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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your Shares in China Galaxy Securities Co., Ltd., you should at once hand this circular and the form of proxy to the purchaser or transferee or to the bank, stockbroker 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.

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

PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS ELECTION OF SUPERVISOR AND NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

The EGM of China Galaxy Securities Co., Ltd. will be held at Conference Room M1919, Qinghai Finance Building, Building No. 1, No. 8 Xiying Street, Fengtai District, Beijing, the PRC, on Tuesday, 19 October 2021 at 10:00 a.m.. The notice convening the EGM is set out on pages 31 to 34 of this circular.

If you intend to appoint a proxy to attend the EGM, please complete the form of proxy in accordance with the instructions printed thereon and return the same to Computershare Hong Kong Investor Services Limited (for holders of H Shares) or the Office of the Board of Directors of the Company (for holders of A Shares) not less than 24 hours before the time appointed for holding the EGM (i.e. no later than 10:00 a.m. on Monday, 18 October 2021) or any adjournment thereof in person or by post. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof if you so wish.

30 September 2021

			Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM	THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		3
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			31
APPENDIX I	–	PRELIMINARY PLAN OF THE PUBLIC
		ISSUANCE OF A SHARE CONVERTIBLE BONDS . . . .	I-1
APPENDIX II	–	FEASIBILITY REPORT ON THE USE OF PROCEEDS
		FROM THE PUBLIC ISSUANCE OF A SHARE
		CONVERTIBLE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	–	REPORT ON THE USE OF PREVIOUSLY RAISED
		PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	DILUTION OF CURRENT RETURNS BY
		THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE
		BONDS AND THE REMEDIAL MEASURES . . . . . . . . . .	IV-1
APPENDIX V	–	RULES FOR THE MEETINGS OF HOLDERS OF
		A SHARE CONVERTIBLE BONDS. . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI	–	THE PLAN OF SHAREHOLDERS’ RETURN FOR THE
		NEXT THREE YEARS (2021-2023) . . . . . . . . . . . . . . . . . .	VI-1

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DEFINITIONS

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

“A Share(s)”
domestic share(s) in the 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
“Articles of Association”
the articles of association of the Company, as amended from time to time
“Board” or “Board of Directors” 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: 06881) and A Shares are listed on the Shanghai Stock Exchange (Stock Code: 601881)
“Company Law”
the Company Law of the People’s Republic of China, as amended from time to time
“connected person(s)”
has the meaning ascribed to it under the Hong Kong Listing Rules
“CSRC”
the China Securities Regulatory Commission
“Director(s)” the director(s) of the Company
“EGM” or “Extraordinary General Meeting”
the first extraordinary general meeting of 2021 to be held by the Company at Conference Room M1919, Qinghai Finance Building, Building No. 1, No. 8 Xiying Street, Fengtai District, Beijing, the PRC on Tuesday, 19 October 2021 at 10:00 a.m.
“Galaxy Financial Holdings” China Galaxy Financial Holdings Company Limited（中國銀河金融控股有限責任公司）, a company with limited liability incorporated in the PRC, and the controlling Shareholder of the Company
“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

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DEFINITIONS

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC
“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
“Independent Director(s)” or “Independent Non-executive Director(s)”
the independent non-executive Director(s) of the Company
“Issuance”, “Issuance of A Share the issuance of A Share Convertible Bonds by the Convertible Bonds” or “Public Company according to the issuance plan of A Share Issuance of A Share Convertible Bonds Convertible Bonds”
“Latest Practicable Date”
24 September 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“PRC” or “China”
the People’s Republic of China, but for the purposes of this circular, excluding Hong Kong, Macau Special Administrative Region and Taiwan region
“Offering Document”
the offering document to be issued by the Company in respect of the Public Issuance of A Share Convertible Bonds
“RMB” or “Renminbi”
Renminbi, the lawful currency of the PRC
“Securities Law” the Securities Law of the People’s Republic of China, as amended from time to time
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” A Share(s) and/or H Share(s) “Shareholder(s)” holder(s) of the Share(s) “Supervisor(s)” the supervisor(s) of the Company “Supervisory Committee” the supervisory committee of the Company

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LETTER FROM THE BOARD

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

(Stock Code: 06881)

The Board of Directors:

Executive Director:

Mr. CHEN Gongyan (Chairman) Mr. CHEN Liang (Vice Chairman and President)

Registered Office in the PRC: 2-6/F, Tower C, Corporate Square 35 Finance Street Xicheng District Beijing, the PRC

Non-executive Directors: Mr. LIU Dingping Mr. YANG Tijun Ms. LIU Chang Mr. LIU Zhihong Mr. JIANG Yuesheng

Principal Place of Business in Hong Kong: 20/F, Wing On Centre 111 Connaught Road Central Sheung Wan Hong Kong

Independent Non-executive Directors: Mr. LIU Ruizhong Mr. WANG Zhenjun Ms. LIU Chun Mr. LAW Cheuk Kin Stephen

30 September 2021

To the Shareholders

Dear Sir or Madam,

PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS AND ELECTION OF SUPERVISOR

INTRODUCTION

On behalf of the Board of Directors, I invite you to attend the EGM to be held at Conference Room M1919, Qinghai Finance Building, Building No. 1, No. 8 Xiying Street, Fengtai District, Beijing, the PRC on Tuesday, 19 October 2021 at 10:00 a.m..

The purpose of this circular is to provide you with the information reasonably necessary to enable you to make an informed decision on whether to vote for or against the proposed resolutions or abstain from voting at the EGM.

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LETTER FROM THE BOARD

PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS

1. Satisfaction of the Conditions of the Public Issuance of A Share Convertible Bonds

Pursuant to the Company Law, the Securities Law, 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》）and the Notice of the Matters in relation to the Issuance of Convertible Corporate Bonds by the 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》）and other laws, regulations and normative documents, the Company has satisfied the relevant requirements for the Public Issuance of A Share Convertible Bonds under the existing laws, regulations and normative documents, and possessed the qualifications and conditions for the Public Issuance of A Share Convertible Bonds.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

2. Proposed Issuance of A Share Convertible Bonds

In order to enhance its comprehensive competitive strength and strengthen 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

Pursuant to the Administrative Measures for the Issuance of Securities by Listed Companies, A Share Convertible Bonds will be issued at par with a nominal value of RMB100 each.

No prescribed minimum issue price is set for the proposed Issuance of A Share Convertible Bonds. There are no regulatory requirements in either the PRC or Hong Kong on setting a prescribed minimum issue price for issuance of corporate bonds.

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LETTER FROM THE BOARD

(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

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LETTER FROM THE BOARD

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

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LETTER FROM THE BOARD

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) based on 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

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LETTER FROM THE BOARD

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

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LETTER FROM THE BOARD

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.

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LETTER FROM THE BOARD

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).

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LETTER FROM THE BOARD

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

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LETTER FROM THE BOARD

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 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;

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LETTER FROM THE BOARD

(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.

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LETTER FROM THE BOARD

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.

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LETTER FROM THE BOARD

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 capital-based 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, their proposed investment amounts and the expected timetable for the use of proceeds are as follows:

Projects for Investment with the Use of Proceeds Investment transaction business Capital-based intermediary business Investment banking business Replenishing the Company’s other working capital Total	Proposed Investment Amount No more than RMB5.0 billion No more than RMB4.0 billion No more than RMB1.0 billion No more than RMB1.0 billion No more than RMB11.0 billion	Expected timetable for the use of proceeds	Expected timetable for the use of proceeds
		Within three months upon receipt of the proceeds 80% of the proposed investment amount 75% of the proposed investment amount 70% of the proposed investment amount 100% of the proposed investment amount	Within four to six months upon receipt of the proceeds
			20% of the proposed investment amount 25% of the proposed investment amount 30% of the proposed investment amount –

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LETTER FROM THE BOARD

In determining the maximum issuance size of the A Share Convertible Bonds, the Company has taken into account factors such as its development strategies and capital requirements, the plan of replenishing net assets and its market position, the scale of its business and development trend, the balance of its bonds, as well as the timing of the Issuance and the market conditions, and in particular, the Company’s capital requirements for the development of its investment transaction business and capital-based intermediary business.

Revenue from investment transaction business has become one of the major revenue sources of domestic securities companies in recent years. Comparing to leading securities companies, there is room for improvement in the scale of the Company’s investment transaction business. Currently, the leverage of the Company’s investment transaction business is 3 to 4 times. The Company intends to invest RMB5 billion of the proceeds from the Issuance of A Share Convertible Bonds to develop its investment transaction business to actively seize market opportunities to expand the scale of its investment transaction business.

The capital-based intermediary business is also a key focus of the Company’s business development. For example, as at 30 June 2021, the balance of margin financing and securities lending from customers of the Company amounted to RMB88.6 billion, representing an increase of 9% as compared to 31 December 2020. The business scale and profitability of the capital-based intermediary business depend on a relatively stable supply of medium- and long-term capital. The Company intends to invest RMB4 billion of the proceeds from the Issuance of A Share Convertible Bonds to develop its capital-based intermediary business to better satisfy the requirements of various risk control indicators and ensure a reasonable growth in the scale of the capital-based intermediary business.

Detailed information on the use of proceeds from the Issuance of A Share Convertible Bonds is set out in Appendix II to this circular.

(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.

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LETTER FROM THE BOARD

(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

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LETTER FROM THE BOARD

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.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

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LETTER FROM THE BOARD

3. Preliminary Plan of the Public Issuance of A Share Convertible Bonds

Pursuant to the Company Law, the Securities Law and the Administrative Measures for the Issuance of Securities by Listed Companies and other laws and regulations, the Company has prepared the preliminary plan of the Public Issuance of A Share Convertible Bonds, details of which are set out in Appendix I to this circular.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

4. Feasibility Report on the Use of Proceeds from the Public Issuance of A Share Convertible Bonds

Pursuant to the Company Law, the Securities Law and the Administrative Measures for the Issuance of Securities by Listed Companies and other laws and regulations, the Company has prepared the feasibility report on the use of proceeds from the Public Issuance of A Share Convertible Bonds, details of which are set out in Appendix II to this circular.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

5. Report on the Use of Previously Raised Proceeds

Pursuant to the Company Law, the Securities Law, the Administrative Measures for the Issuance of Securities by Listed Companies （《上市公司證券發行管理辦法》） and the Rules Concerning the Report on Use of Previously Raised Proceeds （《關於前次募集資金使用情况報告的規定》）and other laws and regulations, the Company has prepared the report on the use of previously raised proceeds, details of which are set out in Appendix III to this circular.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

6. Dilution of Current Returns by the Public Issuance of A Share Convertible Bonds and the Remedial Measures

In accordance with the Opinions of the General Office of the State Council on Further Strengthening the Protection of Legitimate Rights and Interests of Small and Medium Investors in Capital Market （《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》）, the Several Opinions of the State Council on Further Promoting the Healthy Development of the Capital Market （《國務院關於進一步促進資本市場健康發展的若干意見》）and the Guiding Opinions on Matters relating to the Dilution of Current Returns in Initial Public Offering, Refinancing and Major 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 the CSRC, and to protect the interests of minority investors, the Company has analysed the possible impact of the Public Issuance of A Share Convertible Bonds on the interests of and current returns for holders of ordinary Shares, and proposed the relevant remedial measures in light of the circumstance of the Company, details of which are set out in Appendix IV to this circular.

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LETTER FROM THE BOARD

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

7. Rules for the Meetings of Holders of A Share Convertible Bonds

Pursuant to the relevant requirements of the Company Law, the Securities Law, the Administrative Measures for the Issuance of Securities by Listed Companies , the Administrative Measures for Convertible Corporate Bonds （《可轉換公司債券管理辦法》）and other laws, regulations and the Articles of Association, the Company has prepared the rules for the meetings of holders of A Share Convertible Bonds, details of which are set out in Appendix V to this circular.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

8. The Plan of Shareholders’ Return for the Next Three Years (2021-2023)

According to the relevant requirements of the Company Law, the Notice on Further Implementation of Cash Dividend Distribution of Listed Companies （《關於進一步落實上市公司現金分紅有關事項的通知》）and the Guideline No. 3 for Supervision of Listed Companies – 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 relevant laws, regulations and normative documents as well as the Articles of Association, in order to further clarify the Company’s plan for providing reasonable investment returns to Shareholders, improve the transparency and operability of decision-making on profit distribution and facilitate Shareholders to supervise the Company’s operation and profit distribution, the Company has formulated the plan of Shareholders’ return for the next three years (2021-2023), details of which are set out in Appendix VI to this circular.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

9. Authorizations for the Public Issuance of A Share Convertible Bonds

To ensure the completion of the Issuance of A Share Convertible Bonds in a lawful and efficient manner, and determine any specific matters in relation to the issuance plan of A Share Convertible Bonds according to the condition of the capital market, and in accordance with the requirements of the Company Law, the Securities Law, 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》）and other laws and regulations, it is proposed by the Board at the Shareholders’ general meeting to authorize the Board and the Chairman (as may be delegated by the Board and who may delegate any other Directors to deal with any matters relating to the Issuance of A Share Convertible Bonds), subject to the requirements of relevant laws and regulations, to handle all matters relating to the Issuance of A Share Convertible Bonds with full power, including but not limited to:

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LETTER FROM THE BOARD

(1) Authorizations in connection with the Issuance of A Share Convertible Bonds
To make appropriate amendments, adjustments and supplements to the terms of Issuance of A Share Convertible Bonds to the extent permitted by the relevant laws, regulations and the Articles of Association, in accordance with the opinions of regulatory authorities and in the light of the actual situation of the Company; to specify the terms of Issuance and the issuance plan before the Issuance, and to formulate and implement the final plan for the Issuance, including but not limited to determining all other matters in relation to the Issuance plan, such as the size of Issuance, method of Issuance and target investors, percentage of the Issuance reserved for preferential subscription by the existing holders of A Shares, determination of the initial conversion price, adjustment to the conversion price, redemption, interest rates applicable to A Share Convertible Bonds, stipulation of the rights of meetings of holders of A Share Convertible Bonds and the procedures for convening such meetings, as well as the conditions that must be met in order for a resolution to take effect, determination of the timing of the Issuance, creation of a special account for proceeds raised and execution of a tripartite agreement for the supervision of deposits in the special account for proceeds raised;
To retain any relevant intermediaries for handling the application for the Issuance and listing of A Share Convertible Bonds and to determine their service fees; to produce, modify and submit the application materials in relation to the Issuance and listing of A Share Convertible Bonds as required by regulatory authorities;
To amend, supplement, sign, deliver, submit and execute all agreements, contracts and documents arising during the Issuance of A Share Convertible Bonds (including but not limited to underwriting and sponsorship agreements, agreements in connection with the projects in which the proceeds raised will be invested, and intermediary engagement agreements, etc.);
To adjust or decide on specific arrangements for the use of proceeds raised according to the actual progress and funding requirement of the investment projects and within the scope of investment for the proceeds from the Issuance of A Share Convertible Bonds as considered and approved by the Shareholders’ general meeting; according to the actual progress and operational needs of the investment projects, the Company may implement the investment projects using its own funds before the proceeds from the Issuance of A Share Convertible Bonds are received and replace such funds after the proceeds are received; the Company shall make necessary adjustments to the investment projects in accordance with the provisions of relevant laws and regulations, the requirements of regulatory authorities and market conditions;

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LETTER FROM THE BOARD

To amend related articles in the Articles of Association based on the Issuance of A Share Convertible Bonds and their conversion in due course, and to handle matters in relation to the filing with the department for industrial and commercial administration, the registration for changes in registered capital, and the listing of A Share Convertible Bonds, etc.;
In the case of any change in the policy of regulatory authorities with respect to the Issuance of A Share Convertible Bonds or any change in market conditions, to make corresponding adjustments to relevant matters related to the specific plan of the Issuance of A Share Convertible Bonds;
In the event of force majeure or any other circumstance which makes the issuance plan of A Share Convertible Bonds difficult to implement, or which will bring adverse consequences to the Company although the issuance plan can be implemented, or any change in the policy on the Issuance of A Share Convertible Bonds, to determine in its sole discretion to postpone or terminate the implementation of the issuance plan of A Share Convertible Bonds;
Where there are new provisions and requirements under relevant laws and regulations or released by regulatory authorities with respect to the dilution of current returns as a result of re-financing and the remedial measures thereof, to further analyze, study and demonstrate the impacts of the Issuance of A Share Convertible Bonds on the current financial indicators of the Company and the current returns of the Shareholders, etc., to formulate and modify relevant remedial measures, and to handle any other matter in relation thereto with full power, in accordance with relevant laws, regulations and the latest requirements of regulatory authorities;
To handle any other matters in relation to the Issuance of A Share Convertible Bonds;
The above authorizations shall be valid within 12 months from the date on which they are considered and approved by the Shareholders at the Shareholders’ general meeting.

(2) Other authorizations in relation to A Share Convertible Bonds

To handle all matters in relation to redemption with full power, including but not limited to determining the timing of redemption, the percentage of redemption and the execution procedures, in accordance with laws and regulations, approvals of relevant regulatory authorities (if required), the Articles of Association, the relevant terms of the issuance plan of A Share Convertible Bonds considered and approved at the Shareholders’ general meeting and market conditions;

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LETTER FROM THE BOARD

To handle all matters in relation to Share conversion with full power, including but not limited to the adjustment of conversion price; amendments to the articles related to the registered capital in the Articles of Association based on the progress of conversion of A Share Convertible Bonds in due course, and the handling of matters in relation to the approval of amendments to the Articles of Association, filing with the department for industrial and commercial administration, approval for changes in registered capital and changes in registration with the department for industrial and commercial administration, etc., in accordance with laws and regulations, the Articles of Association, the relevant terms of the issuance plan of A Share Convertible Bonds considered and approved at the Shareholders’ general meeting and market conditions;
To handle any other matters associated with A Share Convertible Bonds during the term thereof;
The above authorizations shall be valid from the date on which they are considered and approved by the Shareholders at the Shareholders’ general meeting until the expiry of the term of A Share Convertible Bonds.

This proposal is submitted to the EGM as a special resolution for Shareholders’ consideration and approval.

OTHER INFORMATION RELATING TO THE PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS

1. Reasons for and Benefits of the Proposed Issuance of A Share Convertible Bonds

The Board was of the view that the Issuance of A Shares Convertible Bonds could reinforce the Company’s capital strength, promote the comprehensive development of “wealth management, investment and financing, and international business”, further optimize the business model of “Dual-wheel Driving and Coordinated Development”, enhance the Company’s competitiveness, and realize the Company’s high quality development.

Please refer to Appendix II “Feasibility Report on the Use of Proceeds from the Public Issuance of A Share Convertible Bonds” to this circular for further details of the reasons for the Issuance.

The Company has also considered other fund raising methods, but believed that the Issuance of A Share Convertible Bonds has advantages over other methods and is in the best interests of the Shareholders for the following reasons:

As the Company’s A Share price is significantly higher than the H Share price, the Company has chosen to refinance in the A Share market in order to protect the interests of the Shareholders. Comparing with other financing instruments, the conversion price of the A Share Convertible Bonds is higher than the base price of the non-public issuance and rights issue. Therefore, so far as the Shareholders are concerned, the Issuance of A Share Convertible Bonds can help reduce the

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LETTER FROM THE BOARD

extent of shareholding dilution and the impact on earnings per share under the same fund raising scale, thereby protecting the interests of the existing Shareholders;

The coupon rate of A share convertible corporate bonds in the market is generally within the range of 0.2% to 2%. Comparing with fund raising activities through bank borrowings or issuing debt securities, interests payable by the Company for the Issuance of A Share Convertible Bonds are much lower, and no principal and interests will be payable after the conversion of A Share Convertible Bonds, which will further reduce the Company’s financing costs; and
As the conversion period will commence six months after the completion of the Issuance of A Share Convertible Bonds, the total share capital of the Company will remain unchanged in the short term. Investors usually exercise their conversion rights gradually during the conversion period, and therefore the impact on the return on net assets of the Company and the dilution effect on the existing Shareholders are more moderate as compared to other equity fund raising methods. In addition, the existing holders of A Shares have preferential rights to subscribe for the A Share Convertible Bonds, which can also protect the interests of the existing Shareholders.

2. 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.

3. Implications on the Issuance of A Share Convertible Bonds under the Hong Kong Listing Rules

As of the Latest Practicable Date, Galaxy Financial Holdings held 5,186,538,364 Shares of the Company (including 5,160,610,864 A Shares and 25,927,500 H Shares), representing approximately 51.16% of the total share capital of the Company. Galaxy Financial Holdings is the controlling Shareholder of the Company, and therefore a connected person of the Company. Save as above, there are no other existing holders of A Shares who are connected persons of the Company or associates of the connected persons as of the Latest Practicable Date.

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LETTER FROM THE BOARD

To the best of the Directors’ knowledge, as of the Latest Practicable Date, Galaxy Financial Holdings has no intention to subscribe for the A Share Convertible Bonds under the issuance plan of A Share Convertible Bonds. If the existing Shareholders proceed with the subscription of A Share Convertible Bonds which constitutes a connected transaction under the Hong Kong Listing Rules, the Company shall comply with the relevant requirements on 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.

4. General Mandate

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. 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 Board and its authorized persons will, during such validity period, determine the timing of the Issuance together with the sponsor (the lead underwriter) based on the market conditions, and will only issue the A Share Convertible Bonds when there is a general mandate in effect.

Under the relevant PRC regulatory requirements, and as disclosed in the section headed “Proposed Issuance of A Share Convertible Bonds – (8) Determination of and adjustment to the conversion price” in the “Letter from the Board” of this circular, 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, the average trading price of A Shares during the 20 trading days immediately preceding the date of publication of the Offering Document, the average trading price of A Shares on the trading day immediately preceding the date of publication of the Offering Document, the latest audited net assets per Share and the nominal value per Share. Subject to the satisfaction of the above regulatory requirements on the minimum initial conversion price, the actual initial conversion price will be determined by the Board and its authorized persons together with the sponsor (the lead underwriter) before the Issuance. Further, as disclosed in the section headed “Proposed Issuance of A Share Convertible Bonds – (9) Terms of downward adjustment to the conversion price” in the “Letter from the Board” of this circular, 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 each of the above circumstances, the Company will have the discretion to determine/propose the conversion price. When setting the conversion price, the Company will consider the prevailing market conditions, and also

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LETTER FROM THE BOARD

take into account the maximum number of A Shares to be converted based on the relevant conversion price, so as to ensure the general mandate in effect will be sufficient to cover the A Shares to be issued upon conversion of the A Share Convertible Bonds.

In addition, the initial conversion price is also subject to customary adjustment provisions triggered by corporate actions, including distribution of Share dividends, capitalization, issuance of new Shares or rights issue, distribution of cash dividends, etc. as disclosed in the section headed “Proposed Issuance of A Share Convertible Bonds – (8) Determination of and adjustment to the conversion price” in the “Letter from the Board” of this circular. Such events triggering the adjustments of the conversion price are within the Company’s control. The Company will keep track of the number of A Shares to be issued, and will not take corporate actions that would result in the number of A Shares to be issued upon conversion of the A Share Convertible Bonds exceeding the mandate limit.

5. 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 before the Latest Practicable Date.

6. Effect on the Shareholding Structure of the Company

Pursuant to the issuance plan of A Share Convertible Bonds, the initial conversion price of A Share Convertible Bonds shall not be lower than the highest of (i) 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), (ii) 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), (iii) the average trading price of A Shares on the trading day immediately preceding the date of publication of the Offering Document, and (iv) the latest audited net assets per Share and the nominal value per Share. The actual initial conversion price shall be determined by the Board and its authorized persons upon negotiation with the sponsor (the lead underwriter) based on the market conditions before the Issuance, subject to the authorization by the Shareholders at the EGM.

For reference only and to illustrate the pricing mechanism, assuming the initial conversion price is being determined on the Latest Practicable Date, according to the pricing mechanism described above, the average trading price of A Shares during the 30 trading days immediately preceding the Latest Practicable Date is RMB10.80 per Share, the average trading price of A Shares during the 20 trading days immediately preceding the Latest Practicable Date is RMB11.00 per Share, the average trading price of A Shares on the trading day immediately preceding the Latest Practicable Date is RMB10.92 per Share, and the latest audited net assets per Share (i.e. the audited net assets per Share as at 31 December 2020) is RMB7.53 per Share. Therefore, the minimum initial conversion price on

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the Latest Practicable Date is RMB11.00 per Share, which is the highest amount among RMB10.80 per Share, RMB11.00 per Share, RMB10.92 per Share and RMB7.53 per Share. For the avoidance of doubt, the actual initial conversion price shall be determined by the Board and its authorized persons with the sponsor (the lead underwriter) before the Issuance, and the minimum initial conversion price on the Latest Practicable Date is a theoretical price determined according to the pricing mechanism, which is for illustration purpose only. Based on the minimum initial conversion price of RMB11.00 per Share and the maximum issuance size of A Share Convertible Bonds of RMB11.0 billion, the maximum number of A Shares to be converted would be 1,000,000,000 A Shares.

The shareholding structure of the Company as at the Latest Practicable Date and upon completion of the proposed Issuance of A Share Convertible Bonds (assuming (i) the Company has issued the A Share Convertible Bonds at the maximum issuance amount of RMB11.0 billion; (ii) except for Galaxy Financial Holdings, all other holders of A Shares have exercised their preferential rights in full to subscribe for the corresponding A Share Convertible Bonds in proportion to their current shareholding of A Shares; (iii) all A Share Convertible Bonds are fully converted into A Shares at the minimum initial conversion price of RMB11.00 per Share; and (iv) the Company does not issue and allot any Shares before all of the A Share Convertible Bonds are converted into A Shares) is as follows:

			Immediately after	Immediately after
			the completion of the
			proposed	Issuance
	As at the	Latest	and full conversion
Name of Shareholders	Practicable Date		of A Share Convertible Bonds
		As a percentage		As a percentage
	Number of	of total issued	Number of	of total issued
	Shares	Shares	Shares	Shares
A Shares
– Galaxy Financial Holdings	5,160,610,864	50.91%	5,160,610,864	46.34%
– Public Shareholders	1,285,663,260	12.68%	2,285,663,260	20.52%
Total issued A Shares	6,446,274,124	63.59%	7,446,274,124	66.86%
H Shares
– Galaxy Financial Holdings	25,927,500	0.26%	25,927,500	0.23%
– Public Shareholders	3,665,057,133	36.15%	3,665,057,133	32.91%
Total issued H Shares	3,690,984,633	36.41%	3,690,984,633	33.14%
Total issued Shares	10,137,258,757	100.00%	11,137,258,757	100.00%

After the Issuance of A Share Convertible Bonds, upon the 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 conversion price will be adjusted.

– 27 –

LETTER FROM THE BOARD

Upon occurrence of any of the above changes in Shares and/or Shareholder’s interests, the Company will adjust the conversion price in accordance with the methods determined, and an announcement in relation to the adjustment to the conversion price shall be made on the website of the Shanghai Stock Exchange and the media designated by the CSRC for information disclosure of listed companies. The announcement shall also be published (if necessary) in the Hong Kong market in accordance with the Hong Kong Listing Rules. Please refer to the sections headed “Proposed Issuance of A Share Convertible Bonds – (8) Determination of and adjustment to the conversion price and (9) Terms of downward adjustment to the conversion price” in the “Letter from the Board” of this circular for details of the calculation of conversion price.

7. The Issuance of A Share Convertible Bonds not leading to any change in the control of the Company

As of the Latest Practicable Date, Galaxy Financial Holdings is the controlling Shareholder of the Company, holding approximately 51.16% of the total share capital of the Company.

The Company will issue the A Share Convertible Bonds of not exceeding RMB11.0 billion. Assuming that Galaxy Financial Holdings does not exercise its preferential rights under the Issuance of A Share Convertible Bonds and does not participate in the subscription of A Share Convertible Bonds, it will still remain as the controlling Shareholder of the Company after the completion of the Issuance of A Share Convertible Bonds and the conversion of all A Share Convertible Bonds into A Shares at the minimum initial conversion price of RMB11.00 per Share.

Therefore, the Issuance of A Share Convertible Bonds will not lead to any change in the control of the Company, nor result in a distribution of its shareholding failing to satisfy the relevant listing conditions.

ELECTION OF SUPERVISOR

The Supervisory Committee approved the proposal in relation to the nomination of Ms. Qu Yanping as a candidate for Supervisor of the fourth session of the Supervisory Committee. The proposal is hereby submitted to the EGM as an ordinary resolution for Shareholders’ consideration and approval.

The biographical details of Ms. Qu Yanping are set out below:

Qu Yanping, female, born in July 1966, holds a master of business administration from Tsinghua University, and is a senior economist. She has joined China Investment Corporation since July 2008 and has served as the deputy secretary of the Party Committee of the Company since September 2021. Ms. Qu served as the deputy director (departmental manager level) and managing director of the Leading Group Office of the Directly Managed Enterprise/Equity Management Department II of Central Huijin Investment Ltd. from April 2020 to September 2021. Ms. Qu successively served as the senior manager and vice general manager of Human Resources Department and managing director of China Investment Corporation from July 2008 to January 2021 and concurrently served as a director of

– 28 –

LETTER FROM THE BOARD

Shenyin & Wanguo Securities Co., Ltd. from November 2010 to January 2015, a director of Shenwan Hongyuan Securities Co., Ltd. from January 2015 to March 2019, a director of Shenwan Hongyuan Group Co., Ltd., a company listed on the Shenzhen Stock Exchange (Stock Code: 000166) and the Hong Kong Stock Exchange (Stock Code: 06806), from February 2015 to March 2019, and the Chief Supervisor of Central Huijin Asset Management Ltd. from May 2017 to September 2020. Before joining China Investment Corporation, Ms. Qu successively served as the cadre and vice general manager of the Trust and Loan Department and Fund Planning Department of China Construction Bank Trust and Investment Corporation (later renamed as China Cinda Trust and Investment Company) from May 1988 to October 1999, vice general manager and general manager of the Beijing Securities Trading Branch of China Cinda Trust and Investment Company (later renamed as Beijing Shuangyushu Securities Branch of China Galaxy Securities Company Limited) from October 1999 to April 2003. Ms. Qu served as the inspector general of Galaxy Fund Management Company Limited from April 2003 to July 2008. Ms. Qu obtained a bachelor’s degree in economics from Central Institute of Finance and Banking (later renamed as Central University of Finance and Economics) in June 1987, and a master’s degree in business administration from Tsinghua University in January 2005.

Ms. Qu will enter into a letter of appointment with the Company. The term of office of Ms. Qu will commence from the date of approval by the Shareholders at the EGM, and end on the expiry of the term of the fourth session of the Supervisory Committee. Ms. Qu is eligible for re-election upon expiry of her term.

Ms. Qu will receive salary, performance-based bonus and benefits from the Company. Her specific remuneration will be determined pursuant to the relevant remuneration administrative measures of the Company with reference to her duties and responsibilities.

Save as disclosed above, Ms. Qu has not held any directorships in other listed public companies in the last three years, does not hold any other position with the Company or any of its subsidiaries, and is not connected with any Directors, senior management or substantial or controlling Shareholders of the Company. Ms. Qu does not have any interest in the Shares within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

Further, there is nothing in respect of the election of Ms. Qu that needs to be disclosed pursuant to Rule 13.51(2) of the Hong Kong Listing Rules, nor is there anything that needs to be brought to the attention of the Shareholders.

THE EGM

The notice convening the EGM and the form of proxy are enclosed herewith.

– 29 –

LETTER FROM THE BOARD

VOTING BY POLL

Pursuant to Rule 13.39(4) of the Hong Kong Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. As such, the chairman of the EGM will exercise his power under the Articles of Association to demand a poll for the resolutions proposed at the EGM.

To the best of the Directors’ knowledge, information and belief, none of the Shareholders will be required to abstain from voting on resolutions as set out in this circular.

RECOMMENDATION

The Board considers that the resolutions proposed at the EGM are in the interests of the Company and its Shareholders as a whole. As such, the Board recommends you to vote in favour of the resolutions proposed at the EGM.

Yours faithfully, By Order of the Board China Galaxy Securities Co., Ltd. CHEN Gongyan

Chairman and Executive Director

– 30 –

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

==> picture [246 x 31] intentionally omitted <==

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

(Stock Code: 06881)

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

NOTICE IS HEREBY GIVEN that the first extraordinary general meeting of 2021 (the “ EGM ”) of China Galaxy Securities Co., Ltd. (the “ Company ”) will be held at Conference Room M1919, Qinghai Finance Building, Building No. 1, No. 8 Xiying Street, Fengtai District, Beijing, the PRC on Tuesday, 19 October 2021 at 10:00 a.m. for the following purposes. Unless the context otherwise requires, capitalized terms used herein shall have the same meanings as those defined in the circular of the Company dated 30 September 2021.

SPECIAL RESOLUTIONS

1 To consider and approve the resolution in relation to the satisfaction of the Conditions of the Public Issuance of A Shares Convertible Bonds by the Company.
2 To consider and approve the resolution in relation to the plan of the Public Issuance of A Shares Convertible Bonds by the Company (by way of voting on an individual basis):
2.01 Type of securities to be issued;
2.02 Size of Issuance;
2.03 Par value and issue price;
2.04 Term;
2.05 Interest rate;
2.06 Timing and method of principal and interest payments;

– 31 –

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

2.07 Conversion period;
2.08 Determination of and adjustment to the conversion price;
2.09 Terms of downward adjustment to the conversion price;
2.10 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;
2.11 Terms of redemption;
2.12 Terms of sale back;
2.13 Entitlement to dividend in the year of conversion;
2.14 Method of Issuance and target investors;
2.15 Subscription arrangement for the existing holders of A Shares;
2.16 Matters relevant to the meetings of holders of A Share Convertible Bonds;
2.17 Use of proceeds;
2.18 Guarantee and security;
2.19 Deposit and management of proceeds raised;
2.20 Liabilities for breach of contract;
2.21 Trustee manager of A Share Convertible Bonds;
2.22 Validity period of the issuance plan.

– 32 –

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

3 To consider and approve the resolution in relation to the preliminary plan of the Public Issuance of A Share Convertible Bonds by the Company.
4 To consider and approve the resolution in relation to the feasibility report on the use of proceeds from the Public Issuance of A Share Convertible Bonds by the Company.
5 To consider and approve the resolution in relation to the report on the use of previously raised proceeds by the Company.
6 To consider and approve the resolution in relation to the dilution of current returns by the Public Issuance of A Share Convertible Bonds and the remedial measures by the Company.
7 To consider and approve the resolution in relation to the rules for the meetings of holders of A Share Convertible Bonds of the Company.
8 To consider and approve the resolution in relation to the plan of Shareholders’ return for the next three years (2021-2023) of the Company.
9 To consider and approve the resolution in relation to the grant of authorizations to the Board to handle the matters relating to the Public Issuance of A Share Convertible Bonds.

ORDINARY RESOLUTION

10 To consider and approve the election of Ms. Qu Yanping as a Supervisor of the fourth session of the Supervisory Committee of the Company.

By order of the Board China Galaxy Securities Co., Ltd. CHEN Gongyan

Chairman and Executive Director

Beijing, the PRC, 30 September 2021

Notes:

Pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, any vote of shareholders at a general meeting must be taken by poll. As such, the resolutions set out in the notice of EGM will be voted by poll. Results of the poll voting will be published on the Company’s website at www.chinastock.com.cn and the HKExnews website of Hong Kong Exchanges and Clearing Limited at www.hkexnews.hk after the EGM.

Any shareholder entitled to attend and vote at the EGM convened by the above notice is entitled to appoint one or more proxies to attend and vote instead of him/her. A proxy need not be a shareholder of the Company.

– 33 –

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

In order to be valid, the form of proxy together with the notarized power of attorney or other documents of authorization, if any, must be completed and returned to the Office of the Board of Directors of the Company (for holders of A Shares) or the H Share registrar of the Company, Computershare Hong Kong Investor Services Limited (for holders of H Shares), not less than 24 hours before the time appointed for holding the EGM (i.e. no later than 10:00 a.m. on 18 October 2021) or any adjournment thereof. Computershare Hong Kong Investor Services Limited is located at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong. Completion and return of the form of proxy will not preclude a shareholder from attending and voting in person at the EGM or any adjournment thereof should he/she so wish.
The H Share register of members of the Company will be closed, for the purpose of determining the entitlement of holders of H Shares to attend the EGM, from Wednesday, 13 October 2021 to Tuesday, 19 October 2021 (both days inclusive), during which period no transfer of H Shares will be registered. In order to attend the EGM, all share certificates, together with the instruments of transfers, must be lodged for registration with the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited (for holders of H Shares) at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, not later than 4:30 p.m. on Tuesday, 12 October 2021. The Company will announce separately on the Shanghai Stock Exchange details of the eligibility of the holders of A Shares for attending the EGM.
Where there are joint holders of any shares, the one whose name stands first on the register of members shall be entitled to attend and vote at the EGM in respect of such shares.
Shareholder or his/her proxy shall produce proof of identity when attending the EGM:
(a) Legal representatives of legal person shareholders who attend the meeting shall produce their own identity cards and effective proof of their capacity as legal representatives. Proxies of legal person shareholders shall produce their own identity cards or other effective document of identity; and
(b) Individual shareholders who attend the meeting in person shall produce their identity cards or other effective document of identity. Proxies of individual shareholders shall produce their own identity cards or other effective document of identity.
The EGM is expected to be held for less than half a day. Shareholders who attend the meeting in person or by proxy shall bear their own travelling and accommodation expenses.
The Office of the Board of Directors of the Company is located at Qinghai Finance Building, Building No. 1, No. 8 Xiying Street, Fengtai District, Beijing, the PRC.

Tel. no.: 86 (10) 8635 9022 Fax no.: 86 (10) 6656 8640

As at the date of this notice, 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.

– 34 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

I. Explanation on the Issuance in Compliance with the Conditions for Public Issuance of A Share Convertible Bonds under the Administrative Measures for the Issuance of Securities by Listed Companies

In accordance with the requirements of the Company Law, the Securities Law, 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》） and the Notice 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》）and other laws, regulations and normative documents, the Board has conducted a self-examination of the actual situation of the Company item by item against the requirements concerning the qualifications and conditions for the public issuance of A share convertible bonds by listed companies, and believes that the Company has met the relevant requirements of the current laws and regulations as well as normative documents with respect to the application for the public issuance of A share convertible bonds in all aspects, and possessed the conditions for the public issuance of A share convertible bonds.

II. Overview of the Issuance

The details of the proposed Issuance of A Share Convertible Bonds are set out in the section “Letter from the Board” of this circular.

III. Financial and Accounting Information and Management Discussion and Analysis

(1) Balance sheet, statement of profit or loss and statement of cash flows of the Company for the recent period and three years (prepared in accordance with the China Accounting Standards for Business Enterprises)

Deloitte Touche Tohmatsu Certified Public Accountants LLP audited the financial report for the year 2018 prepared by the Company and issued the standard unqualified audit report. Ernest & Young Hua Ming LLP audited the financial reports for 2019 and 2020 prepared by the Company and issued the standard unqualified audit report. In this section, the financial data of the Company for the year 2018 was extracted from the financial report audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP and the financial data of the Company for the years 2019 and 2020 was extracted from the financial reports audited by Ernest & Young Hua Ming LLP. The financial statements of the Company for January to June 2021 were unaudited and extracted from the interim report.

– I-1 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

I. Balance Sheet

(I) Consolidated balance sheet

Unit: RMB

Items Assets: Monetary Capital Including: Cash held on behalf of customers Clearing settlement funds Including: Customer settlement funds Advances to customers Derivative financial assets Refundable deposits Accounts receivable Interests receivable Financial assets held under resale agreements Financial investments: Financial assets measured at fair value through profit or loss Financial assets held for trading Debt investments Available-for-sale financial assets Other debt investments Investment in other equity instruments Held-to-maturity investments Investments classified as loans and receivables Long-term equity investments Investment properties Fixed assets Construction in progress Right-of-use assets Intangible assets Goodwill Deferred tax assets Other assets Total assets	30 June 2021 100,123,307,724.94 84,906,494,836.90 23,831,191,815.08 18,087,389,276.27 92,194,058,228.43 1,246,877,663.72 12,522,871,884.89 15,559,589,263.38 – 23,897,261,207.35	31 December 2020 92,727,553,502.78 76,851,884,742.29 17,583,856,009.46 12,316,798,684.31 82,018,447,598.08 869,501,481.76 16,194,045,384.14 12,215,069,756.19 – 31,863,071,212.20	31 December 2019 70,329,276,149.83 60,281,957,293.02 11,276,474,884.56 9,485,071,510.87 58,721,318,360.66 208,502,701.01 10,735,256,392.21 5,116,838,493.30 – 30,438,084,072.04	31 December 2018 51,413,630,839.26 42,528,973,315.11 12,686,542,694.97 11,623,904,758.46 44,631,942,885.04 76,290,608.09 5,275,827,016.16 643,111,618.52 – 39,967,073,540.41
	– 107,989,536,982.31 5,574,608,341.06 – 63,071,834,260.43 30,466,237,128.51 – – 1,399,170,532.27 7,739,212.50 322,723,417.80 27,599,832.48 1,365,438,791.95 555,852,964.11 424,160,437.82 54,748,304.89 6,560,910,650.93	– 92,647,010,128.78 5,789,251,783.64 – 52,130,232,360.70 33,868,190,940.87 – – 1,308,173,070.69 7,837,537.50 303,404,371.42 27,599,832.48 922,537,957.96 525,100,703.45 426,453,896.27 69,192,260.85 4,233,686,038.20	– 74,039,119,174.28 5,031,295,864.93 – 23,017,490,419.13 19,349,248,070.01 – – 1,320,135,982.87 8,034,187.50 276,718,303.25 – 1,339,653,532.16 493,538,105.23 439,538,680.25 99,832,078.83 3,425,521,981.78	– 60,338,281,556.50 5,061,777,671.50 – 17,299,229,632.64 9,777,434,930.60 – – 876,823,011.05 8,230,837.50 241,529,767.81 – – 391,666,871.74 223,277,619.51 477,454,435.73 1,973,164,580.11
	487,195,718,644.85	445,730,215,827.42	315,665,877,433.83	251,363,290,117.14

– I-2 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

Items Liabilities: Short-term borrowings Short-term financing instrument payables Due to banks Financial liabilities held for trading Financial liabilities measured at fair value through profit or loss Derivative financial liabilities Financial assets sold under repurchase agreements Accounts payable to brokerage clients Proceeds from underwriting securities received on behalf of customers Accrued staff costs Tax payable Accounts payable Interests payable Bonds payable Lease liabilities Deferred tax liabilities Other liabilities Total liabilities	30 June 2021 11,269,707,112.39 31,333,935,238.49 8,363,251,437.04 11,025,563,729.79 – 2,896,801,755.23 116,993,191,026.06 109,414,767,379.38 48,679,500.00 3,469,682,691.54 443,209,844.47 15,347,426,144.77 – 62,310,877,522.05 1,363,194,916.17 624,383,634.30 18,805,915,428.42	31 December 2020 7,993,492,610.46 48,286,385,500.98 15,617,255,567.62 10,030,747,201.77 – 1,973,411,740.85 88,113,404,866.42 97,670,918,638.02 11,138,610.00 3,714,225,414.95 569,993,076.19 11,627,129,675.66 – 65,669,418,791.97 913,498,354.26 191,231,232.55 11,339,906,805.81	31 December 2019 5,775,420,038.07 17,659,517,315.52 8,177,307,038.33 1,718,081,624.77 – 469,791,795.92 54,855,653,810.50 80,508,860,269.58 – 3,354,729,064.45 363,083,801.38 2,766,214,205.46 – 64,023,358,183.26 1,336,724,225.09 261,392,439.43 2,474,045,715.04	31 December 2018 3,010,778,176.97 6,760,451,698.62 2,001,885,771.10 1,458,698,493.71 – 213,412,804.87 28,059,940,329.82 56,695,274,280.97 – 2,591,518,580.56 164,953,547.00 1,073,023,009.24 – 79,501,423,016.78 – 10,096,290.42 3,483,973,192.65
	393,710,587,360.10	363,722,158,087.51	243,744,179,526.80	185,025,429,192.71

– I-3 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

Items

30 June 2021 31 December 2020 31 December 2019 31 December 2018

Shareholder’s equity: Share capital 10,137,258,757.00 10,137,258,757.00 10,137,258,757.00 10,137,258,757.00 Other equity instruments 14,886,700,000.05 4,962,171,698.13 – – Including: perpetual bonds 14,886,700,000.05 4,962,171,698.13 – – Capital reserve 25,227,335,094.87 25,227,335,094.87 25,022,895,958.83 25,022,895,958.83 Less: treasury shares – – – – Other comprehensive income 569,426,863.72 372,329,921.59 802,506,721.40 205,075,838.18 Special reserve – – – – Surplus reserve 6,744,840,189.43 6,744,840,189.43 6,083,975,483.31 5,600,288,469.98 General risk reserve 11,527,511,067.65 11,509,738,127.73 9,933,043,865.37 8,936,345,567.07 Retained profits 23,626,689,397.95 22,300,856,483.29 18,915,913,292.54 16,080,222,840.21 Total equity attributable to shareholders of the parent company 92,719,761,370.67 81,254,530,272.04 70,895,594,078.45 65,982,087,431.27 Non-controlling interests 765,369,914.08 753,527,467.87 1,026,103,828.58 355,773,493.16 Total equity of the shareholders 93,485,131,284.75 82,008,057,739.91 71,921,697,907.03 66,337,860,924.43 Total liabilities and owner’s equity 487,195,718,644.85 445,730,215,827.42 315,665,877,433.83 251,363,290,117.14

– I-4 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

(II) The Parent Company’s Balance Sheet

Unit: RMB

Items

30 June 2021 31 December 2020 31 December 2019 31 December 2018

Assets: Monetary Capital Including: Cash held on behalf of customers Clearing settlement funds Including: Customer settlement funds Advances to customers Derivative financial assets Refundable deposits Accounts receivable Interests receivable Financial assets held under resale agreements	69,749,627,962.53 61,565,400,519.25 16,356,608,533.99 10,617,949,840.43 86,161,166,700.11 650,165,242.95 2,218,969,169.33 288,990,134.69 – 23,262,118,514.52	68,771,387,276.36 59,066,190,032.94 15,846,583,825.68 10,593,469,635.72 77,993,163,102.21 347,911,319.71 3,440,495,252.88 324,792,691.72 – 31,075,674,445.55	54,569,153,153.38 49,265,274,863.27 9,988,220,413.94 8,236,078,742.64 54,028,306,139.65 19,650,111.41 1,198,127,105.41 213,984,491.98 – 28,890,035,982.20	35,972,214,081.13 32,024,167,668.59 12,531,001,982.11 10,867,401,740.31 41,363,498,035.53 15,962,803.76 782,703,641.65 206,871,972.14 – 38,173,449,426.19

Financial investments: Financial assets measured at fair value through profit or loss Financial assets held for trading Debt investments Available-for-sale financial assets Other debt investments Investment in other equity instruments Investments classified as loans and receivables Long-term equity investments Investment properties Fixed assets Construction in progress Right-of-use assets Intangible assets Goodwill Deferred tax assets Other assets Total assets	– 92,596,807,531.79 4,380,252,033.79 – 63,071,834,260.43 30,466,102,736.27 – 9,943,915,668.02 – 270,544,629.99 27,599,832.48 1,173,541,921.21 449,300,076.50 223,277,619.51 – 6,715,372,249.99	– 79,256,178,734.00 5,078,711,656.61 – 52,130,232,360.70 33,868,045,401.96 – 9,943,915,668.02 – 249,403,561.19 27,599,832.48 751,507,625.25 441,221,512.53 223,277,619.51 – 3,995,078,279.28	– 68,973,038,818.51 4,651,423,601.74 – 23,017,490,419.13 19,349,091,882.90 – 8,595,827,407.02 – 234,356,898.66 – 1,123,744,495.23 385,994,630.53 223,277,619.51 – 1,990,710,078.13	– 59,789,034,412.75 83,382,079.52 – 17,299,229,632.64 9,777,434,930.60 – 7,095,827,407.02 – 214,633,152.75 – – 385,191,390.26 223,277,619.51 377,408,722.88 1,703,717,709.68
	408,006,194,818.10	383,765,180,165.64	277,452,433,249.33	225,994,839,000.12

– I-5 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

Items

30 June 2021 31 December 2020 31 December 2019 31 December 2018

31,333,935,238.49 8,363,251,437.04 10,646,832,744.72 – 2,040,089,237.58 115,940,400,050.52 72,401,254,724.99 48,679,500.00 2,651,580,110.03 341,478,800.58 201,316,862.06 – 62,310,877,522.05 1,161,154,231.86 509,604,541.34 10,505,209,852.99	48,286,385,500.98 15,617,255,567.62 8,258,576,500.08 – 1,019,437,300.54 88,079,209,232.03 69,853,813,160.50 11,138,610.00 3,002,990,955.26 381,461,498.48 199,221,514.77 – 65,669,418,791.97 730,531,398.36 127,599,174.59 3,908,698,451.68	17,066,135,994.57 8,177,307,038.33 1,718,081,624.77 – 146,615,942.67 54,843,554,061.76 57,596,602,174.41 – 2,771,260,844.81 281,441,252.21 114,742,315.44 – 64,023,358,183.26 1,115,415,997.31 228,461,602.69 556,462,490.55	6,760,451,698.62 2,001,885,771.10 1,457,756,966.40 – 128,161,430.00 26,155,091,883.51 42,992,260,003.12 – 2,128,016,529.20 138,585,497.64 1,505,788.89 – 79,191,310,517.11 – – 604,729,527.07
318,455,664,854.25	305,145,737,656.86	208,639,439,522.78	161,559,755,612.66

10,137,258,757.00 14,886,700,000.05 14,886,700,000.05 25,006,907,486.61 – 632,311,069.53 – 6,744,840,189.43 11,039,412,981.38 21,103,099,479.85	10,137,258,757.00 4,962,171,698.13 4,962,171,698.13 25,006,907,486.61 – 359,318,177.61 – 6,744,840,189.43 11,039,412,981.38 20,369,533,218.62	10,137,258,757.00 – – 24,965,390,451.43 – 544,052,963.94 – 6,083,975,483.31 9,717,683,569.14 17,364,632,501.73	10,137,258,757.00 – – 24,965,390,451.43 – 90,659,469.93 – 5,600,288,469.98 8,750,309,542.48 14,891,176,696.64
89,550,529,963.85	78,619,442,508.78	68,812,993,726.55	64,435,083,387.46

408,006,194,818.10	383,765,180,165.64	277,452,433,249.33	225,994,839,000.12

– I-6 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

II. Statement of Profit or Loss

(I) Consolidated Statement of Profit or Loss

Unit: RMB

		January to June
Items		2021	2020	2019	2018
I.	Operating income	15,139,762,170.28	23,749,151,575.19	17,040,817,296.16	9,925,406,079.33
	Net interest income	2,651,395,443.92	4,178,155,740.90	3,491,712,752.89	3,444,688,773.65
	Including: Interest
	income	6,350,441,265.32	10,804,374,351.58	9,527,423,915.52	9,480,578,826.31
	Interest expenses	3,699,045,821.40	6,626,218,610.68	6,035,711,162.63	6,035,890,052.66
	Net fee and
	commission income	4,094,690,088.51	8,520,775,757.70	5,773,267,869.57	4,805,378,538.11
	Including: Net fee
	income from
	brokerage business	3,595,535,138.82	6,920,565,541.82	4,551,498,096.36	3,463,872,414.42
	Net fee income from
	investment banking
	business	200,479,767.52	950,305,076.02	480,027,166.25	530,810,897.11
	Net fee income from
	asset management
	business	258,252,167.59	591,559,253.35	633,750,486.50	746,668,031.23
	Investment gains	2,701,580,484.95	4,990,602,054.27	3,251,790,864.66	–612,706,836.27
	Including: Gains from
	investment in
	associates and joint
	ventures	29,881,741.57	60,638,952.11	10,886,467.81	–2,576,857.64
	Gains from
	derecognition of
	financial assets
	measured at
	amortized cost	11,523,463.83	33,564.38	65,805,388.92	–
	Other gains	58,592,936.43	28,937,239.21	58,383,136.98	5,111,000.00
	Gains from changes in
	fair value	334,812,191.08	–102,387,365.05	1,655,790,172.37	1,555,930,606.25
	Foreign exchange
	gains	13,860,599.12	–7,524,309.63	21,593,019.93	–8,612,474.92
	Other operating
	incomes	5,283,740,451.69	6,136,074,188.23	2,790,162,114.26	734,651,912.48
	Gains from disposal of
	assets	1,089,974.58	4,518,269.56	–1,882,634.50	964,560.03

– I-7 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

		January to June
Items		2021	2020	2019	2018
II.	Operating expenses	9,714,623,360.60	14,571,180,190.67	10,191,546,074.83	6,253,062,932.89
	Tax and surcharges	66,275,283.56	145,004,163.86	124,430,190.18	102,386,637.77
	General and
	administrative
	expenses	4,581,996,790.86	7,817,160,129.68	6,955,044,196.00	5,046,415,996.35
	Impairment losses on
	credits	–28,506,761.41	497,143,549.52	408,334,513.35	408,348,030.90
	Impairment losses on
	other assets	6,517,083.32	–1,441,512.23	2,110,521.68	–
	Impairment losses on
	assets	–	–	–	–
	Other operating
	expenses	5,088,340,964.27	6,113,313,859.84	2,701,626,653.62	695,912,267.87
III.	Operating profits	5,425,138,809.68	9,177,971,384.52	6,849,271,221.33	3,672,343,146.44
	Add: Non-operating
	income	2,787,926.47	50,328,776.24	29,148,508.07	25,724,107.79
	Less: Non-operating
	expense	78,586,285.94	71,566,113.69	48,290,376.24	15,973,459.68
IV.	Profit before income
	tax	5,349,340,450.21	9,156,734,047.07	6,830,129,353.16	3,682,093,794.55
	Less: Income tax
	expense	1,063,419,076.64	1,844,609,928.87	1,579,984,891.85	750,356,961.50
V.	Net profit	4,285,921,373.57	7,312,124,118.20	5,250,144,461.31	2,931,736,833.05
	(1) Categorized by
	operation
	continuity
	1. Net profit from
	continuing
	operations	4,285,921,373.57	7,312,124,118.20	5,250,144,461.31	2,931,736,833.05
	2. Net profit from
	discontinued
	operation	–	–	–	–
	(2) Categorized by
	ownership
	1. Net profit
	attributable to
	shareholders of
	the parent
	company	4,254,888,633.79	7,243,654,385.20	5,228,429,052.09	2,887,126,757.58
	2. Non-controlling
	interest income	31,032,739.78	68,469,733.00	21,715,409.22	44,610,075.47

– I-8 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

		January to June
Items		2021	2020	2019	2018
VI. Other comprehensive
income (net of tax)		180,320,795.89	-444,868,976.44	599,275,966.16	-242,000,170.33
Other comprehensive
	income attributable
	to shareholders of
	the parent company
	(net of tax)	199,511,089.46	–429,367,624.66	597,430,883.22	–242,000,170.33
(1) Other
	comprehensive
	income that will not
	be reclassified into
	profits or losses
	subsequently	145,425,302.33	210,274,577.99	364,306,845.29	–735,333,428.33
1.	Changes arising
	from
	re-measurement of
	defined benefit
	plans	–	36,307,035.22	–6,001,763.90	–31,654,669.00
2.	Other
	comprehensive
	income that cannot
	be reclassified into
	profit or loss under
	the equity method	–	–	–390,603.17	390,603.17
3.	Changes in fair
	value of other
	equity instruments
	investment	145,425,302.33	173,967,542.77	370,699,212.36	–704,069,362.50
(2) Other
	comprehensive
	income that will be
	reclassified into
	profits or losses
	subsequently	54,085,787.13	–639,642,202.65	233,124,037.93	493,333,258.00
1.	Other
	comprehensive
	income that can be
	reclassified into
	profit or loss under
	the equity method	–15,890,531.72	–	5,518,671.14	–5,518,671.14
2.	Changes in fair
	value of other debt
	investments	131,391,709.87	–475,615,523.08	34,613,316.11	394,412,489.80
3.Profit or loss from
	changes in the fair
	value of
	available-for-sale
	financial assets	–	–	–	–
4.	Credit impairment
	provisions for other
	debt investment	–1,409,624.21	81,368,578.37	52,363,034.92	–976,860.44

– I-9 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

		January to June
Items		2021	2020	2019	2018
5.	Cash flow hedge
	reserve (Effective
	portion of profit or
	loss from cash flow
	hedges)	–	–329,706.98	20,534,613.13	–20,204,906.15
6.	Exchange
	differences on
	translation of
	foreign currency
	financial statements	-60,005,766.81	–245,065,550.96	120,094,402.63	125,621,205.93
Net other
	comprehensive
	income attributable
	to non-controlling
	interests (net of tax)	-19,190,293.57	–15,501,351.78	1,845,082.94	–
VII. Total comprehensive
income		4,466,242,169.46	6,867,255,141.76	5,849,420,427.47	2,689,736,662.72
Total comprehensive
	income attributable
	to shareholders of
	the parent company	4,454,399,723.25	6,814,286,760.54	5,825,859,935.31	2,645,126,587.25
Total comprehensive
	income attributable
	to non-controlling
	interests	11,842,446.21	52,968,381.22	23,560,492.16	44,610,075.47
VIII. Earnings per share
(1) Basic earnings per
	share	0.40	0.71	0.52	0.28
(2) Diluted earnings
	per share	0.40	0.71	0.52	0.28

– I-10 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

(II) The Parent Company’s Statement of Profit or Loss

Unit: RMB

		January to June
Items		2021	2020	2019	2018
I.	Operating income	7,721,083,828.77	14,409,734,252.24	11,901,727,094.32	8,072,926,051.46
	Net interest income	2,037,337,478.05	3,468,249,756.06	2,593,666,826.42	2,615,865,214.96
	Including: Interest
	income	5,515,243,562.15	9,714,836,297.32	8,305,765,178.93	8,347,023,180.92
	Interest expenses	3,477,906,084.10	6,246,586,541.26	5,712,098,352.51	5,731,157,965.96
	Net fee and
	commission income	3,184,925,880.20	7,015,908,687.95	4,779,090,803.42	4,200,762,135.13
	Including: Net fee
	income from
	brokerage business	2,973,508,337.66	6,096,168,515.37	4,303,072,476.57	3,628,654,156.04
	Net fee income from
	investment banking
	business	180,415,967.45	868,334,685.97	422,372,266.19	488,526,034.86
	Net fee income from
	asset management
	business	–	–	–	–
	Investment gains	2,229,941,801.80	4,123,577,586.45	3,155,016,542.57	–147,642,283.33
	Including: Gains from
	investment in
	associates and joint
	ventures	–	–	–	–
	Gains from
	derecognition of
	financial assets
	measured at
	amortized costs	139,152.44	–	–	–
	Other gains	52,956,148.07	18,221,181.70	47,635,932.65	–
	Gains from changes in
	fair value	217,270,846.10	–215,897,032.94	1,305,753,988.49	1,401,075,461.57
	Foreign exchange
	gains	–5,645,097.67	–15,164,792.70	6,789,798.01	–12,279,594.73
	Other operating
	incomes	3,363,530.91	7,209,327.44	12,533,184.07	14,026,444.85
	Gains from disposal of
	assets	933,241.31	7,629,538.28	1,240,018.69	1,118,673.01
II.	Operating expenses	3,208,906,192.53	6,212,385,695.84	5,660,158,170.44	4,592,193,697.63
	Tax and surcharges	56,004,332.60	119,820,343.97	106,708,701.27	96,682,438.39
	General and
	administrative
	expenses	3,215,571,268.50	5,687,841,925.73	5,231,939,358.38	4,116,483,865.86
	Impairment losses on
	credits	–62,669,408.57	404,723,426.14	321,510,110.79	379,027,393.38
	Impairment losses on
	assets	–	–	–	–

– I-11 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

			January to June
Items			2021	2020	2019	2018
III.	Operating profits		4,512,177,636.24	8,197,348,556.40	6,241,568,923.88	3,480,732,353.83
	Add: Non-operating
		income	567,269.61	6,912,809.33	6,971,737.79	16,315,063.25
	Less: Non-operating
		expense	36,412,911.97	46,918,449.80	41,309,749.60	14,697,088.20
IV.	Profit before income
	tax		4,476,331,993.88	8,157,342,915.93	6,207,230,912.07	3,482,350,328.88
	Less: Income tax
		expense	831,482,953.44	1,548,695,854.71	1,370,360,778.86	668,273,690.48
V.	Net profit		3,644,849,040.44	6,608,647,061.22	4,836,870,133.21	2,814,076,638.40
	(I) Net profit from
		continuing
		operations	3,644,849,040.44	6,608,647,061.22	4,836,870,133.21	2,814,076,638.40
	(II) Net profit from
		discontinued
		operation	–	–	–	–
VI.	Other comprehensive
	income (net of tax)		275,407,039.25	-183,925,611.18	453,393,494.01	-342,288,402.14
	(I) Other
		comprehensive
		income that will not
		be reclassified into
		profits or losses
		subsequently	145,424,953.57	210,321,333.53	366,417,142.99	–735,724,031.50
	1.	Changes arising
		from
		re-measurement of
		defined benefit
		plans	–	36,353,442.00	–4,282,069.35	–31,654,669.00
	2.	Changes in fair
		value of other
		equity instruments
		investment	145,424,953.57	173,967,891.53	370,699,212.34	–704,069,362.50
	(II) Other
		comprehensive
		income that will be
		reclassified into
		profits or losses
		subsequently	129,982,085.68	–394,246,944.71	86,976,351.02	393,435,629.36
	1.	Changes in fair
		value of other debt
		investments	131,391,709.87	475,615,523.08	34,613,316.10	394,412,489.80
	2.	Profit or loss from
		changes in the fair
		value of
		available-for-sale
		financial assets	–	–	–	–
	3.	Credit loss
		provisions for other
		debt investments	–1,409,624.19	81,368,578.37	52,363,034.92	–976,860.44
VII.	Total comprehensive
	income		3,920,256,079.69	6,424,721,450.04	5,290,263,627.22	2,471,788,236.26

– I-12 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

III. Statement of Cash Flows

(I) Consolidated Statement of Cash Flows

Unit: RMB

January to June Items 2021 2020 2019 2018 I. Cash flows from operating activities: Cash received from interests, fees and commissions 11,314,670,855.99 23,339,546,917.49 17,581,896,655.10 16,723,165,183.71 Net increase in due to banks – 7,380,000,000.00 6,170,000,000.00 1,500,000,000.00 Net decrease in advances to customers – – – 17,200,813,539.88 Net increase in repurchase business 36,724,420,603.96 31,645,743,655.97 36,024,685,814.73 7,648,095,024.81 Net cash received from brokerage clients 11,781,469,837.99 17,170,189,165.61 23,811,739,875.61 – Cash received from other operating activities 17,595,182,702.27 24,603,936,396.49 5,759,120,623.79 2,129,309,820.13 Sub-total of cash inflow from operating activities 77,415,744,000.21 104,139,416,135.56 89,347,442,969.23 45,201,383,568.53

Net increase in financial assets and liabilities held for trading and derivative financial instruments 12,764,057,675.45 8,602,969,110.44 11,518,160,832.91 22,836,674,220.43 Net decrease in due to banks 7,205,000,000.00 – – – Net decrease in cash received from brokerage clients – – – 8,095,992,410.38 Net decrease in repurchase business – – – – Net increase in advances to customers 9,925,066,352.48 23,238,922,309.18 12,275,775,510.10 – Cash for the payment of interests, fees and commissions 2,900,808,213.27 3,685,187,069.02 2,538,511,114.72 1,513,466,126.90 Cash payments to and for employees 3,575,156,414.27 4,970,193,961.95 4,019,943,438.30 4,476,240,096.47 Tax expenses paid 1,784,002,349.10 2,488,125,277.76 2,312,546,768.78 1,370,540,995.91

– I-13 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

January to June 2021 10,985,599,180.75	2020 23,450,036,945.07	2019 15,346,923,228.41	2018 4,446,781,690.96
49,139,690,185.32	66,435,434,673.42	48,011,860,893.22	42,739,695,541.05

28,276,053,814.89	37,703,981,462.14	41,335,582,076.01	2,461,688,027.48

1,910,959,927.01 285,391,110.78 – 3,592,635,236.11 1,155,373.09 – 15,252,081,500.00	2,207,901,170.57 – – – 22,792,903.32 – 10,495,137,407.61	2,071,075,677.58 275,063,597.02 – – 21,590,127.58 1,212,188,726.70 10,365,177,479.59	2,190,160,875.83 1,076,991,347.66 3,174,688,630.34 – 10,387,598.05 – 7,986,961,047.30
21,042,223,146.99	12,725,831,481.50	13,945,095,608.47	14,439,189,499.18

106,853,366.35 –	248,592,226.68 857,883,766.57	1,276,264,864.50 –	826,359,658.69 –

– I-14 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

January to June Items 2021 2020 2019 2018 Net increase in cash from investments classified as loans and receivables – – – – Cash for purchase or disposal of other debt investment 10,542,107,390.39 29,147,219,944.96 5,455,142,159.26 1,218,790,620.77 Cash for purchase or disposal of other equity instruments investment – 14,288,064,931.11 9,002,257,104.31 1,140,000,000.00 Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets 205,979,600.32 423,289,523.44 528,395,495.15 1,342,828,038.91 Net cash paid for acquisition of subsidiaries and other business units – – – – Cash paid for other investing activities 13,185,000,000.00 15,252,081,500.00 10,495,137,407.61 10,369,742,172.20 Sub-total of cash outflow from investing activities 24,039,940,357.06 60,217,131,892.76 26,757,197,030.83 14,897,720,490.57 Net cash flows from investing activities -2,997,717,210.07 -47,491,300,411.26 -12,812,101,422.36 -458,530,991.39 III. Cash flows from financing activities: Cash received from issuance of perpetual bonds 9,924,528,301.92 4,962,171,698.13 – – Cash received by subsidiaries from capital injection of minority interests – 76,805,485.61 – – Cash received from borrowings 3,279,270,463.45 2,218,988,768.95 553,529,537.10 457,663,700.00 Cash received from issuance of long-term bonds and long-term income rights certificates 10,086,800,000.00 32,422,350,000.00 16,895,530,000.00 30,918,990,000.00

– I-15 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

January to June Items 2021 2020 2019 2018 Cash received from issuance of short-term financing notes and short-term income rights certificates 32,751,902,830.18 124,626,520,503.20 24,819,501,320.95 6,699,070,000.00 Cash received from consolidation of structured entities 92,619,910.19 87,465,320.27 – 38,188,635.30 Sub-total of cash inflow from financing activities 56,135,121,505.74 164,394,301,776.16 42,268,560,858.05 38,113,912,335.30 Cash paid for repayment of liabilities 63,211,424,997.78 124,236,187,315.52 46,364,214,198.62 44,789,753,060.81 Cash paid for dividend and profit distribution or interest payment 2,026,123,183.67 6,224,739,276.32 5,099,185,679.71 5,098,111,499.18 Including: Dividend and profit paid to minority shareholders by subsidiaries – – – – Cash paid for consolidation of structured entities – – 1,728,944,688.76 1,183,182,805.32 Cash paid for other financing activities 212,669,667.42 647,337,341.14 264,596,211.92 187,245,333.02 Sub-total of cash outflow from financing activities 65,450,217,848.87 131,108,263,932.98 53,456,940,779.01 51,258,292,698.33 Net cash flows from financing activities -9,315,096,343.13 33,286,037,843.18 -11,188,379,920.96 -13,144,380,363.03 IV. Effect of changes in foreign exchange rates on cash and cash equivalents -79,089,516.81 -288,323,924.80 97,524,620.58 328,290,834.25

– I-16 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

January to June Items 2021 2020 2019 2018 V. Net increase in cash and cash equivalents 15,884,150,744.88 23,210,394,969.26 17,432,625,353.27 -10,812,932,492.69 Add: Balance of cash and cash equivalents at the beginning of the period 94,127,262,119.01 70,916,867,149.75 53,484,241,796.48 64,297,174,289.17 VI. Cash and cash equivalents at the end of the period 110,011,412,863.89 94,127,262,119.01 70,916,867,149.75 53,484,241,796.48

– I-17 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

(II) The Parent Company’s Statement of Cash Flows

Unit: RMB

January to June Items 2021 2020 2019 2018 I. Cash flows from operating activities: Cash received from interests, fees and commissions 9,392,515,296.23 18,602,342,994.37 14,697,829,215.26 15,217,338,748.82 Net increase in due to banks – 7,380,000,000.00 6,170,000,000.00 1,500,000,000.00 Net decrease in advances to customers – – – 17,335,853,846.51 Net increase in repurchase business 35,554,767,774.40 30,862,977,323.68 37,671,557,551.55 8,026,498,875.89 Net cash received from brokerage clients 2,585,062,661.12 12,265,341,783.26 14,602,496,058.29 – Cash received from other operating activities 5,233,599,176.97 3,525,414,577.09 99,990,981.02 559,911,406.08 Sub-total of cash inflow from operating activities 52,765,944,908.72 72,636,076,678.40 73,241,873,806.12 42,639,602,877.30 Net increase in financial assets and liabilities held for trading and derivative financial instruments 9,607,029,567.13 2,765,616,109.11 7,486,135,442.99 22,304,483,313.75 Net decrease in due to banks 7,205,000,000.00 – – – Net decrease in cash received from brokerage clients – – – 6,614,611,133.23 Net decrease in repurchase business – – – – Net increase in advances to customers 7,903,990,695.32 23,869,452,882.40 12,406,904,240.14 – Cash paid for interests, fees and commissions 2,119,101,607.65 3,105,201,714.59 1,761,723,538.68 1,366,708,469.74 Cash payments to and for employees 2,836,626,301.15 3,828,091,155.79 3,090,496,366.15 3,887,001,123.87 Cash paid for tax 1,394,291,702.57 2,291,540,421.11 1,928,023,915.29 1,178,706,943.85 Cash paid for other operating activities 2,794,257,323.72 5,738,026,983.49 1,103,271,314.21 3,114,807,310.81

– I-18 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

January to June 2021 33,860,297,197.54	2020 41,597,929,266.49	2019 27,776,554,817.46	2018 38,466,318,295.25

18,905,647,711.18	31,038,147,411.91	45,465,318,988.66	4,173,284,582.05

1,836,736,029.17 760,510,103.71 – 999,552.59 3,592,623,740.68 102,081,500.00	2,147,413,402.28 – – 11,601,163.80 – 41,406,100.00	1,484,139,076.04 – – 9,776,174.65 – –	1,120,498,393.57 1,168,718,463.80 2,880,610,525.83 9,448,051.07 – 136,234,906.25
6,292,905,926.15	2,200,420,666.08	1,493,915,250.69	5,315,510,340.52

– – – 10,885,003,898.59	1,348,088,261.00 – 498,048,188.63 29,062,562,256.25	1,500,000,000.00 – 4,516,961,122.11 5,405,453,684.18	– – – 1,196,482,080.79

– I-19 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

January to June Items 2021 2020 2019 2018 Cash for purchase or disposal of other equity instrument investments – 14,288,075,230.55 9,077,391,335.82 1,140,000,000.00 Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets 153,095,258.03 343,951,130.58 231,953,364.97 1,313,470,876.12 Cash paid for other investing activities – – 11,917,800.00 131,569,800.00 Sub-total of cash outflow from investing activities 11,038,099,156.62 45,540,725,067.01 20,743,677,307.08 3,781,522,756.91 Net cash flows from investing activities -4,745,148,230.47 -43,340,304,400.93 -19,249,762,056.39 1,533,987,583.61 III. Cash flows from financing activities: Cash received from – – – – capital injection Cash received from issuance of perpetual bonds 9,924,528,301.92 4,962,171,698.13 – – Cash received from issuance of long-term bonds and long-term income rights certificates 10,086,800,000.00 32,422,350,000.00 16,895,530,000.00 30,918,990,000.00 Cash received from issuance of short-term financing notes and short-term income rights certificates 32,751,902,830.18 124,626,520,503.20 24,226,120,000.00 6,699,070,000.00 Cash received for other financing activities – – –- – Sub-total of cash inflow from financing activities 52,763,231,132.10 162,011,042,201.33 41,121,650,000.00 37,618,060,000.00

– I-20 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

January to June Items 2021 2020 2019 2018 Cash paid for repayment of liabilities 63,211,424,997.78 123,642,805,994.57 46,054,001,698.62 44,789,753,060.81 Cash paid for dividend and profit distribution or interest payment 1,578,794,677.49 5,932,142,540.70 5,036,137,156.78 4,983,423,115.49 Cash paid for other financing activities 156,329,344.85 531,464,434.80 244,340,518.36 120,509,433.96 Sub-total of cash outflow from financing activities 64,946,549,020.12 130,106,412,970.07 51,334,479,373.76 49,893,685,610.26 Net cash flows from financing activities -12,183,317,888.02 31,904,629,231.26 -10,212,829,373.76 -12,275,625,610.26 IV. Effect of changes in foreign exchange rates on cash and cash equivalents -14,213,049.28 -92,006,328.94 27,899,140.64 82,151,995.59

V. Net increase in cash and cash equivalents 1,962,968,543.41 19,510,465,913.30 16,030,626,699.15 -6,486,201,449.01 Add: Balance of cash and cash equivalents at the beginning of the period 83,884,900,779.60 64,374,434,866.30 48,343,808,167.15 54,830,009,616.16 VI. Cash and cash equivalents at the end of the period 85,847,869,323.01 83,884,900,779.60 64,374,434,866.30 48,343,808,167.15

– I-21 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

4. Changes in the Scope of the Consolidated Statements

The scope of the consolidated statements of the Company for the recent period and three years was in compliance with the requirements of the Ministry of Finance and the relevant requirements of the Accounting Standards for Business Enterprises. The changes in the scope of the consolidated statements of the Company for the recent period and three years are shown in the table below:

No.	Nature	Name of subsidiary/plan	Reasons for change
2018
1	Included in the	Golden Dragon No. 59 Targeted	Holding ratio and other conditions
	scope of the	Asset Management Plan (金龍59號	reached controlling level
	consolidated	定向資產管理計劃) managed by
	statements	Donghai Funds (東海基金)
2	Included in the	Golden Dragon No. 60 Targeted	Holding ratio and other conditions
	scope of the	Asset Management Plan (金龍60號	reached controlling level
	consolidated	定向資產管理計劃) managed by
	statements	Donghai Funds
3	Included in the	Galaxy Polaris No. 1 Collective	Acting as manager and holding
	scope of the	Asset Management Plan (銀河北極星	ratio and other conditions reached
	consolidated	1號集合資產管理計劃)	controlling level
	statements
4	Included in the	Galaxy Fuxing No. 1 Collective	Acting as manager and holding
	scope of the	Asset Management Plan (銀河福星1	ratio and other conditions reached
	consolidated	號集合資產管理計劃)	controlling level
	statements
5	Included in the	Galaxy Shenghui Ruifeng No. 1	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河盛匯睿豐1號集合資產管理計劃)	controlling level
	statements
6	Included in the	Galaxy 99 Index Collective Asset	Acting as manager and holding
	scope of the	Management Plan (銀河99指數集合	ratio and other conditions reached
	consolidated	資產管理計劃)	controlling level
	statements
7	Included in the	Galaxy Huida Zhiying No. 18	Acting as manager and holding
	scope of the	Targeted Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河匯達智贏18號定向資產管理計劃)	controlling level
	statements
8	Included in the	Galaxy No. 1 FOF Collective Asset	Acting as manager and holding
	scope of the	Management Plan (銀河1號FOF集合	ratio and other conditions reached
	consolidated	資產管理計劃) for supporting the	controlling level
	statements	development of private enterprises
		by the securities industry
9	Included in the	Galaxy Futures Unitrust China	Acting as manager and holding
	scope of the	Influential Portfolio No. 3 Asset	ratio and other conditions reached
	consolidated	Management Plan (銀河期貨乾信中國	controlling level
	statements	影響力組合3號資產管理計劃)
10	Excluded from	Galaxy Futures Gaoyang Asset	Due for settlement
	the scope of the	Management Plan (銀河期貨高陽資產
	consolidated	管理計劃)
	statements

– I-22 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

No.	Nature	Name of subsidiary/plan	Reasons for change
11	Excluded from	Galaxy Futures Heyu Quantitative	Due for settlement
	the scope of the	Phase 1 Asset Management Plan (銀
	consolidated	河期貨和譽量化1期資產管理計劃)
	statements
12	Excluded from	Galaxy Anxin Yield No. 2	Decrease in holding ratio
	the scope of the	Collective Asset Management Plan
	consolidated	(銀河安心收益2號集合資產管理計劃)
	statements
13	Excluded from	Galaxy Jinyan Investment Advisory	Cancelled
	the scope of the	(Shenzhen) Co., Ltd. (銀河金巖投資
	consolidated	諮詢（深圳）有限公司)
	statements
2019
1	Included in the	CGS-CIMB Securities International	Business combination of entities
	scope of the	Pte. Ltd. (銀河-聯昌證券國際私人有限	under non-common control
	consolidated	公司)
	statements
2	Included in the	Yuchun No. 55 Asset Management	Holding ratio and other conditions
	scope of the	Plan (玉泉55號資產管理計劃)	reached controlling level
	consolidated	managed by Caitong Fund
	statements	(財通基金)
3	Included in the	Galaxy Securities Yuesheng No. 1	Holding ratio and other conditions
	scope of the	Asset Management Plan (銀河證券躍	reached controlling level
	consolidated	升1號資產管理計劃) managed by
	statements	Bosera Funds (博時基金)
4	Included in the	Rongbao No. 16 Special Fund (融寶	Holding ratio and other conditions
	scope of the	16號專項基金) managed by Rongbao	reached controlling level
	consolidated	Fund (融寶基金)
	statements
5	Included in the	Galaxy Futures Yuanquan No. 1	Acting as manager and holding
	scope of the	Single Asset Management Plan (銀	ratio and other conditions reached
	consolidated	河期貨源權1號單一資產管理計劃)	controlling level
	statements
6	Excluded from	Galaxy Shenghui Ruifeng No. 1	Due for settlement
	the scope of the	Collective Asset Management Plan
	consolidated	(銀河盛匯睿豐1號集合資產管理計劃)
	statements
7	Excluded from	Galaxy 99 Index Collective Asset	Due for settlement
	the scope of the	Management Plan (銀河99指數集合
	consolidated	資產管理計劃)
	statements
8	Excluded from	Galaxy Futures Unitrust China	Due for settlement
	the scope of the	Influential Portfolio No. 3 Asset
	consolidated	Management Plan (銀河期貨乾信中國
	statements	影響力組合3號資產管理計劃)
9	Excluded from	Galaxy Futures Steel No. 1 Asset	Due for settlement
	the scope of the	Management Plan (銀河期貨鋼鐵1號
	consolidated	資產管理計劃)
	statements
10	Excluded from	Galaxy Wenying No. 8 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈8
	consolidated	號集合資產管理計劃)
	statements

– I-23 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

No.	Nature	Name of subsidiary/plan	Reasons for change
11	Excluded from	Galaxy Wenying No. 9 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈9
	consolidated	號集合資產管理計劃)
	statements
12	Excluded from	Galaxy Wenying No. 10 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	10號集合資產管理計劃)
	statements
13	Excluded from	Galaxy Henghui CPPI Strategy No.	Due for settlement
	the scope of the	5 Targeted Asset Management Plan
	consolidated	(銀河恆匯CPPI策略5號定向資管計劃)
	statements
2020
1	Included in the	Galaxy Futures Xinghai FOF Phase	Acting as manager and holding
	scope of the	1 Collective Asset Management	ratio and other conditions reached
	consolidated	Plan (銀河期貨星海FOF一期集合資產	controlling level
	statements	管理計劃)
2	Included in the	Galaxy Futures Industries No. 6	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河期貨產業6號集合資產管理計劃)	controlling level
	statements
3	Included in the	Galaxy Futures Selected Value No.	Acting as manager and holding
	scope of the	1 Collective Asset Management	ratio and other conditions reached
	consolidated	Plan (銀河期貨價值精選1號集合資產管	controlling level
	statements	理計劃)
4	Included in the	Galaxy Shenghui Leqian No. 1	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河盛匯樂錢1號集合資產管理計劃)	controlling level
	statements
5	Included in the	Galaxy Shenghui Yuanheng No. 5	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河盛匯元亨5號集合資產管理計劃)	controlling level
	statements
6	Included in the	Galaxy Mercury Xinghe No. 1	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河水星興和1號集合資產管理計劃)	controlling level
	statements
7	Included in the	Galaxy Shenghui Lexiang No. 2	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河盛匯樂享2號集合資產管理計劃)	controlling level
	statements
8	Included in the	Galaxy Shenghui Fengli No. 12	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河盛匯豐利12號集合資產管理計劃)	controlling level
	statements
9	Included in the	Galaxy Mercury Xinhe No. 1	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河水星信和1號集合資產管理計劃)	controlling level
	statements
10	Included in the	Galaxy Mercury Xinhe No. 3	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河水星信和3號集合資產管理計劃)	controlling level
	statements

– I-24 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

No. Nature

Name of subsidiary/plan

Reasons for change

11	Included in the	Galaxy Shenghui Lexiang Huimin	Acting as manager and holding
	scope of the	No. 1 Collective Asset Management	ratio and other conditions reached
	consolidated	Plan (銀河盛匯樂享慧民1號集合資產管	controlling level
	statements	理計劃)
12	Included in the	Galaxy Shenghui Lexiang Huimin	Acting as manager and holding
	scope of the	No. 2 Collective Asset Management	ratio and other conditions reached
	consolidated	Plan (銀河盛匯樂享慧民2號集合資產管	controlling level
	statements	理計劃)
13	Included in the	Horizon Asset and Galaxy	Holding ratio and other conditions
	scope of the	Securities No. 1 Collective Asset	reached controlling level
	consolidated	Management Plan (匯安基金銀證1號
	statements	集合資產管理計劃)
14	Included in the	Dacheng Fund and Galaxy	Holding ratio and other conditions
	scope of the	Securities No. 1 Single Asset	reached controlling level
	consolidated	Management Plan (大成基金銀河證券
	statements	1號單一資產管理計劃)
15	Included in the	Harvest Fund Steady Growth and	Holding ratio and other conditions
	scope of the	Selected Assets No. 2 Single Asset	reached controlling level
	consolidated	Management Plan (嘉實基金定增優選
	statements	2號單一資產管理計劃)
16	Included in the	Caitong Fund Yuchun No. 1055	Holding ratio and other conditions
	scope of the	Single Asset Management Plan (財	reached controlling level
	consolidated	通基金玉泉1055號單一資產管理計劃)
	statements
17	Included in the	Galaxy Jinhui Juhui No. 19 Single	Acting as manager and holding
	scope of the	Asset Management Plan (銀河金匯聚	ratio and other conditions reached
	consolidated	匯19號單一資產管理計劃)	controlling level
	statements
18	Included in the	Galaxy Zhihui FOF No. 12 Single	Acting as manager and holding
	scope of the	Asset Management Plan (銀河智匯	ratio and other conditions reached
	consolidated	FOF12號單一資產管理計劃)	controlling level
	statements
19	Excluded from	Galaxy Mercury High Yield Bond	Due for settlement
	the scope of the	No. 1 Collective Asset Management
	consolidated	Plan (銀河水星高收益債1號集合資產管
	statements	理計劃)
20	Excluded from	Galaxy Wenying No. 11 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	11號集合資產管理計劃)
	statements
21	Excluded from	Galaxy Wenying No. 12 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	12號集合資產管理計劃)
	statements
22	Excluded from	Galaxy Wenying No. 13 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	13號集合資產管理計劃)
	statements
23	Excluded from	Galaxy Wenying No. 14 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	14號集合資產管理計劃)
	statements

– I-25 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

No.	Nature	Name of subsidiary/plan	Reasons for change
24	Excluded from	Galaxy Wenying No. 15 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	15號集合資產管理計劃)
	statements
25	Excluded from	Galaxy Wenying No. 16 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	16號集合資產管理計劃)
	statements
26	Excluded from	Galaxy Wenying No. 17 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	17號集合資產管理計劃)
	statements
27	Excluded from	Galaxy Wenying No. 18 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	18號集合資產管理計劃)
	statements
28	Excluded from	Galaxy Wenying No. 19 Collective	Due for settlement
	the scope of the	Asset Management Plan (銀河穩盈
	consolidated	19號集合資產管理計劃)
	statements
29	Excluded from	Galaxy Jinhui Huitong Stock Fund	Due for settlement
	the scope of the	FOF Collective Asset Management
	consolidated	Plan (銀河金匯慧通股基FOF集合資產
	statements	管理計劃)
30	Excluded from	Galaxy New Normal No. 1	Due for settlement
	the scope of the	Collective Asset Management Plan
	consolidated	(銀河新常態1號集合資產管理計劃)
	statements
31	Excluded from	Galaxy New Normal No. 2	Due for settlement
	the scope of the	Collective Asset Management Plan
	consolidated	(銀河新常態2號集合資產管理計劃)
	statements
32	Excluded from	Galaxy Securities Yuesheng No. 1	Due for settlement
	the scope of the	Asset Management Plan (銀河證券躍
	consolidated	升1號資產管理計劃)
	statements
33	Excluded from	Galaxy Phase 1 Collective Fund	Due for settlement
	the scope of the	Trust (CR Trust) (銀河一期集合資金
	consolidated	信託（華潤信託）)
	statements
34	Excluded from	Galaxy Futures Commodities FOF	Due for settlement
	the scope of the	Phase 1 Single Asset Management
	consolidated	Plan (銀河期貨商品FOF一期單一資產
	statements	管理計劃)
January to June 2021
1	Included in the	Galaxy Mercury Dual Bonds No. 2	Acting as manager and holding
	scope of the	Collective Asset Management Plan	ratio and other conditions reached
	consolidated	(銀河水星雙債2號集合資產管理計劃)	controlling level
	statements

– I-26 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

No. Nature Name of subsidiary/plan Reasons for change 2 Included in the Galaxy Mercury Xinghe No. 2 Acting as manager and holding scope of the Collective Asset Management Plan ratio and other conditions reached consolidated (銀河水星興和2號集合資產管理計劃) controlling level statements
3 Included in the Galaxy Mercury No. 101 Collective Acting as manager and holding scope of the Asset Management Plan (銀河水星 ratio and other conditions reached consolidated 101號集合資產管理計劃) controlling level statements
4 Included in the Galaxy Zhihui FOF No.13 Single Acting as manager and holding scope of the Asset Management Plan (銀河智匯 ratio and other conditions reached consolidated FOF13號單一資產管理計劃) controlling level statements
5 Included in the Galaxy Zhihui FOF No. 15 Single Acting as manager and holding scope of the Asset Management Plan (銀河智匯 ratio and other conditions reached consolidated FOF15號單一資產管理計劃) controlling level statements
6 Included in the Galaxy Zhihui FOF No. 16 Single Acting as manager and holding scope of the Asset Management Plan (銀河智匯 ratio and other conditions reached consolidated FOF16號單一資產管理計劃) controlling level statements
7 Included in the Galaxy Zhihui FOF No. 25 Single Acting as manager and holding scope of the Asset Management Plan (銀河智匯 ratio and other conditions reached consolidated FOF25號單一資產管理計劃) controlling level statements
8 Included in the Galaxy Futures Xinxin Xiangrong Acting as manager and holding scope of the No. 1 Collective Asset Management ratio and other conditions reached consolidated Plan (銀河期貨新鑫向融1號集合資產管 controlling level statements 理計劃)

(II) Major Financial Indicators and Regulatory Indicators

1. Major Financial Indicators of the Company

	January to June
	2021/ 30 June	2020/ 31	2019 / 31	2018 / 31
Financial Indicators	2021	December 2020	December 2019	December 2018
Basic earnings per share
(RMB/share)	0.40	0.71	0.52	0.28
Diluted earnings per share
(RMB/share)	0.40	0.71	0.52	0.28
Basic earnings per share
after deduction of
extraordinary gains and
losses (RMB/share)	0.40	0.71	0.52	0.28
Diluted earnings per share
after deduction of
extraordinary gains and
losses (RMB/share)	0.40	0.71	0.52	0.28
Weighted average return on
net assets (%)	5.11	9.84	7.64	4.40

– I-27 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

	January to June
	2021/ 30 June	2020/ 31	2019 / 31	2018 / 31
Financial Indicators	2021	December 2020	December 2019	December 2018
Weighted average return on
net assets after deduction
of extraordinary gains and
losses (%)	5.16	9.86	7.67	4.38
Net assets per share
attributable to shareholders
of the parent company
(RMB/share)	7.68	7.53	6.99	6.51

Notes:

(1) Earnings per share and return on net assets are calculated according to the requirements under the Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (revised in 2010)（《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》（ 2010 年修訂） );
(2) Net assets per share = (Net assets attributable to shareholders of the parent company at the end of the period – Other equity instruments)/Total equity at the end of the period.

– I-28 –

APPENDIX I

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

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

The risk control indicators of the Company (including net capital) for the recent period and three years have consistently complied with the relevant regulatory requirements. The major risk control indicators are as follows:

				31	31	31
	Warning	Regulatory	30 June	December	December	December
Items	Standard	Standard	2021	2020	2019	2018
Net capital
(RMB0’000)	–	–	7,460,355.99	7,052,213.37	6,901,681.15	6,191,905.63
Net assets
(RMB0’000)	–	–	8,955,053.00	7,861,944.25	6,881,299.37	6,443,508.34
Net capital/Sum of
risk provisions	–	–	244.35%	251.09%	367.00%	320.39%
Net capital/Net
assets	�24%	�20%	83.31%	89.70%	100.30%	96.10%
Net capital/
Liabilities	�9.6%	�8%	30.33%	29.97%	45.69%	52.22%
Net assets/
Liabilities	�12%	�10%	36.40%	33.42%	45.56%	54.34%
Self-operated equity
securities and
their derivatives/
Net capital	�80%	�100%	14.24%	28.00%	18.39%	20.89%
Self-operated fixed
income securities/
Net capital	�400%	�500%	234.82%	204.67%	138.40%	110.94%
Capital leverage
ratio	�9.6%	�8%	17.03%	18.12%	25.42%	29.31%
Liquidity coverage	�120%	�100%	255.92%	280.88%	307.93%	312.02%
Net capital stability
ratio	�120%	�100%	122.95%	133.56%	125.88%	144.27%

– I-29 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

(III) Analysis on the Financial Position of the Company

1. Asset Composition Analysis

As of the end of each reporting period, the asset composition of the Company is as follows:

Items Monetary Capital Including: Cash held on behalf of customers Clearing settlement funds Including: Customer settlement funds Advances to customers Derivative financial assets Refundable deposits Accounts receivable Financial assets held under resale agreements Financial assets held for trading Debt investments Other debt investments Investment in other equity instruments Long-term equity investments Investment properties Fixed assets Construction in progress Right-of-use assets Intangible assets Goodwill Deferred income tax assets Other assets Total assets	30 June 2021 Amount Ratio (RMB0’000) (%) 10,012,330.77 20.55 8,490,649.48 17.43 2,383,119.18 4.89 1,808,738.93 3.71 9,219,405.82 18.92 124,687.77 0.26 1,252,287.19 2.57 1,555,958.93 3.19 2,389,726.12 4.91 10,798,953.70 22.17 557,460.83 1.14 6,307,183.43 12.95 3,046,623.71 6.25 139,917.05 0.29 773.92 0.00 32,272.34 0.07 2,759.98 0.01 136,543.88 0.28 55,585.30 0.11 42,416.04 0.09 5,474.83 0.01 656,091.07 1.35 48,719,571.86 100	31 December Amount (RMB0’000) 9,272,755.35 7,685,188.47 1,758,385.60 1,231,679.87 8,201,844.76 86,950.15 1,619,404.54 1,221,506.98 3,186,307.12 9,264,701.01 578,925.18 5,213,023.24 3,386,819.09 130,817.31 783.75 30,340.44 2,759.98 92,253.80 52,510.07 42,645.39 6,919.23 423,368.60 44,573,021.58	2020 Ratio (%) 20.80 17.24 3.94 2.76 18.40 0.20 3.63 2.74 7.15 20.79 1.30 11.70 7.60 0.29 0.00 0.07 0.01 0.21 0.12 0.10 0.02 0.95 100	31 December Amount (RMB0’000) 7,032,927.61 6,028,195.73 1,127,647.49 948,507.15 5,872,131.84 20,850.27 1,073,525.64 511,683.85 3,043,808.41 7,403,911.92 503,129.59 2,301,749.04 1,934,924.81 132,013.60 803.42 27,671.83 – 133,965.35 49,353.81 43,953.87 9,983.21 342,552.20 31,566,587.74	2019 Ratio (%) 22.28 19.10 3.57 3.00 18.60 0.07 3.40 1.62 9.64 23.45 1.59 7.29 6.13 0.42 0.00 0.09 – 0.42 0.16 0.14 0.03 1.09 100	31 December Amount (RMB0’000) 5,141,363.08 4,252,897.33 1,268,654.27 1,162,390.48 4,463,194.29 7,629.06 527,582.70 64,311.16 3,996,707.35 6,033,828.16 506,177.77 1,729,922.96 977,743.49 87,682.30 823.08 24,152.98 – – 39,166.69 22,327.76 47,745.44 197,316.46 25,136,329.01	2018 Ratio (%) 20.45 16.92 5.05 4.62 17.76 0.03 2.10 0.26 15.90 24.00 2.01 6.88 3.89 0.35 0.00 0.10 – – 0.16 0.09 0.19 0.78
							100

As of the end of each reporting period, the total assets of the Company amounted to RMB251,363.2901 million, RMB315,665.8774 million, RMB445,730.2158 million and RMB487,195.7186 million, respectively, representing a general trend of growth.

The assets of the Company mainly comprise of self-owned assets and customers’ assets. Customers’ assets included cash held on behalf of customers and customer settlement funds. As of the end of each reporting period, customers’

– I-30 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

assets amounted to RMB54,152.8781 million, RMB69,767.0288 million, RMB89,168.6834 million and RMB102,993.8841 million, respectively. During the reporting period, there was a greater change in customers’ assets of the Company, which was mainly attributable to the overall fluctuations in the securities market.

Self-owned assets of the Company mainly comprise of monetary capital, clearing settlement funds, advances to customers, financial assets held under resale agreements, financial assets held for trading, other debt investments and investment in other equity instruments, etc. (Items such as financial assets measured at fair value through profit or loss, available-for-sale financial assets, investment held to maturity and investments classified as loans and receivables were reclassified as items such as financial assets held for trading, debt investments, other debt investments and investment in other equity instruments due to the implementation by the Company of new financial instruments standards).

As of the end of each reporting period, the size of self-owned assets of the Company amounted to RMB197,210.4120 million, RMB245,898.8486 million, RMB356,561.5324 million and RMB384,201.8345 million, respectively, representing increases of 24.69%, 45.00% and 7.75% as of the end of 2019, 2020 and June 2021 as compared with the end of the previous year, respectively. In particular, the size of self-owned assets as of the end of 2019 increased significantly from the end of 2018, which was mainly attributable to the growth of the scale of advances to customers led by the rebound of the securities market and the increases in the balances of financial assets held for trading, other debt investments and investment in other equity instruments resulting from the Company’s substantial increase in the investment scale of various bonds. The size of self-owned assets of the Company as of the end of 2020 increased significantly from the end of 2019, which was mainly attributable to the growth of the scale of financing business, as well as bonds and stocks investments. The size of self-owned assets of the Company as of the end of June 2021 increased slightly from the end of 2020, which was mainly attributable to the growth of the scale of investments in self-owned assets.

During the reporting period, the assets of the Company were mainly current assets, with the long-term assets such as fixed assets accounting for a lower proportion. The asset structure was reasonable. Overall, the Company had assets with high security and strong liquidity, which was in line with the characteristics of operation of the industry.

– I-31 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

2. Liability Composition Analysis

As of the end of each reporting period, the liability composition of the Company is as follows:

Items Short-term borrowings Short-term financing instrument payables Due to banks Financial liabilities held for trading Derivative financial liabilities Financial assets sold under repurchase agreements Accounts payable to brokerage clients Proceeds from underwriting securities received on behalf of customers Accrued staff costs Tax payable Accounts payable Bonds payable Lease liabilities Deferred income tax liabilities Other liabilities Total liabilities	30 June 2021 Amount Ratio (RMB0’000) (%) 1,126,970.71 2.86 3,133,393.52 7.96 836,325.14 2.12 1,102,556.37 2.80 289,680.18 0.74 11,699,319.10 29.72 10,941,476.74 27.79 4,867.95 0.01 346,968.27 0.88 44,320.98 0.11 1,534,742.61 3.90 6,231,087.75 15.83 136,319.49 0.35 62,438.36 0.16 1,880,591.54 4.78 39,371,058.74 100	31 December Amount (RMB0’000) 799,349.26 4,828,638.55 1,561,725.56 1,003,074.72 197,341.17 8,811,340.49 9,767,091.86 1,113.86 371,422.54 56,999.31 1,162,712.97 6,566,941.88 91,349.84 19,123.12 1,133,990.68 36,372,215.81	2020 Ratio (%) 2.20 13.28 4.29 2.76 0.54 24.23 26.85 0.00 1.02 0.16 3.20 18.05 0.25 0.05 3.12 100	31 December Amount (RMB0’000) 577,542.00 1,765,951.73 817,730.70 171,808.16 46,979.18 5,485,565.38 8,050,886.03 – 335,472.91 36,308.38 276,621.42 6,402,335.82 133,672.42 26,139.24 247,404.57 24,374,417.95	2019 Ratio (%) 2.37 7.25 3.35 0.70 0.19 22.51 33.03 – 1.38 0.15 1.13 26.27 0.55 0.11 1.02 100	31 December Amount (RMB0’000) 301,077.82 676,045.17 200,188.58 145,869.85 21,341.28 2,805,994.03 5,669,527.43 – 259,151.86 16,495.35 107,302.30 7,950,142.30 – 1,009.63 348,397.32 18,502,542.92	2018 Ratio (%) 1.63 3.65 1.08 0.79 0.12 15.17 30.64 – 1.40 0.09 0.58 42.97 – 0.01 1.88
							100

As of the end of each reporting period, the total liabilities of the Company amounted to RMB185,025.4292 million, RMB243,744.1795 million, RMB363,722.1581 million and RMB393,710.5874 million, respectively.

During the reporting period, the liabilities of the Company were categorized as customers’ liabilities and self-owned liabilities. Customers’ liabilities were mainly accounts payable to brokerage clients which were payments received by the Company for accepting clients’ entrustment and trading securities on behalf of clients. As of the end of each reporting period, accounts payable to brokerage clients of the Company accounted for 30.64%, 33.03%, 26.85% and 27.79% of the total liabilities, respectively. Accounts payable to brokerage clients is a specific liability for securities companies and its fluctuations mainly depend on various factors such as market conditions, investors’ behaviour and securities underwriting. A corresponding and matching relationship exists between such customers’ liabilities and customers’ assets, which in nature shall have no material impact on the solvency of the Company.

– I-32 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

Self-owned liabilities of the Company mainly comprise of short-term financing instrument payables, financial assets sold under repurchase agreements and bonds payable. As of the end of each reporting period, the balances of self-owned liabilities of the Company amounted to RMB128,330.1549 million, RMB163,235.3192 million, RMB266,040.1009 million and RMB284,247.1405 million, respectively, representing increases of 27.20%, 62.98% and 6.84% as of the end of 2019, 2020 and June 2021 as compared with the end of the previous year, respectively. In particular, the size of self-owned liabilities as of the end of 2019 increased significantly from the end of 2018, which was mainly attributable to an increase in the size of short-term financing funds by the Company through the pledged repurchase business and the issuance of short-term income rights certificates and short-term financing notes based on its business development and the market capital, thereby leading to the significant increases in the balances of items such as financial assets sold under repurchase agreements and short-term financing instrument payables. The size of self-owned liabilities of the Company as of the end of 2020 increased significantly from the end of 2019, which was mainly attributable to an increase in the issuance of short-term financing notes by the Company and the growth of the scale of pledged repurchase business. The size of self-owned liabilities of the Company as of the end of June 2021 increased slightly from the end of 2020, which was mainly attributable to the growth of the scale of pledged repurchase business and an increase in settlement payables of overseas subsidiaries.

3. Solvency Analysis

As of the end of each reporting period, the major solvency indicators of the Company are as follows:

		31 December	31 December	31 December
Items	30 June 2021	2020	2019	2018
Gearing ratio
(consolidated)	75.25%	76.44%	69.42%	65.92%
Gearing ratio
(parent company)	73.32%	74.95%	68.70%	64.79%
Current ratio	1.33	1.32	1.90	3.49
Quick ratio	1.33	1.32	1.90	3.49

Notes:

Gearing ratio = (Total liabilities – Accounts payable to brokerage clients) / (Total assets – Accounts payable to brokerage clients);
Current ratio = (Monetary Capital + Clearing settlement funds + Advances to customers + Refundable deposits + Accounts receivable + Interests receivable + Financial assets held under resale agreements + Financial assets held for trading – Accounts payable to brokerage clients) / (Short-term borrowings + Short-term financing instrument payables + Due to banks + Financial liabilities held for trading + Financial assets sold under repurchase agreements + Accrued staff costs + Tax payable + Accounts payable + Interests payable);
Quick ratio = (Monetary Capital + Clearing settlement funds + Advances to customers + Refundable deposits + Accounts receivable + Interests receivable + Financial assets held under resale agreements

– I-33 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

Financial assets held for trading – Accounts payable to brokerage clients) / (Short-term borrowings + Short-term financing instrument payables + Due to banks + Financial liabilities held for trading + Financial assets sold under repurchase agreements + Accrued staff costs + Tax payable + Accounts payable + Interests payable).

As of the end of each reporting period, the consolidated gearing ratio of the Company and the gearing ratio of the parent company were generally on an upward trend, which was mainly attributable to the growth of short-term financing and the increase in the balances of financial assets sold under repurchase agreements. The assets of the Company mainly comprise of assets with stronger liquidity such as monetary capital, advances to customers and financial assets held for trading. With non-current assets accounting for a lower proportion, the Company had assets with high security and strong liquidity. In addition, the overall operation of the Company was stable. With good operational conditions and strong profitability, the Company had better solvency. During the reporting period, there were no significant changes in the solvency of the Company and the solvency risk was relatively low.

4. Profitability Analysis

During the reporting period, the major profitability indicators of the Company are as follows:

Unit: RMB0’000

	January to
Items	June 2021	2020	2019	2018
Operating income	1,513,976.22	2,374,915.16	1,704,081.73	992,540.61
Operating expenses	971,462.34	1,457,118.02	1,019,154.61	625,306.29
Operating profit	542,513.88	917,797.14	684,927.12	367,234.31
Total profit	534,934.05	915,673.40	683,012.94	368,209.38
Net profit	428,592.14	731,212.41	525,014.45	293,173.68
Net profit
attributable to
shareholders of
the parent
company	425,488.86	724,365.44	522,842.91	288,712.68

During the reporting period, the operating income of the Company amounted to RMB9,925.4061 million, RMB17,040.8173 million, RMB23,749.1516 million and RMB15,139.7622 million, respectively, while net profit attributable to shareholders of the parent company amounted to RMB2,887.1268 million, RMB5,228.4291 million, RMB7,243.6544 million and RMB4,254.8886 million, respectively.

From business perspective, the operating income of the Company was primarily derived from securities brokerage, futures brokerage, proprietary trading and other securities trading, investment banking, and asset management, etc., which was therefore greatly affected by the fluctuations in the securities market and investors’ behavior. There was obvious cyclical

– I-34 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

fluctuation and volatility. From accounting perspective, the operating income of the Company was primarily derived from net interest income, net fee income of securities brokerage business and investment gains. During the reporting period, the above income of the Company accounted for 63.43%, 66.28%, 67.75% and 59.11% of its operating income, respectively.

The securities market gradually rebounded under the stimulation of domestic countercyclical macro-economic policies in 2019. The operating income of the Company in 2019 rose significantly by 71.69% from 2018, which was mainly attributable to: 1. the increase of RMB967.8893 million or 20.14% in net fee and commission income of the Company as compared with 2018 resulting from the sharp increase in trading volume as the secondary market fell back after surging higher and then remained volatile; 2. the increase of RMB3,864.4977 million or 630.73% in investment gains of the Company as compared with 2018 as the securities market entered an upward phase; 3. the increase of RMB2,055.5102 million or 279.79% in other business income of the Company with a significant increase of revenue from the warehouse receipts business of Galaxy Derivatives Capital Management Company Limited, a subsidiary of Galaxy Futures Company Limited.

In 2020, due to the impact of the COVID-19 pandemic on the capital market, the counter cyclical policy adjustments were intensified with overall liquidity relaxed, the market trading recovered, and the index fluctuated upward. As compared to 2019, the operating income of the Company in 2020 increased by 39.37%, of which net fee and commission income increased by 47.59% mainly due to the rising income from the securities brokerage business brought by the increasing trading volume of shares. Investment gains was up 53.47% as compared to 2019, which was mainly attributable to an increase in the gains on disposal of financial assets held for trading.

During the reporting period, the operating results of the Company fluctuated to a certain extent due to the effect of various factors, including macro-economic performance, macro-economic policies, market development, international economic situation and overseas financial market fluctuation as well as investors’ behaviour. The Company, however, showed strong profitability in general. The Company will further promote innovative transformation and continuously optimize its income structure by leveraging on the advantage of business diversification to further enhance its profitability.

– I-35 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

IV. USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

Details of the use of proceeds from the Issuance of A Share Convertible Bonds are set out in Appendix II to this circular.

V. DILUTION OF CURRENT RETURNS AND THE REMEDIAL MEASURES

Details of the dilution of current returns by the Issuance of A Share Convertible Bonds and the remedial measures are set out in Appendix IV to this circular.

VI. PROFIT DISTRIBUTION POLICY AND CASH DIVIDENDS OF THE COMPANY

(I) Profit Distribution Policy of the Company

Pursuant to the relevant requirements under the Opinions of the General Office of the State Council on Further Strengthening the Protection of Legitimate Rights and Interests of Small and Medium Investors in Capital Market （《國務院辦公廳關於進一步加強資本市場中小投資者合法權益保護工作的意見》）, the Regulatory Guideline No. 3 for Listed Companies – 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 the Guidelines of the Shanghai Stock Exchange on Cash Dividends of Listed Companies （《上海證券交易所上市公司現金分紅指引》）, the Articles of Association of the Company currently in force has made specific provisions for the profit distribution policy of the Company for the purpose of further strengthening the management of cash dividends and comprehensive risks. Please refer to Article 268, Article 269, Article 270, Article 271 and Article 272 of the current Articles of Association of the Company for details.

(II) Plan of Shareholders’ Return for the Next Three Years (2021-2023)

Details of the plan of shareholders’ return for the next three years (2021-2023) are set out in Appendix VI to this circular.

(III) Amount and Payment Ratio of Cash Dividend Distribution of the Company for the recent three years

The Company completed its initial public offering and listing of A Shares in January 2017 and its shares have been listing for three years as of today.

– I-36 –

PRELIMINARY PLAN OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

APPENDIX I

The details of cash dividend distribution of the Company for the recent three years are as follows:

Unit: RMB0’000

Items	2020	2019	2018
Amount of cash dividend (tax inclusive)	223,019.69	162,196.14	91,235.33
Net profit attributable to shareholders of
the parent company	724,365.44	522,842.91	288,712.68
Cash dividend/Net profit attributable to
shareholders of the parent company	30.79%	31.02%	31.60%
Cumulative amount of cash dividend for
the recent three years			476,451.16
Annual average net profit attributable to
shareholders of the parent company
for the recent three years			511,973.68
Cumulative amount of cash dividend for
the recent three years/Annual average
net profit attributable to shareholders
of the parent company for the recent
three years			93.06%

The profit distribution of the Company has complied with the relevant requirements of the CSRC and the Articles of Association. The cumulative amount of profits distributed in cash for the recent three years is not less than 30% of the annual average distributable profits for the recent three years.

– I-37 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

In order to reinforce its capital strength, promote the comprehensive development of “wealth management, investment and financing, and international business”, further optimize the business model of “Dual-wheel Driving and Coordinated Development”, enhance the Company’s competitiveness, and realize the Company’s high quality development to better serve the real economy, the Company intends to raise funds through Public Issuance of A Share Convertible Bonds. The feasibility of the use of proceeds from the Public Issuance of A Share Convertible Bonds is reported as follows:

I. THE TOTAL AMOUNT OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

The total amount of proceeds from the Public 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 capital-based intermediary business, and the expansion of investment banking business, as well as for the replenishment of the Company’s other working capital. Such proceed will also be used to replenish the Company’s capital pursuant to the relevant regulatory requirements upon conversion of the A Share Convertible Bonds.

– II-1 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

II. THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

The projects proposed for investment with the use of proceeds and their proposed investment amount are as follows:

	Projects for Investment with the Use of Proceeds Proposed Investment Amount Investment transaction business Not more than RMB5.0 billion Capital-based intermediary business Not more than RMB4.0 billion Investment banking business Not more than RMB1.0 billion Replenishing the Company’s other working capital Not more than RMB1.0 billion Total Not more than RMB11.0 billion

The proceeds from the Public Issuance of A Share Convertible Bonds will be mainly used for the purposes including but not limited to:

(1) Developing investment transaction business to strengthen the market competitiveness of the Company

Not more than RMB5 billion of the proceeds are intended to be used for the development of investment transaction business.

The investment transaction business has become one of the most important sources of income for securities companies in recent years. Investment by securities companies is changing towards de-direction and increasing diversified trading, and the overall investment strategy is becoming more mature and stable, thus market competitiveness is increased. Seizing market opportunities at the right time, the Company’s investment transaction business continued to optimise its general asset allocation, adjust the scale and structure of its bond investments, strictly control credit risk, strengthen its underlying assets and realise its returns in a timely manner. However, as compared to leading securities companies, there is room for improvement in the scale of the Company’s investment transaction business.

In order to further optimise its business structure, the Company intends to invest part of the proceeds to develop its investment transaction business, actively grasp market opportunities and expand the scale of its investment transaction business. In the future, in terms of traditional bond investment, the Company will focus on risk control, maintain a reasonable investment scale and make dedicated effort in achieving a stable return. At the same time, the Company will moderately participate in the investment of new bond categories such as China-funded USD bonds and expand its commodity investment transaction business centered on precious metals, so as to gradually optimise the investment income structure. In terms of equity investment derivatives investment, the Company will moderately increase the scale of investment and focus on

– II-2 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

core assets while increasing medium to low risk strategic investments featuring arbitrage and hedging. The Company will also actively grasp the business opportunities brought about by the supporting policies of the New OTC Board to promote the steady development of related businesses.

(2) Developing the capital-based intermediary business to enhance financial services capabilities

Not more than RMB4 billion of the proceeds are intended to be used for the development of capital-based intermediary business, including the expansion of business scale of margin financing and securities lending, over-the-counter derivatives business and cross-border business.

Capital-based intermediary business is a type of business in which the Company uses its own assets and liabilities to meet the investment and financing needs of its clients through product design. As a result of intensified competition in the industry, securities companies will seek further breakthroughs in their wealth management transformation in terms of customers, products, channels and brands, etc. The securities lending business is expected to gradually become a new breakthrough in the capital-based intermediary business of securities companies. The Company will continue to enhance its core competitiveness in credit business, grow its margin financing business and strengthen its securities lending business, and further increase the proportion of revenue from margin financing and securities lending business. The Company has strengthened its block trading and OTC derivatives business to serve the needs of institutional clients, and innovative capital-based intermediary businesses such as income swaps and equity derivatives have become important business growth drivers for the Company. In addition, with the acceleration of financial supply-side reform and two-way opening of the capital market, clients’ demand for global asset allocation, strategic investment and risk management is growing rapidly. The Company will take the opportunity to expand and strengthen its cross-border capital-based intermediary business to comprehensively enhance its financial services capacity to serve the real economy and clients’ investment and financing needs.

The business scale and profitability of the capital-based intermediary business depend on a relatively stable supply of medium- and long-term capital. The Company intends to increase its investment in the capital-based intermediary business by raising funds through the Issuance of A Share Convertible Bonds to better satisfy the requirements of various risk control indicators and ensure a reasonable growth in the scale of the capital-based intermediary business.

(3) Promoting the development of investment banking business to serve the financing and investment needs of the real economy

Not more than RMB1 billion of the proceeds are intended to be used to promote the development of investment banking business.

– II-3 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

With the steady progress of the comprehensive reform of the capital market, the full implementation of the registration system, the implementation of the delisting system and the continuous improvement of the basic system, the capital market will continue to move to a higher level of openness and promote the high-quality development of listed companies. The Company’s equity financing business focuses on national strategic key regions and core cities to help the development of the real economy. While increasing underwriting efforts, the Company’s bond financing business will further explore the business of financial institutions and asset securitization business, and high-quality corporate credit bond business, actively develop innovative business, promote the development of poverty alleviation and green bond business, accelerate the promotion of equity and bond linkage, and provide customers with diversified, full-cycle comprehensive financial services solutions. In addition, the underwriting mechanism of market-based issuance has placed higher requirements on the scale of capital for the Company’s participation in investment banking business. The Company intends to promote the development of its investment banking business by increasing the securities underwriting reserve and the equity and bond underwriting quota to effectively serve the financing and investment needs of the real economy.

(4) Replenishing other working capital

Not more than RMB1 billion of the proceeds are intended to be used to replenish other working capital. The Company will pay close attention to the changes in regulatory policies and market conditions, combine its development strategies with actual operating conditions, and reasonably allocate the proceeds from the Issuance of A Share Convertible Bonds to timely replenish its working capital requirements in the course of business development and ensure the orderly development of various businesses.

III. NECESSITY OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

(1) Increasing the Company’s capital, promoting the Company’s business expansion and optimising its business structure

Securities companies are in a capital-intensive industry, and therefore the capital scale of securities companies has material impacts on their market positioning, profitability, capabilities of risk prevention and comprehensive competitiveness. China’s securities industry implements a risk control system with focuses on net capital and liquidity. In such context and with the aim of achieving development in scale and comprehensiveness of the securities industry, capital strength has become a key element for the Company to develop capital-based intermediary businesses, enhance integrated financial service capabilities for the real economy, and develop core competitiveness and differentiated competitive advantages. The Issuance of A Share Convertible Bonds will be beneficial to the Company’s business expansion, enhance its competitiveness in

– II-4 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

the industry, and replenish the Company’s working capital to achieve the expansion of innovative businesses and the optimisation of business structure, so as to further enhance the Company’s profitability.

(2) Strengthening the Company’s risk prevention and reducing the potential risk exposure

Pursuant to the relevant provisions under the Administrative Measures for the Risk Control Indicators of Securities Companies （《證券公司風險控制指標管理辦法》）, the Provisions on the Calculation Basis for Risk Control Indicators of Securities Companies （《證券公司風險控制指標計算標準規定》）, the Guidelines for Securities Companies on Liquidity Risk Management （《證券公司流動性風險管理指引》）, the Guidelines for Dynamic Monitoring System of Risk Control Indicators of Securities Companies （《證券公司風險控制指標動態監控系統指引》）and other laws and regulations currently in force, the regulatory policy has expressly required securities companies to establish a risk control indicator system with focuses on net capital and liquidity, and provided for liquidity-related regulatory indicators such as liquidity coverage ratio and net capital stability ratio. The industry regulations have become increasingly stringent. As a capital-intensive enterprise, the capability of risk prevention of a securities company is also directly related to its own capital scale. A securities company can better prevent market risks, credit risks, liquidity risks and various other potential risks and ensure its profitability and sustainable development by maintaining a capital base in line with its business development scale. The successful Issuance of A Share Convertible Bonds and the conversion of A Share Convertible Bonds will directly increase the scale of the Company’s net capital, which will subsequently increase the Company’s capability of risk prevention.

(3) Supporting the Company’s business expansion and its needs for achieving strategic targets

The Company is committed to becoming a leading investment bank in the Asian capital market and a securities financial institution of systematic importance. In recent years, with the growing marketization of the capital market, the gradual implementation of policy measures of the comprehensive in-depth reform of the capital market and the implementation of major decisions and arrangements of further opening up of the financial industry, securities companies are facing increasing competition and also embracing new growth opportunities. To cope with the situation, the Company will follow the development requirement of opening up the industry, timely adjust the business development model and associated management systems, promote the Company’s “dual wheel” business collaboration, accelerate its development of overseas business, and strive to achieve the strategic targets of “building a carrier securities broker and a modern investment bank” and become an industry leading securities company with comprehensive capabilities.

The Issuance of A Share Convertible Bonds is beneficial to the Company’s rapid development of wealth management business, investment and financing business and international business as well as the further enhancement of the standards of financial

– II-5 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

technologies and research capabilities. It will enable the Company to optimise its business model of “Dual-wheel Driving and Coordinated Development”, as well as its management system of “centralized organization + line supervision + hierarchical management”, so as to establish a refined integrated business system of “wealth management, investment and financing, and international business”, form a new profit growth driver, optimise the Company’s income structure and achieve its high quality development. The Issuance of A Shares Convertible Bonds will provide capital support for the Company’s development strategy in the future, which is a necessary measure for achieving the Company’s strategic development targets.

IV. THE FEASIBILITY OF THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

(1) The Issuance is in line with the government’s industry policy directions

A lot of industry policies and normative documents issued in China in recent years give strong support to the securities industry and create a better policy environment for the development of securities companies. With the continuous development of the securities industry, the requirements for capital scale of innovative businesses such as capital-based intermediary and capital investment as well as traditional businesses such as proprietary securities and securities underwriting and sponsorship are continuously increasing. The Company intends to use the proceeds for replenishment of working capital to support its future business development, which is in line with the government’s industry policy directions.

(2) The Issuance meets conditions under relevant laws and regulations and normative documents

The Company has a sound and functional organizational structure, is in good financial position, and maintains sustainable profitability; there is no false statement in its financial accounting documents, and the amount and use of the proceeds comply with relevant provisions; there’s no material violation of law on the part of the Company. The Company meets the rules and requirements for public issuance of A share convertible bonds by listed companies as specified in applicable laws and regulations including the Company Law, the Securities Law, 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》） and the Notice on the Matters Relating to the Issuance of Convertible Corporate Bonds by the 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》）; the Company is qualified for, and meets relevant conditions of, the Public Issuance of A Share Convertible Bonds; the Issuance of A Share Convertible Bonds will not cause abnormality of any risk control indicator of the Company; the Company will keep complying with relevant provisions of the Administrative Measures for the Risk Control Indicators of Securities Companies （《證券公司風險控制指標管理辦法》）, and its overall risks are controllable.

– II-6 –

APPENDIX II FEASIBILITY REPORT ON THE USE OF PROCEEDS FROM THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS

V. EFFECT OF THE ISSUANCE OF A SHARE CONVERTIBLE BONDS ON THE COMPANY’S OPERATING MANAGEMENT AND FINANCIAL POSITION

(1) Effect on the shareholding structure

Upon completion of the Issuance, Galaxy Financial Holdings remains to be the controlling Shareholder of the Company, and Central Huijin Investment Ltd. remains to be the de facto controller of the Company. The Issuance will not result in any material change in the shareholding structure of the Company, nor will it lead to any change of control of the Company.

(2) Effect of the Public Issuance of A Share Convertible Bonds on the Company’s operating management

The total amount of proceeds from the Issuance 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 capital-based intermediary business, and the expansion of investment banking business, as well as for the replenishment of the Company’s other working capital to support future business development, enhance the Company’s competitiveness in the market and its capabilities of risk prevention, and promote the realisation of the Company’s strategic development targets.

(3) Effect of the Public Issuance of A Share Convertible Bonds on the Company’s financial position

The proceeds received will be beneficial to the enhancement of the Company’s capital strength, and the Company’s capital will be increased after the holders of the A Share Convertible Bonds convert the bonds into A Shares, which will further enhance the Company’s capability of risk prevention. However, it takes certain procedures and time for the replenishment of the Company’s working capital with the proceeds raised and the development of principal business to generate profits, shareholder’s equity and returns may be diluted in short term. The Company will apply the proceeds raised in a reasonable manner, proactively develop its principal business and enhance its revenue and profitability to maximize shareholders’ interests.

– II-7 –

APPENDIX III REPORT ON THE USE OF PREVIOUSLY RAISED PROCEEDS

REPORT ON THE USE OF PREVIOUSLY RAISED PROCEEDS

In accordance with the Regulations on the Report of the Use of Previously Raised Proceeds （《關於前次募集資金使用情況報告的規定》and other relevant guidelines, the Company reports the use of previously raised proceeds as of 30 June 2021 as follows:

I. BASIC INFORMATION ABOUT THE PREVIOUSLY RAISED PROCEEDS

The previously raised proceeds mentioned in this report referred to the proceeds raised from domestic offering of RMB-denominated ordinary shares (A Shares) in January 2017 (the “ Proceeds from Domestic Offering of RMB-denominated Ordinary Shares ”).

With the approval from the CSRC, the Company launched its initial public offering of 600,000,000 RMB-denominated ordinary shares (A Shares) in January 2017, at an issue price of RMB6.81 per share, the total proceeds raised amounted to RMB4,086,000,000. After deducting the issuance expenses, the net proceeds raised amounted to RMB3,954,214,008.52. As verified by Deloitte Touche Tohmatsu Certified Public Accountants LLP, the above proceeds raised were fully transferred to the special account for proceeds as set up by the Company on 17 January 2017.

As of 30 June 2021, the previously raised proceeds were fully utilized by the Company, and the special account for proceeds was cancelled on 23 November 2017. Details are as follows:

Unit: RMB

	Bank for depositing the proceeds A/C No. Date of receipt of the proceeds Amount of the proceeds received (RMB) Date of cancellation China Construction Bank, Fuxing Sub-branch, Beijing 11050137510000001538 2017/1/17 4,086,000,000.00 2017/11/23

II. UTILIZATION OF THE PREVIOUSLY RAISED PROCEEDS

(1) The actual utilization of the previously raised proceeds

For details of the utilization of the Proceeds from Domestic Offering of RMB-denominated Ordinary Shares, please refer to the annex to this report.

(2) Change in the projects actually invested with the previously raised proceeds

There was no change in the projects actually invested with the previously raised proceeds.

– III-1 –

APPENDIX III REPORT ON THE USE OF PREVIOUSLY RAISED PROCEEDS

(3) External transfer or replacement of the projects invested with the previously raised proceeds

There was no external transfer or replacement of projects invested with the previously raised proceeds.

(4) Utilization of the unutilized raised proceeds

There was no temporarily utilization of the unutilized raised proceeds for other purposes.

III. DESCRIPTION OF BENEFITS REALIZED FROM THE PROJECTS INVESTED WITH THE PREVIOUSLY RAISED PROCEEDS

As of 30 June 2021, the Proceeds from Domestic Offering of RMB-denominated Ordinary Shares of the Company were fully used to increase the capital of the Company and replenish the working capital of the Company so as to expand the business scale, optimise the business structure and enhance the Company’s market competitiveness and risk resistance capacity. As the raised proceeds were used to increase the capital and working capital, its benefits realized cannot be accounted for independently.

IV. EXPLANATION ON THE DIFFERENCE BETWEEN THE ACTUAL INVESTMENT AMOUNT AND THE COMMITTED INVESTMENT AMOUNT OF THE PROJECTS INVESTED WITH THE PREVIOUSLY RAISED PROCEEDS AND THE REASONS THEREFOR

There was no significant difference between the actual investment amount and the committed investment amount of the projects invested with the previously raised proceeds.

V. EXPLANATION ON THE OPERATION OF ASSETS USED TO SUBSCRIBE FOR SHARES WITH THE PREVIOUSLY RAISED PROCEEDS

There was no subscription for Shares with the previously raised proceeds.

VI. EXPLANATION ON THE ACTUAL UTILIZATION OF THE PREVIOUSLY RAISED PROCEEDS AS COMPARED WITH THE PUBLICLY DISCLOSED INFORMATION

By comparing the actual utilization of the previously raised proceeds with the relevant contents disclosed in the Company’s regular reports and other information disclosure documents item by item, it is confirmed that the actual utilization of the previously raised proceeds is consistent with the publicly disclosed information.

– III-2 –

APPENDIX III REPORT ON THE USE OF PREVIOUSLY RAISED PROCEEDS

VII. CONCLUSION

The Board of Directors is of the view that the Company utilized the previously raised proceeds according to the previously disclosed plan for the proceeds raised. The Company fulfilled its disclosure obligation with respect to the utilization and progress of the previously raised proceeds in accordance with the Regulations on the Report of the Use of Previously Raised Proceeds （《關於前次募集資金使用情況報告的規定》).

All Directors undertake that there are no misrepresentations, misleading statements or material omissions in this report and they are jointly and severally liable for the authenticity, accuracy and completeness of the information contained in this report.

Annex: Utilization of the Proceeds from Domestic Offering of RMB-denominated Ordinary Shares

– III-3 –

APPENDIX III REPORT ON THE USE OF PREVIOUSLY RAISED PROCEEDS

Annex

Utilization of the Proceeds from Domestic Offering of RMB-denominated Ordinary Shares

Unit: RMB Ten Thousand

==> picture [771 x 347] intentionally omitted <==

----- Start of picture text -----

Net proceeds raised [(Note] [1)] : 395,421.40 Total amount of proceeds 395,586.99
utilized in accumulation:
Total amount of proceeds used for a changed – Utilization of the total amount 395,586.99
purpose: of proceeds in each year:
2017 395,586.99
2018 –
Proportion of the total amount of proceeds used – 2019 –
for a changed purpose:
2020 –
January to June 2021 –
Total amount of investment from proceeds Accumulated amount of investment from proceeds raised
Investment projects
raised as of the date
Difference Date for
between project to
actual reach
Committed Committed Committed Committed investment intended use
Committed Actual investment investment Actual investment investment Actual amount and (or the extent
No. investment investment amount amount after investment amount amount after investment committed of completion
project project before raising raising amount before raising raising amount investment of projects as
proceeds proceeds proceeds proceeds amount after of the date)
raising
proceeds
(Note 2)
Replenishment Replenishment
of working of working
1 395,421.40 395,421.40 395,586.99 395,421.40 395,421.40 395,586.99 165.59 Not applicable
capital of the capital of the
Company Company
Total 395,421.40 395,421.40 395,586.99 395,421.40 395,421.40 395,586.99 165.59 –
----- End of picture text -----

Note 1: The net amount of proceeds raised is the total amount of proceeds raised after deducting various issuance expenses.

Note 2: As of 30 June 2021, the accumulated amount of investment exceeded the net proceeds raised by RMB1.6559 million, which were interests generated by the special account for proceeds.

– III-4 –

APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

According to the requirements of relevant documents, including the Opinions of the General Office of the State Council on Further Strengthening the Protection of Legitimate Rights and Interests of Small and Medium Investors in Capital Market （《國務院辦公廳關於進一步加强資本市場中小投資者合法權益保護工作的意見》）, Several Opinions of the State Council on Further Promoting the Healthy Development of the Capital Market （《國務院關於進一步促進資本市場健康發展的若干意見》） and the Guiding Opinions on Matters Relating to the Dilution of Current Returns in Initial Public Offering, Refinancing and Major 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》） published by the CSRC, if a company proceeds with an initial public offering of shares, or a listed company undergoes refinancing or engages in mergers and acquisitions or restructuring, in each case resulting in dilution of its current returns, it shall undertake to adopt specific remedial measures and honor the undertaking.

In order to protect and safeguard minority investors’ interests, the Company has analysed the possible impact of the Public Issuance of A Share Convertible Bonds on the rights and interests of ordinary Shareholders and current returns, and proposed specific remedial measures based on actual situation, and relevant parties have made undertakings on the effective implementation of the remedial measures, details of which are as follows:

I. IMPACT OF THE DILUTION OF CURRENT RETURNS BY THE ISSUANCE ON THE KEY FINANCIAL INDICATORS

(I) Major assumptions

With the measures for preventing and containing the COVID-19 outbreak in China producing satisfactory results, and the economic order gradually returning to normal, there are no material adverse changes in the macro-economic environment, securities industry and operating environment of the Company;
The Public Issuance of A Share Convertible Bonds will be completed by the end of December 2021, and there are two scenarios thereafter – all or none of the holders of A Share Convertible Bonds have or has completed the conversion by 31 December 2022. The aforementioned timeline of completion is estimation only, subject to the actual completion of the issuance and the actual completion of the conversion by such holders upon approval of the CSRC;
The total amount of proceeds from the Issuance is RMB11.0 billion, without considering the impact of issuance expenses. The actual amount of proceeds from the Issuance will be finally determined subject to regulatory approval and based on status of subscription as well as incurrence of issuance expenses;

– IV-1 –

APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

No impact of proceeds received from the Issuance on the Company’s production, operation and financial position (e.g., financial expenses and investment income) is taken into consideration;
The conversion price of the A Share Convertible Bonds to be issued is not lower than the highest of the average trading price of the Company’s Shares for the 30 trading days, or the average trading price of the Company’s Shares for the 20 trading days, or the average trading price of the Company’s Shares on the trading day, in each case immediately prior to 27 August 2021 (inclusive), i.e. , RMB10.30 per Share. The conversion price is only used to calculate the impact of the dilution of current returns by the Issuance on key financial indicators. The definitive initial conversion price will be determined by the Board of Directors based on market conditions before the Issuance upon authorization by the Shareholders at the EGM, and may be subject to ex-right or ex-dividend adjustments;
The net profit attributable to owners of the parent company and the net profit attributable to owners of the parent company after deducting non-recurring gains and losses in 2020 amounted to RMB7,243,654,400 and RMB7,258,771,700, respectively. Estimates are made based on the assumption that the net profits attributable to owners of the parent company before and after deducting non-recurring gains and losses in 2021 remain the same as those in 2020, and that the net profits attributable to owners of the parent company before and after deducting non-recurring gains and losses in 2022 are calculated on the following basis: (1) increase 10% as compared to the corresponding period last year; (2) remain unchanged as compared to the corresponding period last year; (3) decrease 10% as compared to the corresponding period last year. Such assumptions are for the purpose of evaluating the impact of the dilution of current returns by the Issuance on the earnings per Share of the Company only, and do not represent the Company’s judgement about operating conditions and trends in the future, nor do they constitute a profit forecast for the Company. Investors shall not make decisions on investment based on such assumptions. The Company will not be liable for any loss of investors arising from or in reliance upon the same;
No impact of profit distribution by the Company in the coming years is taken into consideration;
Other than the Issuance, there is no act of the Company that may affect or potentially affect the total share capital of the Company.

– IV-2 –

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

APPENDIX IV

(II) Impact on key financial indicators of the Company

Based on the assumptions above, the impact of the Issuance of A Share Convertible Bonds on the key financial indicators of the Company is analysed as follows:

						Year 2022/31 December 2022	Year 2022/31 December 2022	Year 2022/31 December 2022	Year 2022/31 December 2022
		Year 2020/		Year 2021/
Item	31 December 2020 31 December 2021					No conversion		Full conversion
Total share capital		1,013,726		1,013,726		1,013,726		1,120,522
(0’000 shares)
1. Assuming the net profits attributable to shareholders of					the listed	company before and after deducting
non-recurring gains and losses in 2021 remain the same as those in 2020, and the							net	profits attributable to
owners of the parent company before and after deducting non-recurring gains and losses in 2022 remain the
same as in 2021
Net profit attributable to		724,365.44		724,365.44		724,365.44		724,365.44
owners of the parent
company (RMB0’000)
Net profit attributable to		725,877.17		725,877.17		725,877.17		725,877.17
owners of the parent
company after deducting
non-recurring gains and
losses (RMB0’000)
Basic earnings per share			0.71	0.71		0.71			0.71
(RMB/Share)
Diluted earnings	per		0.71	0.71		0.65			0.71
share (RMB/Share)
Basic earnings per share			0.71	0.71		0.71			0.71
after deducting
non-recurring gains and
losses (RMB/Share)
Diluted earnings	per		0.71	0.71		0.65			0.71
share after deducting
non-recurring gains and
losses (RMB/Share)

2. Assuming the net profits attributable to shareholders of the	2. Assuming the net profits attributable to shareholders of the	2. Assuming the net profits attributable to shareholders of the	2. Assuming the net profits attributable to shareholders of the	listed company before	and after	deducting
non-recurring gains and losses in 2021 remain the			same as those in 2020,	and the net profits		attributable	to
owners of the parent company before		and after deducting non-recurring gains and			losses in 2022 are 10%
higher than those in 2021
Net profit	attributable to 724,365.44 724,365.44 796,801.98					796,801.98
owners of	the parent
company (RMB0’000)
Net profit	attributable to 725,877.17 725,877.17 798,464.89					798,464.89
owners of	the parent
company after deducting
non-recurring gains and
losses (RMB0’000)

– IV-3 –

APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

						Year 2022/31 December 2022	Year 2022/31 December 2022	Year 2022/31 December 2022	Year 2022/31 December 2022
		Year 2020/	Year 2021/
Item	31 December 2020 31 December 2021 No conversion							Full	conversion
Basic earnings per	share	0.71		0.71			0.79		0.79
(RMB/Share)
Diluted earnings per		0.71		0.71			0.71		0.79
share (RMB/Share)
Basic earnings per	share	0.71		0.71			0.79		0.79
after deducting
non-recurring gains and
losses (RMB/Share)
Diluted earnings per		0.71		0.71			0.71		0.79
share after deducting
non-recurring gains and
losses (RMB/Share)
3. Assuming the	net profits attributable to shareholders of the listed company before and after deducting
non-recurring	gains and losses of 2021 remain the same as those in 2020,					and the net		profits attributable to
owners of the	parent company before and after deducting non-recurring gains and losses in 2022								are 10%
lower than those in 2021
Net profit attributable to		724,365.44	724,365.44		651,928.90			651,928.90
owners of the parent
company (RMB0’000)
Net profit attributable to		725,877.17	725,877.17		653,289.45			653,289.45
owners of the parent
company after deducting
non-recurring gains and
losses (RMB0’000)
Basic earnings per	share	0.71		0.71			0.64		0.64
(RMB/Share)
Diluted earnings per		0.71		0.71			0.58		0.64
share (RMB/Share)
Basic earnings per	share	0.71		0.71			0.64		0.64
after deducting
non-recurring gains and
losses (RMB/Share)
Diluted earnings per		0.71		0.71			0.58		0.64
share after deducting
non-recurring gains and
losses (RMB/Share)

Note: The earnings per share indicator is calculated in accordance with the relevant provisions of the Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (revised in 2010) ( 《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》 (2010 年修訂 )).

– IV-4 –

APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

II. RISK WARNING FOR THE DILUTION OF CURRENT RETURNS BY THE ISSUANCE

Upon completion of the Issuance, the number of outstanding potential dilutive ordinary Shares of the Company will increase accordingly. After the conversion of all or part of the A Share Convertible Bonds held by the investors, the number of outstanding ordinary Shares and net assets of the Company will increase to certain extent. It will take some time and efforts for the Company to gain benefits by use of the proceeds, and therefore, the basic earnings per Share and diluted earnings per Share, both before and after deducting non-recurring gains and losses, may decrease upon completion of the Issuance of the A Share Convertible Bonds. In addition, the A Share Convertible Bonds contain terms on downward adjustment to the conversion price. When such terms are triggered, the Company may apply for downward adjustment to the conversion price, which will result in an increase in the newly increased Share capital due to the conversion of A Share Convertible Bonds, thus expanding the potential dilution effect of the conversion of A Share Convertible Bonds on the existing ordinary shareholders of the Company.

Investors are hereby reminded of potential dilution of current returns by the Issuance.

III. NECESSITY AND FEASIBILITY OF THE ISSUANCE

The necessity and feasibility of the Issuance set forth in Appendix II to this circular.

IV. RELATIONSHIP BETWEEN THE INVESTMENT PROJECTS USING PROCEEDS AND THE COMPANY’S EXISTING BUSINESS, AND THE COMPANY’S PERSONNEL, TECHNICAL AND MARKET RESERVES FOR THE PROJECTS

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 capital-based intermediary business, and the expansion of investment banking business as well as for the replenishment of the Company’s other working capital to support its business development, optimise its business structure, and enhance its market competitiveness and the capabilities of risk prevention. Such proceeds will be used to replenish the Company’s capital pursuant to the relevant regulatory requirements upon conversion of the A Share Convertible Bonds.

(I) Relationship between the investment projects using proceeds and the Company’s existing business

The Company provides brokerage, sales and trading business, including brokerage and wealth management, institutional sales and investment research, margin financing and securities lending and stocks pledge and asset management, investment banking business, including equity financing, debt financing and financial advisory, investment management business, including proprietary trading and other securities trading

– IV-5 –

APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

services, private equity investment and alternative investment, and overseas business, including brokerage and sales, investment banking, investment management and asset management. The proceeds from the Issuance by the Company will be used to develop investment transaction business and capital-based intermediary business, expand investment banking business and replenish the Company’s other working capital, which conforms to the requirements on net capital and the long-term development strategy of the Company, facilitates the Company to enhance its comprehensive competitiveness and risk prevention capacity, captures market opportunities, promotes corporate value and maximize Shareholders’ interests while consolidating its business with competitive advantages.

(II) The Company’s personnel, technical and market reserves for the investment projects using proceeds

1. Talent reserves

The Company has a stable management team, and the senior management of the Company features such merits as long-time working experience in the financial industry, rich management experience, and strong business capabilities, which have made significant contribution to the Company’s rapid and stable development in recent years. The heads of the major business departments of the Company have extensive industry experience and rich management experience in the securities business field. They have served the Company for years, highly recognised the Company’s culture, and ensured the effective execution of the Company’s decisions. Most of the staff of the Company have working experience in large state-owned financial institutions and state organs, and have been working in the Company since its establishment. They are loyal to the Company and have high quality in work, and have gradually become specialists in their respective fields. Meanwhile, the Company provides new-hire trainings for new employees and routine business trainings for business personnel through a multi-level training system to continuously enrich employees’ business knowledge structure.

2. Technical reserves

As a key strategic resource for corporate development, information technology relates to the strategic deployment, business development and brand image of the Company. A secure, stable and efficient information technology operating environment is the fundamental guarantee for the Company’s business and management development innovation. The Company actively promotes the construction of risk management information technology systems and continues to increase investment in information technology in order to guarantee the Company’s improvement and control of various business processes, and achieve virus protection, business continuity and Internet security. In order to effectively cope with and manage the risks pertaining to information technology, the Company has established and improved the network security management system, made full use of various technologies, built a guarantee system for network

– IV-6 –

APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

security management; the Company also formulated a system for disaster recovery and offsite backup within the same city, used data backup technology and hardware redundancy backup technology, achieved information security management and control in key matters, deployed anti-virus and data anti-breach systems, conducted security vulnerability scanning on important systems on a regular basis and engaged external security companies to carry out security assessments and penetration tests for essential systems.

3. Market reserves

As at 30 June 2021, the Company had 5 subsidiaries, 36 branches and 499 securities brokerage branches in 31 provinces, autonomous regions and municipalities directly under the Central Government across China. It is the securities company with the largest number of branches in China. Leveraging on its extensive network of branches, the Company has developed relatively strong sales capability and accumulated a large customer base. As at 30 June 2021, the Company had 12.83 million brokerage clients, and served over 600 corporate clients in the investment banking business. Benefitted from its stable client base, the Company has significant potentiality for cross-selling among its business lines, which will enable the Company to quickly capture opportunities to expand its business scale and explore new businesses.

V. MEASURES ADOPTED BY THE COMPANY TO ENSURE THE EFFECTIVE USE OF PROCEEDS, PREVENT DILUTION OF CURRENT RETURNS AND IMPROVE FUTURE RETURNS

In order to safeguard the interests of investors, reduce the risk of dilution of current returns and enhance the capability of creating long-term returns for Shareholders, the Company will adopt various measures to ensure the effective use of the proceeds, prevent dilution of current returns and improve future returns. The specific measures are as follows:

(1) Strengthening operation management and internal control, and improving operational efficiency

Upon receipt of the proceeds of the Issuance, the Company will strive to increase the efficiency of capital use, improve and strengthen the decision-making procedures, design a reasonable fund use plan, strengthen internal control, control capital costs, cut various expenses, and effectively manage the Company’s operations and control risks. Meanwhile, the Company will continue to improve the internal control system, compliance management system and dynamic risk control indicator monitoring system so that its operations will be conducted within a measurable, controllable and affordable scope of risks.

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APPENDIX IV

DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

(2) Strengthening the management of proceeds to ensure that the proceeds are used reasonably

The Company has formulated and will continue to improve the Administrative Measures for the Proceeds （《募集資金管理辦法》）in accordance with the requirements of the Company Law, the Securities Law, the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange （《上海證券交易所股票上市規則》） and other laws and regulations, normative documents and the Articles of Association to regulate the use of the proceeds. Upon receipt of the proceeds, the Company will strengthen the management of the proceeds in accordance with requirements under the relevant laws and regulations and other normative documents, the Articles of Association and the Administrative Measures for the Proceeds ( 《募集資金管理辦法》 ) , and execute custody agreements for the proceeds with the sponsoring institutions and the commercial bank where such proceeds are deposited in a timely manner. When using the proceeds, the Company will strictly follow the application and approval procedures, set up a ledger, and record in detail the use of the proceeds and investment of the proceeds in the investment projects. The Board will also continue to inspect and supervise the use of the proceeds to ensure that the proceeds are used reasonably and the risks of using the proceeds are properly prevented.

(3) Accelerating the progress of the use of proceeds in the investment projects to improve the performance of the Company

All the proceeds from the Issuance are intended to be used to replenish working capital, specifically for the development of investment transactions business and capital-based intermediary business, and the expansion of investment banking business, as well as for the replenishment of the Company’s other working capital, which is in line with the Company’s development needs. The investment projects funded with the proceeds will facilitate the Company to further expand its business scale, optimize its business structure, and improve its sustainable profitability. Upon receipt of the proceeds from the Public Issuance of A Share Convertible Bonds, the Company will accelerate the use of the proceeds, increase the Company’s business scale, strive to achieve better returns, and minimise the risk of dilution of Shareholders’ current returns by the Issuance.

(4) Further improving the profit distribution policy and strengthening the investor return mechanism

According to the provisions of the Notice on Further Implementation of Cash Dividend Distribution of Listed Companies （《關於進一步落實上市公司現金分紅相關事項的通知》）and the Guideline No. 3 for Supervision of Listed Companies – Cash Dividends of Listed Companies （《上市公司監管指引第3號 – 上市公司現金分紅》） issued by the CSRC, in order to improve the profit distribution policy of the Company, increase the transparency of profit distribution and protect the legitimate interests of the public

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DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

investors, the Company has incorporated definite and effective profit distribution policies in the Articles of Association to further protect minority investors’ rights and interests.

In addition, in order to better ensure the reasonable returns for all the Shareholders and enhance the transparency and operability of the profit distribution decisions, the Company has formulated the Plan of Shareholders’ Return for the Next Three Years (2021-2023). The Company will actively promote the profit distribution to Shareholders and effectively protect and increase returns to Shareholders subject to certain conditions of profit distribution and in accordance with relevant laws, regulations, the Articles of Association and the Plan of Shareholders’ Return for the Next Three Years (2021-2023) in the future.

VI. UNDERTAKINGS MADE BY THE COMPANY’S DIRECTORS AND SENIOR MANAGEMENT FOR THE EFFECTIVE IMPLEMENTATION OF THE REMEDIAL MEASURES

In order to ensure the effective implementation of the remedial measures of the Company, the Directors and senior management of the Company undertake that they will faithfully and diligently perform their respective duties and safeguard the legitimate rights and interests of the Company and its Shareholders as a whole. They have made the following undertakings in accordance with relevant requirements of the CSRC to ensure that the remedial measures will be implemented in an effective manner:

“1. I undertake not to transfer any interests to other units or individuals without consideration or on unfair terms and conditions, or otherwise jeopardize any interests of the Company;
I undertake to exercise self-discipline on my position-related consumption activities;
I undertake not to use any assets of the Company for any investment and consumption activities that are not related to my performance of duties;
I undertake that the remuneration policy formulated by the Board or the remuneration committee is in line with the implementation of the remedial measures to be adopted by the Company; and
I undertake that if the Company is to adopt any stock incentive policy, the conditions for the exercise of any rights thereunder are in line with the implementation of the remedial measures to be adopted by the Company.”

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DILUTION OF CURRENT RETURNS BY THE PUBLIC ISSUANCE OF A SHARE CONVERTIBLE BONDS AND THE REMEDIAL MEASURES

VII. UNDERTAKING MADE BY THE CONTROLLING SHAREHOLDER

In order to protect the legitimate rights and interests of the Company and its Shareholders as a whole, the controlling Shareholder of the Company has made the following undertaking on the remedial measures to be adopted in respect of the dilution of current returns by the Public Issuance of the A Share Convertible Bonds:

“I will not intervene in the business management activities of China Galaxy Securities Co., Ltd. without due authorization, nor will I infringe upon any rights and interests of China Galaxy Securities Co., Ltd.”

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RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

APPENDIX V

RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

CHAPTER 1 GENERAL PROVISIONS

Article 1 In order to regulate the organization and conduct of meetings of holders of convertible corporate bonds publicly issued by China Galaxy Securities Co., Ltd. (the “ Issuer ” or the “ Company ”), define the powers and obligations of bondholders’ meetings, and protect the legitimate rights and interests of bondholders, these Rules are hereby formulated in accordance with 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》） issued by the China Securities Regulatory Commission (the “ CSRC ”), the Rules Governing the Listing of Stocks on Shanghai Stock Exchange （《上海證券交易所股票上市規則》）and the Administrative Measures for Convertible Corporate Bonds （《可轉換公司債券管理辦法》）, and other laws, regulations, normative documents and the Articles of Association of China Galaxy Securities Co., Ltd. (the “ Articles of Association ”) and in the light of the actual situation of the Company.

The basic elements and important requirements of the convertible bonds, such as the short name and code of the bonds, issue date, redemption date, issuance interest rate, issuance size, special terms, provisions for the protection of rights and interests of investors, are subject to the terms set out in the offering document of the convertible bonds and other documents.

Article 2 The convertible corporate bonds under these Rules refer to the convertible corporate bonds (the “ Convertible Bonds ”) issued by the Company according to the offering document of the Convertible Bonds (the “ Offering Document of Convertible Bonds ”), and bondholders are investors who acquire the Convertible Bonds through subscription, transaction, transfer or other lawful means.

Zheshang Securities Co., Ltd. was appointed by the Company as the trustee manager of the Convertible Bonds (the “ Trustee Manager ”).

Article 3 A bondholders’ meeting shall be constituted by all bondholders in accordance with these Rules. A bondholders’ meeting shall be convened and held in accordance with the procedures stipulated in these Rules, and shall consider and vote on matters falling within the scope of authority prescribed by these Rules according to law.

During the listing of the bonds, the aforesaid holders refer to the holders of the bonds whose names appeared on the register of bondholders as maintained by China Securities Depository and Clearing Corporation, unless otherwise stipulated by laws and regulations.

Article 4 A resolution considered and adopted at a bondholders’ meeting in accordance with these Rules shall be equally binding on all bondholders (including all bondholders who attended the meeting, who did not attend the meeting, who voted against the resolution, or who abstained from voting, holders of Convertible Bonds with no right to vote, and holders to whom the Convertible Bonds are transferred after the adoption of the resolution).

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APPENDIX V

Article 5 By subscribing for, holding of, accepting the transfer of or otherwise lawfully acquiring the Convertible Bonds, investors shall be deemed to have accepted all the provisions of these Rules and agreed to be bound by these Rules.

CHAPTER 2 RIGHTS AND OBLIGATIONS OF BONDHOLDERS

Article 6 Rights of holders of Convertible Bonds:

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

Article 7 Obligations of holders of Convertible Bonds

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

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APPENDIX V RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

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

CHAPTER 3 SCOPE OF AUTHORITY OF A BONDHOLDERS’ MEETING

Article 8 The scope of authority of a bondholders’ meeting is as follows:

(1) When the Company proposes to change a plan agreed upon in the Offering Document of Convertible Bonds, a resolution shall be made as to whether to accept the proposal made by the Issuer; provided, however , that a bondholders’ meeting may not adopt a resolution to release the Company from paying the principal of and interest on the Convertible Bonds, to change the interest rate and term of the Convertible Bonds, or to revoke the redemption or sale back terms in the Offering Document of Convertible Bonds;
(2) When the Company fails to pay the principal of and interest on the Convertible Bonds as scheduled, a resolution shall be made as to whether to approve relevant solutions, whether to enforce the Company to repay the principal of and interest on the Convertible Bonds through legal and other proceedings, or whether to participate in the restructuring, settlement, reorganization or bankruptcy proceedings of the Issuer;
(3) In case of any capital reduction (other than those resulting from any share repurchase under employees share ownership schemes 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 filing for bankruptcy of the Company, a resolution shall be made as to whether to accept the proposal made by the Company and on the plan for the exercise of rights of bondholders in accordance with law;
(4) If any event that has a material impact on rights and interests of bondholders occurs, a resolution shall be made on the plan for the exercise of rights of bondholders in accordance with law;
(5) To resolve any amendment to these Rules to the extent permitted by law;
(6) To resolve the change or dismissal of the Trustee Manager;

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APPENDIX V

(7) Other circumstances in which resolutions shall be made at the bondholders’ meeting pursuant to the relevant requirements of laws, regulations, the Articles of Association and these Rule.

Save for the matters stipulated in this Article, no separate authorization shall be sought from a bondholders’ meeting in respect of any measures adopted by the Company for the purpose of protecting the interests of holders of the Convertible Bonds.

CHAPTER 4 CONVENING BONDHOLDERS’ MEETINGS

Article 9 A bondholders’ meeting shall be convened by the Trustee Manager of the Convertible Bonds if any of the following circumstances occurs during the term of the Convertible Bonds:

(1) proposal by the Company for change of the terms of the Offering Document of Convertible Bonds;
(2) the Company’s default in paying the principal of the 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 employees share ownership plans or, share incentive plans or as a result of 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 these Rules;
(5) proposed change of the Trustee Manager of the 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 as 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 bondholders;
(9) any written proposal made by the Board of Directors of the Company or holders of Convertible Bonds holding, individually or collectively, at least 10% of the total nominal value of the outstanding Convertible Bonds;
(10) other matters to be considered and determined at the bondholders’ meetings in accordance with laws and administrative regulations, the requirements of the CSRC and the Shanghai Stock Exchange, and these Rules.

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APPENDIX V

RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

The following institutions or persons may propose to convene a bondholders’ meeting:

(1) the Board of Directors of the Company;
(2) the Trustee Manager of the Convertible Bonds;
(3) bondholders holding, individually or collectively, at least 10% of the total nominal value of the outstanding Convertible Bonds shall have the right to convene a bondholders’ meeting on their own when the Board of Directors or the Trustee Manager of Convertible Bonds should convene a bondholders’ meeting but fail to do so;
(4) other institutions or persons as required by laws, regulations and the requirements of the CSRC.

CHAPTER 5 CONVENING OF A BONDHOLDERS’ MEETING

Article 10 A bondholders’ meeting shall be convened by the Trustee Manager of the Convertible Bonds. The Trustee Manager of the Convertible Bonds shall hold a bondholders’ meeting within 30 days following the proposal, or receipt of a proposal, to convene a bondholders’ meeting. A notice of the meeting shall be published by way of public announcement on the media designated by the CSRC for information disclosure 15 days prior to the date of the bondholder’s meeting, which shall specify the following:

(1) the date, time, venue, form, rules of procedure and way of poll of the meeting;
(2) matters to be considered at the meeting;
(3) an explicit statement that all bondholders have the right to attend the bondholders’ meeting and may attend and vote at the meeting by proxy, and that a proxy need not to be a bondholder;
(4) documents to be prepared and formalities to be gone through by persons who are to attend the meeting, including but not limited to the proxy statement and identity certification of the proxy who are to attend the meeting on behalf of a bondholder, content requirements of the proxy statement as well as its delivery time and address;
(5) the record date for the purpose of determining the bondholders eligible to attend the bondholders’ meeting;
(6) name of the convenor, and name and telephone number of the permanent contact person for the meeting;
(7) other matters that the convenor is required to notify.

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APPENDIX V

Article 11 If the Trustee Manager of the Convertible Bonds fails to perform its duties according to these Rules within 15 days from the date of occurrence of any event described in Article 9 of these Rules, the bondholders who individually or collectively hold at least 10% of the aggregate nominal value of the outstanding Convertible Bonds shall have the right to issue a notice for convening a bondholders’ meeting by way of public announcement.

Article 12 After the notice of a bondholders’ meeting is given, the bondholder’s meeting may not be rescheduled or canceled as desired, nor shall any proposal set out in the notice be changed. Where a bondholder’s meeting has to be rescheduled or canceled, or any proposal set out in the notice of the meeting has to be changed, the convenor shall, by way of public announcement, notify all bondholders and explain the reasons therefor, at least five trading days prior to the original date of the bondholders’ meeting; provided, however , that the record date for bondholders shall not be changed.

After the notice of the bondholders’ meeting is published, if some of the matters to be resolved are eliminated, the convenor may cancel the relevant resolutions, publish a public announcement in a timely manner and explain the reasons therefor. If the matters to be resolved at a bondholders’ meeting are eliminated, the convenor may, by way of public announcement, cancel the bondholders’ meeting and explain the reasons therefor.

For a bondholder meeting requiring feedback for participation, the convenor shall have the right to decide the cancellation of the meeting directly if the holders of the Convertible Bonds representing less than one-half of the outstanding Convertible Bonds intend to attend the meeting and the convenor has indicated in the notice of the meeting the risk of possible cancellation of the meeting.

Article 13 An on site meeting of bondholders shall be held at the Company’s domicile in principle or any other venue with convenient transportation, which shall be set out in the notice of the meeting. The meeting venue shall be provided by the Company or by the convenor of the bondholders’ meeting.

Article 14 The institution or personnel who gives notice of a bondholders’ meeting in accordance with these Rules shall be the convenor of the meeting.

Article 15 When convening a bondholders’ meeting, the convenor shall engage a legal counsel to issue legal opinions on the following matters:

(1) whether the procedures for convening and holding the meeting comply with provisions of applicable laws and regulations and these Rules;
(2) whether the attendees and the convenor of the meeting are legally and validly qualified;
(3) whether the voting procedures and voting results of the meeting are legitimate and valid;

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APPENDIX V

(4) other relevant matters on which legal opinions are given at the request of the convenor.

Article 16 The convenor shall produce an attendees’ signature book. The signature book shall contain the names, ID numbers and residential addresses of persons attending the meeting, the nominal value of the bonds with voting rights held or represented by them, and the names of the bondholders who delegate the voting rights to their proxies.

CHAPTER 6 PROPOSALS FOR BONDHOLDERS’ MEETINGS, PARTICIPANTS AND THEIR RIGHTS

Article 17 A proposal to be submitted for consideration at a bondholders’ meeting shall be drafted by the convenor. The proposal shall comply with the provisions of applicable laws and regulations, be within the scope of authority of the bondholders’ meeting, and produce explicit proposals and specific subject matters to be considered and resolved.

Article 18 Matters to be considered at a bondholders’ meeting shall be decided by the convenor in accordance with Articles 8 and 9 of these Rules.

Article 19 Bondholders who individually or collectively represent at least 10% of the aggregate nominal value of the outstanding Convertible Bonds have the right to submit an interim proposal to the bondholders’ meeting. The Company and its affiliated parties may participate in a bondholders’ meeting and submit an interim proposal. The proposer(s) of an interim proposal shall submit the complete interim proposal to the convenor no later than 10 days before the bondholders’ meeting. The convenor shall, within five days from the date of receipt of such interim proposal, issue a supplementary notice of the bondholders’ meeting and disclose in a public announcement the name(s) of the bondholder(s) submitting the interim proposal, the bondholding percentage of such bondholder(s) and the content of the interim proposal. The supplementary notice shall be published by way of public announcement on the same designated media on which the notice of the meeting has been published.

Subject to the foregoing, the convenor may not amend proposals set out in the notice of the meeting or add any new proposal after giving notice of the bondholders’ meeting. A proposal not specified in the notice of the bondholders’ meeting (including the supplementary notice for the addition of an interim proposal) or a proposal that does not meet the requirements of these Rules shall not be voted and decided upon.

Article 20 The record date of a bondholders’ meeting shall be the fifth trading day prior to the date of the bondholders’ meeting. The holders of the Convertible Bonds whose names appear on the register of bondholders as maintained by the Shanghai Branch of China Securities Depository and Clearing Corporation Limited or by any other institutions specified under applicable laws as of the close of business on the record date shall have the right to attend and vote at the bondholders’ meeting. A bondholder may attend and vote at a bondholders’ meeting in person or by proxy. Travel, accommodation and other expenses incurred by a bondholder or his proxy in connection with attending the bondholders’ meeting shall be borne by the bondholder.

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APPENDIX V

The following institutions or personnel may attend bondholders’ meetings as non-voting members and also participate in any discussion and express their views at the meeting, but with no voting rights:

(i) the bond issuer (i.e. the Company) or its authorised representative;
(ii) the directors, supervisors and senior management of the Company;
(iii) the custodian of the bonds;
(iv) shareholders holding at least 5% of shares of the Company, who confirm that the record date of shareholding of the above-mentioned shareholders of the Company is the record date.

Article 21 Where a natural person bondholder attends a meeting in person, he shall present his identity documents and the securities account card for the outstanding Convertible Bonds held by him or other supporting documents prescribed by applicable laws; where a corporate bondholder shall attend a meeting by the legal representative or a responsible person, such legal representative or responsible person shall present his identity documents, valid proof of his qualifications as the legal representative or responsible person and the securities account card for the outstanding Convertible Bonds or other supporting documents prescribed by applicable laws.

Where a proxy is appointed to attend a meeting, the proxy shall present his identity documents, the proxy statement issued by the appointing bondholder according to law, the identity documents of the appointing bondholder, and the securities account card for the outstanding Convertible Bonds held by the appointing bondholder or other supporting documents prescribed by applicable laws.

Article 22 The proxy statement issued by a bondholder to appoint another person to attend a bondholders’ meeting shall contain the following:

(1) the name and identity card number of the proxy;
(2) the authority granted to the proxy, including but not limited to whether he has the right to vote;
(3) voting instructions (“for”, “against” or “abstain”) with respect to each of the matters to be considered and resolved on the agenda of the bondholders’ meeting;
(4) the issuance date and valid term of the proxy statement;
(5) the signature or seal of the appointing bondholder.

It shall be indicated in the proxy statement whether the proxy may vote in his own discretion in the absence of specific instructions from the appointing bondholder. The proxy statement shall be delivered to the convenor before the bondholders’ meeting.

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RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

APPENDIX V

Article 23 The Company (including but not limited to Directors, secretary to the Board, supervisors and other senior management of the Company) can attend a bondholders’ meeting without voting rights.

Bondholders who are shareholders holding no less than 5% of the Company’s shares, or are affiliated parties of such shareholders or the Issuer, may express their opinions at a bondholders’ meeting, but have no right to vote, and the number of Convertible Bonds they represent shall not be counted as the Convertible Bonds with the right to vote in calculating whether a resolution is passed at the bondholders’ meeting.

Article 24 The convenor and the legal counsel shall jointly verify the qualifications and legitimacy of bondholders present at the meeting based on the register of holders of the Convertible Bonds as of the close of business on the record date provided by the securities registration and clearing institution, and record the names of bondholders and/or proxies attending the meeting and the number of Convertible Bonds held by them with the right to vote.

The above-mentioned register of bondholders shall be obtained by the Company from the securities registration and clearing institution, and the Company shall actively assist the convenor in obtaining such register of bondholders and provide it to the convenor free of charge.

CHAPTER 7 HOLDING OF A BONDHOLDERS’ MEETING

Article 25 A bondholders’ meeting shall, in principle, be held in the form of onsite meeting, and may be convened via internet or communication tools or by other means.

Article 26 A bondholders’ meeting shall only be convened in the presence of the bondholders entitled to vote representing at least one-half of the outstanding Convertible Bonds. Bondholders signing an attendance form at an onsite meeting or voting at an offsite meeting shall be deemed to have attended at such bondholders’ meeting.

Article 27 The convenor shall specify the form and specific arrangements of the meeting in a public announcement containing the notice of the bondholders’ meeting. Where the meeting is conducted by way of online voting, the convenor shall also disclose information such as the online voting measures, form of voting, vote-taking principles and methods.

Article 28 A bondholders’ meeting shall be chaired and presided over by the authorized representative appointed by the Trustee Manager of the Convertible Bonds for attending the meeting. If such authorized representative is unable to preside over the meeting, the chairman of the Board of Directors or his authorized director shall preside over the meeting; if neither the chairman of the Board of Directors, nor the authorized representative appointed by the Trustee Manager of the Convertible Bonds for attending the meeting, nor the director authorized by the chairman of the Board of Directors is able to preside over the meeting, a bondholder (or the proxy thereof) shall be elected by the bondholders (or the proxies thereof) present at the meeting by votes representing more than

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APPENDIX V

50% of the Convertible Bonds with voting rights to chair and preside over the meeting. If a chairman of the meeting fails to be so elected within one hour after the commencement of the meeting, the bondholder (or the proxy thereof) who attends the meeting and holds the outstanding Convertible Bonds presenting the largest percentage of voting rights shall chair and preside over the meeting.

The chairman of the meeting shall be responsible for producing the signature book of the attendees. The signature book shall set forth the names of the bondholders attending the meeting, the names and identity certificate numbers of proxies attending the meeting, the aggregate principal amount of all outstanding Convertible Bonds held or represented by them, and their securities account cards number or relevant information of other documentation required by applicable laws. The meeting registration shall end before the chairman of the meeting announces the number of bondholders and proxies attending the meeting and the aggregate amount of Convertible Bonds held or represented by them.

The chairman of a bondholders’ meeting has the right to adjourn, resume or change the venue of a meeting with the approval of the meeting. Subject to a resolution adopted at the meeting, the chairman of the meeting shall change the time and venue of the meeting as required by the resolution. At the resumed meeting after adjournment, no matters falling outside the scope of the original proposals shall be resolved.

Article 29 At the request of bondholders who individually or collectively hold no less than 10% of the Convertible Bonds with voting rights, the Company shall dispatch at least one director or senior manager to attend the bondholders’ meeting. Directors or senior managers present at the meeting shall provide answers or explanations in response to bondholders’ inquiries and suggestions, except where the Company’s trade secrets are involved or they are prevented from doing so by applicable laws and regulations related to information disclosure by listed companies.

CHAPTER 8 VOTING AND RESOLUTIONS AT AND MINUTES OF A BONDHOLDERS’ MEETING

Article 30 Each proposal submitted to a meeting shall be voted on by bondholders present at the meeting who are entitled to attend the bondholders’ meetings or their duly authorized proxies. Each outstanding bond (with a nominal value of RMB100) entitles the holder to one vote.

The bonds directly held or indirectly controlled by the following institutions or personnel are not entitled to votes:

(i) the Company and its affiliates, including the Company’s controlling shareholder, de facto owner, consolidated subsidiaries, affiliated companies under the control of the same de facto owner (except for those under the common control by the Assets Supervision and Administration Commission under the State Council only);
(ii) the successor of the settlement obligations under the bonds;

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APPENDIX V

(iii) other institutions or individuals having a conflict of interest in relation to the matters to be considered.

Before the commencement of voting at the bondholders’ meeting, the above-mentioned institutions or individuals or the managers of the asset management products entrusted by them shall take the initiative to declare to the convenor any connection or conflict of interest they may have in relation thereto and abstain from voting.

Article 31 The proposals or paralleled matters in any single proposal as set out in the notice of the meeting published by a public announcement shall be considered and voted upon separately. Except where the meeting is suspended or prevented from adopting resolutions due to any event of force majeure or any other special reason, the meeting shall not shelve or withhold from voting on any matter to be considered as set out in the notice of the meeting. Where there are different proposals on the same matter, such proposals shall be voted and resolved in chronological order in which they were submitted.

A bondholders’ meeting shall not vote on any matters not published by a public announcement. When a bondholders’ meeting considers a matter, it shall not make any change to such matter. Any change in the matter shall be regarded as a new matter to be considered and shall not be voted on at the meeting.

Article 32 A bondholders’ meeting shall vote by open ballot. When a bondholder or his proxy votes on a matter, he may vote for or against it, or abstain from voting. Votes cast via unfilled, incorrectly filled-out or illegible ballots shall be counted as invalid votes and shall not count towards the voting results. Uncast votes shall be deemed abstention and shall not count towards the voting results. The right to vote may be exercised in one of such forms as on-site voting, online voting or otherwise only. If the right to vote has been exercised more than once, the first voting shall prevail.

Article 33 There shall be one teller and one scrutineer at the meeting who are responsible for counting votes and scrutinizing the voting process, respectively. The teller and the scrutineer shall be nominated by the chairman of a meeting and shall be served by bondholders (or the proxies thereof) present at the meeting. None of the bondholders who are affiliated to the Company and their proxies shall act as a teller or a scrutineer.

For each matter considered, at least two bondholders (or the proxies thereof) shall count the votes jointly with an authorized representative of the Company, and the counters shall announce the voting results on the spot. The legal counsel is responsible for witnessing the voting process.

Article 34 The chairman of a bondholders’ meeting shall confirm whether a resolution has been adopted at the meeting based on the voting results, and announce the same at the meeting. The results of the vote on a resolution shall be recorded in the minutes of the meeting.

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RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

APPENDIX V

Article 35 If the chairman of a bondholders’ meeting has any doubts about the voting result of a resolution, he may recount the votes cast; if the chairman of the meeting has not proposed a recount and a bondholder (or the proxy thereof) present at the meeting disagrees with the results announced by the chairman, such bondholder (or the proxy thereof) shall have the right to request a recount immediately after the announcement of the voting results, and the chairman shall promptly organize a recount.

Article 36 Except as otherwise provided herein, a resolution will not become effectively passed at a bondholders’ meeting unless the bondholders (or the proxies thereof) present at the meeting who represent at least one-half of the aggregate amount of the outstanding Convertible Bonds vote in favor of the resolution.

Article 37 Resolutions put to the vote at a bondholders’ meeting shall take effect on the date when they are passed; provided, however , that resolutions subject to approval by the CSRC or other authoritative bodies shall take effect on the date of approval or any other date as determined by the relevant approval.

Article 38 According to the provisions of relevant laws and regulations, the Offering Document of Convertible Bonds and these Rules, unless special compensation granted to those who vote against the resolutions or do not attend the meetings is otherwise expressly agreed upon, a resolution passed at a bondholders’ meeting by voting is legally binding on all holders of the Convertible Bonds.

Where any resolution relating to the Convertible Bonds will result in a change in rights and obligations as between the Company and bondholders, unless any laws, regulations or departmental rules or the Offering Document of Convertible Bonds expressly stipulate that resolutions adopted by bondholders are binding on the Company:

(1) if the resolution is made based on a proposal submitted by a bondholder, it shall be legally binding on the Company and all bondholders upon adoption at a bondholders’ meeting and approval in writing by the Company;
(2) if the resolution is made based on a proposal submitted by the Company, it shall be legally binding on the Company and all bondholders upon adoption at a bondholders’ meeting.

Article 39 Within two trading days after resolutions are adopted at a bondholders’ meeting, the convenor of the bondholders’ meeting shall publish a public announcement thereof on the media designated by the regulatory department. The announcement shall specify the date, time, venue, form, convenor and chairman of the meeting, the number of bondholders and proxies present at the meeting, the number of Convertible Bonds with voting rights represented by bondholders and their proxies present at the meeting and that number as a percentage of the total number of the outstanding Convertible Bonds, the results of the vote on each matter considered and the content of the resolutions adopted.

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APPENDIX V RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

Article 40 Minutes shall be prepared and maintained for bondholders’ meetings, which shall record:

(1) the time, venue, agenda and the name of the convenor of the meeting;
(2) the names of the chairman, persons attending the meeting (with or without voting rights), the legal counsel witnessing the meeting, the vote teller, the scrutineer and the counters;
(3) the number of bondholders and their proxies present at the meeting, the number of Convertible Bonds with voting rights represented and that number as a percentage of the total number of outstanding Convertible Bonds;
(4) the key points of remarks on each matter considered;
(5) the voting result of each matter;
(6) bondholders’ inquiries and suggestions, and answers or explanations provided by the Company’s directors or senior management;
(7) other contents required to be recorded in the minutes by laws, administrative regulations, normative documents and the bondholders’ meeting.

Article 41 The convenor and chairman of a bondholders’ meeting shall ensure that the contents of the minutes of the meeting are true, accurate and complete. The minutes of a bondholders’ meeting shall be signed by the chairman, the convenor (or his representative) or the representative of the Trustee Manager of Convertible Bonds present at the meeting, the legal counsel witnessing the meeting, the recorder and the scrutineer. The minutes, ballots, signature books of attendees, proxy statements, legal opinions issued by legal counsels and other documents related to a bondholders’ meeting shall be kept by the Board for a period of 10 years.

Article 42 The convenor of a bondholders’ meeting shall ensure that a meeting remains uninterrupted until all matters have been resolved. If a meeting is suspended, cannot be held normally or cannot adopt resolutions due to any event of force majeure, any unexpected event or any other special reason, the convenor shall take necessary measures to resume the meeting as soon as possible or terminate the meeting directly, and make a public announcement to that effect in a timely manner. Meanwhile, the convenor shall report the matter to the CSRC’s local office in the place where the Company is domiciled and the Shanghai Stock Exchange. The convenor shall take measures to stop the acts of interfering with the meeting, picking quarrels and provoking troubles and infringing on the legitimate rights and interests of bondholders and report them to the relevant departments for investigation and punishment in a timely manner.

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RULES FOR THE MEETINGS OF HOLDERS OF A SHARE CONVERTIBLE BONDS

APPENDIX V

Article 43 The Board shall strictly implement resolutions adopted at a bondholders’ meeting, communicate with relevant parties about the content of relevant resolutions on behalf of bondholders in a timely manner, and supervise the specific implementation of resolutions adopted at a bondholders’ meeting.

CHAPTER 9 SUPPLEMENTARY PROVISIONS

Article 44 Where any applicable law, administrative regulation or normative document contains explicit provisions with regard to the rules of procedure for meetings of holders of Convertible Bonds, such provisions shall prevail. These Rules shall not be changed unless with the consent from the Company and the approval at the bondholders’ meeting by way of resolution.

Article 45 Public announcements under these Rules shall be made on the website of the Shanghai Stock Exchange and the media designated by the Company for statutory information disclosure.

Article 46 The terms “no less than”, “at least” and “within” herein shall be inclusive of the number followed, while the terms “more than” shall be exclusive.

Article 47 For the purpose of these Rules, “outstanding Convertible Bonds” shall refer to all the Convertible Bonds issued except the following:

(1) bonds for which the principal and interest have been paid in full;
(2) bonds due for which the Issuer has deposited the funds to be disbursed by the paying agent to bondholders for payment of any interest and principal payable as of the principal payment date. Such funds include any interest and principal of the bonds payable as of the principal payment date under the terms of the Convertible Bonds;
(3) bonds that have been converted into the Company’s A shares;
(4) bonds that the Issuer has repurchased and canceled according to agreement.

Article 48 Disputes over the legality and validity of the procedures for convening, holding and voting at bondholders’ meetings, as well as of resolutions, shall be resolved through litigation in a competent people’s court of the place where the Company is domiciled.

Article 49 These Rules shall become effective on the date of issuance of the Convertible Bonds subject to approval at a shareholders’ general meeting of the Company.

These Rules may be amended and interpreted by the Board as authorized by the shareholders’ general meeting, and any amendments hereto shall also be subject to the approval of a bondholders’ meeting.

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THE PLAN OF SHAREHOLDERS’ RETURN FOR THE NEXT THREE YEARS (2021-2023)

APPENDIX VI

THE PLAN OF SHAREHOLDERS’ RETURN FOR THE NEXT THREE YEARS (2021-2023)

According to the relevant requirements of the Company Law, the Notice on Further Implementation of Cash Dividend Distribution of Listed Companies （《關於進一步落實上市公司現金分紅有關事項的通知》）and the Guideline No. 3 for Supervision of Listed Companies – 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 relevant laws, regulations and normative documents, as well as the Articles of Association and the five-year strategic plan of the Company, in order to further clarify the Company’s plan for providing reasonable investment returns to Shareholders, improve the transparency and operability of decision-making on profit distribution and facilitate Shareholders to supervise the Company’s operation and profit distribution, the Company has formulated the Plan of Shareholders’ Return for the Next Three Years (2021-2023) (the “ Plan ”), detailed contents of which are set out below:

I. FACTORS CONSIDERED IN FORMULATING THE PLAN

The Company is committed to long-term and sustainable development. It establishes sustainable and stable return plan and mechanism for its investors on the basis of comprehensive analysis of the Company’s actual conditions of operation and development, Shareholders’ concerns and requirements, cost of social capital and external financing environment after taking into consideration its current and future profitability, cash flow position, stage of development, fund requirements for project investment, bank credit and debt financing environment, so as to make systematic arrangement for the profit distribution to ensure the continuity and stability of its profit distribution policies.

II. PRINCIPLES FOR FORMULATION OF THE PLAN

Subject to relevant national laws and regulations and the Articles of Association, the Company has fully taken into account the return to investors, continuity and stability of the Company’s profit distribution policies, as well as the Company’s long-term interests, the overall interests of all Shareholders and the Company’s sustainable development in formulating the Plan. The Company shall fully consider the opinions of independent Directors and public investors in the study, demonstration and decision-making process of its profit distribution policies.

III. CONCRETE PLAN OF SHAREHOLDERS’ RETURN FOR THE NEXT THREE YEARS (2021-2023)

The Company may distribute dividends in cash, shares or a combination of cash and shares. The Company shall prioritise adopting cash dividend in profit distribution subject to the relevant conditions. If the relevant conditions are satisfied, interim profit distribution may be made by the Company.

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THE PLAN OF SHAREHOLDERS’ RETURN FOR THE NEXT THREE YEARS (2021-2023)

APPENDIX VI

Save for any significant capital expenditure arrangement of the Company or other special circumstances approved at the general meeting, if the Company makes profit for the year and its accumulative undistributed profit is positive, the profit to be distributed in cash per annum should not be less than 10% of the distributable profit of the parent company realized in that year.

Significant capital expenditure includes major investment and other significant capital outflow. Major investment refers to the total amount of one-off investment (or total proceeds from disposal of assets) or total amount of investments (or total proceeds from disposals of assets) in four months in aggregate reaching 10% of the Company’s latest audited net assets or 5% of the Company’s latest audited own assets (whichever is reached first); other significant capital expenditure refers to the total amount of other one-off expenditures reaching 10% of the Company’s latest audited net assets or 5% of the Company’s latest audited own assets (whichever is reached first).

In developing the profit distribution plan, due consideration shall be given to whether the net capital of the Company after profit distribution is in compliance with the requirements under the Administration Measures for the Risk Control Indicators of Securities Companies （《證券公司風險控制指標管理辦法》）with respect to net capital risk control indicators. If any alert arises in risk control indicators due to profit distribution, the proportion of profit distribution shall be adjusted.
Where the Company is in good operating condition, and the Board considers that the share price of the Company does not reflect its share capital size and distributing dividends in the form of shares will be in the interest of Shareholders of the Company as a whole, the Company may carry out profit distribution by way of stock dividends taking into account true and reasonable factors such as cash flow, business growth and net asset value per Share of the Company.

If the Company does not proceed with the payment of cash dividends or adjusts the proportion of profit distribution due to the circumstances mentioned in items (2) and (3) of this Article, it shall be approved at a Shareholders’ general meeting of the Company by way of special resolution.

IV. DECISION-MAKING AND SUPERVISION MECHANISMS REGARDING THE PLAN OF SHAREHOLDERS’ RETURN

The profit distribution plan of the Company shall be submitted by the general manager (president) to the Board for consideration. The Board shall thoroughly discuss the rationale of the profit distribution plan, seek opinions extensively from Shareholders, independent Directors and supervisors, and develop a proposal for special resolution by taking into account sustainable and stable returns for all Shareholders, and submit the same to the Shareholders’ general meeting for consideration after independent Directors express their opinions in this regard.

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THE PLAN OF SHAREHOLDERS’ RETURN FOR THE NEXT THREE YEARS (2021-2023)

APPENDIX VI

When convening the Shareholders’ general meeting for the purpose of considering the profit distribution plan, the Company shall take the initiative to communicate and exchange its views with Shareholders, in particular with the minority Shareholders, through various channels (including but not limited to communication through telephone, fax and email or inviting minority Shareholders to attend meetings), and fully listen to the opinions and appeals from minority Shareholders and respond promptly to questions which they are concerned about.
If the Company fails to determine its plan of profit distribution for the year according to the established policies or the lowest proportion of cash dividends under special circumstances, the Company shall disclose the specific reasons, and the purposes and plan of the use of the retained capital that has not been applied for cash dividends distribution in announcements of the Board resolution and annual report of the Company, and independent Directors shall express their independent opinions on the rationale of no distribution of cash dividends or lower proportion of cash dividends. In such a circumstance, the profit distribution plan of the Company for the year shall be submitted to the Shareholders’ general meeting for voting as a special resolution.
The supervisory committee of the Company shall supervise the implementation of the profit distribution policies and the plan of shareholders’ return by the Board and the business management and the decision-making process.

V. IMPLEMENTATION OF THE PROFIT DISTRIBUTION PLAN

After the resolution on the profit distribution plan is passed by the Shareholders at the Shareholders’ general meeting of the Company, the Board must complete the dividend (or share) distribution within two months of the Shareholders’ general meeting.

VI. ADJUSTMENT MECHANISM OF THE PLAN OF SHAREHOLDERS’ RETURN

In the event of war, natural disasters and other force majeure, or any change in the external operating environment which has a material impact on the operation of the Company, or any significant change in the operation of the Company, the Company may make adjustments to the profit distribution policy.

If the Company makes adjustments to the profit distribution policy, a special proposal shall be made by the Board. Such proposal shall specify the reasons for the adjustments in detail and then be submitted to a Shareholders’ general meeting for approval by way of special resolution after being commented by independent Directors. In considering any alteration to the profit distribution policy, the Company shall make available online voting method to Shareholders.

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THE PLAN OF SHAREHOLDERS’ RETURN FOR THE NEXT THREE YEARS (2021-2023)

APPENDIX VI

VII. OTHERS

Relevant laws and regulations, normative documents and the Articles of Association shall apply to matters not covered in the Plan. The Plan shall be interpreted by the Board, and come into force upon approval at the Shareholders’ general meeting.

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AI assistant

China Galaxy Securities Co., Ltd. — Proxy Solicitation & Information Statement 2021

51069_rns_2021-09-29_013fd2f0-63f6-42e6-bd18-3dc3e7e069ab.pdf

PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS ELECTION OF SUPERVISOR AND NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

CONTENTS

DEFINITIONS

DEFINITIONS

(Stock Code: 06881)

The Board of Directors:

PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS AND ELECTION OF SUPERVISOR

INTRODUCTION

PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS

1. Satisfaction of the Conditions of the Public Issuance of A Share Convertible Bonds

2. Proposed Issuance of A Share Convertible Bonds

(1) Type of securities to be issued

(2) Size of Issuance

(3) Par value and issue price

(4) Term

(5) Interest rate

(6) Timing and method of principal and interest payments

1. Calculation of annual interest

2. Method of interest payment

(7) Conversion period

(8) Determination of and adjustment to the conversion price

LETTER FROM THE BOARD

2. Method of adjustments to the conversion price and calculation formula

(9) Terms of downward adjustment to the conversion price

1. Adjustment authorization and magnitude of adjustment

2. Procedure of adjustment

(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

LETTER FROM THE BOARD

(11) Terms of redemption

1. Terms of redemption at maturity

2. Terms of conditional redemption

LETTER FROM THE BOARD

(12) Terms of sale back

(13) Entitlement to dividend in the year of conversion

(14) Method of Issuance and target investors

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

(16) Matters relevant to the meetings of holders of A Share Convertible Bonds

LETTER FROM THE BOARD

(17) Use of proceeds

LETTER FROM THE BOARD

(18) Guarantee and security

(19) Deposit and management of proceeds raised

LETTER FROM THE BOARD

(20) Liabilities for breach of contract

3. Dispute resolution mechanism

(21) Trustee manager of A Share Convertible Bonds

(22) Validity period of the issuance plan

3. Preliminary Plan of the Public Issuance of A Share Convertible Bonds

4. Feasibility Report on the Use of Proceeds from the Public Issuance of A Share Convertible Bonds

5. Report on the Use of Previously Raised Proceeds

6. Dilution of Current Returns by the Public Issuance of A Share Convertible Bonds and the Remedial Measures

7. Rules for the Meetings of Holders of A Share Convertible Bonds

8. The Plan of Shareholders’ Return for the Next Three Years (2021-2023)

9. Authorizations for the Public Issuance of A Share Convertible Bonds

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(2) Other authorizations in relation to A Share Convertible Bonds

OTHER INFORMATION RELATING TO THE PROPOSED ISSUANCE OF A SHARE CONVERTIBLE BONDS

1. Reasons for and Benefits of the Proposed Issuance of A Share Convertible Bonds

2. Implications on the Issuance of A Share Convertible Bonds under the PRC regulatory requirements

3. Implications on the Issuance of A Share Convertible Bonds under the Hong Kong Listing Rules

LETTER FROM THE BOARD

4. General Mandate

5. Recent Equity Fund Raising Activities in the Past Twelve Months

6. Effect on the Shareholding Structure of the Company

LETTER FROM THE BOARD

LETTER FROM THE BOARD

7. The Issuance of A Share Convertible Bonds not leading to any change in the control of the Company

ELECTION OF SUPERVISOR

LETTER FROM THE BOARD

THE EGM

VOTING BY POLL

RECOMMENDATION

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2021

SPECIAL RESOLUTIONS

ORDINARY RESOLUTION

By order of the Board China Galaxy Securities Co., Ltd. CHEN Gongyan

China Galaxy Securities Co., Ltd. Proxy Solicitation & Information Statement 2021