matters such as the entitlement to relevant interest and dividend in the year of conversion shall be determined by the Board in accordance with relevant laws and regulations and the requirements of the Shanghai Stock Exchange.

(3) Record date for interest payment: The record date for interest payment in each year will be the trading day immediately preceding the interest payment date in each year. The Company will pay the interest accrued in that year within five trading days from the interest payment date in each year. If any holder of A Share Convertible Bonds has applied to convert the A Share Convertible Bonds into A Shares on or before the record date for interest payment, the Company will not pay any interest for that year and subsequent interest accrual years to such holder of A Share Convertible Bonds.
(4) Any tax payable on the interest income of a holder of A Share Convertible Bonds shall be borne by such holder of A Share Convertible Bonds.

(7) Conversion period

The conversion period of A Share Convertible Bonds shall commence on the first trading day immediately following the expiry of the six-month period from the date of issuance, and end on the maturity date of the A Share Convertible Bonds.

(8) Determination of and adjustment to the conversion price

1. Basis for determining the initial conversion price

The initial conversion price of A Share Convertible Bonds shall not be lower than the highest of the average trading price of A Shares during the 30 trading days immediately preceding the date of publication of the Offering Document (in the event that during such 30 trading days, the share price has been adjusted due to ex-rights or ex-dividend, the average trading price of each of these trading days before the adjustment shall be adjusted with reference to the adjusted share price following the ex-rights or ex-dividend events), the average trading price of A Shares during the 20 trading days immediately preceding the date of publication of the Offering Document (in the event that during such 20 trading

days, the share price has been adjusted due to ex-rights or ex-dividend, the average trading price of each of these trading days before the adjustment shall be adjusted with reference to the adjusted share price following the ex-rights or ex-dividend events), and the average trading price of A Shares on the trading day immediately preceding the date of publication of the Offering Document. The initial conversion price shall also be no lower than the latest audited net assets per Share and the nominal value per Share, and no upward adjustment shall be made. The actual initial conversion price shall be determined by the Board and its authorized persons upon negotiation with the sponsor (the lead underwriter) in accordance with the market conditions before the issuance, subject to the authorization by the Shareholders at the Shareholders’ general meeting.

The average trading price of A Shares for the 30 trading days immediately preceding the date of publication of the Offering Document = the total trading amount of A Shares for such 30 trading days÷the total trading volume of A Shares for such 30 trading days; the average trading price of A Shares for the 20 trading days immediately preceding the date of publication of the Offering Document = the total trading amount of A Shares for such 20 trading days÷the total trading volume of A Shares for such 20 trading days; the average trading price of A Shares for the trading day immediately preceding the date of publication of the Offering Document = the total trading amount of A Shares for such trading day÷the total trading volume of A Shares for such trading day.

(2) Method of adjustments to the conversion price and calculation formula

After the issuance of A Share Convertible Bonds, upon occurrence of such circumstances as distribution of Share dividends, capitalization, issuance of new Shares or rights issue, distribution of cash dividends, etc. (excluding any increase in the share capital as a result of conversion of the A Share Convertible Bonds), the Company will adjust the conversion price based on the following formula (which will be rounded to two decimal places):

Distribution of Share dividends or capitalization: P1=P0÷(1+n);

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

The above two events occurring concurrently: P1=(P0+A×k)÷(1+n+k);

Distribution of cash dividends: P1= P0-D;

The above three events occurring concurrently: P1=(P0-D+A×k)÷(1+n+k).

Where: “P0” denotes the conversion price before the adjustment, “n” denotes the rate of distribution of Share dividends or capitalization, “k” denotes the rate of issuance of new Shares or rights issue, “A” denotes the price of issuance of new Shares or rights issue, “D” denotes the cash dividend per Share, and “P1” denotes the adjusted conversion price.

Upon occurrence of any of the abovementioned changes in Shares and/or Shareholders’ interests, the Company will adjust the conversion price accordingly, and an announcement shall be made on the website of the Shanghai Stock Exchange and the media designated by the CSRC for information disclosure of listed companies. Such announcement shall indicate information such as the date of adjustment to the conversion price, method of adjustment and suspension period of Share conversion (if necessary). The announcement shall also be published (if necessary) in the Hong Kong market in accordance with the Hong Kong Listing Rules. If the conversion price adjustment date is on or after the date on which a holder of A Share Convertible Bonds applies for conversion of his/her A Share Convertible Bonds but before the registration date of the Shares to be issued upon conversion, then such conversion will be executed based on the adjusted conversion price of the Company.

In the event that the creditor’s interests or the interests derived from the Share conversion of the holders of A Share Convertible Bonds are affected by the change in the Company’s Share class, quantity and/or Shareholders’ interests due to any possible Share repurchase, consolidation, division or any other circumstances, the Company will adjust the conversion price based on the actual situations and in accordance with the principles of fairness, justice and equality so as to fully protect the interests of holders of A Share Convertible Bonds. The details of the adjustment to the conversion price and its implementation measures shall be determined in accordance with the relevant national laws and regulations and the relevant requirements of the securities regulatory authorities then in force.

(9) Terms of downward adjustment to the conversion price

1. Adjustment authorization and magnitude of adjustment

If, during the term of the A Share Convertible Bonds, the closing prices of A Shares for at least 15 trading days out of any 30 consecutive trading days are lower than 80% of the prevailing conversion price, the Board may propose a downward adjustment to the conversion price to Shareholders at the Shareholders’ general meeting for their consideration and approval.

In case of any adjustment to the conversion price by the Company due to ex-rights or ex-dividend during the aforesaid trading days, in respect of the trading days prior to the adjustment to the conversion price, the calculation shall be based on the unadjusted conversion price and the closing price on each such day, while in respect of the trading day on which adjustments to the conversion price are made and the trading days afterwards, the calculation shall be made based on the adjusted conversion price and the closing price on each such day.

Such proposal is subject to approval of more than two-thirds of the voting rights held by the Shareholders attending the meeting. Shareholders who hold the A Share Convertible Bonds shall abstain from voting at the Shareholders’ general meeting. The adjusted conversion price shall be no less than the highest of the average trading price of A Shares for the 30 trading days immediately preceding the date of the Shareholders’ general

meeting described above, the average trading price of A Shares for the 20 trading days immediately preceding the date of the Shareholders’ general meeting described above (in the event that during such 30 trading days or 20 trading days, the share price has been adjusted due to ex-rights or ex-dividend, the average trading price of each of these trading days before the adjustment shall be adjusted with reference to the adjusted share price following the ex-rights or ex-dividend events) and the average trading price of A Shares for the trading day immediately preceding the date of the Shareholders’ general meeting described above. The adjusted conversion price shall also be no less than the latest audited net assets per Share and the nominal value per Share.

In case of any adjustment to the conversion price during the aforesaid 30 trading days, in respect of the trading days prior to the adjustment to the conversion price, the calculation shall be based on the unadjusted conversion price and the closing price on each such day, while in respect of the trading day on which adjustments to the conversion price are made and the trading days afterwards, the calculation shall be made based on the adjusted conversion price and the closing price on each such day.

2. Procedure of adjustment

If the Company decides to make a downward adjustment to the conversion price, the Company shall publish the relevant announcement on the website of the Shanghai Stock Exchange and the media designated by the CSRC for information disclosure of listed companies. Such announcement shall disclose information including the magnitude of the adjustment, the registration date of the Shares and the suspension period of Share conversion (if necessary). The announcement shall also be published (if necessary) in the Hong Kong market in accordance with the Hong Kong Listing Rules. Application for conversion of A Share Convertible Bonds at the adjusted conversion price shall be resumed upon the first trading day after the registration date (i.e. the conversion price adjustment date).

If the conversion price adjustment date is on or after the date of the application for conversion but before the registration date of the Shares to be issued upon conversion, such conversion will be executed based on the adjusted conversion price.

(10) Method for determining the number of Shares for conversion and treatment for any amount of A Share Convertible Bonds which are insufficient to be converted into one A Share

Where a holder of A Share Convertible Bonds applies to convert his/her A Share Convertible Bonds during the conversion period, the formula for calculating the number of Shares to be issued upon conversion is: Q = V÷P. Any fractional Share shall be rounded down to the nearest whole number.

In the aforesaid formula, “Q” denotes the number of Shares to be issued upon conversion, “V” denotes the aggregate nominal value of A Share Convertible Bonds in respect of which the holders of the A Share Convertible Bonds apply for conversion, and “P” denotes the prevailing conversion price as at the date of application for conversion.

The number of Shares to be requested by any holders of A Share Convertible Bonds in the application for Share conversion shall be in whole number. Within five trading days from the Share conversion by the holders of the A Share Convertible Bonds, the Company will pay the holders of A Share Convertible Bonds in cash an amount equal to the remaining balance of such A Share Convertible Bonds which are insufficient to be converted into one A Share and the interest then accrued thereon in accordance with the relevant requirements of the Shanghai Stock Exchange and other authorities (please refer to “(11) Terms of redemption” for details of the method of calculating the then accrued interest).

(11) Terms of redemption

1. Terms of redemption at maturity

Within 5 trading days upon maturity of A Share Convertible Bonds, the Company will redeem all the A Share Convertible Bonds which have not been converted into Shares. The specific redemption price shall be determined by the Board and its authorized persons upon negotiation with the sponsor (the lead underwriter) with reference to the market conditions at the time of issuance, subject to the authorization by the Shareholders at the Shareholders’ general meeting.

2. Terms of conditional redemption

During the conversion period of A Share Convertible Bonds, when either of the following two circumstances occurs, the Company shall have the right to redeem all or part of the outstanding A Share Convertible Bonds at a price equal to the nominal value of A Share Convertible Bonds plus the then accrued interest: (1) during the conversion period of A Share Convertible Bonds, if the closing prices of A Shares in at least 15 trading days out of any 30 consecutive trading days are no less than 130% (inclusive) of the prevailing conversion price; or (2) when the amount of the outstanding A Share Convertible Bonds is lower than RMB30 million.

The formula for calculating the then accrued interest is: IA=B×i×t÷365

IA: denotes the accrued interest for the current period;
B: denotes the aggregate nominal value of the A Share Convertible Bonds held by the holders of A Share Convertible Bonds;

i: denotes the nominal interest rate of the A Share Convertible Bonds for the current year;
t: denotes the number of days on which interest is accrued, i.e. the actual number of calendar days from the last interest payment date up to the redemption date of that interest accrual year (including the last interest payment date and excluding the redemption date).

In case of any adjustment to the conversion price during the aforesaid 30 trading days, in respect of the trading days prior to the adjustment to the conversion price, the calculation shall be based on the unadjusted conversion price and the closing price on each such day, while in respect of the trading days after the adjustment to the conversion price, the calculation shall be based on the adjusted conversion price and the closing price on each such day.

(12) Terms of sale back

If the actual use of the proceeds from A Share Convertible Bonds materially differs from the undertakings of the use of proceeds set out by the Company in the Offering Document, and such change is deemed as a deviation in the use of the proceeds under the relevant requirements of the CSRC, the holders of A Share Convertible Bonds shall have a one-off sale back right. Holders of A Share Convertible Bonds shall have the right to sell all or part of their A Share Convertible Bonds back to the Company at a price equal to the nominal value of such bonds plus the then accrued interest.

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

IA: denotes the accrued interest for the current period;
B: denotes the aggregate nominal value of the A Share Convertible Bonds held by holders of A Share Convertible Bonds for sale back;
i: denotes the nominal interest rate of the A Share Convertible Bonds for the current year;
t: denotes the number of days on which interest is accrued, i.e. the actual number of calendar days from the last interest payment date up to the redemption date of that interest accrual year (including the last interest payment date and excluding the redemption date).

Holders of A Share Convertible Bonds may, subject to the satisfaction of sale back conditions, sell their A Share Convertible Bonds back to the Company during the sale back declaration period after the publication of an announcement by the Company. If the holders of A Share Convertible Bonds do not exercise their sale back rights during the sale back declaration period, they shall not further exercise the sale back rights.

(13) Entitlement to dividend in the year of conversion

The new A Shares to be issued as a result of the conversion of A Share Convertible Bonds shall rank pari passu with all the existing A Shares. All ordinary Shareholders (including those derived from the conversion of A Share Convertible Bonds) whose names are recorded on the register of members of the Company after the end of the afternoon trading session on the record date for dividend distribution shall be entitled to participate in the dividend distribution of that period and enjoy the same rights and interests.

(14) Method of issuance and target investors

The specific method of the issuance of A Share Convertible Bonds will be determined by the Board and its authorized persons upon negotiation with the sponsor (the lead underwriter), subject to the authorization by the Shareholders at the Shareholders’ general meeting.

The target investors of A Share Convertible Bonds are natural persons, legal persons, securities investment funds and other investors in compliance with legal requirements, who have maintained securities accounts with the Shanghai Branch of China Securities Depository and Clearing Corporation Limited, except for those prohibited by the PRC laws and regulations.

(15) Subscription arrangement for the existing holders of A Shares

The existing holders of A Shares shall have preferential rights to subscribe for the A Share Convertible Bonds to be issued. The actual amount to be preferentially allocated to the existing holders of A Shares shall be determined by the Board and its authorized persons with reference to the market conditions before the issuance, subject to the authorization by the Shareholders at the Shareholders’ general meeting, and shall be disclosed in the announcement in relation to the issuance of A Share Convertible Bonds. Such preferential allocation is subject to the Company Law of the People’s Republic of China and the Hong Kong Listing Rules or all other applicable laws, regulations and rules (including but not limited to any rules and requirements regarding related party transactions/connected transactions) of any government or regulatory bodies.

A Share Convertible Bonds which are not subject to the preferential subscription by any existing holders of A Shares and are not subscribed by the existing holders of A Shares within the preferential subscription will be issued by way of a combination of offline offering to institutional investors and online issuance through the trading system of the Shanghai Stock Exchange, and the remaining balance will be underwritten by the underwriter. The specific method of issuance shall be determined by the Board and its authorized persons upon negotiation with the sponsor (the lead underwriter) before the issuance, subject to the authorization by the Shareholders at the Shareholders’ general meeting.

(16) Matters Relevant to the Meetings of Holders of A Share Convertible Bonds

1. Rights of the holders of A Share Convertible Bonds

(1) to attend and vote at any meetings of holders of A Share Convertible Bonds, either in person or by proxy, in accordance with the relevant requirements such as laws and administrative regulations;
(2) to receive agreed interests based on the amount of the A Share Convertible Bonds held by the holders of A Share Convertible Bonds;
(3) to require the Company to pay the principal of A Share Convertible Bonds and any interests accrued thereon within such time limit and in such manner as prescribed in the Offering Document;
(4) to convert the A Share Convertible Bonds held by the holders of A Share Convertible Bonds into A Shares according to the conditions set out in the Offering Document;
(5) to exercise sale back right according to the conditions set out in the Offering Document;
(6) to assign, bestow or pledge the A Share Convertible Bonds held by the holders of A Share Convertible Bonds in accordance with the requirements of laws, administrative regulations, the Articles of Association and the Offering Document;
(7) to receive relevant information in accordance with the requirements of laws and the Articles of Association;
(8) other rights to which the holders of A Share Convertible Bonds are entitled as creditors of the Company under laws, administrative regulations, the Articles of Association and the Offering Document.

2. Obligations of the holders of A Share Convertible Bonds

(1) to comply with the relevant terms of the issuance of A Share Convertible Bonds;
(2) to pay subscription money in respect of A Share Convertible Bonds subscribed for by them;
(3) to comply with the valid resolutions adopted at the meetings of holders of A Share Convertible Bonds;

(4) not to require the Company to make repayment of the principal of A Share Convertible Bonds and any interests accrued thereon in advance, except as stipulated in laws, regulations, the Articles of Association and the Offering Document;
(5) other obligations to be assumed by the holders of A Share Convertible Bonds as required by laws, administrative regulations, the Articles of Association and the Offering Document.

3. A meeting of holders of A Share Convertible Bonds shall be convened by the trustee manager of A Share Convertible Bonds if any of the following circumstances occurs during the term of A Share Convertible Bonds:

(1) proposal by the Company for change of the terms of the Offering Document;
(2) the Company’s default in paying the principal of A Share Convertible Bonds and any interests accrued thereon as scheduled;
(3) the reduction of the Company’s capital (other than those resulting from any Share repurchase under employee share ownership plans or share incentive plans or as a result of the performance guarantee made by counterparties to previous acquisitions, or any Share repurchase as may be necessary for the purpose of safeguarding the Company’s value and its Shareholders’ interests), merger, division, dissolution or application for bankruptcy;
(4) amendments to the rules of the meetings of holders of A Share Convertible Bonds;
(5) proposed change of the trustee manager of A Share Convertible Bonds or the key contents of the trustee management agreement;
(6) actions required to be taken in accordance with law when the management of the Company fails to perform duties properly, which would cause serious uncertainty to the Company’s solvency;
(7) any debt restructuring plan proposed by the Company;
(8) other matters which may significantly affect the material interests of the holders of A Share Convertible Bonds;
(9) any written proposal made by the Board or the holders of A Share Convertible Bonds holding, individually or collectively, more than 10% of the total nominal amount of the outstanding A Share Convertible Bonds for the convening of such meeting;

(10) other matters to be considered and determined at the meetings of holders of A Share Convertible Bonds in accordance with laws and administrative regulations, the requirements of the CSRC and the Shanghai Stock Exchange, and the rules of the meetings of holders of A Share Convertible Bonds.

The following institutions or individuals may propose to convene a meeting of holders of A Share Convertible Bonds:

(1) the Board;
(2) the trustee manager of A Share Convertible Bonds;
(3) the holders of A Share Convertible Bonds holding, individually or collectively, more than 10% of the total nominal amount of the outstanding A Share Convertible Bonds shall have the right to convene a meeting of holders of A Share Convertible Bonds on their own when the Board or the trustee manager of A Share Convertible Bonds should convene a meeting of holders of A Share Convertible Bonds but fails to do so;
(4) other institutions or individuals as required by laws, regulations and the requirements of the CSRC.

(17) Use of proceeds

The total amount of proceeds from the issuance of A Share Convertible Bonds will be no more than RMB11.0 billion (including RMB11.0 billion), all of which, after deducting the issuance expenses, will be used for the development of investment transaction business and capitalbased intermediary business, and the expansion of investment banking business, as well as for the replenishment of the Company’s other working capital. Such proceeds will also be used to replenish the Company’s capital pursuant to the relevant regulatory requirements upon conversion of the A Share Convertible Bonds. The projects proposed for investment with the use of proceeds and their proposed investment amounts are as follows:

Projects for Investment with the Use of Proceeds Proposed Investment Amount Investment transaction business No more than RMB5.0 billion Capital-based intermediary business No more than RMB4.0 billion Investment banking business No more than RMB1.0 billion Replenishing the Company’s other working capital No more than RMB1.0 billion Total No more than RMB11.0 billion

(18) Guarantee and security

There is no guarantee or security in relation to A Share Convertible Bonds.

(19) Deposit and management of proceeds raised

The Company has established the measures for the management of proceeds raised. The proceeds from the issuance of A Share Convertible Bonds shall be maintained in a special account designated by the Board. Details regarding the opening of the account will be determined by the Board before the issuance, and the information regarding the special account for proceeds shall be disclosed in the announcement in relation to the issuance.

(20) Liabilities for breach of contract

1. Event of Default of A Share Convertible Bonds

(1) the Company fails to repay the principal of A Share Convertible Bonds due and payable at maturity or upon acceleration;
(2) the Company fails to repay the interest of A Share Convertible Bonds due on time;
(3) any default or breach by the Company of any of its undertakings under the trustee management agreement of A Share Convertible Bonds has a material adverse impact on the Company’s ability to repay the principal and interest of A Share Convertible Bonds, and such default has not been rectified after 30 consecutive business days from the date of receipt of the written notice from the trustee manager of A Share Convertible Bonds, or the written notice from the holders of A Share Convertible Bonds representing individually and/or collectively more than 10% of the voting rights of the outstanding A Share Convertible Bonds;
(4) during the term of A Share Convertible Bonds, the Company encounters dissolution, cancellation, revocation of business license, cessation of operation, liquidation, insolvency, a court-appointed receivership, or commencement of litigation relating to the above matters;
(5) the Company and its consolidated subsidiaries default on their debts (corporate debts/ debt financing instrument/corporate bonds/overseas bonds/loans from financial institutions/other financing), with principal and interest being overdue/debts being declared accelerated maturity/other forms of default with the right to declare accelerated maturity), or have not repaid such debts payable when the grace period (if any) expires;
(6) the Company triggers the clause of financial indicator commitment (if any), and the behaviour pre-binding clause (if any);
(7) other circumstances that have a material adverse impact on the scheduled redemption of A Share Convertible Bonds.

2. Liabilities for breach of contract and relevant commitments

The Company undertakes to guarantee the payment of interest and the redemption of the principal amount to the holders of A Share Convertible Bonds in accordance with the principal and interest payment arrangement stipulated in the terms of the issuance of A Share Convertible Bonds. If the interest on the A Share Convertible Bonds cannot be paid on time or the principal amount of the A Share Convertible Bonds cannot be redeemed upon maturity, the Company undertakes to pay the holders of A Share Convertible Bonds the overdue interest for the days overdue at the overdue rate of 10% above the coupon rate of the A Share Convertible Bonds in respect of any principal or interest delayed in payment.

If an event of default occurs and remains unresolved for 30 consecutive business days, the trustee manager of A Share Convertible Bonds may, in accordance with the resolution adopted at a meeting of holders of A Share Convertible Bonds, coordinate with the holders of A Share Convertible Bonds to take any feasible legal remedies to collect the principal and interests of the A Share Convertible Bonds in accordance with law.

3. Dispute resolution mechanism

The issuance of A Share Convertible Bonds shall be governed by and construed in accordance with the PRC laws.

Any dispute arising from the issuance of A Share Convertible Bonds and during the terms thereof shall first be resolved by the parties to the dispute through negotiation. If such dispute cannot be resolved through negotiation, it shall be submitted to a people’s court of competent jurisdiction in the place where the trustee manager of A Share Convertible Bonds is located for litigation.

When any dispute arises and is being resolved in accordance with the preceding provision, the parties shall have the right to continue to exercise other rights in relation to the issuance of A Shares Convertible Bonds and during the terms thereof and shall perform other obligations in connection therewith, except for any matters in dispute.

(21) Trustee manager of A Share Convertible Bonds

The Company has appointed Zheshang Securities Co., Ltd. as the trustee manager in respect of the public issuance of A Share Convertible Bonds and has entered into a trustee management agreement with it in respect of any matters associated with the trustee management.

(22) Validity period of the issuance plan

The validity period of the resolution in relation to the issuance of A Share Convertible Bonds will be twelve months from the date on which the issuance plan is considered and approved by the Shareholders at the Shareholders’ general meeting.

The issuance plan of A Share Convertible Bonds shall not be implemented until approved by the CSRC, and shall be subject to the plan approved by the CSRC.

II. IMPLICATIONS ON THE ISSUANCE OF A SHARE CONVERTIBLE BONDS UNDER THE PRC REGULATORY REQUIREMENTS

The A Share Convertible Bonds to be issued by the Company may lead to the issuance of new A Shares upon exercise of the conversion rights of the A Share Convertible Bonds, the actual number of which depends on a number of factors, including the conversion price of A Share Convertible Bonds. The Board considers that the conversion of A Share Convertible Bonds into new A Shares will dilute the interests of the existing Shareholders in the Company’s share capital.

According to the relevant domestic laws and regulations of the PRC, the proposed issuance of the A Share Convertible Bonds shall be subject to the Shareholders’ approval at the Shareholders’ general meeting and the approvals from the relevant PRC regulatory authorities.

III. IMPLICATIONS ON THE ISSUANCE OF A SHARE CONVERTIBLE BONDS UNDER THE HONG KONG LISTING RULES

It is proposed that new A Shares to be issued upon conversion of A Share Convertible Bonds will be issued under the General Mandate in effect on the date of issuance.

To the best of the Directors’ knowledge, none of the connected persons of the Company has any intention to subscribe for the A Share Convertible Bonds under the issuance plan of A Share Convertible Bonds. If the existing Shareholders proceed with any subscription of A Share Convertible Bonds which constitutes a connected transaction under the Hong Kong Listing Rules, the Company shall be subject to the relevant requirements of connected transactions under Chapter 14A of the Hong Kong Listing Rules, including but not limited to the announcement, circular and independent Shareholders’ approval requirements.

The Board expects that the Company will maintain sufficient public float to meet the minimum requirement applicable to the Company under the Hong Kong Listing Rules.

None of the Directors has or is deemed to have any material interest in the issuance of A Share Convertible Bonds, and therefore none of the Directors shall abstain from voting on the resolution in relation to the proposed issuance of A Share Convertible Bonds.

IV. RECENT 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 prior to the date of this announcement.

V. EXTRAORDINARY GENERAL MEETING

Investors should be aware that the proposed issuance of A Share Convertible Bonds is subject to: (i) approval of the Shareholders at the extraordinary general meeting; and (ii) approvals from the CSRC and other relevant authorities. As the proposed issuance of A Share Convertible Bonds is still subject to the fulfillment of various conditions thereof, the proposed issuance of A Share Convertible Bonds may not proceed or may not become unconditional or may not become effective. Shareholders and potential investors should exercise caution and only rely on the information issued by the Company when dealing, or contemplating dealing, in securities of the Company.

VI. DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:

“Articles of Association” the articles of association of the Company, as amended from time to time
“A Share(s)” domestic share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which is (are) listed on the Shanghai Stock Exchange and traded in RMB
“A Share Convertible Bonds” the convertible corporate bonds in the total amount of not more than RMB11.0 billion which are convertible into new A Shares and are proposed to be issued publicly by the Company in the PRC
“Board” the board of Directors of the Company

“Company”	China Galaxy Securities Co., Ltd., a joint stock company with
	limited liability incorporated in the PRC on 26 January 2007,
	whose H Shares are listed on the Hong Kong Stock Exchange
	(stock code: 6881) and A Shares are listed on the Shanghai Stock
	Exchange (stock code: 601881)
“connected person(s)	has the meaning ascribed to it under the Hong Kong Listing Rules
“CSRC”	the China Securities Regulatory Commission of the PRC
“Director(s)”	the director(s) of the Company
“Galaxy Financial Holdings”	China Galaxy Financial Holdings Company Limited (中國銀河金
	融控股有限責任公司), a limited liability company incorporated in
	the PRC on 8 August 2005, and the controlling shareholder of the
	Company
“General Mandate”	the general mandate granted by the Shareholders to the Board to
	allot, issue and deal with A Shares and/or H Shares not exceeding
	20% of each of the number of A Shares and the number of H
	Shares in issue of the Company as at the date on which such
	resolution was approved by the Shareholders (including but
	not limited to ordinary shares, preference shares and securities
	convertible into Shares)
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“H Share(s)”	overseas listed foreign share(s) in the share capital of the Company
	with a nominal value of RMB1.00 each, which is (are) listed on the
	Hong Kong Stock Exchange and traded in Hong Kong dollars
“Hong Kong Listing Rules”	the Rules Governing the Listing of Securities on the Hong Kong
	Stock Exchange, as amended from time to time
“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited
“PRC” or “China”	the People’s Republic of China, for the purpose of this
	announcement only, excluding Hong Kong, Macau Special
	Administrative Region and Taiwan
“Offering Document”	the offering document to be issued by the Company in respect of
	the public issuance of A Share Convertible Bonds
“RMB”	Renminbi, the lawful currency of the PRC

“Shareholder(s)”

holder(s) of the Share(s)

“Share(s)”

A Share(s) and/or H Share(s)

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

Beijing, the PRC 30 August 2021

As at the date of this announcement, the executive Directors of the Company are Mr. CHEN Gongyan (Chairman) and Mr. CHEN Liang (Vice Chairman and President); the non-executive Directors are Mr. LIU Dingping, Mr. YANG Tijun, Ms. LIU Chang, Mr. LIU Zhihong and Mr. JIANG Yuesheng; and the independent non-executive Directors are Mr. LIU Ruizhong, Mr. WANG Zhenjun, Ms. LIU Chun and Mr. LAW Cheuk Kin Stephen.