THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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, independent adviser or other professional adviser.

If you have sold or otherwise transferred all your shares in China Merchants Securities Co., Ltd., you should at once hand this circular and the enclosed form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

招商证券股份有限公司

China Merchants Securities Co., Ltd.

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

(Stock Code: 6099)

(1) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF THE SECURITIES AND FINANCIAL PRODUCTS, TRANSACTIONS AND SERVICES FRAMEWORK AGREEMENTS
(2) PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR
(3) PROPOSED APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE SUPERVISOR

AND

(4) NOTICE OF THE 2025 FIRST EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 4 to 47 of this circular.

A notice convening the EGM of the Company to be held at China Merchants Securities Building, No. 111 Fuhua Yi Road, Futian Street, Futian District, Shenzhen, Guangdong Province, the PRC on Monday, April 7, 2025 at 10:00 a.m. is set out on pages N-1 to N-4 of this circular.

The proxy form for use at the EGM is enclosed with this circular. This proxy form is also available on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (www.cmschina.com) respectively. If you are not able to attend the EGM, please complete and return the proxy form in accordance with the instructions printed thereon as soon as practicable and in any event not less than 24 hours before the time stipulated for the holding of the EGM and deposit it together with the notarised power of attorney or other document of authorization with the Company's H Share registrar, Computershare Hong Kong Investor Services Limited (for holders of H Shares). Completion and return of the proxy form will not preclude you from attending and voting at the EGM in person should you so desire.

March 19, 2025

CONTENTS

Page

DEFINITIONS 1
LETTER FROM THE BOARD 4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE 48
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER 50
APPENDIX I - STATUTORY AND GENERAL INFORMATION I-1
NOTICE OF THE 2025 FIRST EXTRAORDINARY GENERAL MEETING N-1

DEFINITIONS

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

“2022 CMG Framework Agreement” the Securities and Financial Products, Transactions and Services Framework Agreement entered into between the Company and China Merchants Group on May 27, 2022

“2022 COSCO Framework Agreement” the Securities and Financial Products, Transactions and Services Framework Agreement entered into between the Company and COSCO Shipping on May 27, 2022

“2024 CMG Framework Agreement” the Securities and Financial Products, Transactions and Services Framework Agreement entered into between the Company and China Merchants Group on December 18, 2024

“2024 COSCO Framework Agreement” the Securities and Financial Products, Transactions and Services Framework Agreement entered into between the Company and COSCO Shipping on December 18, 2024

“A Share(s)” PRC domestic listed share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange (stock code: 600999) and traded in RMB

“Articles of Association” the articles of association of the Company, as amended from time to time

“associate(s)” has the meaning ascribed to this term under the Listing Rules

“Board” the board of Directors of the Company

“China Merchants Group” China Merchants Group Limited (招商局集團有限公司), a wholly state-owned enterprise established in the PRC in October 1986, and is a controlling shareholder of the Company

“Company” China Merchants Securities Co., Ltd., a joint stock company incorporated in the PRC under the laws of the PRC in August 1993 with limited liability, the H Shares and A Shares of which are listed on the Main Board of the Hong Kong Stock Exchange (stock code: 6099) and on the Shanghai Stock Exchange (stock code: 600999), respectively

“connected person(s)” has the meaning ascribed to this term under the Listing Rules

“controlling shareholder(s)” has the meaning ascribed to this term under the Listing Rules

DEFINITIONS

“COSCO Shipping”
China COSCO Shipping Corporation Limited (中國遠洋海運集團有限公司), a wholly state-owned enterprise established in the PRC in February 2016, and is a substantial shareholder of the Company

“CSRC”
China Securities Regulatory Commission

“Director(s)”
director(s) of the Company

“EGM”
the 2025 first extraordinary general meeting to be held by the Company at China Merchants Securities Building, No. 111 Fuhua Yi Road, Futian Street, Futian District, Shenzhen, Guangdong Province, the PRC on Monday, April 7, 2025 at 10:00 a.m. or its any adjournment thereof (as the case may be)

“Group”
the Company and its subsidiaries

“H Share(s)”
overseas-listed foreign share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange (stock code: 6099) and traded in Hong Kong dollars

“Hong Kong”
the Hong Kong Special Administrative Region of the PRC

“Hong Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited

“Independent Board Committee”
an independent committee of the Board comprising all the independent non-executive Directors

“Independent Financial Adviser”
Lego Corporate Finance Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), being the independent financial adviser appointed by the Company for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement, and the transactions contemplated thereunder (including the Proposed Annual Caps)

“Independent Shareholders”
in respect of the resolution regarding entering into of the 2024 CMG Framework Agreement, means Shareholders other than China Merchants Group and its associates; in respect of the resolution regarding entering into of the 2024 COSCO Framework Agreement, means Shareholders other than COSCO Shipping and its associates

“IPO(s)
the initial public offering

DEFINITIONS

"Latest Practicable Date"
March 12, 2025, being the latest practicable date for the purpose of ascertaining certain information contained in this circular

"Listing Rules"
the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange

"Model Code"
the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 of the Listing Rules

"PRC"
the People's Republic of China, and for the purposes of this circular only, excluding Hong Kong, the Macau Special Administrative Region of the People's Republic of China and Taiwan

"Proposed Annual Caps"
the Proposed CMG Annual Caps and the Proposed COSCO Annual Caps

"Proposed CMG Annual Caps"
the proposed annual caps for the transactions contemplated under the 2024 CMG Framework Agreement

"Proposed COSCO Annual Caps"
the proposed annual caps for the transactions contemplated under the 2024 COSCO Framework Agreement

"RMB"
Renminbi, the lawful currency of the PRC

"SFO"
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

"SHIBOR"
the Shanghai Interbank Offered Rate

"Share(s)"
the ordinary share(s) in the share capital of the Company with a nominal value of RMB1.00 each comprising A Shares and H Shares

"Shareholder(s)"
holder(s) of the Share(s)

"Supervisory Committee"
the supervisory committee of the Company

"Supervisor"
supervisors of the Company

"Wind Information"
Wind Information Co., Ltd., a service provider of financial data, information and software in Mainland China

"%"
per cent.

LETTER FROM THE BOARD

耐高证券股份有限公司

China Merchants Securities Co., Ltd.

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

(Stock Code: 6099)

Executive Directors:
Mr. HUO Da (Chairman of the Board)
Mr. WU Zongmin (President)

Non-executive Directors:
Mr. LIU Weiwu
Mr. LIU Zhenhua
Ms. LIU Hui
Mr. LI Delin
Mr. LI Xiaofei
Mr. HUANG Jian
Mr. ZHANG Mingwen
Ms. DING Lusha

Registered Office:
No.111, Fuhua Yi Road
Futian Street
Futian District
Shenzhen
the PRC

Principal Place of Business in Hong Kong:
48/F, One Exchange Square
8 Connaught Place
Central
Hong Kong

Independent Non-executive Directors:
Mr. YIP, Ying Chi Benjamin
Ms. ZHANG Ruijun
Ms. CHEN Xin
Mr. CAO Xiao
Mr. FENG Jinhua

March 19, 2025

To the Shareholders

Dear Sir or Madam,

INTRODUCTION

The purpose of this circular is to provide H Shareholders with reasonably necessary information, enabling you to make an informed decision on whether to vote for or against the proposed resolutions at the extraordinary general meeting.

LETTER FROM THE BOARD

At the extraordinary general meeting, ordinary resolutions will be proposed for consideration and approval regarding: (i) the continuing connected transactions under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement; (ii) the proposed appointment of non-executive Director; and (iii) the proposed appointment of shareholders' representative Supervisor.

I. CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF THE SECURITIES AND FINANCIAL PRODUCTS, TRANSACTIONS AND SERVICES FRAMEWORK AGREEMENTS

Reference is made to the announcement of the Company dated December 18, 2024, in relation to the entering into of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement.

The 2024 CMG Framework Agreement

Reference is made to the announcement of the Company dated December 18, 2024 in relation to, among others, the entering into of the 2024 CMG Framework Agreement between the Company and China Merchants Group.

As (i) the validity of the 2022 CMG Framework Agreement will expire on December 31, 2024; and (ii) the Group and China Merchants Group and/or its associates expect to continually conduct securities and financial transactions with each other and provide securities and financial products to each other based on normal commercial terms and market practices at prevailing market prices or rates, and the Group expects to continually provide financial services to China Merchants Group and/or its associates thereafter in the ordinary course of business based on normal commercial terms and market practices at prevailing market prices or rates, the Company entered into the 2024 CMG Framework Agreement with China Merchants Group on December 18, 2024 to renew the 2022 CMG Framework Agreement. Subject to the approval by the Independent Shareholders at the EGM, the term of the 2024 CMG Framework Agreement will commence from January 1, 2025 or the date of approval by the Independent Shareholders at the EGM (whichever is later), and will expire on December 31, 2027.

The principal terms of the 2024 CMG Framework Agreement are set out as follows:

Date

December 18, 2024

Parties

The Company; and
China Merchants Group
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LETTER FROM THE BOARD

Term

Subject to the approval by the Independent Shareholders at the EGM, the term of the 2024 CMG Framework Agreement will commence from January 1, 2025 or the date of approval by the Independent Shareholders at the EGM (whichever is later), and will expire on December 31, 2027.

Scope of the Transactions and Services

Securities and financial products and transactions

All the securities and financial products and transactions between the Group and China Merchants Group and/or its associates have been provided to each other and conducted in the usual course of business pursuant to normal commercial terms. Such securities and financial products and transactions are related to securities and financial products and transactions conducted in the inter-bank bond markets, exchange bond markets, exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange and the China Foreign Exchange Trade System) and other over-the-counter (“OTC”) markets. The securities and financial transactions to be conducted between the Group and China Merchants Group and/or its associates and the securities and financial products to be provided to each other include (but are not limited to) (i) fixed-income products or transactions, (ii) equity products or transactions, (iii) financing transactions, and (iv) other securities and financial products and transactions as permitted by regulatory authorities.

Pursuant to the 2024 CMG Framework Agreement, the securities and financial transactions to be conducted between the Group and China Merchants Group and/or its associates and the securities and financial products to be provided to each other include (but are not limited to):

(2) equity products or transactions – including stocks, equity, funds, trust, wealth management products, asset management schemes with equity features and equity derivative products or transactions;

(3) financing transactions – including interbank lendings, repurchase, transfer of income right, pledged loans, reciprocal holding of debt certificates including but not limited to short-term financing bills, beneficiary certificates, subordinated bonds, corporate bonds and asset-backed securities, etc.; and

(4) other related securities and financial products and derivative products – including swaps, futures, options, forward contracts, commodity contracts and foreign exchange.

LETTER FROM THE BOARD

2. Financial services

The Group provides various financial services to its clients, which include China Merchants Group and/or its associates, in its ordinary course of business. Due to the expertise and professional capabilities of the Group, the Group has been engaged by China Merchants Group and/or its associates to provide financial services including but not limited to (i) underwriting and sponsoring services, (ii) other investment banking services, and (iii) other financial services, from time to time.

Pursuant to the 2024 CMG Framework Agreement, the financial services to be provided by the Group to China Merchants Group and/or its associates include (but are not limited to):

(1) underwriting and sponsoring services – including the underwriting and sponsoring of equity and fixed-income products. The Group shall receive underwriting commissions and sponsoring fees for such services;

(2) other investment banking services – including financial advisory services for, among others, mergers and acquisitions and restructuring. The Group shall receive financial advisory fees and/or other fees for such services; and

(3) other financial services – including securities and futures trading agency services, research services and custody outsourcing services (such as asset custody and operation outsourcing services).

Pricing Basis

1. Securities and financial products and transactions

The securities and financial products and transactions under the 2024 CMG Framework Agreement are conducted through the PRC Inter-bank Bond Market, the PRC Foreign Exchange Trading Center, the PRC Exchange Bond Market, the exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange) and the Inter-institutional Private Placement Product Quotation and Service System and other OTC markets.

The transaction prices and related fees for each type of the securities and financial products and transactions shall be determined by the prevailing market price or the market price normally applicable to independent third parties for similar types of products and transactions at the time of the transaction. The pricing of such transactions is also subject to strict PRC regulatory supervision and requirements of the applicable PRC laws and regulations.

The fixed income products and transactions in the PRC are mainly conducted through inter-bank bond markets and stock exchanges (through centralised bidding trading systems, block trading platforms and fixed-income platforms). Except for centralised bidding transactions conducted at securities markets, pricing of transactions conducted at inter-bank bond markets, block trade platform and fixed income platform of securities markets is determined mainly with reference to the bond valuation published by China Central Depository & Clearing Co.,

LETTER FROM THE BOARD

Ltd. (the "CCDC") and China Securities Depository and Clearing Corporation Limited (the "CSDC"). The price quotations of the transactions conducted at inter-bank bond markets shall be within 2% of the valuation published by the CCDC. Otherwise, such transactions must be reported to the CCDC. Abnormal pricing, if without reasonable reason(s), may result in warning or penalty by the regulatory institution(s). For fixed income products and transactions conducted at securities markets, prices of centralised bidding transactions are prevailing market prices and non-centralised bidding transactions are determined mainly with reference to the bond valuation published by the CSDC. In terms of subscriptions by the Group of the fixed income financial instruments offered by China Merchants Group and/or its associates, or subscription by China Merchants Group and/or its associates of such financial instruments offered by the Group, the subscription price is determined by the issuers of such financial instruments with reference to the valuation published by the CCDC of financial instruments of similar credit quality with a similar term, and is the same subscription price as the subscriptions by other investors. Both the Group and China Merchants Group and/or its associates are required to satisfy and comply with the relevant PRC administrative rules, regulations and measures regulating issuance, including pricing determination, of their financial instruments. In addition, the fixed income products conducted outside the PRC are mainly conducted through OTC markets and pricing of the transactions is determined mainly with reference to the market price quotations obtained from market makers.

For certain equity products and transactions conducted through securities markets (including stock exchanges), most of these products and transactions are conducted through system(s) where the counterparties do not have knowledge of the identities with each other and the transaction prices are based on the quotation made by the counterparties in the market. The Company could access to the trading systems of the relevant exchanges to obtain the real-time quotations of the relevant securities and financial products. For equity products where reference market prices are not available from the market, the Group mainly makes reference to the market-based valuation methods and post-market pricing of products of similar nature.

For financing transactions, (i) in terms of interbank lendings and interbank market repurchases, they are variably quoted based on SHIBOR of the National Interbank Funding Center and the time-weighted rate of repurchase at the front office along with certain factors, such as assessment of prevailing capital adequacy, the credit quality of counterparties and the quality of collaterals, such as pledged bonds. The pricing of such transactions is also subject to strict PRC regulatory supervision and requirements of the applicable PRC laws and regulations; and (ii) in terms of subscriptions by the Group of the financial instruments offered by China Merchants Group and/or its associates, or subscriptions by China Merchants Group and/or its associates of such financial instruments offered by the Group, the subscription price is determined by the issuers of such financial instruments with reference to the valuation published by the CCDC of financial instruments of similar credit quality with a similar term, and is the same subscription price as the subscriptions by other investors. The Group and China Merchants Group and/or its associates are required to satisfy and comply with the relevant PRC administrative rules, regulations and measures regulating issuance, including pricing determination, of their financial instruments.

LETTER FROM THE BOARD

The pricing in respect of transactions in OTC derivatives is determined mainly (i) based on the derivative pricing models, such as Monte Carlo simulation, B-S model; or (ii) with reference to the expected changes in the price of relevant subject. The foregoing pricing policy is in line with market practice in the pricing of OTC derivatives transactions.

Transactions involving bullion products, futures and foreign exchange are mainly conducted on the Shanghai Gold Exchange, the China Financial Futures Exchange and the China Foreign Exchange Trade System. Call auction mechanism or quote request mechanism is mainly adopted in these exchanges and the pricing is primarily determined with reference to the turnover of a particular securities and financial product. The Company has access to the trading systems of the relevant exchanges to obtain the real-time quotations of the relevant securities and financial products.

Securities and financial products and transactions also include subscriptions of funds, trust, wealth management products and asset management schemes (the "Products"). The pricing of such transactions is determined based on the unit net value of the relevant Products on the date of transaction. The unit net value of such Products is calculated by dividing the net asset value of the Products by the total number of the fund units. The net asset value of the Products is the sum of the values of various marketable securities and notes, principals and interests of bank deposits, fund subscription monies receivables and other assets invested by such Products, less the liabilities of such Products, the calculation of which shall be in compliance with the China Accounting Standards for Business Enterprises. The net value of such Products are audited by a manager, reviewed by a custodian and confirmed by an external audit firm on a regular basis. The calculation of the unit net value of the Products is set forth in the relevant fund contract and prospectus, and equally applies to all investors of the Products.

To ensure that the above-mentioned transactions with China Merchants Group and/or its associates are on normal commercial terms and to safeguard the interests of the Shareholders as a whole, including the minority Shareholders, the Group has put in place internal approval and monitoring procedures relating to the connected transactions, the details of which are set out in the section headed "Internal Control Measures of Continuing Connected Transactions" below.

Financial services

The pricing basis for the financial services to be provided by the Group to China Merchants Group and/or its associates is as follows:

(1) underwriting and sponsoring services – underwriting commissions and sponsoring fees shall be determined by arm's length negotiation after taking into account numerous factors including the prevailing market conditions, size of the proposed issue and the usual market commission rates of recent issues of similar nature and size as well as the rates that the Group charges from independent third parties.

LETTER FROM THE BOARD

With respect to the equity-related underwriting and sponsor services, having regard to the prevailing market rates for transactions of similar type and size and taking into account the nature of the specific issue, the size of the transaction, the complexity of the transaction, frequency of transactions between the relevant client and the Company and the prevailing market conditions, pricing is determined through competitive bidding and commercial negotiations based on the foregoing factors or by reference to standard pricing charged by independent third parties in other similar projects.

With respect to the underwriting fees of fixed income products such as corporate bonds, asset securitization products and other interbank products, the Company reasonably determines the quotation after comprehensively evaluating the project execution cost and risk basis under the self-discipline requirements and guidance of the industry. The rate charged by the Company generally ranges from 0.01% to 1.5%, which is mainly determined based on the above-mentioned factors and negotiations with issuer and competitive bidding.

(2) other investment banking services – financial advisory fees and other services fees shall be determined after taking into account factors including the transaction nature and size, and the prevailing market conditions. As at the Latest Practicable Date, it was estimated that the range of financial advisory fees for each case is approximately from RMB one million to RMB several ten million. The range of financial advisory fees and other services fees shall be determined in accordance with the nature and complexity of such transactions and then prevailing market rates for financial advisory fees and the relevant services fees for similar transactions.

(3) other financial services – other financial services fees shall be determined after taking into account factors including market prices and industry practices, with reference to price level in respect of similar financial services provided by the Group to independent third parties.

The terms, including pricing terms, between China Merchants Group and/or its associates and the Group to be entered into in respect of the provision of financial services above to be provided by the Group shall be comparable to those offered to the Group's other institutional clients of a similar size and with similar transaction volume who are independent third parties, and shall be subject to the same internal approval and monitoring procedures and pricing policies applicable to independent third party clients. For more details, please refer to the section headed "Internal Control Measures of Continuing Connected Transactions" below.

Condition Precedent

The 2024 CMG Framework Agreement is subject to the approval from the Independent Shareholders at the EGM.

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LETTER FROM THE BOARD

Miscellaneous

The Company and China Merchants Group agreed that under Rule 14A.54 of the Listing Rules, if at any time during the term of the 2024 CMG Framework Agreement, the total transaction amount may or is expected to exceed the Proposed CMG Annual Caps and thus requires re-approval from the Independent Shareholders, the Group shall fulfil all applicable and necessary regulatory obligations under the Listing Rules as soon as practicable. Before the fulfilment of all relevant regulatory requirements, both parties agreed to use their best efforts to prevent the aggregated amount for the relevant transaction in such year from exceeding the relevant monetary cap. Otherwise, the implementation of relevant transactions under the 2024 CMG Framework Agreement shall be suspended.

Historical Figures

1. Securities and financial products and transactions

The approximate historical figures of securities and financial products and transactions between the Group and China Merchants Group and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024 were as follows:

	Historical figures
	For the year ended December 31, 2022	For the year ended December 31, 2023	For the six months ended June 30, 2024
Securities and financial products and transactions - Inflow(1)
Actual historical amount (RMB million)	2,751.14	1,059.19	0.0011
Existing annual caps (RMB million)	2,900.00	7,500.00	3,750.00
Utilisation rate	94.9%	14.1%(3)	0.00003%(3)
Securities and financial products and transactions - Outflow(2)
Actual historical amount (RMB million)	1,562.23	5,107.30	3,432.00
Existing annual caps (RMB million)	2,500.00	11,660.00	5,835.00
Utilisation rate	62.5%	43.8%	58.8%

Notes:

(1) "Inflow" refers to the Group's total cash inflow arising from the sale of fixed-income products, equity products and derivative products to, transactions with, and/or borrowing/repurchase from financing transactions with, China Merchants Group and/or its associates.

(2) "Outflow" refers to the Group's total cash outflow arising from the purchase of fixed-income products, equity products and derivative products from, transactions with, and/or lending/resale from financing transactions with, China Merchants Group and/or its associates.

LETTER FROM THE BOARD

(3) In 2023 and for the six months ended June 30, 2024, the relatively low utilisation rate of the existing annual caps of the inflow amounts of securities and financial products and transactions was mainly due to:

(i) In estimating the existing annual caps, the Company considered that China Merchants Group and/or its associates have set up securities trading accounts at the Company, which may be used for the subscription of the shares issued by listed companies or potential listed companies, usually in a relatively high amount but relatively low frequency, and the purchase and redemption of the products managed by CMS Asset Management, a wholly-owned subsidiary of the Group, may be conducted in a relatively short period before subscription, the maximum inflow and outflow for the purchase and redemption of the products managed by CMS Asset Management from 2019 to 2021 were RMB6.532 billion and RMB6.533 billion respectively, and the maximum annual inflow and outflow from 2022 to 2024 were expected to be approximately half of the maximum value from 2019 to 2021, therefore it is anticipated that an inflow generated within the year will not exceed RMB3.0 billion. The sluggish performance of the Shanghai and Shenzhen stock markets in 2023 and for the six months ended June 30, 2024 and the low willingness of China Merchants Group and its associates to participate in stock market transactions resulted in a decrease in the inflow amounts generated by the purchase of products managed by CMS Asset Management;

(ii) In estimating the existing annual caps, the Company has also considered that following an outflow generated by the subscription of the financing instruments issued by China Merchants Group and/or its associates by the Group and/or the asset management products managed by the Group in the primary market, the redemption of the relevant financing instruments at maturity will generate an inflow, therefore it is anticipated that an inflow generated within the year will not exceed RMB3.0 billion. However, in accordance with the Group's requirements for risk neutrality in such related party transactions, after the Group and/or the asset management products managed by the Group subscribed the financing instruments issued by China Merchants Group and/or its associates in the primary market, the relevant financing instruments were required to be sold to independent third parties at market prices within a short period of time and were not able to be held on a long-term basis, resulting in an outflow of RMB4.096 billion in 2023 and an outflow of RMB3.432 billion in the first half of 2024, respectively, but without generating a corresponding scale of inflows; and

(iii) Due to limited rolling liquidity financing in the real estate industry in 2023 and for the six months ended June 30, 2024, the scale of purchase and resale of underlying assets of China Merchants Shekou Industrial Zone Holdings Co., Ltd., a subsidiary of China Merchants Group, which is mainly engaged in property development, operation and management businesses, by ABS of which the Group acted as the manager, was limited, resulting in an inflow amount of nil.

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LETTER FROM THE BOARD

2. Financial services

The approximate historical figures of revenue generated by the Group from providing financial services to China Merchants Group and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024 were as follows:

	Historical figures
	For the year ended December 31, 2022	For the year ended December 31, 2023	For the six months ended June 30, 2024
Financial services - Revenue generated by the Group
Actual historical amount (RMB million)	63.71	63.39	5.10
Existing annual caps (RMB million)	70.00	92.00	47.50
Utilisation rate	91.0%	68.9%	10.7%

From January 1, 2025 to the Latest Practicable Date, the Group did not conduct any securities and financial products transactions with/to China Merchants Group and/or its associates, and generated revenue of RMB0.098 million from the provision of financial services.

Proposed CMG Annual Caps

The Proposed CMG Annual Caps for the transaction amounts under the 2024 CMG Framework Agreement are as follows:

1. Securities and financial products and transactions

The Company considers that it is impracticable and extremely difficult to set a separate cap for each category of the securities and financial products and transactions for the following main reasons: (i) the securities and financial products and transactions are frequently conducted at the prevailing market prices in the ordinary and usual course of business of the Group. Such transactions are market-driven and are entered into depending on various factors including the bidding price and timing; (ii) most of these transactions are conducted within a very short timeframe and are very sensitive to market prices; (iii) as the variety and characteristics of products are experiencing rapid innovations in the ever-changing securities and financial market, it is difficult to precisely estimate when new products will be launched, however, once new securities and financial products and transactions are launched, it is expected that the total inflow and the total outflow of securities and financial products and transactions between China Merchants Group and/or its associates and the Group will increase; (iv) all such transactions will continue to be entered into at the prevailing market prices in the ordinary and usual course of business of the Group; and (v) if an annual cap is set for each category of these transactions, it would cause significant delay to such transactions and harm to the Group's existing operations and potential growth to the detriment of the Company and the Shareholders as a whole and restrict the Company's overall competitiveness in a highly competitive

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LETTER FROM THE BOARD

securities industry. In light of the above, the Company considers that it is more practicable to set a cap for the total inflow and the total outflow of all the securities and financial products and transactions under the 2024 CMG Framework Agreement, instead of a separate cap for each category of those products and transactions.

The Proposed CMG Annual Caps of expected total inflow$^{(1)}$ amount and total outflow$^{(2)}$ amount of the securities and financial products and transactions between the Group and China Merchants Group and/or its associates under the 2024 CMG Framework Agreement for each of the three years ending December 31, 2027 are as follows:

Proposed CMG Annual Caps (RMB million)
	For the year ending December 31, 2025	For the year ending December 31, 2026	For the year ending December 31, 2027
Securities and financial products and transactions
Inflow$^{(1)}$	12,500	12,500	12,500
Outflow$^{(2)}$	22,050	22,050	22,050

Notes:

(1) “Inflow” refers to the Group’s total cash inflow arising from the sale of fixed income products and equity products to, transactions of derivative products with, and/or borrowing/repurchase from financing transactions with, China Merchants Group and/or its associates.

(2) “Outflow” refers to the Group’s total cash outflow arising from the purchase of fixed income products and equity products from, transactions of derivative products with, and/or lending/resale from financing transactions with, China Merchants Group and/or its associates.

In estimating the Proposed CMG Annual Caps of the total inflow amount and the total outflow amount of the securities and financial products and transactions between the Group and China Merchants Group and/or its associates for the three years ending December 31, 2027, the Group has considered, among other things, the following key factors:

The total outflow amounts of those securities and financial products and transactions between the Group and China Merchants Group and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024 were approximately RMB1.56 billion, RMB5.11 billion and RMB3.43 billion, respectively, and the total inflow amounts were approximately RMB2.75 billion, RMB1.06 billion and RMB1,100, respectively;
In accordance with the development initiative of “Industry-finance Integration” (產繳結合) of the Group and China Merchants Group, it is estimated that the Group will generate an outflow of no more than RMB11.0 billion from securities underwriting
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business co-investment, underwriting by way of standby commitment of fixed-income securities (including ABS initiated) issued by China Merchants Group and/or its associates and acting as manager of ABS initiated by China Merchants Group and/or its associates, and an inflow of no more than RMB4.0 billion from maturity of ABS under management for each year from 2025 to 2027. The above estimation is made after taking into consideration the following facts:

i. The Group may generate an outflow from the subscription of fixed income securities issued by China Merchants Group and/or its associates as a result of co-investment and underwriting by way of standby commitment. The Group may generate an outflow from the purchase of the underlying assets of China Merchants Group and/or its associates as original equity holders by CMS Asset Management, which is a wholly-owned subsidiary of the Company and may act as the manager of ABS; when ABS expires, the resale of the underlying assets by CMS Asset Management to China Merchants Group and/or its associates may incur an inflow;

ii. In 2022, 2023 and in the first half of 2024, the outflow arising from co-investment, underwriting by way of standby commitment and management of fixed income securities issued by China Merchants Group and/or its associates was approximately RMB1.56 billion, RMB4.10 billion and RMB3.43 billion, respectively;

iii. China Merchants Group was transformed into a state-owned capital investment enterprise in June 2022. In accordance with the requirements of optimizing distribution and structure of state-owned capital, China Merchants Group has vigorously carried out investment and financing, industry nurturing and capital operation in recent years. According to Wind Information statistics, the amount of fixed income securities issued by China Merchants Group and its associates in the domestic market of China in 2022, 2023 and from January to August 2024 exceeded RMB150.0 billion, RMB120.0 billion and RMB110.0 billion, respectively, and it is expected that the amount of fixed income securities issued by China Merchants Group and its associates was approximately RMB150.0 billion each year from 2025 to 2027. As a subsidiary of China Merchants Group, the Group will provide more underwriting and management services for fixed income securities issued by China Merchants Group and its associates under the planning of strengthening internal synergies. Considering the rapid development of the Group's related businesses and the expected scale of fixed income securities to be issued by China Merchants Group and its associates in the next three years, it is expected that the outflow amount of fixed income securities issued by China Merchants Group and/or its associates to be subscribed for by the Group as a result of co-investment and underwriting by way of standby commitment will be approximately RMB7.0 billion for each of the three years ending December 31, 2027; and

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iv. In 2022, 2023 and from January to August 2024, the total amount of ABS projects initiated by associates of China Merchants Group as original equity holders amounted to approximately RMB6.2 billion, RMB4.1 billion and RMB2.0 billion, respectively. To ensure the normal operation of relevant businesses and avoid undue disruption and damage to the Group's ordinary course of business, and with reference to the maximum amount of a single ABS project of approximately RMB4.1 billion for which China Merchants Group and/or its associates have been the original equity holders since the IPO of H shares of the Company in 2016, it is estimated that for each of the three years ending December 31, 2027, an outflow arising from the purchase of the underlying assets of China Merchants Group and/or its associates as original equity holders by CMS Asset Management as the manager of ABS will be approximately RMB4.0 billion. Considering that ABS has a flexible term ranging from a few days to several decades, in order to ensure the normal operation of business, it is estimated that an inflow from the resale of underlying assets due to the maturity of ABS will be approximately RMB4.0 billion for each of the three years ending December 31, 2027;

it is estimated that the outflow from agency primary bond auction business, forward contracts/forward trading business and other fixed income intermediary business to be conducted between the Group and China Merchants Group and/or its associates will be approximately RMB3.0 billion for each of the three years ending December 31, 2027, of which the outflow from agency primary bond auction business will be approximately RMB2.5 billion, and the total outflow from forward contracts/forward trading business and other fixed income intermediary business will be approximately RMB500 million, while the total inflow from the relevant transactions will be approximately RMB500 million. The above estimation is made based on the following facts:

i. The Group has been operating its fixed income intermediary business on a trial basis since 2022 and has continued to expand the relevant business in recent years. The fixed income intermediary business includes agency primary bond auction business, forward contracts/forward trading business and other fixed income intermediary business. In respect of the agency primary bond auction business, the Group may subscribe for the financial instruments issued by China Merchants Group and/or its associates at primary markets as commissioned by the clients and then sell back to the clients, thus resulting in an outflow; in respect of forward contracts/forward trading business, the Group may conduct forward bond transaction at secondary markets with China Merchants Group and/or its associates, which may be the purchaser or vendor of the bonds, thus resulting in an inflow or outflow; in respect of other fixed income intermediary business, the Group may conduct bond transaction at secondary markets with China Merchants Group and/or its associates, which may be the purchaser or vendor of the bonds, thus resulting in an inflow or outflow;

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ii. The scale of the Group's agency primary bond auction business involving China Merchants Group and its associates is closely related to the fluctuation of interest rates in the bond market and the factors of the bonds subscribed. From 2022 to 2024, it was originally estimated that the scale of fixed income products issued by China Merchants Group and/or its associates in the domestic market of China would be approximately RMB150 billion, of which approximately 2% would generate fixed income intermediary business opportunities. It is estimated that the annual average scale of the agency primary bond auction business would be approximately RMB2.5 billion, and the total annual average scale of forward contracts/forward trading business and other fixed income intermediary business between them would be approximately RMB500 million, generating an inflow of RMB500 million and an outflow of RMB3.0 billion each year. In recent years, China has entered a period of industrial restructuring, with relatively sluggish economic growth, moderately easy monetary policy, and a notable decline in bond market interest rates. Due to the high market recognition of the qualification of China Merchants Group and its associates, the coupon rates of their issued bonds are at a relatively low level, which, along with the continued extension of the issuance duration, has led to a reduction in customer demand and consequently kept the connected transactions involved in the fixed-income intermediary business at a low level. The interest rates of the bond market are expected to remain stable with a slight decline in the next three years, which will be conducive to the expansion of the scale of bond issuance of China Merchants Group and its associates, thereby expanding the space for the Group to carry out agency primary bond auction business with China Merchants Group and its associates, and increasing the development of opportunities in negotiated trading and other fixed income intermediary business; and

iii. According to Wind Information statistics, the scale of fixed income products issued by China Merchants Group and/or its associates in the domestic market of China in 2022, 2023 and from January to August 2024 exceeded RMB150.0 billion, RMB120.0 billion and RMB110.0 billion respectively. Therefore, it is estimated that the scale of fixed income products issued by China Merchants Group and/or its associates for each year from 2025 to 2027 will be approximately RMB150.0 billion. Based upon the issuance plans of China Merchants Group and/or its associates and integrated needs of customers, approximately 2% of the issuance scale of China Merchants Group and/or its associates is expected to generate fixed income intermediary business opportunities. The Group estimates that the annual amount of fixed income products issued by China Merchants Group and/or its associates to be applied and paid by the Group at primary markets as commissioned by the clients will be no more than RMB2.5 billion, thus resulting in an outflow of RMB2.5 billion. Meanwhile, the Group will expand its efforts in conducting forward contracts/forward trading business and other fixed income intermediary business with financial enterprises controlled by China Merchants Group, such as China Merchants Life Insurance Company Limited, in future three years. The size of each forward contracts/forward trading business and other fixed income

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intermediary business normally ranges from tens of millions of RMB to RMB100 million. It is expected that the total number of forward contracts/forward trading business and other fixed income intermediary business to be conducted between the Group and China Merchants Group and/or its associates will be 5-25 each year, thus resulting in an inflow and outflow of RMB500 million for each year from 2025 to 2027.

In view of the highly fluctuating capital demand of the securities industry with market changes, in order to meet the capital demand and ensure sufficient liquidity, the Group has established diversified financing channels to maintain adequate and stable financing channels. Among them, beneficiary certificates with flexible maturity and convenient issuance process, are one of the main debt financing instruments of the Group. For the two years ended December 31, 2023, the financing scale of beneficiary certificates issued by the Group each year was approximately RMB20.0 billion to RMB40.0 billion, and it is estimated that the Group will issue beneficiary certificates of approximately RMB50.0 billion to RMB60.0 billion for each year from 2025 to 2027. The Group will continue to improve the institutional customer service marketing system. Beneficiary certificates, as one of the important tools for wealth management of the Group's institutional clients, are featured by capital and interest preservation, flexible term and diversified structure, which can meet the investment requirements of China Merchants Group and/or its associates for high-quality assets, especially in a low interest rate environment. Considering that (i) the amount of beneficiary certificates issued by the Group purchased by China Merchants Group and/or its associates in 2023 was RMB1.0 billion; (ii) China Merchants Group and/or its associates may increase the subscription of beneficiary certificates issued by the Group in the next three years, mainly because the beneficiary certificates meet the investment requirements of China Merchants Group/or its associates for financial instruments in the current market environment, therefore, it is estimated that the annual inflow and outflow from the purchase and redemption of the Group's beneficiary certificates by China Merchants Group and/or its associates will be approximately RMB3.0 billion in each of the next three years;
Based on liquidity management, China Merchants Group and/or its associates may subscribe the dealer-quoted repurchase products issued by the Group on a rolling basis over the next three years. Dealer-quoted repurchase transaction means any transaction in which a securities company takes its own assets meeting the requirements as collateral, takes the amount corresponding to the number of standard bonds converted from collateral as the financing limit, raises funds from qualified customers through quotation, and agrees to return such funds to customers and pay corresponding income when repurchase expires. As a cash management tool, dealer-quoted repurchase products are characterized by agreed income, repurchase in advance and automatic renewal. The Group issues dealer-quoted repurchase products with flexible maturities ranging from 1 day to 365 days. In 2023, the turnover frequency of institutional clients' subscription of dealer-quoted repurchase products issued by the Group was approximately 4-8 times/year, with each subscription size of approximately RMB200 million to RMB500 million. Based on the previous subscription size and turnover frequency of institutional clients, the Group estimates that the annual inflow from the
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subscription of dealer-quoted repurchase products by China Merchants Group and/or its associates from 2025 to 2027 will be approximately RMB2.0 billion, and the outflow resulting from the redemption of related dealer-quoted repurchase products will be approximately RMB2.05 billion (of which the outflow arising from interest payments is expected to be approximately RMB50 million);

it is estimated that for each of the three years ending December 31, 2027, the total inflow and outflow from the purchase and redemption of the products (including monetary products, fixed income products, equity product and customized products) managed by CMS Asset Management, a wholly-owned subsidiary of the Company, by China Merchants Group and/or its associates will be approximately RMB3.0 billion and RMB3.0 billion, respectively, which was estimated based on the following facts:

i. For the two years ended December 31, 2023 and the six months ended June 30, 2024, the inflow from the purchase of the products managed by CMS Asset Management, a wholly-owned subsidiary of the Company, by China Merchants Group and/or its associates was approximately RMB2.0 million, RMB49.0 million and RMB1,100, respectively, and the outflow from the redemption of such products was approximately RMB0.09 million, RMB10.0 million and RMB3,000, respectively;

ii. China Merchants Group and/or its associates have opened securities trading accounts with the Company and may participate in the subscription of shares issued by listed companies or proposed listed companies. Prior to the subscription, China Merchants Group and/or its associates may purchase and redeem monetary products managed by CMS Asset Management within a relatively short period of time, usually at a higher amount but with an unpredictable frequency. As the scale of transactions is typically closely related to market activity and supportive policies in the capital market, the transaction scale is usually larger when the market is active, whereas it generally decreases when the market is inactive. According to the Group's "Medium and Long-term Development Strategy and 2019-2023 Development Plan," which focuses on developing active asset management, the Group vigorously promoted the purchase of products managed by CMS Asset Management by China Merchants Group and/or its associates. For example, during the active phase of the A share market in 2020, the inflow and outflow generated by the purchase and redemption of products managed by CMS Asset Management by China Merchants Group and/or its associates reached approximately RMB6.532 billion and RMB6.533 billion respectively; In the month of July 2024, both inflow and outflow from the purchase and redemption of products managed by CMS Asset Management by China Merchants Group and/or its associates exceeded RMB300 million. Taking into account that the subscription of the relevant products is subject to highly volatile market activity, the single transaction amount of asset management products subscribed by China Merchants Group and/or its associates is usually high, in order to avoid undue disruption and damage to the Group's ordinary course of business and to retain the business flexibility, the Group

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estimates the inflows and outflows generated by the relevant transactions in the next three years with reference to approximately 50% of the maximum annual transaction amount in the past five years;

iii. In the first half of 2024, CMS Asset Management was qualified as a public fund manager to carry out asset management business in a broader and more standardized field. Seven existing collective products such as Tiantianli (天添利) will be changed into public funds in 2024, and the first batch of five public offering products will be reported, of which two equity products have been approved by the regulatory authorities, and the follow-up issuance is intended to be initiated at an appropriate time. Based on short-term cash management and medium-to long-term sound investment needs, it is expected that the annual inflow and outflow from the subscription and redemption of the above products in the next three years will be approximately RMB500 million; and

iv. CMS Asset Management has been vigorously developing active asset management business in recent years, among which the scale of institutional customized asset management products that meet the needs of institutional and corporate customers has increased from RMB112.8 billion at the end of 2023 to RMB120.2 billion at the end of the first half of 2024. With the impetus given by the implementation of cooperation strategy between the Group and China Merchants Group and/or its associates, China Merchants Group and/or its associates may subscribe for the institutional customized asset management schemes managed by CMS Asset Management in the future. Given that the Group did not conduct such transactions with China Merchants Group and/or its associates in the past years, the Company will estimate the inflow and outflow from such transactions based on (a) historical size of the actively-managed institutional customized asset management schemes managed by CMS Asset Management, i.e. approximately RMB120.0 billion per year in the past three years; and (b) the proportion of the size of the institutional customized asset management schemes managed by CMS Asset Management expected to be purchased or redeemed by China Merchants Group and/or its associates in each of the next three years, i.e. approximately 0.4% to 0.5%. As such, it is estimated that the annual inflow and outflow from the purchase and redemption of institutional customized asset management schemes managed by CMS Asset Management by China Merchants Group and/or its associates from 2025 to 2027 will be approximately RMB500 million;

The Group provides integrated financial products to customers and conducts integrated financial transactions with customers. The Group has now obtained over 100 business qualifications and has been authorized to engage in integrated financial products and integrated financial transactions business activities, which have played an active role in the past three years. In the next three years, the Group will actively implement the strategy of "three investments (investment banking, investment and investment research) linkage" in collaboration with China Merchants Group to assist China Merchants Group transform and upgrade its traditional industries and layout strategic emerging industries,
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which is expected to increase the scale of financing instruments issued by associates of the China Merchants Group purchased by the Group and the scale of financing instruments issued by the Group purchased by associates of the China Merchants Group. In addition, the Group will also make every effort to build a comprehensive corporate financial service brand of "China Merchants Securities Helps Start the Sailing (招證啟航)", integrating various business lines of the Group around the needs of China Merchants Group, forming innovative comprehensive service products such as brokerage service system of "transaction matching, trading system, futures brokerage, margin financing and securities lending" and investment service system of "fund investment advisory, Zhiyuan private banking (致遠私行), equity investment, derivative investment and wealth management". It is expected to expand the scale of securities and financial products and transactions between the Group and China Merchants Group and/or its associates. Meanwhile, China Merchants Group and/or its associates are mainly engaged in transportation logistics, comprehensive finance, comprehensive development and operation of cities and parks, and strategic emerging industries, anchoring the goal of building a world-class enterprise, creating "two curves (兩條曲線)", promoting "the third venture (第三次創業)", and promoting the transformation and upgrading of traditional industries and the cultivation and development of strategic emerging industries. The business growth and diversification of the China Merchants Group and/or its associates will create more opportunities for the Group to engage in securities and financial transactions and provide securities and financial products to each other with China Merchants Group and/or its associates. As a result, the total inflow and outflow are expected to increase substantially in the next three years; and

given that (i) the inherent nature of the securities and financial products and transactions described above, including their market-sensitivity and timeliness, (ii) the Group's limited control over the counterparties in those transactions, and (iii) the volatility and unpredictability of the financial market in general, an adequate buffer (representing approximately $10\% - 15\%$ of the Proposed CMG Annual Caps) should be provided to prevent undue restriction on the future business operations of the Group.
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2. Financial services

The Proposed Annual Caps of the revenue to be generated by the Group from providing financial services to China Merchants Group and/or its associates under the 2024 CMG Framework Agreement for each of the three years ending December 31, 2027 are as follows:

Proposed CMG Annual Caps (RMB million)	For the year ending December 31, 2025	For the year ending December 31, 2026	For the year ending December 31, 2027
Financial services
Revenue to be generated by the Group	141.00	111.00	111.00

In estimating the Proposed CMG Annual Caps of the revenue to be generated by the Group from the provision of financial services to China Merchants Group and/or its associates for the three years ending December 31, 2027, the Group has considered, among other things, the following key factors:

historical amounts of the revenue generated by the Group from providing financial services to China Merchants Group and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024, including the different service rates and fees the Group charged for the provision of different types of financial services, and considering, in particular, that the Group's provision of financial services to China Merchants Group and/or its associates is mainly market-driven. Therefore, the Proposed CMG Annual Caps shall include an adequate buffer (representing approximately 10%-15% of the Proposed CMG Annual Caps) to cover any market volatility and changes. Otherwise, an annual cap that is too restrictive might cause undue disruption to the operations of the Group and hamper its ability to respond quickly to changes in the highly volatile financial market;
as part of its normal course of business, the Group will continue to provide underwriting and sponsoring services for the equity and fixed income financial instruments to be issued by China Merchants Group and/or its associates, which is expected to generate a revenue of approximately RMB59 million, RMB59 million and RMB59 million in 2025, 2026 and 2027, respectively. The above estimates are based on the following facts:

i. For the two years ended December 31, 2023 and the six months ended June 30, 2024, income from underwriting and sponsoring services provided by the Group for the equity and fixed income financial instruments issued by China Merchants Group and/or its associates amounted to approximately RMB38.8 million, RMB31.6 million and RMB1.9 million, respectively; and

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ii. As a large corporate group, China Merchants Group controls and holds shares of various listed companies in Hong Kong and Mainland China. Meanwhile, it has cultivated and is cultivating various enterprises with influence in new energy, semiconductor, bio-pharmaceutical, technology and other industries, which are expected to enter the domestic capital market in the future. Under the general background of the central government promoting the high-quality development of capital market, the reform of the registration-based system in the domestic securities market and Hong Kong supporting the listing of leading enterprises in mainland industries in Hong Kong, the IPOs, re-financing and other financing demands of China Merchants Group and the relevant listed companies and industrial enterprises controlled by the China Merchants Group will increase significantly. As a comprehensive securities company controlled by the China Merchants Group, the Group enjoys strong competitiveness in the above business sectors. Therefore, it is expected that revenue from the provision of underwriting and sponsoring services to China Merchants Group and/or its associates will record significant growth. Due to the difficulty in estimating the progress of the projects and the subsequent market regulatory environment, it would be impracticable to predict the actual years for the realization of such revenue. Based on the expected demand of China Merchants Group and its associates for capital operation services, the expected progress of the ongoing projects, the potential transactions for which the Group may provide such services and the charges on large-scale projects in the market, it is expected that revenue from the provision of underwriting and sponsoring services (including but not limited to IPOs, re-financing, mergers and acquisitions and restructuring) by the Group to China Merchants Group and/or its associates will be approximately RMB59 million, RMB59 million and RMB59 million in 2025, 2026 and 2027, respectively;

In addition to underwriting and sponsoring services, the Group will continue to provide other financial services (mainly financial advisory services) to the China Merchants Group and/or its associates in its ordinary course of business, and the service fees are expected to be approximately RMB82 million, RMB52 million and RMB52 million in 2025, 2026 and 2027, respectively. The above estimates are based on the following facts:

i. For the two years ended December 31, 2023 and the six months ended June 30, 2024, service fees charged by the Group for other financial services (mainly financial advisory services) provided to China Merchants Group and/or its associates amounted to approximately RMB24.9 million, RMB31.7 million and RMB3.2 million, respectively; and

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adequate than that in 2026 and 2027, the Group expects that revenue from the provision of financial advisory and other financial services by the Group to China Merchants Group and/or its associates will be approximately RMB82 million, RMB52 million and RMB52 million in 2025, 2026 and 2027, respectively.

Reasons for and Benefits of Entering into the 2024 CMG Framework Agreement

The securities and financial products and transactions and financial services under the 2024 CMG Framework Agreement will be conducted in the ordinary course of business of the Group. Such transactions will continue to be entered into on arm's length basis and based on terms which are fair and reasonable so far as the Group is concerned. In light of the past and current cooperation relationships between the Group and China Merchants Group and its associates in relation to "Industry-finance Integration" (產融結合) and "Financial Sector Integration" (融融結合), and that such transactions have contributed and will continue to contribute to the overall business operation and growth of the Group, the Board (including the Independent Board Committee having taken into account of the advice of the Independent Financial Adviser) considers that entering into the 2024 CMG Framework Agreement with China Merchants Group is beneficial to the Group.

Such transactions will create cost synergy by integrating the strengths of the Group and China Merchants Group and/or its associates, which will in turn improve the profitability of the Group and enhance the Group's leading position in the securities industry. The Board (including the Independent Board Committee having taken into account the advice of the Independent Financial Adviser) is of the view that the 2024 CMG Framework Agreement was: (i) entered into in the ordinary and usual course of business of the Group; (ii) on normal commercial terms (in accordance with the terms determined after arm's length negotiation or those no less favorable than the terms offered by the Group to independent third parties); and (iii) its terms and the Proposed CMG Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

2. The 2024 COSCO Framework Agreement

Reference is made to the announcement of the Company dated December 18, 2024 in relation to, among others, the entering into of the 2024 COSCO Framework Agreement between the Company and COSCO Shipping.

As (i) the validity of the 2022 COSCO Framework Agreement will expire on December 31, 2024; and (ii) the Group and COSCO Shipping and/or its associates expect to continually conduct securities and financial transactions with each other and provide securities and financial products to each other based on normal commercial terms and market practices at prevailing market prices or rates, and the Group expects to continually provide financial services to COSCO Shipping and/or its associates thereafter in the ordinary course of business based on normal commercial terms and market practices at prevailing market prices or rates, the Company entered into the 2024 COSCO Framework Agreement with COSCO Shipping on December 18, 2024 to renew the 2022 COSCO Framework Agreement. Subject to the approval by the Independent Shareholders at the EGM, the term of the 2024 COSCO Framework Agreement will commence from January 1, 2025 or the date of approval by the Independent Shareholders at the EGM (whichever is later), and will expire on December 31, 2027.

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The principal terms of the 2024 COSCO Framework Agreement are set out as follows:

Date

December 18, 2024

Parties

The Company; and
COSCO Shipping

Term

Subject to the approval by the Independent Shareholders at the EGM, the term of the 2024 COSCO Framework Agreement will commence from January 1, 2025 or the date of approval by the Independent Shareholders at the EGM (whichever is later), and will expire on December 31, 2027.

Scope of the Transactions and Services

Securities and financial products and transactions

All the securities and financial products and transactions between the Group and COSCO Shipping and/or its associates have been provided to each other and conducted in the usual course of business pursuant to normal commercial terms. Such securities and financial products and transactions are related to securities and financial products and transactions conducted in the inter-bank bond markets, exchange bond markets, exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange and the China Foreign Exchange Trade System) and other OTC markets. The securities and financial transactions to be conducted between the Group and COSCO Shipping and/or its associates and the securities and financial products to be provided to each other include (but are not limited to) (i) fixed-income products or transactions, (ii) equity products or transactions, (iii) financing transactions, and (iv) other securities and financial products and transactions as permitted by regulatory authorities.

Pursuant to the 2024 COSCO Framework Agreement, the securities and financial transactions to be conducted between the Group and COSCO Shipping and/or its associates and the securities and financial products to be provided to each other include (but are not limited to):

(1) fixed-income products or transactions – including bonds, funds, trust, wealth management products, asset management schemes, asset securitization products, convertible bonds, structured products, interest rates and credit risk derivative products with fixed-income features and other fixed-income products or transactions;
(2) equity products or transactions – including stocks, equity, funds, trust, wealth management products, asset management schemes with equity features and equity derivative products or transactions;

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(4) other related securities and financial products and derivative products – including swaps, futures, options, forward contracts, commodity contracts and foreign exchange.

2. Financial services

The Group provides various financial services to its clients, which include COSCO Shipping and/or its associates, in its ordinary course of business. Due to the expertise and professional capabilities of the Group, the Group has been engaged by COSCO Shipping and/or its associates to provide financial services including but not limited to (i) underwriting and sponsoring services, (ii) other investment banking services, and (iii) other financial services from time to time.

Pursuant to the 2024 COSCO Framework Agreement, the financial services to be provided by the Group to COSCO Shipping and/or its associates include (but are not limited to):

Pricing Basis

1. Securities and financial products and transactions

The securities and financial products and transactions under the 2024 COSCO Framework Agreement are conducted through OTC markets such as the PRC Inter-bank Bond Market, the PRC Foreign Exchange Trading Center, the PRC Exchange Bond Market, the exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange, etc) and the Inter-agency Private Placement Product Quotation and Service system.

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The transaction prices and related fees for each type of the securities and financial products and transactions shall be determined by the prevailing market price or the market price normally applicable to independent third parties for similar products and transactions at the time of the transaction. The pricing of such transactions is also subject to strict PRC regulatory supervision and requirements of the applicable PRC laws and regulations.

The fixed income products and transactions in China are mainly conducted through inter-bank bond markets and stock exchanges (through centralised bidding trading systems, block trading platforms and fixed income platforms). Except for centralised bidding transactions conducted at securities markets, pricing of transactions conducted at inter-bank bond markets, block trade platform and fixed income platform of securities markets is determined mainly with reference to the bond valuation published by China Central Depository & Clearing Co., Ltd. (the "CCDC") and China Securities Depository and Clearing Corporation Limited (the "CSDC"). The price quotations of the transactions conducted at inter-bank bond markets shall be within 2% of the valuation published by the CCDC. Otherwise, such transactions must be reported to CCDC. Abnormal pricing, if without reasonable reason(s), may result in warning or penalty by the regulatory institution(s). For fixed income products and transactions conducted at securities markets, prices of centralised bidding transactions are prevailing market prices and non-centralised bidding transactions are determined mainly with reference to the bond valuation published by the CSDC. In terms of subscriptions by the Group of the fixed income financial instruments offered by COSCO Shipping and/or its associates, or subscription by COSCO Shipping and/or its associates of such financial instruments offered by the Group, the subscription price is determined by the issuers of such financial instruments with reference to the valuation published by CCDC of financial instruments of similar credit quality with a similar term, and is the same subscription price as the subscriptions by other investors. Both the Group and COSCO Shipping and/or its associates are required to satisfy and comply with the relevant PRC administrative rules, regulations and measures regulating issuance, including pricing determination, of their financial instruments. In addition, fixed income products conducted outside the PRC are mainly conducted through OTC markets and pricing of the transactions is determined mainly with reference to the market price quotations obtained from market makers.

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PRC regulatory supervision and requirements of the applicable PRC laws and regulations; and (ii) in terms of subscriptions by the Group of the financial instruments offered by COSCO Shipping and/or its associates, or subscriptions by COSCO Shipping and/or its associates of such financial instruments offered by the Group, the subscription price is determined by the issuers of such financial instruments with reference to the valuation published by CCDC of financial instruments of similar credit quality with a similar term, and is the same subscription price as the subscriptions by other investors. The Group and COSCO Shipping and/or its associates are required to satisfy and comply with the relevant PRC administrative rules, regulations and measures regulating issuance, including pricing determination, of their financial instruments.

Transactions involving bullion products, futures and foreign exchange are mainly conducted on the Shanghai Gold Exchange, the China Financial Futures Exchange and the China Foreign Exchange Trade System. Call auction mechanism is mainly adopted in these exchanges and the pricing is primarily determined with reference to the turnover of a particular securities and financial product. The Company has access to the trading systems of the relevant exchanges to obtain the real-time quotations of the relevant securities and financial products.

To ensure that the above transactions with COSCO Shipping and/or its associates are on normal commercial terms and to safeguard the interests of the Shareholders as a whole, including the minority Shareholders, the Group has put in place internal approval and monitoring procedures relating to the connected transactions, the details of which are set out in the section headed "Internal Control Measures of Continuing Connected Transactions" below.

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2. Financial services

The pricing basis for the financial services to be provided by the Group to COSCO Shipping and/or its associates is as follows:

(1) underwriting and sponsoring services – underwriting commissions and sponsoring fees shall be determined by arm’s length negotiation after taking into account numerous factors including the prevailing market conditions, size of the proposed issue and the usual market commission rates of recent issues of similar nature and size as well as the rates that the Group charges from independent third parties.

The terms, including pricing terms, between COSCO Shipping and/or its associates and the Group to be entered into in respect of the provision of financial services above to be provided by the Group shall be comparable to those offered to the Group’s other institutional clients of a similar size and with similar transaction volume who are independent third parties, and shall be

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subject to the same internal approval and monitoring procedures and pricing policies applicable to independent third party clients. For more details, please refer to the section headed "Internal Control Measures of Continuing Connected Transactions" below.

Condition Precedent

The 2024 COSCO Framework Agreement is subject to the approval from the Independent Shareholders at the EGM.

Miscellaneous

The Company and COSCO Shipping agreed that under Rule 14A.54 of the Listing Rules, if at any time during the term of the 2024 COSCO Framework Agreement, the total transaction amount may or is expected to exceed the Proposed COSCO Annual Caps and thus requires re-approval from the Independent Shareholders, the Group shall fulfil all applicable and necessary regulatory obligations under the Listing Rules as soon as practicable. Before the fulfilment of all relevant regulatory requirements, both parties agreed to use their best efforts to prevent the aggregated amount for the relevant transaction in such year from exceeding the relevant monetary cap. Otherwise, the implementation of relevant transactions under the 2024 COSCO Framework Agreement shall be suspended.

Historical Figures

1. Securities and financial products and transactions

The approximate historical figures of securities and financial products and transactions between the Group and COSCO Shipping and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024 were as follows:

	Historical figures
	For the year ended December 31, 2022	For the year ended December 31, 2023	For the six months ended June 30, 2024
Securities and financial products and transactions - Inflow(1)
Actual historical amount (RMB million)	84.56	0.19	-
Existing annual caps (RMB million)	600.00	1,600.00	800.00
Utilisation rate	14.1%	0.01%(3)	-(3)
Securities and financial products and transactions - Outflow(2)
Actual historical amount (RMB million)	94.00	555.00	130.00
Existing annual caps (RMB million)	800.00	3,650.0	1,830.00
Utilisation rate	11.8%	15.2%	7.1%

LETTER FROM THE BOARD

Notes:

(1) “Inflow” refers to the Group’s total cash inflow arising from the sale of fixed-income products, equity products and derivative products to, transactions with, and/or borrowing/repurchase from financing transactions with, COSCO Shipping and/or its associates.

(2) “Outflow” refers to the Group’s total cash outflow arising from the purchase of fixed-income products, equity products and derivative products from, transactions with, and/or lending/resale from financing transactions with, COSCO Shipping and/or its associates.

(3) The relatively low utilisation rate of the existing annual caps of inflow amounts of the securities and financial products and transactions in 2023 and for the six months ended June 30, 2024 was mainly due to: (i) it was originally estimated that from 2022 to 2024, the cash outflow and inflow generated by the Group’s purchase of fixed income securities issued by COSCO Shipping’s associates, REITS and serving as ABS Manager initiated by COSCO Shipping’s associates were both RMB1 billion each year. In 2023 and for the six months ended June 30, 2024, except for interest received of RMB0.19 million in 2023, no other inflow generated as there was no maturity or redemption of the connected party bonds held by the Group or ABS managed by the Group; and (ii) in estimating the caps for 2022 to 2024, the Company expected that the scale of its agency primary bond auction business would be RMB150 billion in 2021, and the scale of its forward contracts/forward trading business and other fixed income intermediary business would be RMB150 billion, and that such businesses would continue to grow steadily from 2022 to 2024, and the annual cash outflow and inflow of connected transactions with COSCO Shipping and its associates arising from the above-mentioned fixed income capital intermediary business were approximately RMB2.0 billion and RMB500 million, respectively, representing approximately 1% and 0.3% of the transaction amounts for the year. In 2023 and for the six months ended June 30, 2024, affected by the rapid decline in loan interest rates and the acceleration of loan issuance by commercial banks, the financing increment of COSCO Shipping and its associates concentrated on loans, and the development of fixed income intermediary business was limited.

Financial services

The approximate historical figures of revenue generated by the Group from providing financial services to COSCO Shipping and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024 were as follows:

	Historical figures
	For the year ended December 31, 2022	For the year ended December 31, 2023	For the six months ended June 30, 2024
Financial services - Revenue generated by the Group
Actual historical amount (RMB million)	3.09	1.76	0.40
Existing annual caps (RMB million)	7.0	71.2	35.75
Utilisation rate	44.1%	2.5%^{(1)}	1.1%^{(1)}

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Note:

(1) In accordance with the overall development plan of the Group's investment banking business, the Group's pipeline of investment banking projects for COSCO Shipping’s associates, and the Group's plan for industry-finance integration with COSCO Shipping, it was originally expected that the Group would generate an underwriting income of RMB30-40 million from one IPO or refinancing project per year, and a financial advisory income of RMB30-40 million from completing one or two mergers and acquisitions projects per year from 2023 to 2024. The relatively low utilisation rate of the existing annual caps for revenue generated from financial services in 2023 and for the six months ended June 30, 2024 was primarily due to a significant reduction in the issuance of equity financing instruments (including IPOs and refinancing) in the PRC market in 2023 and for the six months ended June 30, 2024, and the spread between lending rates and bond rates narrowed sharply as lending rates declined rapidly, the underwriting and sponsoring services between the Group and COSCO Shipping in relation to IPOs, refinancing and bond issues almost ceased, and other investment banking services such as financial advisory in relation to mergers and acquisitions also decreased significantly.

From January 1, 2025 to the Latest Practicable Date, the Group did not conduct any securities and financial products transactions with/to COSCO Shipping and/or its associates, and generated revenue of RMB0.04 million from the provision of financial services.

Proposed COSCO Annual Caps

The Proposed COSCO Annual Caps for the transaction amounts under the 2024 COSCO Framework Agreement are as follows:

Securities and financial products and transactions

The Company considers that it is impracticable and extremely difficult to set a separate cap for each category of the securities and financial products and transactions for the following main reasons: (i) the securities and financial products and transactions are frequently conducted at the prevailing market prices in the ordinary and usual course of business of the Group. Such transactions are market-driven and are entered into depending on various factors including the bidding price and timing; (ii) most of these transactions are conducted within a very short timeframe and are very sensitive to market prices; (iii) as the variety and characteristics of products are experiencing rapid innovations in the ever-changing securities and financial market, it is difficult to precisely estimate when new products will be launched, however, once new securities and financial products and transactions are launched, it is expected that the total inflow and the total outflow of securities and financial products and transactions between COSCO Shipping and/or its associates and the Group will increase; (iv) all such transactions will continue to be entered into at the prevailing market prices in the ordinary and usual course of business of the Group; and (v) if an annual cap is set for each category of these transactions, it would cause significant delay to such transactions and harm to the Group’s existing operations and potential growth to the detriment of the Company and the Shareholders as a whole and restrict the Company’s overall competitiveness in a highly competitive securities industry. In light of the above, the Company considers that it is more practicable to set a cap for the total inflow and the total outflow of all the securities and financial products and transactions under the 2024 COSCO Framework Agreement, instead of a separate cap for each category of those products and transactions.

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The Proposed COSCO Annual Caps of expected total inflow$^{(1)}$ amount and total outflow$^{(2)}$ amount of the securities and financial products and transactions between the Group and COSCO Shipping and/or its associates under the 2024 COSCO Framework Agreement for each of the three years ending December 31, 2027 are as follows:

Proposed COSCO Annual Caps (RMB million)
	For the year ending December 31, 2025	For the year ending December 31, 2026	For the year ending December 31, 2027
Securities and financial products and transactions
Inflow$^{(1)}$	6,500	6,500	6,500
Outflow$^{(2)}$	9,500	9,500	9,500

Notes:

In estimating the Proposed COSCO Annual Caps of the total inflow amount and the total outflow amount of the securities and financial products and transactions between the Group and COSCO Shipping and/or its associates for the three years ending December 31, 2027, the Group has considered, among other things, the following key factors:

The approximate historical amounts of total inflow amounts and total outflow amounts of those securities and financial products and transactions between the Group and COSCO Shipping and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024;
It is estimated that the total inflow and outflow amount from the purchase and redemption of the products (including fixed-income products, equity products, monetary products and customized products) managed by the Group by COSCO Shipping and/or its associates will be approximately RMB1.5 billion in each of the next three years, which was estimated based on the following facts: although the Group has not conducted the above transactions with COSCO Shipping and/or its associates in the past three years, given that COSCO Shipping and/or its associates have opened securities trading accounts with the Company and may conduct securities trading, and may purchase and redeem monetary products and/or other products managed by CMS Asset Management within a relatively short period of time before trading. For the two years
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ended December 31, 2023 and the six months ended 30 June, 2024, the maximum transaction amount of A shares equity fund of COSCO Shipping and/or its associates was RMB1.47 billion. Taking into account that the subscription of the relevant products is subject to the business requirements and market conditions of COSCO Shipping and/or its associates and the transaction amount may be high, in order to avoid undue disruption and damage to the Group's ordinary course of business and to retain the business flexibility, the Company has made reference to the above-mentioned transaction amounts of A shares equity fund of COSCO Shipping and/or its associates in estimating the inflow and outflow amount generated by the relevant transactions. It is estimated that the inflow and outflow from the subscription of monetary and fixed income asset management plan products managed by CMS Asset Management by COSCO Shipping and/or its associates will not exceed RMB1.50 billion, namely the maximum transaction amount of A shares equity fund of COSCO Shipping and/or its associates in past two years;

In view of the highly fluctuating capital demand of the securities industry with market changes, in order to meet the capital demand and ensure sufficient liquidity, the Group has established diversified financing channels to maintain adequate and stable financing channels. Among them, beneficiary certificates with flexible maturity and convenient issuance process, are one of the main debt financing instruments of the Group. For the two years ended December 31, 2023, the annual financing scale of beneficiary certificates issued by the Group was approximately RMB20.0 billion to RMB40.0 billion, and it is estimated that the annual financing scale of beneficiary certificates issued in the next three years will be approximately RMB50.0 billion to RMB60.0 billion. The Group will continue to improve the institutional customer service marketing system. Beneficiary certificates, as one of the important tools for wealth management of the Group's institutional clients, are featured by capital and interest preservation, flexible term and diversified structure, which can meet the investment requirements of COSCO Shipping and/or its associates for high-quality assets, especially in a low interest rate environment. Considering that the beneficiary certificates meet the investment requirements of COSCO Shipping and/or its associates for financial instruments in the current market environment, therefore, it is estimated that the inflow and outflow from the purchase and redemption of beneficiary certificates to be issued by the Group by COSCO Shipping and/or its associates will be approximately RMB2.0 billion and RMB2.0 billion respectively in each of the next three years;
It is estimated that in each of 2025, 2026 and 2027, the Group will generate an outflow of not more than RMB6.0 billion from securities underwriting business co-investment, underwriting by way of standby commitment of fixed-income securities (including ABS initiated) issued by COSCO Shipping and/or its associates and acting as manager of ABS initiated by COSCO Shipping and/or its associates, respectively, and an inflow of not more than RMB3.0 billion from the maturity of ABS under management. The above estimates are based on the following facts:
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i. The Group may generate an outflow from the subscription of fixed income securities issued by COSCO Shipping and/or its associates as a result of co-investment and underwriting by way of standby commitment. The Group may generate an outflow from purchase of the underlying assets of China Merchants Group and/or its associates as original equity holders by CMS Asset Management, which is a wholly-owned subsidiary of the Company and may act as the manager of ABS, and may incur an inflow when ABS expires;

ii. In 2022, 2023 and in the first half of 2024, the outflow arising from co-investment, underwriting by way of standby commitment and management of fixed income securities issued by COSCO Shipping and/or its associates was approximately RMB94 million, RMB555 million and RMB130 million, respectively;

iii. The backbone business of COSCO Shipping and its associates includes shipbuilding, shipping and derived shipbuilding and shipping finance. In 2022 and 2023, the financing of COSCO Shipping and/or its associates was dominated by low-interest bank loans, and the scale of fixed income financial instruments issued in the domestic market of China was approximately RMB48.8 billion and RMB33.0 billion. In 2023, China has surpassed Greece to become the world's largest shipowner country in the world by gross shipping tonnage. In the first half of 2024, the completed volume, the volume of new orders received and handheld orders of China's shipbuilding industry accounted for 55%, 74.7% and 58.9% of the world market share respectively. Given that there is an urgent demand for the replacement of old ships worldwide, the new environmental protection policy promotes the accelerate renewal of fleet, and the recovery of global trade drives the growth of shipping demand, the shipbuilding sector of China are expected to continue to grow in the future. In order to achieve the "national goods transported by national ships (國貨國運)" and ensure the growth of foreign trade business and shipping safety, COSCO Shipping Group has launched "100 Ships Plan (百船計劃)". In order to meet the rapid development of asset-heavy business, it is expected that COSCO Shipping and its associates will increase the financing scale of fixed-income securities. From January to August 2024, the scale of fixed income securities issued by COSCO Shipping and/or its associates was approximately RMB28.5 billion. Considering the rapid development of the Group's related business and the expected scale of fixed income securities to be issued by COSCO Shipping and its associates in the next three years, the Company's plan to increase future cooperation with COSCO Shipping, and the steady growth of the Company's debt investment scale year by year, etc., it is expected that the outflow amount from the subscription of fixed income securities issued by COSCO Shipping and/or its associates by the Group as a result of co-investment and underwriting by way of standby commitment will be approximately RMB3.0 billion for each of the three years ending December 31, 2027;

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iv. In 2022, 2023 and from January to August 2024, the total amount of ABS projects initiated by associates of COSCO Shipping as original equity holders amounted to approximately RMB21.3 billion, RMB21.4 billion and RMB7.1 billion, respectively. As the Company will deepen business cooperation with COSCO Shipping in the future, to ensure the normal operation of relevant businesses and avoid undue disruption and damage to the Group's ordinary course of business, and with reference to the maximum amount of a single ABS project of approximately RMB3.0 billion for which COSCO Shipping and/or its associates have been the original equity holders since the IPO of H shares of the Company in 2016, it is estimated that for each of the three years ending December 31, 2027, an outflow arising from the purchase of the underlying assets of COSCO Shipping and/or its associates as original equity holders by CMS Asset Management as the manager of ABS will be approximately RMB3.0 billion. Considering that ABS has a flexible term ranging from a few days to several decades, in order to ensure the normal operation of business, it is estimated that an inflow from the resale of underlying assets due to the maturity of ABS will be approximately RMB3.0 billion for each of the three years ending December 31, 2027;

The Group provides integrated financial products to customers and conducts integrated financial transactions with customers. The Group has now obtained over 100 business qualifications and has been authorized to engage in integrated financial products and integrated financial transactions business activities, which have played an active role in the past three years. In recent years, the Group has promoted the transformation of investment banking, built a modern investment bank, promoted the transformation of wealth management, strategically developed institutional business, and continued to enrich the variety and quantity of the Company's financial services and financial products. In addition, COSCO Shipping and/or its associates serve global trade and operate global networks, and with the shipping, ports and logistics as the foundation and core industries, and with shipping finance, equipment manufacturing, value-added services and digital innovation as the empowering and value-added industries, COSCO Shipping and/or its associates strive to create a "3+4" industrial ecosystem, and are committed to building a world-class global integrated logistics supply chain service ecosystem. This will create more opportunities for the Group to engage in securities and financial transactions and provide securities and financial products to each other with COSCO Shipping and/or its associates. As a result, the total inflow and outflow are expected to increase from 2025 to 2027; and
Given that (i) the inherent nature of the securities and financial products and transactions described above, including their market-sensitivity and timeliness, (ii) the Group's limited control over the counterparties in those transactions, and (iii) the volatility and unpredictability of the financial market in general, an adequate buffer (representing approximately $10\% - 15\%$ of the Proposed COSCO Annual Caps) should be provided to prevent undue restriction on the future business operations of the Group.

LETTER FROM THE BOARD

2. Financial services

The Proposed COSCO Annual Caps of the revenue to be generated by the Group from the financial services transactions under the 2024 COSCO Framework Agreement for each of the three years ending December 31, 2027 are as follows:

Proposed COSCO Annual Caps (RMB million)
For the year ending December 31, 2025	For the year ending December 31, 2026	For the year ending December 31, 2027
Financial services
Revenue to be generated by the Group	48.00	48.00

In estimating the Proposed COSCO Annual Caps of the revenue to be generated by the Group from the provision of financial services to COSCO Shipping and/or its associates for the three years ending December 31, 2027, the Group has considered, among other things, the following key factors:

historical amounts of the revenue generated by the Group from providing financial services to COSCO Shipping and/or its associates for the two years ended December 31, 2023 and the six months ended June 30, 2024, including the different service rates and fees the Group charged for the provision of different types of financial services, and considering, in particular, that the Group’s provision of financial services to COSCO Shipping and/or its associates is mainly market-driven. Therefore, the Proposed COSCO Annual Caps shall include an adequate buffer (representing approximately 10%-15% of the Proposed COSCO Annual Caps) to cover any market volatility and changes. Otherwise, an annual cap that is too restrictive might cause undue disruption to the operations of the Group and hamper its ability to respond quickly to changes in the highly volatile financial market;
as part of its normal course of business, the Group will continue to provide underwriting and sponsoring services by COSCO Shipping and/or its associates, which is expected to generate a revenue of approximately RMB31.5 million, RMB31.5 million and RMB31.5 million in 2025, 2026 and 2027, respectively. The above-mentioned estimates are based on the following facts:

i. In 2022, 2023 and for the six months ended June 30, 2024, revenue from underwriting and sponsoring services provided by the Group for the equity and fixed income financial instruments issued by COSCO Shipping and/or its associates amounted to approximately RMB2.9 million, RMB0.6 million and RMB0.3 million, respectively; and

LETTER FROM THE BOARD

ii. COSCO Shipping is a corporate group engaged in Industry-finance Integration with a relatively comprehensive industrial structure system, comprising shipping, terminals, logistics, shipping finance and shipyards. Those companies along the upstream and downstream industrial chain, such as shipping, terminals, logistics, shipping finance and shipyards, will require higher mid-to-long term financing in the next three years. Under the general background of encouraging direct financing by the central government, the reform of the registration-based system in the domestic securities market and Hong Kong supporting the listing of leading enterprises in mainland industries in Hong Kong, the re-financing, IPOs and other financing demands of COSCO Shipping and the relevant listed companies and industrial enterprises controlled by COSCO Shipping will increase significantly. The Group enjoys strong competitiveness in the above business sectors. Therefore, it is expected that revenue from the provision of underwriting and sponsoring services to COSCO Shipping and/or its associates will record significant growth. Due to the difficulty in estimating the progress of the projects and the subsequent market regulatory environment, it would be impracticable to predict the actual years for the realization of such revenue. Based on the expected demand of COSCO Shipping and its associates for capital operation services, the expected progress of the ongoing projects, the potential transactions for which the Group may provide such services and the charges on large-scale projects in the market, it is expected that revenue from the provision of underwriting and sponsoring services (including but not limited to IPOs, re-financing, mergers and acquisitions and restructuring) by the Group to COSCO Shipping and/or its associates in the next three years will be approximately RMB31.5 million, RMB31.5 million and RMB31.5 million, respectively;

In addition to underwriting and sponsoring services, the Group will continue to provide other financial services (mainly financial advisory services) to the COSCO Shipping and/or its associates in its ordinary course of business, and the service fees are expected to be approximately RMB16.5 million, RMB16.5 million and RMB16.5 million in 2025, 2026 and 2027, respectively. The above-mentioned estimates are based on the following facts:

i. For the two years ended December 31, 2023 and the six months ended June 30, 2024, service fees charged by the Group for other financial services (mainly financial advisory services) provided to COSCO Shipping and/or its associates amounted to approximately RMB0.2 million, RMB1.2 million and RMB0.1 million, respectively; and

ii. Based on the expected demand for capital operation services from COSCO Shipping and its associates, the expected progress of projects in progress and potential transactions in which the Group may provide financial advisory or other financial services to COSCO Shipping and its associates, the Group expects that revenue from the provision of financial advisory and other financial services by

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the Group to COSCO Shipping and/or its associates will be approximately RMB16.5 million, RMB16.5 million and RMB16.5 million in 2025, 2026 and 2027, respectively.

Reasons for and Benefits of Entering into the 2024 COSCO Framework Agreement

The securities and financial products and transactions and financial services under the 2024 COSCO Framework Agreement will be conducted in the ordinary course of business of the Group. Such transactions will continue to be entered into on arm's length basis and based on terms which are fair and reasonable so far as the Group is concerned. In light of the past and current cooperation relationships between the Group and COSCO Shipping, and that such transactions have contributed and will continue to contribute to the overall business operation and growth of the Group, the Board (including the Independent Board Committee having taken into account of the advice of the Independent Financial Adviser) considers that entering into the 2024 COSCO Framework Agreement with COSCO Shipping is beneficial to the Group.

Such transactions will comprehensively capitalize on the resource advantages of the Group and COSCO shipping and/or its associates, enhance the market competitiveness of the parties' business, and create cost synergy by integrating the strengths of the parties, which will in turn improve the profitability of the Group and enhance the Group's leading position in the securities industry. The Board (including the Independent Board Committee having taken into account the advice of the Independent Financial Adviser) is of the view that the 2024 COSCO Framework Agreement was: (i) entered into in the ordinary and usual course of business of the Group; (ii) on normal commercial terms (in accordance with the terms determined after arm's length negotiation or those no less favorable than the terms offered by the Group to independent third parties); and (iii) its terms and the Proposed COSCO Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

3. Internal Control Measures of Continuing Connected Transactions

To safeguard the interests of the Shareholders as a whole, including minority Shareholders, the Group has implemented internal approval and monitoring procedures for connected transactions, which include the following:

the Group has formulated and established internal guidance and policies for various securities and financial products and transactions and financial services, as well as internal procedures and system for the approval and monitoring of such transactions. Such policies and guidance set forth requirements regarding pre-transaction inquiry, applicable price, pricing procedures, approval authorities and procedures, record retention, supervision and review procedures. The Group's connected transaction management working team, the connected transaction control team of departments at the Group's headquarters and the Company's subsidiaries are responsible for reviewing the actual transaction amount and determining whether the Proposed Annual Caps have been exceeded;

LETTER FROM THE BOARD

the Group’s connected transaction management working team will regularly (every half-year and every year) or irregularly collect data from all departments and subsidiaries, to ensure the Proposed Annual Caps will not be exceeded and will remind relevant departments and subsidiaries to keep such connected transactions not exceeding the Proposed Annual Caps. The connected transaction control team of departments at the Group’s headquarters and the Company’s subsidiaries will also review such transactions and grant approval when and as appropriate;
while offering or selling the same batch of securities and financial products and transactions and financial services to customers (including both connected persons and independent third parties), the Group will offer the same pricing terms to all the customers and no preferential terms shall be provided to the customers who are the Group’s connected persons;
in order to ensure that the price/market rate is with reference to the then prevailing market prices/rates, the Group will obtain market references or quotations for similar products/services/transactions. For fixed-income products or transactions, the Group will obtain market references or quotations from similar products offered in the inter-bank markets or the PRC stock exchange markets. For equity products or transactions, the Group will obtain market references or quotations from similar products offered in the PRC stock exchange markets. The Group will normally obtain three to five market references or quotations (depending on available information). The Group will then adopt evaluation methods to ascertain the market price for similar products or transactions and determine whether the price offered by connected person is fair and reasonable. For other products/services/transactions where there are no active markets (for example, forward contracts), the Group will obtain market references or quotations for similar products/services/transactions offered in an active market (for example, futures market) and/or market references or quotations in that inactive market. Depending on the availability of information, the Group will compare the information collected from both active and inactive markets to ascertain the market price of such products/services/transactions and determine whether the price offered by connected person is fair and reasonable;
the Group has formulated internal guidelines requiring additional approval procedures, including prior assessment and approval by the independent non-executive Directors before the matter is submitted for consideration and approval by the Board for transactions that exceed certain monetary amounts;
for securities and financial products and transactions, the Group has implemented the following internal control procedures to ensure that the terms are normal commercial terms or better: the investment department and the investment management department will determine the reasonable pricing of fixed-income products and equity products according to the pricing model for the issuing of such products or purchase such products issued by China Merchants Group, COSCO Shipping and/or their associates. For fixed-income products or transactions, under normal circumstances, the Group will determine the reasonable pricing of such products or transactions from multiple dimensions such as subject, rating and financial indicators. The Group will evaluate the terms and the credit risk of such products and transactions based on the rating of such products provided by the external rating agencies after their evaluation and the internal rating system developed by the Group. The rating evaluated by the external rating
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agencies will be verified and evaluated by the internal rating system to ensure that the terms of such products and transactions are on normal commercial terms or better. For equity products and transactions, under normal circumstances, the Group will determine the reasonable pricing of such products or transactions in accordance with market-based valuation methods (such as, price-earnings ratio valuation method, PS valuation method, PEG valuation method, price-to-book ratio valuation method, market rate valuation method, DCF valuation method, etc.) Different valuation methods will be adopted depending on the ability to continue as a going concern, financial condition and risk condition of the industry of the issuer or the financier. Should there be no direct market comparable, the Group will also consider price of derivative of such products and also market price of such products of similar nature for reference when necessary in order to determine the market price of such products or transactions. The Group will take priority to consider price of derivative of such products to determine the market price. If there are no derivatives of such products, the Group will consider products of similar nature to determine the market price. The Group will select comparable of products of similar nature with reference to, among other things, industry of the issuer or the financier, its business and financial scale, its price-to-earnings ratio and its price-to-book ratio. The Group will select two to three market comparables and determine a range of market price of these comparables as reference to determine, among others whether the price offered by China Merchants Group, COSCO Shipping and/or their associates is normal commercial terms or better. With reference to the above-mentioned, the Group can ascertain the value of certain securities and financial products and transactions and ensure whether the terms are normal commercial terms or better.

The independent non-executive Directors and auditors of the Company will conduct an annual review on the continuing connected transactions of the Group (including the pricing terms) and provide their annual confirmations in accordance with the Listing Rules that, among others, the relevant transactions are conducted in the ordinary and usual course of business of the Group and in accordance with the terms of the agreement that are fair and reasonable and in the interests of the Company and the Shareholders as a whole, on normal commercial terms or better and in accordance with the pricing policy of the Group.

4. General Information of the Company, China Merchants Group and COSCO Shipping

The Company is a joint stock company incorporated in the PRC with limited liability, the domestic shares of which are listed on the Shanghai Stock Exchange and the H Shares of which are listed on the Main Board of the Hong Kong Stock Exchange. The Group mainly engages in brokerage and wealth management and institutional business, investment banking business, investment management business, and investment and trading business.

China Merchants Group is a large-scale comprehensive enterprise with diversified businesses incorporated in China and directly managed by the State-owned Assets Supervision and Administration Commission of the State Council. At present, the business of China Merchants Group mainly focuses on four major sectors: transportation and logistics, integrated finance, integrated development and operation of urban and industrial parks, and strategic emerging industries, thus promoting the transformation and upgrading of traditional industries and the cultivation and development of strategic emerging industries.

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COSCO Shipping is a wholly state-owned enterprise incorporated in the PRC, and is a substantial shareholder of the Company. Its businesses mainly focus on shipping, logistics, ship financing, equipment manufacturing and maritime services.

5. Board Approval

Pursuant to Rule 14A.68(8) of the Listing Rules, as Mr. HUO Da, Mr. LIU Weiwu, Mr. LIU Zhenhua, Ms. LIU Hui, Mr. WU Zongmin, Mr. LI Delin and Mr. LI Xiaofei are directors connected to China Merchants Group, they are deemed to have material interests in the transactions contemplated under the 2024 CMG Framework Agreement and thus have abstained from voting on the relevant board resolution in respect of the entering into of the 2024 CMG Framework Agreement and the transactions contemplated thereunder (including the Proposed CMG Annual Caps). Save as disclosed above, none of the Directors has any material interest in the transactions contemplated under the 2024 CMG Framework Agreement and thus be required to abstain from voting on the relevant board resolution.

Pursuant to Rule 14A.68(8) of the Listing Rules, as Mr. HUANG Jian and Mr. ZHANG Mingwen are directors connected to COSCO Shipping, they are deemed to have material interests in the transactions contemplated under the 2024 COSCO Framework Agreement and thus have abstained from voting on the relevant board resolution in respect of the entering into of the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed COSCO Annual Caps). Save as disclosed above, none of the Directors has any material interest in the transactions contemplated under the 2024 COSCO Framework Agreement and thus be required to abstain from voting on the relevant board resolution.

6. Implications under the Listing Rules

China Merchants Group is a controlling shareholder of the Company. As at the Latest Practicable Date, China Merchants Group indirectly holds approximately 44.17% in aggregate of the equity interest of the Company. Accordingly, China Merchants Group and its associates are connected persons of the Company under the Listing Rules, and the transactions contemplated under the 2024 CMG Framework Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios in respect of the transactions contemplated under the 2024 CMG Framework Agreement exceed 5%, the transactions contemplated under the 2024 CMG Framework Agreement are subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

COSCO Shipping is a substantial shareholder of the Company. As at the Latest Practicable Date, COSCO Shipping indirectly holds approximately 10.02% in aggregate of the equity interest of the Company. Accordingly, COSCO Shipping and its associates are connected persons of the Company under the Listing Rules, and the transactions contemplated under the 2024 COSCO Framework Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios in respect of the transactions contemplated under the 2024 COSCO Framework Agreement exceed 5%, the transactions

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LETTER FROM THE BOARD

contemplated under the 2024 COSCO Framework Agreement are subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee, comprising all the independent non-executive Directors, has been established to consider the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and to advise the Independent Shareholders on the entering into of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement. Lego Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement are on normal commercial terms or better in the ordinary and usual course of business of the Company and are in the interests of the Company and the Shareholders as a whole.

II. PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR

Reference is made to the announcement of the Company dated March 17, 2025 in relation to, among others, the proposed appointment of Ms. LUO Li ("Ms. LUO") as a non-executive Director of the Company.

The Board of Directors of the Company has resolved to nominate Ms. LUO as a candidate for non-executive director of the eighth session of the Board at the meeting held on March 17, 2025. The appointment of Mr. LUO shall be subject to the consideration and approval by the shareholders at the general meeting of the Company by way of an ordinary resolution. The term of office of Ms. LUO as a non-executive Director of the Company will take effect from the date on which the resolution in relation to her appointment as a non-executive Director of the eighth session of the Board is approved by the Shareholders at the EGM by way of an ordinary resolution until the expiry of the term of the eighth session of the Board. Pursuant to the Articles of Association, Ms. LUO is eligible for reelection upon the expiry of her term of office.

The biographical details of Ms. LUO and other information relating to her appointment are as follows:

Ms. LUO Li, aged 41, has served as the head of the finance department (property rights department) of China Merchants Group Limited (招商局集團有限公司) since November 2024. Since September 2022, she has served as a director of China Merchants Investment Development Company Limited (招商局投資發展有限公司) and a director of Sinotrans Limited (中國外運股份有限公司) (a company listed on the Shanghai Stock Exchange, stock code: 601598; a company listed on the Hong Kong Stock Exchange, stock code: 00598). From October 2022, she served as a supervisor of China Merchants Group (Shanghai) Co., Ltd. (招商局集團(上海)有限公司) and a director of Greater Bay Area Homeland Youth Foundation (大灣區共同家園青年公益基金). Since December 2022, she has served as a director of China Merchants Group Finance Co., Ltd. (招商局集團財務有限公司) (formerly Sinotrans & CSC Finance Co., Ltd.) ("CMG Finance"). Since September 2024, she has served as a director of Bosera Asset Management Co., Limited (博時基金管理有限公司). Since February 2025, she has served as a director of Liaoning Port Group Limited (遼寧港口集團有限公司). Since March 2025, she has served as the chairman of China Merchants Union (BVI) Limited (招

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LETTER FROM THE BOARD

商局聯合發展有限公司). From May 2018 to January 2022, and from January 2022 to November 2024, she served as assistant director and deputy director of the finance department (property rights department) of China Merchants Group Limited, respectively. From December 2022 to October 2023, she served as a director of China Merchants Shekou Industrial Zone Holdings Co., Ltd. (招商局蛇口工業區控股股份有限公司) (a company listed on the Shenzhen Stock Exchange, stock code: 001979). Ms. Luo has also previously served as the head of the capital division under the finance department of Sinotrans & CSC Holdings Co., Ltd. (中國外運長航集團有限公司), the general manager of the settlement department of Sinotrans & CSC Finance Co., Ltd. (中外運長航財務有限公司) and the assistant general manager of CMG Finance.

Ms. LUO received a bachelor's degree in economics from Central University of Finance and Economics in June 2003 and a master's degree in economics from the same university in June 2005. She obtained the Senior Practitioner Certificate (Asset Management) of the Hong Kong Securities and Investment Institute, and the Certified Management Accountant qualification of USA and the title of Senior Economist in March 2018, November 2021 and October 2023 respectively.

Based on the diversity policy and nomination policy of the Company and at the recommendation of the nomination committee of the Board, the Board has proposed to appoint Ms. LUO as a non-executive Director of the Company after comprehensively taking into account of her education background, knowledge, skills, experience and the contributions she can make to the Board.

Upon the approval by the Shareholders at the EGM by way of an ordinary resolution on the appointment of Ms. LUO as a non-executive Director of the Company, the Company will enter into a service contract with Ms. LUO. Ms. LUO will not receive any remuneration from the Company during her term of office as a non-executive Director of the Company.

Ms. LUO has confirmed that, save as disclosed above, as of the Latest Practicable Date: (1) she does not hold any other positions in the Company or any of its subsidiaries, nor has she held any directorships in the last three years in any other public companies where the securities of which are listed on any securities market in Hong Kong or overseas; (2) she does not have any relationship with any other Directors, supervisors, senior management, substantial shareholders or controlling shareholders of the Company or any of its subsidiaries; (3) she does not hold any interests in the shares of the Company within the meaning of the Securities and Futures Ordinance; and (4) she does not have any matters regarding her proposed appointment that shall be disclosed pursuant to Rule 13.51(2)(h) to Rule 13.51(2)(v) of the Listing Rules, nor is there any other matter regarding her proposed appointment that shall be brought to the attention of the Shareholders. The above resolution has been considered and approved by the Board on March 17, 2025, and is hereby proposed at the EGM for the Shareholders' consideration and approval by way of an ordinary resolution.

III. PROPOSED APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE SUPERVISOR

Reference is made to the announcement of the Company dated March 17, 2025 in relation to, among others, the proposed appointment of Mr. HUANG Zheng ("Mr. HUANG") as a shareholders' representative Supervisor of the Company.

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LETTER FROM THE BOARD

The Supervisory Committee of the Company has resolved to nominate Mr. HUANG as a candidate for shareholders' representative Supervisor of the eighth session of the Supervisory Committee at the meeting held on March 17, 2025. The appointment of Mr. HUANG is subject to the consideration and approval by the Shareholders of the Company at the EGM by way of an ordinary resolution. The term of office of Mr. HUANG as a shareholders' representative Supervisor of the Company will take effect from the date on which the resolution in relation to his appointment as a shareholders' representative Supervisor of the eighth session of the Supervisory Committee is approved by the Shareholders at the EGM by way of an ordinary resolution until the expiry of the term of the eighth session of the Supervisory Committee. Pursuant to the Articles of Association, Mr. HUANG is eligible for re-election upon the expiry of his term of office.

The biographical details of Mr. HUANG and other information relating to his appointment are as follows:

Mr. HUANG Zheng, aged 46, has served as the chairman of Hebei Port Group (Tianjin) Investment Management Co., Ltd (河北港口集團(天津)投資管理有限公司)) since November 2024. Since July 2021, he has served as the director and the general manager of Jigang Financial leasing (Tianjin) Co., Ltd. (冀港融資租賃(天津)有限公司) and Jigang Commercial Factoring (Tianjin) Co., Ltd. (冀港商業保理(天津)有限公司), and has served as the chairman of both companies since December 2024. Previously, Mr. HUANG served the deputy section chief and section chief of the capital division under the finance department of Qinhuangdao Port Co., Ltd. (秦皇島港股份有限公司) (a company listed on the Shanghai Stock Exchange, stock code: 601326), the manager of the business department of Hebei Port Group Finance Co., Ltd. (河北港口集團財務有限公司), the deputy general manager of Hebei Port Group Finance Co., Ltd., the deputy director of the urban construction development department of Hebei Port Group Co., Ltd. (河北港口集團有限公司), the deputy general manager of Hebei Port Group Urban Construction Development Co., Ltd. (河北港口集團城市建設發展有限公司), the deputy manager of the West Port Industrial Park Branch of Hebei Port Group Co., Ltd. (河北港口集團有限公司西港產業園分公司), as well as the deputy general manager of Qinhuangdao Seaview Hotel Co., Ltd. (秦皇島海景酒店有限公司).

Mr. HUANG received a bachelor's degree in finance from Jilin Normal University in July 2016 and he obtained the title of Intermediate Accountant in July 2013.

Upon the approval by the Shareholders at the EGM by way of an ordinary resolution on the appointment of Mr. HUANG as a shareholders' representative Supervisor of the Company, the Company will enter into a service contract with Mr. HUANG. Mr. HUANG will not receive any remuneration from the Company during his term of office as a shareholders' representative Supervisor of the Company. Mr. HUANG has confirmed that, save as disclosed above, as of the Latest Practicable Date: (1) he does not hold any other positions in the Company or any of its subsidiaries, nor has he held any directorships in the last three years in any other public companies where the securities of which are listed on any securities market in Hong Kong or overseas; (2) he does not have any relationship with any other Directors, supervisors, senior management, substantial shareholders or controlling shareholders of the Company or any of its subsidiaries; (3) he does not hold any interests in the shares of the Company within the meaning of the Securities and Futures Ordinance; and (4) he does not have any matters regarding his proposed appointment that shall be disclosed pursuant to Rule 13.51(2)(h) to Rule 13.51(2)(v) of the Listing Rules, nor is there any other

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LETTER FROM THE BOARD

matter regarding his proposed appointment that shall be brought to the attention of the Shareholders. The above resolution has been considered and approved by the Supervisory Committee on March 17, 2025, and is hereby proposed at the EGM for the Shareholders' consideration and approval by way of an ordinary resolution.

IV. EGM

The EGM is to be held at China Merchants Securities Building, No. 111 Fuhua Yi Road, Futian Street, Futian District, Shenzhen, Guangdong Province, the PRC on Monday, April 7, 2025 at 10:00 a.m.. The notice convening the EGM is set out on pages N-1 to N-4 of this circular.

The summary of the important dates for holders of H Share is as follows:

Last Registration Date : at 4:30 p.m. on or before Monday, March 31, 2025

Closure of Register of Members for H Shareholders : Tuesday, April 1, 2025 to Monday, April 7, 2025 (both days inclusive)

Submission of Proxy Form : not later than 24 hours before the time appointed for the EGM (i.e. at 10:00 a.m. on Sunday, April 6, 2025)

The register of members of H shares of the Company will be closed from Tuesday, April 1, 2025 to Monday, April 7, 2025 (both days inclusive), during which period no transfer of H Shares will be registered. All transfer documents accompanied by the relevant share certificates shall be lodged with the Company's H Share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong not later than 4:30 on Monday, March 31, 2025. Purchasers of Shares who have submitted their transfer documents to the Company's H Share registrar, Computershare Hong Kong Investor Services Limited, and registered as Shareholders on the register of members of H Shares of the Company before 4:30 p.m. on Monday, March 31, 2025 are entitled to attend and vote in respect of all resolutions to be proposed at the EGM.

To be valid, for holders of H Share, the form of proxy and notarised power of attorney or other document of authorisation must be delivered to Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong not less than 24 hours before the time appointed for the EGM. Completion and return of the proxy form will not preclude you from attending and voting at the EGM in person if you so wish.

V. PROCEDURES FOR VOTING AT THE EGM

According to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a Shareholders' general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the chairman of the EGM will demand a poll in relation to the proposed resolutions at the EGM in accordance with Article 108 of the Articles of Association.

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LETTER FROM THE BOARD

China Merchants Group, which indirectly holds approximately 44.17% in aggregate of the equity interest of the Company, is a controlling shareholder of the Company. As such, China Merchants Group and its associates will be required to abstain from voting on the relevant resolution in respect of the entering into of the 2024 CMG Framework Agreement and the transactions contemplated thereunder at the EGM.

COSCO Shipping, which indirectly holds approximately 10.02% in aggregate of the equity interest of the Company, is a substantial shareholder of the Company. As such, COSCO Shipping and its associates will be required to abstain from voting on the relevant resolution in respect of the entering into of the 2024 COSCO Framework Agreement and the transactions contemplated thereunder at the EGM.

Save as disclosed above, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, no other Shareholders have material interests in the resolutions to be proposed at the EGM and are required to abstain from voting on such resolutions.

VI. RECOMMENDATION

The Board (including the Independent Board Committee having taken into account the advice of the Independent Financial Adviser) is of the view that each of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement was: (i) entered into in the ordinary and usual course of business of the Group; (ii) on normal commercial terms (in accordance with the terms determined after arm's length negotiation or those no less favorable than the terms offered by the Group to independent third parties); and (iii) its terms and the proposed annual caps for the continuing connected transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole. As such, the Board (including the Independent Board Committee having taken into account the advice of the Independent Financial Adviser) recommends that all Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM in respect of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps).

The Board is of the view that that the ordinary resolutions proposed at the extraordinary general meeting, namely (i) the proposed appointment of non-executive Director and (ii) the proposed appointment of shareholders' representative Supervisor, are in the interests of the Company and its shareholders as a whole. Therefore, the Board recommends that all shareholders vote in favor of the aforementioned resolutions to be proposed at the extraordinary general meeting.

VII. FURTHER INFORMATION

Your attention is drawn to the statutory and general information set out in Appendix I to this circular.

Yours faithfully,

By order of the Board

China Merchants Securities Co., Ltd.

Huo Da

Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in connection with the entering into of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement for inclusion in this circular.

招商证券股份有限公司

China Merchants Securities Co., Ltd.

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

(Stock Code: 6099)

March 19, 2025

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF THE SECURITIES AND FINANCIAL PRODUCTS, TRANSACTIONS AND SERVICES FRAMEWORK AGREEMENTS

We have been appointed to form the Independent Board Committee to consider and advise the Independent Shareholders as to our opinions on the entering into of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement, and the transactions contemplated thereunder, the details of which are set out in the circular issued by the Company to the Shareholders dated March 19, 2025 (the "Circular"), of which this letter forms part. Terms defined in the Circular will have the same meanings when used herein unless the context otherwise requires. Lego Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee. We wish to draw your attention to the letter from the Independent Financial Adviser as set out on pages 50 to 95 of the Circular.

Having taken into account (i) the reasons as disclosed in the paragraphs headed "Reasons for and Benefits of Entering into the 2024 CMG Framework Agreement" and "Reasons for and Benefits of Entering into the 2024 COSCO Framework Agreement" of the Circular; and (ii) the principal factors and reasons considered by the Independent Financial Adviser, and its conclusion and advice, we are of the view and concur with the opinion of the Independent Financial Adviser that the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement were entered into in the ordinary and usual course of business of the Group and are on normal commercial terms, the terms and conditions therein as well as the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM in respect of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps).

Yours faithfully
Independent Board Committee of
China Merchants Securities Co., Ltd.
Mr. YIP, Ying Chi Benjamin
Ms. ZHANG Ruijun
Ms. CHEN Xin
Mr. CAO Xiao
Mr. FENG Jinhua
(Independent non-executive Directors)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from Lego Corporate Finance Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps).

19 March 2025

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF THE SECURITIES AND FINANCIAL PRODUCTS, TRANSACTIONS AND SERVICES FRAMEWORK AGREEMENTS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps), details of which are set out in the Letter from the Board (the "Letter from the Board") contained in the circular of the Company dated 19 March 2025 (the "Circular"), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

References are made to (i) the announcement of the Company dated 27 May 2022 in relation to the continuing connected transactions under the 2022 CMG Framework Agreement; and (ii) the announcement of the Company dated 18 December 2024 in relation to the 2024 CMG Framework Agreement entered into between the Company and the China Merchants Group.

As (i) the validity of the 2022 CMG Framework Agreement will expire on 31 December 2024; and (ii) the Group and China Merchants Group and/or its associates expect to continually conduct securities and financial transactions with each other and provide securities and financial products to each other, and the Group expects to continually provide financial services to China Merchants Group and/or its associates thereafter in their respective ordinary course of business based on normal commercial terms and market practices at prevailing market prices or rates, the Company entered into the 2024 CMG Framework Agreement with China Merchants Group on 18 December 2024 to renew the 2022 CMG Framework Agreement. The term of the 2024 CMG Framework Agreement shall take effect upon obtaining the approval from the Independent Shareholders, and shall expire on 31 December 2027.

China Merchants Group is a controlling shareholder of the Company. As at the Latest Practicable Date, China Merchants Group indirectly holds approximately $44.17\%$ in aggregate of the equity interest of the Company. Accordingly, China Merchants Group and its associates are connected persons of the Company

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

under the Listing Rules, and the transactions contemplated under the 2024 CMG Framework Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios in respect of the transactions contemplated under the 2024 CMG Framework Agreement exceed 5%, the transactions contemplated under the 2024 CMG Framework Agreement are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

Further references are made to (i) the announcement of the Company dated 27 May 2022 in relation to the continuing connected transactions under the 2022 COSCO Framework Agreement; and (ii) the announcement of the Company dated 18 December 2024 in relation to the entering into of the 2024 COSCO Framework Agreement entered into between the Group and COSCO Shipping.

As (i) the validity of the 2022 COSCO Framework Agreement will expire on 31 December 2024; and (ii) the Group and COSCO Shipping and/or its associates expect to continually conduct securities and financial transactions with each other and provide securities and financial products to each other, and the Group expects to continually provide financial services to COSCO Shipping and/or its associates thereafter in their respective ordinary course of business based on normal commercial terms and market practices at prevailing market prices or rates, the Company entered into the 2024 COSCO Framework Agreement with COSCO Shipping on 18 December 2024 to renew the 2022 COSCO Framework Agreement. The term of the 2024 COSCO Framework Agreement shall take effect upon obtaining the approval from the Independent Shareholders, and shall expire on 31 December 2027.

COSCO Shipping is a substantial shareholder of the Company. As at the Latest Practicable Date, COSCO Shipping indirectly holds approximately 10.02% in aggregate of the equity interests of the Company. Accordingly, COSCO Shipping and its associates are connected persons of the Company under the Listing Rules, and the transactions contemplated under the 2024 COSCO Framework Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios in respect of the transactions contemplated under the 2024 COSCO Framework Agreement exceed 5%, the transactions contemplated under the 2024 COSCO Framework Agreement are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Company will obtain the Independent Shareholders' approval for the transactions contemplated under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement at the EGM. China Merchants Group, COSCO Shipping and their respective associates will abstain from voting on the relevant resolutions.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Yip, Ying Chi Benjamin, Ms. Zhang Ruijun, Ms. Chen Xin, Mr. Cao Xiao and Mr. Feng Jinhua, has been established to advise the Independent Shareholders as to whether the entering into of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps) are in the ordinary and usual course of business of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Company based on normal commercial terms or better and the terms of which are fair and reasonable so far as the Company and the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders as to whether to vote in favour of the relevant resolution(s) to be proposed at the EGM to approve the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps). As the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in such regard.

As at the Latest Practicable Date, Lego Corporate Finance Limited did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to the independence of Lego Corporate Finance Limited. In the last two years, there was no other engagement between the Group and Lego Corporate Finance Limited. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received or will receive any fees or benefits from the Company or any other party to the transactions. Accordingly, we are qualified to give independent advice in respect of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps).

BASIS OF OUR OPINION

In formulating our opinion and advice, we have considered, amongst other things, (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the management of the Group (the "Management"); and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us by the Directors and/or the Management for which they are solely and wholly responsible for, or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the date of the EGM and all such statements of belief, opinions and intention of the Directors and the Management and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors, the Management and/or the advisers of the Company. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the Management are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the EGM.

We consider that we have reviewed the relevant information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the Management, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company, or any of their respective subsidiaries and associates.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps), and except for its inclusion in the Circular and for the purpose of the EGM, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation, we have considered the following principal factors and reasons:

1. General information of the Company, China Merchants Group and COSCO Shipping

1.1 Information of the Company

As set out in the Letter from the Board, the Company is a joint stock company incorporated in the PRC with limited liability, the domestic shares of which are listed on the Shanghai Stock Exchange and the H Shares of which are listed on the Main Board of the Stock Exchange. The Group mainly engages in brokerage and wealth management and institutional business, investment banking business, investment management business, and investment and trading business.

The following table summarises the financial information of the Company for two years ended 31 December 2023 and the six months ended 30 June 2024 as extracted from the annual report of the Company for the year ended 31 December 2023 (the "2023 Annual Report") and the interim report of the Company for the six months ended 30 June 2024 (the "2024 Interim Report"), respectively:

	For the year ended 31 December		For the six months ended 30 June
	2022	2023	2023	2024
	RMB'000
(Audited)	RMB'000
(Audited)	RMB'000
(Unaudited)	RMB'000
(Unaudited)
Revenue	27,700,235	28,190,949	14,610,659	14,238,000
- Wealth management and institutional business	17,828,201	16,652,189	8,519,065	7,432,289
- Investment banking	1,446,575	1,426,891	492,187	301,677
- Investment management	1,217,500	994,366	581,265	507,886
- Investment and trading	6,721,288	8,481,821	4,697,318	5,645,617
- Others	547,440	721,706	354,750	381,192
- Elimination	(60,769)	(86,024)	(33,926)	(30,661)
Profit before income tax	8,531,660	9,295,693	5,210,202	4,968,280
Profit for the year	8,077,131	8,769,087	4,729,592	4,749,962

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated in the above table, the Group recorded an increase in revenue of approximately 1.8% for the year ended 31 December 2023, as compared to that for the year ended 31 December 2022, mainly contributed by the combined effects of the increase in revenue generated from the investment and trading business, which was partially offset by the decrease in revenue generated from the wealth management and institutional business segments of the Group. According to the 2023 Annual Report, the revenue from the wealth management and institutional business segment recorded a year-on-year decrease of approximately RMB1.2 billion, or approximately 6.6%, of which, income from securities and futures brokerage business of the Group has decreased during 2023, mainly attributable to the year-on-year decrease in the trading volume of stocks and funds in both A Share and H Share, and the commission rate of stocks and funds of the Group has decreased as in line with the downward trend of the industry's commission rate; and the interest income from margin financing and securities of the Group has decreased during 2023, with a slight year-on-year increase in the closing size of the margin financing and securities lending business, but a decrease in interest rate of the margin financing and securities. The revenue from the investment and trading business of the Group has increased during 2023, mainly attributable to the year-on-year increase in revenue from equity and fixed-income investments.

The Group recorded a decrease in revenue of approximately 2.6% for the six months ended 30 June 2024, as compared to that for the six months ended 30 June 2023, which was mainly attributable to the combined effects of the increase in revenue generated from the investment and trading business, which was partially offset by the decrease in revenue generated from the wealth management and institutional business segments. According to the 2024 Interim Report, the decrease in revenue of the Group was mainly attributable to (i) the one-way trading volume of stocks and funds in the A share market amounted to approximately RMB116 trillion, representing a year-on-year decrease of approximately 7.07%; (ii) the decrease in clients' assets under custody of approximately 3.23% of the Company as compared to that of the end of 2023; and (iii) the CSRC further strengthened the counter-cyclical adjustment mechanism for new share issuance, which resulted in the slowdown of the pace of issuance in the A share equity financing market and a significant decrease in the scale and number of financing.

1.2 Information of China Merchants Group

As disclosed in the Letter from the Board, China Merchants Group is a large-scale conglomerate with diversified businesses incorporated in the PRC and directly administered by Stated-owned Assets Supervision and Administration Commission of the State Council. At present, China Merchants Group mainly focuses on four major business segments: transportation and logistics, integrated finance, holistic development and operation of residential communities and industrial parks, strategic emerging industries, with a view to promoting the transformation and upgrading of traditional industries as well as the cultivation and development of strategic emerging industries.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.3 Information of COSCO Shipping

As disclosed in the Letter from the Board, COSCO Shipping is a state-owned enterprise incorporated in the PRC and directly wholly owned by the State Council and is a substantial shareholder of the Company. Its business mainly focuses on shipping, logistic, shipping finance, equipment manufacturing, and shipping services.

2. The 2024 CMG Framework Agreement

2.1 Reasons for and benefits of entering into the 2024 CMG Framework Agreement

As disclosed in the Letter from the Board, the securities and financial products and transactions and financial services under the 2024 CMG Framework Agreement will be conducted in the ordinary course of business of the Group. Such transactions will continue to be entered into on arm's length basis and based on terms which are fair and reasonable so far as the Group is concerned. In light of the past and current cooperation relationships between the Group and China Merchants Group and its associates in relation to "Collaboration between Industrial Companies and Financial Companies" (產融結合) and "Collaboration between Financial Companies" (融融結合), and that such transactions have contributed and will continue to contribute to the overall business operation and growth of the Group, the Board (excluding Mr. HUO Da, Mr. LIU Weiwu, Mr. LIU Zhenhua, Ms. LIU Hui, Mr. WU Zongmin, Mr. LI Delin and Mr. LI Xiaofei) considers that entering into the 2024 CMG Framework Agreement with China Merchants Group is beneficial to the Group.

We have discussed with the Management and were given to understand that the abovementioned transactions will create cost synergy by integrating the strengths of the Group and China Merchants Group and/or its associates, thereby reducing the aggregate operational costs and general expenses which will in turn improve the profitability of the Group and enhance the Group's leading position in the securities industry.

We were advised by the Directors that, as the transactions contemplated under the 2024 CMG Framework Agreement will be entered into in the ordinary and usual course of business of the Group and on a frequent and regular basis, it would be (i) impracticable to negotiate for numerous agreements with China Merchants Group and/or its associates; and (ii) costly and impractical to make regular disclosure of each of the relevant transactions and obtain the prior approval from the Independent Shareholders as required by the Listing Rules, if necessary.

In light of the abovementioned factors, we concur with the Directors that the entering into of the 2024 CMG Framework Agreement is in the interests of the Company and the Shareholders as a whole and the transactions contemplated under the 2024 CMG Framework Agreement are conducted in the ordinary and usual course of business of the Group.

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2.2 Principal terms of the 2024 CMG Framework Agreement

As disclosed in the Letter from the Board, the validity of the 2022 CMG Framework Agreement will expire on 31 December 2024. The Group and China Merchants Group and/or its associates expect to continually conduct securities and financial transactions with each other and provide securities and financial products to each other, and the Group expects to continually provide financial services to China Merchants Group and/or its associates thereafter in their respective ordinary course of business based on normal commercial terms and market practices at prevailing market prices or rates, the Company entered into the 2024 CMG Framework Agreement with China Merchants Group on 18 December 2024 to renew the 2022 CMG Framework Agreement. The principal terms of the 2024 CMG Framework Agreement are as follows:

Date: 18 December 2024

Parties: The Company and China Merchants Group

Term: Subject to the approval by the Independent Shareholders at the EGM, the term of the 2024 CMG Framework Agreement will commence from 1 January 2025 or the date of approval by the Independent Shareholders at the EGM (whichever is later), and will expire on 31 December 2027.

The 2024 CMG Framework Agreement is conditional upon the obtaining of the approval from the Independent Shareholders. Details of the scope of the transactions and services contemplated under the 2024 CMG Framework Agreement are set out under the sub-section headed "The 2024 CMG Framework Agreement – Scope of the Transactions and Services" in the Letter from the Board.

2.3 Pricing basis for the 2024 CMG Framework Agreement

In relation to securities and financial products and transactions

As disclosed under the sub-section headed "The 2024 CMG Framework Agreement – Pricing basis – 1. Securities and financial products and transactions" in the Letter from the Board, the securities and financial products and transactions under the 2024 CMG Framework Agreement are conducted through OTC markets such as the PRC Inter-bank Bond Market, the PRC Foreign Exchange Trading Center, the PRC Exchange Bond Market, the exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange, etc.) and the Interagency Private Placement Product Quotation and Service system.

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We have discussed with the Management and noted that currently there are total four categories of securities and financial products and transactions under the 2024 CMG Framework Agreement, namely fixed income products or transactions, equity products or transactions, financing transactions and other related securities and financial products and derivative products as permitted by regulatory authorities, and it is expected that the said four types of securities and financial products will continue to comply with the corresponding pricing policies as disclosed in the Letter from the Board.

In relation to financial services

As disclosed in the Letter from the Board, the Group provides various financial services to its clients, which include China Merchants Group and/or its associates, in its ordinary course of business. Due to the expertise and professional capabilities of the Group, the Group has been engaged by China Merchants Group and/or its associates to provide financial services including but not limited to (i) underwriting and sponsoring services, (ii) other investment banking services, and (iii) other financial services, from time to time. The pricing basis for the financial services to be provided by the Group to China Merchants Group and/or its associates under the 2024 CMG Framework Agreement are set out under the section headed "The 2024 CMG Framework Agreement – Pricing basis – 2. Financial services" in the Letter from the Board.

The terms, including pricing terms, between China Merchants Group and/or its associates and the Group to be entered into in respect of the provision of financial services above to be provided by the Group shall be no less favourable to the Group than those offered to the Group's other institutional clients of a similar size and with similar transaction volume who are independent third parties, and shall be subject to the same internal approval and monitoring procedures and pricing policies applicable to independent third party clients.

As disclosed in the Letter from the Board, both the securities and financial products and transactions and financial services are conducted according to the prevailing market rates with majority of the securities and financial products and transactions under the strict supervision and monitoring of the People's Bank of China and other PRC regulatory authorities. We also understood from the Management that the securities and financial products and transactions and financial services are highly sensitive to the market conditions, which are volatile and vulnerable to numerous complicated factors, such as economic environment.

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Assessment on the pricing basis of the 2024 CMG Framework Agreement

In order to assess the fairness and reasonableness of the pricing basis of the 2024 CMG Framework Agreement, we have randomly selected and reviewed sample copies of contracts for different types of transactions entered into by the Group. We have randomly selected and reviewed five sample agreements entered into between the Company and China Merchant Group for each of the two years ended 31 December 2023 and the six months ended 30 June 2024 pursuant to the 2022 CMG Framework Agreement which covered each category of securities and financial products as stated above, and noted that the pricing policies stipulated in the product agreements are consistent with the pricing policies as discussed above. We have randomly selected and reviewed five sample agreements entered into between the Company and other independent third parties to provide/purchase similar products which covered each category of securities and financial products for the same periods and noted that the terms of each category of securities and financial products offered/purchased by such independent third parties are similar to that offered/purchased by China Merchant Group.

Further, we have also randomly selected and reviewed five sample agreements which covered each category of the financial services, namely (i) underwriting and sponsoring services; (ii) other investment banking services; and (iii) other financial services for each of the two years ended 31 December 2023 and the six months ended 30 June 2024 provided by the Group to China Merchants Group and/or its associates and similar services provided by the Group to independent third parties. In view of the aforesaid samples cover the principal types of securities and financial products and financial services provided by the Group to China Merchants Group and/or its associates, which contemplated under the 2022 CMG Framework Agreement, and similar services provided by the Group to independent third parties for each of the two years ended 31 December 2023 and the six months ended 30 June 2024, which covered the substantial time period as the 2022 CMG Framework Agreement, we consider that such samples are fair and representative to illustrate the pricing of transactions under the 2024 CMG Framework Agreement is no less favourable to the Group than that provided/purchased to/from independent third parties. We consider such review covering the historical period under the 2024 CMG Framework Agreement on a random sampling basis on each category of financial products and financial services of the Group to be sufficient from the Independent Financial Adviser's perspective and nothing has come to our attention that causes us to believe that such agreements did not follow the internal control measures.

We were further advised that such service fees or commission or brokerage fees charged for the financial services provided to China Merchants Group and/or its associates shall be based on negotiations between the parties with reference to the prevailing market rates and the fees or commissions charged by the Group for services provided to independent third parties, while taking into account individual factors such as deal size and complexities, market responses, and competition from other securities companies, and in accordance with the requirements of the applicable laws and regulations of the PRC. We have reviewed terms including but not limited to the (i) scope of service; (ii) payment terms; and (iii) basic information of the customers stated on the contract samples provided by the Company, and noted that pricing

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terms offered by the Group to China Merchants Group and/or its associates were on normal commercial terms or on terms no less favourable than those offered by the Group to the independent third parties which substantiated the above.

Internal approval procedures and supervision

As advised by the Management, the Group has adopted a series of internal pricing policies and approval procedures to regulate the transactions under the 2024 CMG Framework Agreement. Details of the major internal policies are set out in the section headed “Internal Control Measures of Continuing Connected Transactions” in the Letter from the Board. For due diligence purpose, we have obtained and reviewed the documents showing the Group’s internal approval and monitoring procedures for both (i) the securities and financial products and transactions; and (ii) financial services.

We have also obtained and reviewed four guidelines showing the Group’s internal approval and monitoring procedures for the transactions contemplated under the 2022 CMG Framework Agreement. We noted from the documents that, among other things, the Group has formulated and established internal guidance and policies for (a) various securities and financial products and transactions; and (b) financial services, as well as internal procedures and system for the approval and monitoring of such transactions. Such documents covered the major internal policies of the Group as set out in the section headed “Internal Control Measures of Continuing Connected Transactions” in the Letter from the Board, therefore we consider that the documents are fair and representative to illustrate the internal control measures.

In view of (i) the Group would conduct pricing quotations/offering procedures from/to at least two independent third parties for contemporaneous transactions; (ii) the Group’s connected transaction management working team, which comprises staff from various departments and are mainly responsible for managing the Group’s connected transactions on a regular basis (every half year and every year) so as to ensure the Proposed Annual Caps in respect of such transactions will not be exceeded and will remind relevant departments and subsidiaries to control such connected transactions to be conducted on normal commercial terms from time to time; and (iii) the Group is required to offer the same pricing terms to all the customers and no preferential terms shall be provided to the customers who are the Group’s connected persons in the sale of the same batch of (a) securities and financial products and transactions; and (b) financial services to customers (including both connected persons and independent third parties), we consider that the internal control procedures are sufficient for the Company to monitor the securities and financial products and transactions and the effective implementation of the procedures would help to ensure fair pricing of the transactions contemplated under the 2024 CMG Framework Agreement according to the pricing policies. Based on the above, we consider that the internal control procedures are sufficient for the Company to monitor the transactions contemplated under the 2024 CMG Framework Agreement and the effective implementation of the procedures would help to ensure fair pricing according to the pricing policies.

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In light of the above and that the transactions under the 2024 CMG Framework Agreement (i) are mainly conducted through the PRC inter-bank bond market and the PRC exchange bond market, exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange and the China Foreign Exchange Trade System) and other OTC markets; (ii) are highly market-sensitive and the Group generally could not control on the counterparties of transactions due to the majority of the securities and financial products and transactions are conducted through intermediate system(s); and (iii) are monitored by the Group's internal control procedures as mentioned in the Letter from the Board, we are of the view that the terms of the 2024 CMG Framework Agreement are on normal commercial terms and the pricing basis which are determined with reference to prevailing market prices/rates at the time of transactions and the terms are fair and reasonable so far as the Independent Shareholders are concerned.

2.4 The historical amounts and the proposed annual caps of securities and financial products and transactions

Set out below are (i) the actual historical transaction amount of the securities and financial products and transactions between the Company and China Merchants Group and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024 with existing annual caps; (ii) the annualised historical transaction amount of the securities and financial products and transactions between the Company and China Merchants Group and/or its associates for the year ending 31 December 2024; and (iii) the proposed annual caps in respect to the provision of securities and financial products and transactions for the three years ending 31 December 2027 ("CMG Financial Products Annual Caps"):

	Historical transaction amounts			For the year ending31 December2024
	For the year ended 31 December2022		For the six monthsended 30 June 2024
	RMB million	RMB million	RMB million	(For illustrativepurpose only)RMB million
Securities and financial products and transactions - Inflow(1)
Actual historical amount	2,751.14	1,059.19	0.0011	0.0022(3)
Existing annual caps	2,900.00	7,500.00	3,750.00	7,500.00
Utilisation rate	94.9%	14.1%	0.00003%	0.00003%(on annualisedbasis)
Securities and financial products and transactions - Outflow(2)
Actual historical amount	1,562.23	5,107.30	3,432.00	6,864.00(3)
Existing annual caps	2,500.00	11,660.00	5,835.00	11,670.00
Utilisation rate	62.5%	43.8%	58.8%	58.8%(on annualisedbasis)

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	For the year ending 31 December
	2025	2026	2027
	RMB million	RMB million	RMB million
CMG Financial Products
Annual Caps
Inflow(1)	12,500	12,500	12,500
Outflow(2)	22,050	22,050	22,050

Notes:

(1) "Inflow" refers to the Group's total cash inflow arising from the sale of fixed income products and equity products and derivative products to, transactions with, and/or borrowing/repurchase from financing transactions with, China Merchants Group and/or its associates.

(2) "Outflow" refers to the Group's total cash outflow arising from the purchase of fixed income products and equity products and derivative products from, transactions with, and/or lending/resale from financing transactions with, China Merchants Group and/or its associates.

(3) For the six months ended 30 June 2024, the amount of the inflow and outflow of the securities and financial products and transactions between the Company and China Merchants Group and/or its associates were approximately RMB0.0011 million and RMB3,432.0 million, respectively. The annualised amount of the said inflow and outflow of the securities and financial products and transactions for the year ending 31 December 2024, for illustrative purpose only, were approximately RMB0.0022 million and RMB6,864.0 million, respectively. Such estimation does not take into account the inflow and outflow of the securities and financial products and transactions under new contracts commenced/to be commenced after 30 June 2024 or contracts that ended/to be ended between 1 July 2024 and 31 December 2024, and thus the actual utilisation rate may vary.

Due to the nature of the securities and financial products and transactions, the Company considers that it is more practicable to set a cap for the total inflow amount and outflow of all the securities and financial products and transactions under the 2024 CMG Framework Agreement, instead of a separate cap for each category of those products and transactions. In arriving at the CMG Financial Products Annual Caps, the Directors have considered the historical figures for similar transactions and have taken into account various factors, details of which are set out under the section headed "Proposed CMG Annual Caps - 1. Securities and financial products and transactions" in the Letter from the Board.

2.5 The historical amounts and the proposed annual caps of the financial services

Set out below are (i) the actual historical transaction amount of the financial services provided by the Group to China Merchants Group and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024 with existing annual caps; and (ii) the proposed annual caps in respect of the provision of financial services for the three years ending 31 December 2027 ("CMG Financial Services Annual Caps"):

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	Historical transaction amounts			For the year ending 31 December 2024
	For the year ended 31 December		For the six months ended 30 June 2024
	2022	2023
	RMB million	RMB million	RMB million	(For illustrative purpose only) RMB million
Financial services transactions – Revenue nature
Actual historical amount	63.71	63.39	5.10	10.2^{(Note)}
Existing annual caps	70.00	92.00	47.50	95.00
Utilisation rate	91.0%	68.9%	10.7%	10.7% (on annualised basis)
	For the year ending 31 December
---	---	---	---
	2025	2026	2027
	RMB million	RMB million	RMB million
CMG Financial Services
Annual Caps	141.00	111.00	111.00

Note: For the six months ended 30 June 2024, the amount of the financial services transactions between the Company and China Merchants Group and/or its associates was approximately RMB5.10 million. The annualised amount of the said amount of the financial services transactions for the year ending 31 December 2024, for illustrative purpose only, was approximately RMB10.2 million. Such estimation does not take into account the transaction amount of the financial services under new contracts commenced/to be commenced after 30 June 2024 or contracts that ended/to be ended between 1 July 2024 and 31 December 2024, and thus the actual utilisation rate may vary.

With reference to the Letter from the Board, the CMG Financial Services Annual Caps for the three years ending 31 December 2027 were determined after taking into account of various factors, details of which are set out under the section headed "Proposed CMG Annual Caps – 2. Financial services" in the Letter from the Board.

2.6 Utilisation rates of the existing annual caps

As illustrated in the tables above, except for that of the year ended 31 December 2022, the utilisation rates of the existing annual caps for cash inflow and outflow of the securities and financial products and transactions for the year ended 31 December 2023 and 2024 were not at a relatively high level. In particular, the utilisation rates of the existing annual caps for cash inflow of the securities and financial products and transactions for the year ended 31 December 2023 and 2024 were relatively low. As advised by the Management and as disclosed in the Letter from the Board, such low levels of utilisation rates of the existing annual caps for the inflow amounts of the securities and financial products and transactions were mainly attributable to (i) China Merchants Group and/or its associates have set up securities trading

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

accounts at the Company, mainly for the subscriptions of the shares issued by listed companies or potential listed companies, which are usually with relatively high amounts but relatively lower frequencies, and the purchase and redemption of products managed by CMS Asset Management, a wholly-owned subsidiary of the Group may be conducted in a relatively short period before subscription. The sluggish performance of the Shanghai and Shenzhen stock markets in 2023 and for the six months ended 30 June 2024, along with the low willingness of China Merchants Group and its associates to participate in stock market transactions resulted in a decrease in the inflow amounts generated by the purchase of products managed by CMS Asset Management; (ii) the redemption of financing instruments issued by China Merchants Group and/or its associates at maturity will generate an inflow. However, in accordance with the Group's requirements for risk neutrality in such related party transactions, after the Group and/or the asset management products managed by the Group subscribed the financing instruments issued by China Merchants Group and/or its associates in the primary market, the relevant financing instruments were required to be sold to independent third parties at market prices within a short period of time and were not able to be held on a long-term basis, resulting in no related inflows generated in 2023 and the first half of 2024; and (iii) the limited rolling liquidity financing in the real estate industry in 2023 and for the six months ended 30 June 2024, the purchase and resale of underlying assets of China Merchants Shekou Industrial Zone Holdings Co., Ltd., a subsidiary of China Merchants Group, which is mainly engaged in property development, operation and management businesses, by ABS of which the Group acted as the manager, was limited, resulting in a decrease in the inflow amount generated.

2.7 Assessment on the Proposed CMG Annual Caps

To assess the fairness and reasonableness of the Proposed CMG Annual Caps, we conducted following analysis:

In relation to securities and financial products and transactions

As stated in the Letter from the Board, in estimating the CMG Financial Products Annual Caps of the total inflow amount and the total outflow amount of the securities and financial products and transactions to be conducted between the Group and China Merchants Group and/or its associates for the three years ending 31 December 2027, the Group has considered, among other things, the following key factors:

The total outflow amounts of those securities and financial products and transactions between the Group and China Merchants Group and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024 were approximately RMB1.56 billion, RMB5.11 billion and RMB3.43 billion, respectively, and the total inflow amounts were approximately RMB2.75 billion, RMB1.06 billion and RMB1,100, respectively;
In accordance with the development initiative of “Industry-finance Integration” (產融結合) of the Group and China Merchants Group, it is estimated that the Group will generate an outflow of no more than RMB11.0 billion from securities underwriting business co-investment, underwriting by way of standby commitment of fixed-income
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securities (including ABS initiated) issued by China Merchants Group and/or its associates and acting as manager of ABS initiated by China Merchants Group and/or its associates, and an inflow of no more than RMB4.0 billion from maturity of ABS under management for each year from 2025 to 2027. The above estimation is made after taking into consideration the following facts:

(i) The Group may generate an outflow from the subscription of fixed income securities issued by China Merchants Group and/or its associates as a result of co-investment and underwriting by way of standby commitment. The Group may generate an outflow from the purchase of the underlying assets of China Merchants Group and/or its associates as original equity holders by CMS Asset Management, which is a wholly-owned subsidiary of the Company and may act as the manager of ABS; when ABS expires, the resale of the underlying assets by CMS Asset Management to China Merchants Group and/or its associates may incur an inflow;

(ii) In 2022, 2023 and in the first half of 2024, the outflow arising from co-investment, underwriting by way of standby commitment and management of fixed income securities issued by China Merchants Group and/or its associates was approximately RMB1.56 billion, RMB4.10 billion and RMB3.43 billion, respectively;

(iii) China Merchants Group was transformed into a state-owned capital investment enterprise in June 2022. In accordance with the requirements of optimising distribution and structure of state-owned capital, China Merchants Group has vigorously carried out investment and financing, industry nurturing and capital operation in recent years. According to the statistics of Wind Information Co., Ltd. ("Wind"), a service provider of financial data, information and software, the amount of fixed income securities issued by China Merchants Group and its associates in the domestic market of China in 2022, 2023 and from January to August 2024 exceeded RMB150.0 billion, RMB120.0 billion and RMB110.0 billion, respectively, and it is expected that the amount of fixed income securities issued by China Merchants Group and its associates was approximately RMB150.0 billion each year from 2025 to 2027. As a subsidiary of China Merchants Group, the Group will provide more underwriting and management services for fixed income securities issued by China Merchants Group and its associates under the planning of strengthening internal synergies. Considering the rapid development of the Group's related businesses and the expected scale of fixed income securities to be issued by China Merchants Group and its associates in the next three years, it is expected that the outflow amount of fixed income securities issued by China Merchants Group and/or its associates to be subscribed for by the Group as a result of co-investment and underwriting by way of standby commitment will be approximately RMB7.0 billion for each of the three years ending 31 December 2027; and

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(iv) In 2022, 2023 and from January to August 2024, the total amount of ABS projects initiated by associates of China Merchants Group as original equity holders amounted to approximately RMB6.2 billion, RMB4.1 billion and RMB2.0 billion, respectively. To ensure the normal operation of relevant businesses and avoid undue disruption and damage to the Group's ordinary course of business, and with reference to the maximum amount of a single ABS project of approximately RMB4.1 billion for which China Merchants Group and/or its associates have been the original equity holders since the IPO of H shares of the Group in 2016, it is estimated that for each of the three years ending 31 December 2027, an outflow arising from the purchase of the underlying assets of China Merchants Group and/or its associates as original equity holders by CMS Asset Management as the manager of ABS will be approximately RMB4.0 billion. Considering that ABS has a flexible term ranging from a few days to several decades, in order to ensure the normal operation of business, it is estimated that an inflow from the resale of underlying assets due to the maturity of ABS will be approximately RMB4.0 billion for each of the three years ending 31 December 2027;

It is estimated that the outflow from agency primary bond auction business, forward contracts/forward trading business and other fixed income intermediary business to be conducted between the Group and China Merchants Group and/or its associates will be approximately RMB3.0 billion for each of the three years ending 31 December 2027, of which the outflow from agency primary bond auction business will be approximately RMB2.5 billion, and the total outflow from forward contracts/forward trading business and other fixed income intermediary business will be approximately RMB500 million, while the total inflow from the relevant transactions will be approximately RMB500 million. The above-mentioned estimation is made based on the following facts:

(i) The Group has been operating its fixed income intermediary business on a trial basis since 2022 and has continued to expand the relevant business in recent years. The fixed income intermediary business includes agency primary bond auction business, forward contracts/forward trading business and other fixed income intermediary business. In respect of the agency primary bond auction business, the Group may subscribe for the financial instruments issued by China Merchants Group and/or its associates at primary markets as commissioned by the clients and then sell back to the clients, thus resulting in an outflow; in respect of forward contracts/forward trading business, the Group may conduct forward bond transaction at secondary markets with China Merchants Group and/or its associates, which may be the purchaser or vendor of the bonds, thus resulting in an inflow or outflow; in respect of other fixed income intermediary business, the Group may conduct bond transaction at secondary markets with China Merchants Group and/or its associates, which may be the purchaser or vendor of the bonds, thus resulting in an inflow or outflow;

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(ii) The scale of the Group's agency primary bond auction business involving China Merchants Group and its associates is closely related to the fluctuation of interest rates in the bond market and the factors of the bonds subscribed. From 2022 to 2024, it was originally estimated that the scale of fixed income products issued by China Merchants Group and/or its associates in the domestic market of China would be approximately RMB150 billion, of which approximately 2% would generate fixed income intermediary business opportunities. It is estimated that the annual average scale of the agency primary bond auction business would be approximately RMB2.5 billion, and the total annual average scale of forward contracts/forward trading business and other fixed income intermediary business between them would be approximately RMB500 million, generating an inflow of RMB500 million and an outflow of RMB3 billion each year. In recent years, China has entered a period of industrial restructuring, with relatively sluggish economic growth, moderately easy monetary policy, and a notable decline in bond market interest rates. Due to the high market recognition of the qualification of China Merchants Group and its associates, the coupon rates of their issued bonds are at a relatively low level, which, along with the continued extension of the issuance duration, has led to a reduction in customer demand and consequently kept the connected transactions involved in the fixed-income intermediary business at a low level. The interest rates of the bond market are expected to remain stable with a slight decline in the next three years, which will be conducive to the expansion of the scale of bond issuance of China Merchants Group and its associates, thereby expanding the space for the Group to carry out agency primary bond auction business with China Merchants Group and its associates, and increasing the development of opportunities in negotiated trading and other fixed income intermediary business; and

(iii) According to Wind, the scale of fixed income products issued by China Merchants Group and/or its associates in the domestic market of China in 2022, 2023 and from January to August 2024 exceeded RMB150.0 billion, RMB120.0 billion and RMB110.0 billion respectively. Therefore, it is estimated that the scale of fixed income products issued by China Merchants Group and/or its associates for each year from 2025 to 2027 will be approximately RMB150.0 billion. Based upon the issuance plans of China Merchants Group and/or its associates and integrated needs of customers, approximately 2% of the issuance scale of China Merchants Group and/or its associates is expected to generate fixed income intermediary business opportunities. The Group estimates that the annual amount of fixed income products issued by China Merchants Group and/or its associates to be applied and paid by the Group at primary markets as commissioned by the clients will be no more than RMB2.5 billion, thus resulting in an outflow of RMB2.5 billion. Meanwhile, the Group will expand its efforts in conducting forward contracts/forward trading business and other fixed income intermediary business with financial enterprises controlled by China Merchants Group, such as China Merchants Life Insurance Company Limited, in future three years. The size of each forward contracts/forward trading business and other fixed income intermediary business normally ranges from tens of millions

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of RMB to RMB100 million. It is expected that the total number of forward contracts/forward trading business and other fixed income intermediary business to be conducted between the Group and China Merchants Group and/or its associates will be 5-25 each year, thus resulting in an inflow and outflow of RMB500 million for each year from 2025 to 2027;

In view of the highly fluctuating capital demand of the securities industry with market changes, in order to meet the capital demand and ensure sufficient liquidity, the Group has established diversified financing channels to maintain adequate and stable financing channels. Among them, beneficiary certificates with flexible maturity and convenient issuance process, are one of the main debt financing instruments of the Group. For the two years ended 31 December 2023, the financing scale of beneficiary certificates issued by the Group each year was approximately RMB20.0 billion to RMB40.0 billion, and it is estimated that the Group will issue beneficiary certificates of approximately RMB50.0 billion to RMB60.0 billion for each year from 2025 to 2027. The Group will continue to improve the institutional customer service marketing system. Beneficiary certificates, as one of the important tools for wealth management of the Group's institutional clients, are featured by capital and interest preservation, flexible term and diversified structure, which can meet the investment requirements of China Merchants Group and/or its associates for high-quality assets, especially in a low-interest rate environment. Considering that (i) the amount of beneficiary certificates issued by the Group purchased by China Merchants Group and/or its associates in 2023 was RMB1.0 billion; (ii) China Merchants Group and/or its associates may increase the subscription of beneficiary certificates issued by the Group in the next three years, mainly because the beneficiary certificates meet the investment requirements of China Merchants Group/or its associates for financial instruments in the current market environment, therefore, it is estimated that the annual inflow and outflow from the purchase and redemption of the Group's beneficiary certificates by China Merchants Group and/or its associates will be approximately RMB3.0 billion in each of the next three years;
Based on liquidity management, China Merchants Group and/or its associates may subscribe the dealer-quoted repurchase products issued by the Group on a rolling basis over the next three years. Dealer-quoted repurchase transaction means any transaction in which a securities company takes its own assets meeting the requirements as collateral, takes the amount corresponding to the number of standard bonds converted from collateral as the financing limit, raises funds from qualified customers through quotation, and agrees to return such funds to customers and pay corresponding income when repurchase expires. As a cash management tool, dealer-quoted repurchase products are characterized by agreed income, repurchase in advance and automatic renewal. The Group issues dealer-quoted repurchase products with flexible maturities ranging from 1 day to 365 days. In 2023, the turnover frequency of institutional clients' subscription of dealer-quoted repurchase products issued by the Group was approximately 4-8 times/year, with each subscription size of approximately RMB200 million to RMB500 million. Based on the previous subscription size and turnover frequency of institutional clients, the Group estimates that the annual inflow from the subscription of dealer-quoted repurchase products by China Merchants Group and/or its
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associates from 2025 to 2027 will be approximately RMB2.0 billion, and the outflow resulting from the redemption of related dealer-quoted repurchase products will be approximately RMB2.05 billion (of which the outflow arising from interest payments is expected to be approximately RMB50 million);

It is estimated that for each of the three years ending 31 December 2027, the total inflow and outflow from the purchase and redemption of the products (including monetary products, fixed income products, equity product and customised products) managed by CMS Asset Management, a wholly-owned subsidiary of the Company, by China Merchants Group and/or its associates will be approximately RMB3.0 billion and RMB3.0 billion, respectively, which was estimated based on the following facts:

(i) For the two years ended 31 December 2023 and the six months ended 30 June 2024, the inflow from the purchase of the products managed by CMS Asset Management, a wholly-owned subsidiary of the Company, by China Merchants Group and/or its associates was approximately RMB2.0 million, RMB49.0 million and RMB1,100, respectively, and the outflow from the redemption of such products was approximately RMB0.09 million, RMB10.0 million and RMB3,000, respectively;

(ii) China Merchants Group and/or its associates have opened securities trading accounts with the Company and may participate in the subscription of shares issued by listed companies or proposed listed companies. Prior to the subscription, China Merchants Group and/or its associates may purchase and redeem monetary products managed by CMS Asset Management within a relatively short period of time, usually at a higher amount but with an unpredictable frequency. As the scale of transactions is typically closely related to market activity and supportive policies in the capital market, the transaction scale is usually larger when the market is active, whereas it generally decreases when the market is inactive. According to the Group's "Medium and Long-term Development Strategy and 2019-2023 Development Plan," which focuses on developing active asset management, the Group vigorously promoted the purchase of products managed by CMS Asset Management by China Merchants Group and/or its associates. For example, during the active phase of the A share market in 2020, the inflow and outflow generated by the purchase and redemption of products managed by CMS Asset Management by China Merchants Group and/or its associates reached approximately RMB6.532 billion and RMB6.533 billion respectively; in the month of July 2024, both inflow and outflow from the purchase and redemption of products managed by CMS Asset Management by China Merchants Group and/or its associates exceeded RMB300 million. Taking into account that the subscription of the relevant products is subject to highly volatile market activity, the single transaction amount of asset management products subscribed by China Merchants Group and/or its associates is usually high, in order to avoid undue disruption and damage to the Group's ordinary course of business and to retain the business flexibility, the Group

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estimates the inflows and outflows generated by the relevant transactions in the next three years with reference to approximately 50% of the maximum annual transaction amount in the past five years;

(iii) In the first half of 2024, CMS Asset Management was qualified as a public fund manager to carry out asset management business in a broader and more standardised field. Seven existing collective products such as Tiantianli (天添利) will be changed into public funds in 2024, and the first batch of five public offering products will be reported, of which two equity products have been approved by the regulatory authorities, and the follow-up issuance is intended to be initiated at an appropriate time. Based on short-term cash management and medium-to long-term sound investment needs, it is expected that the annual inflow and outflow from the subscription and redemption of the above-mentioned products in the next three years will be approximately RMB500 million; and

(iv) CMS Asset Management has been vigorously developing active asset management business in recent years, among which the scale of institutional customised asset management products that meet the needs of institutional and corporate customers has increased from RMB112.8 billion at the end of 2023 to RMB120.2 billion at the end of the first half of 2024. With the impetus given by the implementation of cooperation strategy between the Group and China Merchants Group and/or its associates, China Merchants Group and/or its associates may subscribe for the institutional customised asset management schemes managed by CMS Asset Management in the future. Given that the Group did not conduct such transactions with China Merchants Group and/or its associates in the past years, the Company will estimate the inflow and outflow from such transactions based on (a) historical size of the actively-managed institutional customised asset management schemes managed by CMS Asset Management, i.e. approximately RMB120.0 billion per year in the past three years; and (b) the proportion of the size of the institutional customised asset management schemes managed by CMS Asset Management expected to be purchased or redeemed by China Merchants Group and/or its associates in each of the next three years, i.e. approximately 0.4%-0.5%. As such, it is estimated that the annual inflow and outflow from the purchase and redemption of institutional customised asset management schemes managed by CMS Asset Management by China Merchants Group and/or its associates from 2025 to 2027 will be approximately RMB500 million;

The Group provides integrated financial products to customers and conducts integrated financial transactions with customers. The Group has now obtained over 100 business qualifications and has been authorised to engage in integrated financial products and integrated financial transactions business activities, which have played an active role in the past three years. In the next three years, the Group will actively implement the strategy of “three investments (investment banking, investment and research) linkage” in collaboration with China Merchants Group to assist China Merchants Group transform and upgrade its traditional industries and layout strategic emerging industries, which is
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expected to increase the scale of financing instruments issued by associates of the China Merchants Group purchased by the Group and the scale of financing instruments issued by the Group purchased by associates of the China Merchants Group. In addition, the Group will also make every effort to build a comprehensive corporate financial service brand of “China Merchants Securities Helps Start the Sailing (招證啟航)”, integrating various business lines of the Group around the needs of China Merchants Group, forming innovative comprehensive service products such as brokerage service system of “transaction matching, trading system, futures brokerage, margin financing and securities lending” and investment service system of “fund investment advisory, Zhiyuan private banking (致遠私行), equity investment, derivative investment and wealth management”. It is expected to expand the scale of securities and financial products and transactions between the Group and China Merchants Group and/or its associates. Meanwhile, China Merchants Group and/or its associates are mainly engaged in transportation logistics, comprehensive finance, comprehensive development and operation of cities and parks, and strategic emerging industries, anchoring the goal of building a world-class enterprise, creating “two curves” (兩條曲線), promoting “the third venture” (第三次創業), and promoting the transformation and upgrading of traditional industries and the cultivation and development of strategic emerging industries. The business growth and diversification of China Merchants Group and/or its associates will create more opportunities for the Group to engage in securities and financial transactions and provide securities and financial products to each other with China Merchants Group and/or its associates. As a result, the total inflow and outflow are expected to increase substantially in the next three years; and

Given that (i) the inherent nature of the securities and financial products and transactions described above, including their market-sensitivity and timeliness, (ii) the Group's limited control over the counterparties in those transactions, and (iii) the volatility and unpredictability of the financial market in general, an adequate buffer (representing 10%-15% of the Proposed CMG Annual Caps) should be provided to prevent undue restriction on the future business operations of the Group.

We have discussed with the Management and were given to understand that an adequate buffer should be provided to cope with the changes to the securities and financial products and transactions brought about due to the market factors to prevent undue restriction on the future business operations of the Group as a result of the inherent nature of the securities and financial products and transactions, including their market-sensitivity and timeliness, and the Group's limited control over the counterparties in those transactions as the majority of which are conducted through intermediate system(s), as well as the volatility and unpredictability of the financial market in general. As disclosed in the Letter from the Board, it is expected that there will be an increase in the total inflow amount and total outflow amount in 2025, 2026 and 2027 taking into account the new types of securities and financial products that the Group may offer and the business growth and diversification of China Merchants Group and/or its associates, which will create more opportunities for the Group and China Merchants Group and/or its associates to conduct securities and financial transactions and provide securities and financial products to each other.

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As such, the Proposed CMG Annual Caps were determined with reference to the historical data, but were mainly determined after considering (i) the increasing business collaboration and business integration with China Merchants Group and/or its associates, including the abovementioned “Industry-finance Integration” (產融結合); (ii) will create cost synergy by integrating the strengths of the Group and China Merchants Group and/or its associates, which will in turn improve the profitability of the Group and enhance the Group’s leading position in the securities industry; and (iii) the development of the financial products markets, with an adequate buffer incorporated to cater for new products and businesses, and given the nature of the securities and financial products and transactions being market-sensitive and unpredictable, to avoid restriction on the Group’s future business opportunities and growth.

To assess the fairness and reasonableness of the total inflow amount and total outflow amount of the CMG Financial Products Annual Caps for the effective period of the 2024 CMG Framework Agreement, we have taken into consideration the factors as detailed below.

We have reviewed the business plan for the three years ending 31 December 2027 provided by the Company and noted that the CMG Financial Products Annual Caps are estimated based on the expected transaction volume of different types of transactions in such business plan. We noted that the total inflow amount and the total outflow amount of the securities and financial products and transactions to be conducted between the Group and China Merchants Group and/or its associates for the three years ending 31 December 2027 is in line with the estimations in the business plan.

According to the information on the National Bureau of Statistics of the PRC (https://data.stats.gov.cn/), the PRC achieved steady economic growth, with gross domestic product increased by a CAGR of approximately 5.1% from approximately RMB80,976 per capita in 2021 to approximately RMB81,370 per capita in 2023. From 2021 to 2023, the per capita disposable income grew at a CAGR of approximately 5.6% from approximately RMB35,128 to approximately RMB39,218. The increase in per capita disposable income demonstrates the rapid accumulation of personal wealth in the PRC. Such wealth accumulation leads to stronger demands of securities and financial products and financial services.

As advised by the Management, the Group has been continuously growing its scale of operation since 2015, and has become a large-scale financial holding group across the PRC engaging in brokerage and wealth management business, including stocks, funds, bonds and financial products trading; investment banking business, including equity financing, debt financing and structured financing; investment management business, including collective asset management, targeted asset management and special asset management, as well as investment and trading business, including equity securities and fixed income securities transactions.

For our due diligence purpose, we have obtained a list from the Company, showing the breakdown of the CMG Financial Products Annual Caps for each of the three years ending 31 December 2027. We understood from the Company that relevant subsidiaries/departments of the Company provided an estimation of the forecasted sale and purchase amount of securities and financial products and transactions for the three years ending 31 December 2027. We noted that such forecasted amounts were based on (i) the historical growth of the respective

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business sub-segments, including but not limited to those under the fixed-income intermediary business of the Group; and (ii) the expansion plans and potential business development between the Group and China Merchants Group anticipated by the Management as detailed above. Such forecasted amounts can be reconciled with the estimations in the business plan, and were approved by management of the relevant subsidiaries before submitting to the Company for consolidation and review. The connected transaction management working team of the Company was responsible for the consolidation and review.

The CMG Financial Products Annual Caps are taking into account the above factors, including (i) the annual caps are generally in line with the estimation of transaction volume in the business plan and the forecasted breakdown of the Group; (ii) adequate buffer is required to prevent undue restriction on the future business development of the Group and for risk management regarding market volatility and changes; (iii) current status of PRC capital market; and (iv) increase in the scale of operation of the Group since 2015 which demonstrates the business expansion in recent years, we concur with the Directors that the CMG Financial Products Annual Caps for the three years ending 31 December 2027 to be fair and reasonable.

Shareholders should note that as the CMG Financial Products Annual Caps for the three years ending 31 December 2027 are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2027, and they do not represent forecasts of revenue/income/cost to be incurred from the securities and financial products and transactions. Consequently, we express no opinion as to how closely the actual revenue/income/cost to be incurred from the securities and financial products and transactions will correspond with the CMG Financial Products Annual Caps.

In relation to financial services

As disclosed in the Letter from the Board, in estimating the CMG Financial Services Annual Caps of the revenue to be generated by the Group from the provision of financial services to China Merchants Group and/or its associates for the three years ending 31 December 2027, the Group has considered, among other things, the following key factors:

historical amounts of the revenue generated by the Group from providing financial services to China Merchants Group and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024, including the different service rates and fees the Group charged for the provision of different types of financial services, and considering, in particular, that the Group's provision of financial services to China Merchants Group and/or its associates is mainly market-driven. Therefore, the Proposed CMG Annual Caps shall include an adequate buffer (representing 10%-15% of the Proposed CMG Annual Caps) to cover any market volatility and changes. Otherwise, an annual cap that is too restrictive might cause undue disruption to the operations of the Group and hamper its ability to respond quickly to changes in the highly volatile financial market;
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as part of its normal course of business, the Group will continue to provide underwriting and sponsoring services for the equity and fixed income financial instruments to be issued by China Merchants Group and/or its associates, which is expected to generate a revenue of approximately RMB59 million, RMB59 million and RMB59 million in 2025, 2026 and 2027, respectively. The above-mentioned estimates are based on the following facts:

i. For the two years ended 31 December 2023 and the six months ended 30 June 2024, income from underwriting and sponsoring services provided by the Group for the equity and fixed income financial instruments issued by China Merchants Group and/or its associates amounted to approximately RMB38.8 million, RMB31.6 million and RMB1.9 million, respectively; and

ii. As a large corporate group, China Merchants Group controls and holds shares of various listed companies in Hong Kong and Mainland China. Meanwhile, it has cultivated and is cultivating various enterprises with influence in new energy, semiconductor, bio-pharmaceutical, technology and other industries, which are expected to enter the domestic capital market in the future. Under the general background of the central government promoting the high-quality development of capital market, the reform of the registration-based system in the domestic securities market and Hong Kong supporting the listing of leading enterprises in mainland industries in Hong Kong, the IPOs, re-financing and other financing demands of China Merchants Group and the relevant listed companies and industrial enterprises controlled by China Merchants Group will increase significantly. As a comprehensive securities company controlled by China Merchants Group, the Group enjoys strong competitiveness in the above-mentioned business sectors. Therefore, it is expected that revenue from the provision of underwriting and sponsoring services to China Merchants Group and/or its associates will record significant growth. Due to the difficulty in estimating the progress of the projects and the subsequent market regulatory environment, it would be impracticable to predict the actual years for the realisation of such revenue. Based on the expected demand of China Merchants Group and its associates for capital operation services, the expected progress of the ongoing projects, the potential transactions for which the Group may provide such services and the charges on large-scale projects in the market, it is expected that revenue from the provision of underwriting and sponsoring services (including but not limited to IPOs, re-financing, mergers and acquisitions and restructuring) by the Group to China Merchants Group and/or its associates will be approximately RMB59 million, RMB59 million and RMB59 million in 2025, 2026 and 2027, respectively;

In addition to underwriting and sponsoring services, the Group will continue to provide other financial services (mainly financial advisory services) to China Merchants Group and/or its associates in its ordinary course of business, and the service fees are expected to be approximately RMB82 million, RMB52 million and RMB52 million in 2025, 2026 and 2027, respectively. The above-mentioned estimates are based on the following facts:
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i. For the two years ended 31 December 2023 and the six months ended 30 June 2024, service fees charged by the Group for other financial services (mainly financial advisory services) provided to China Merchants Group and/or its associates amounted to approximately RMB24.9 million, RMB31.7 million and RMB3.2 million, respectively; and

ii. Based on the expected demand for capital operation services from China Merchants Group and its associates, the expected progress of projects in progress and potential transactions in which the Group may provide financial advisory or other financial services to China Merchants Group, and considering that the pipeline of projects which are expected to realise revenue in 2025 is more adequate than that in 2026 and 2027, the Group expects that revenue from the provision of financial advisory and other financial services by the Group to China Merchants Group and/or its associates will be approximately RMB82 million, RMB52 million and RMB52 million in 2025, 2026 and 2027, respectively.

To assess the fairness and reasonableness of the CMG Financial Services Annual Caps for the effective period of the 2024 CMG Framework Agreement, we have taken into consideration the factors as detailed below.

As disclosed in the 2023 Annual Report, despite the downturn in the market environment as well as the tightened IPOs and refinancing periodically, and the declining number and amount of equity financing in the A share market, the Company promoted the professional transformation of investment banking, vigorously developed refinancing business, and improved the ranking in terms of the number of equities underwritten. According to the statistics from Wind, the Company ranked the 9th in the industry in terms of the value of A share projects underwritten as a leading underwriter, and the Company ranked the 11th place in terms of the number of A share equity projects underwritten as a leading underwriter, in which, the Company ranked the 7th in the industry in terms of the number of refinancing projects underwritten, representing a year-on-year increase of five places in the ranking. As of the end of 2023, the number of products under custody and fund administrative services of the Company amounted to 43,000, representing a year-on-year increase of approximately $4.32\%$, and the size of which amounted to approximately RMB3.47 trillion, representing a year-on-year increase of approximately $0.19\%$. According to the statistics from the Asset Management Association of China (https://www.amac.org.cn/) and Wind, the Company's market share in terms of the number of private fund products under custody reached approximately $21.91\%$ and ranked the 1st in the industry for ten consecutive years. The Company ranked the 3rd in the securities industry in terms of the amount of mutual fund products under custody. Moreover, according to the statistics from Bloomberg, in the Hong Kong stock market, the Company completed a total of five underwriting projects, with an underwritten amount of approximately US$26.97 million, of which three of them were Hong Kong IPO projects sponsored by the Company, and the Company have assisted 17 enterprises in related industries in completing equity financing, with an underwriting amount of approximately RMB12.972 billion. Furthermore, according to the statistics from Wind, in 2023, the Company completed two M&A and restructuring projects in the A share market, with a transaction value of approximately RMB11.135 billion, including the acquisition of equity interests of Tianxin

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Breeding (天心種業) and other companies by New Wellful (新五豐) (a state-owned regional leading enterprise in the hog industry), and the issuance of shares to purchase assets and raise supporting funds by China Merchants Shekou Industrial Zone Holdings.

We have discussed with the Management and according to the 2023 Annual Report, we noted that the Directors consider that (i) the full implementation of the registration-based IPO system has been officially commenced, and a multi-level capital market was improved; (ii) residents' demand for wealth management continued to increase, with the year-end household savings balance reaching approximately RMB136.99 trillion, representing an average compound annual growth rate (CAGR) of approximately 13.85% from 2019 to 2023; (iii) various new regulatory regulations were introduced, and the mutual fund and private fund industries developed in a more standardised and transparent manner and with high quality. According to the statistics from the Asset Management Association of China (https://www.amac.org.cn/), as of the end of 2023, the assets under management of the mutual fund industry amounted to approximately RMB27.60 trillion, and the assets under management of private securities investment funds amounted to approximately RMB5.72 trillion, representing an increase of approximately 6.03% and 2.87%, respectively, from the end of 2022; (iv) with the full implementation of the registration-based IPO system was successfully commenced, significant progress were made in major reforms. The functions of the capital market were effectively played, and the quality and efficiency of serving the real economy and scientific and technological innovation were continuously enhanced, all of which actively contributed to the economic recovery and high-quality development; and (v) the ecology of ETF market continued to improve, and residents' demand for index-based investment was released, with the share of ETFs exceeding 2 trillion at the end of the year, representing an average CAGR of approximately 40.24% from 2019 to 2023.

We have reviewed the business plan for the three years ending 31 December 2027 provided by the Company and noted that the CMG Financial Services Annual Caps are estimated based on the expected transaction volume of different types of transactions in such business plan. We noted that the revenue to be generated by the Group from the provision of financial services to China Merchants Group and/or its associates for the three years ending 31 December 2027 is in line with the estimations in the business plan.

For our due diligence purpose, we have obtained a list from the Company, showing the breakdown of the CMG Financial Services Annual Caps for each of the three years ending 31 December 2027. We understood that the forecasted sale and purchase amount of financial services for the three years ending 31 December 2027. We noted that such amounts were based on (i) the historical revenue generated from the provision of financial services; and (ii) the expansion plans and potential business development between the Group and China Merchants Group anticipated by the Management as detailed above. Such forecasted amounts can be reconciled with the estimations in the business plan, and were approved by management of the relevant subsidiaries before submitting to the Company for consolidation and review. The connected transaction management working team of the Company was responsible for such consolidation and review. We understood from the relevant personnel from the connected transaction management working team of the Company that (i) it would be in the interests of the Group for the CMG Financial Services Annual Caps to be as accommodating to the Group

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as possible, provided that the conduct of those transactions would be strictly followed relevant internal control procedure to ensure the fair pricing; (ii) the Group would have flexibility in the provision and accepting of financial services if the CMG Financial Services Annual Caps are tailored to the future business and market growth; and (iii) if the CMG Financial Services Annual Caps are set without considering sufficient room for future business and market growth and the Company has to revise the annual caps upward at a general meeting before conducting additional transactions, the Company's business may be restricted and it will have to incur additional administrative costs and resources to obtain approval from the Independent Shareholders. During our discussion, we have not identified any major factor which caused us to doubt the reasonableness of the estimation of the services amounts of the financial services for the three years ending 31 December 2027.

As advised by the Management, the merger and acquisition and restructuring are among the strategic goals of China Merchants Group, coupled with the Group's plan to strengthen its merger and acquisition advisory business in which it is expected that there will be more opportunities for the Group to provide financial advisory services to China Merchants Group and/or its associates.

We have also discussed with the Management on the possible high growth rate to the asset management service income after taking into account that after China Merchants Group and/or its associates obtains their investment license(s) in which they will be able to invest in the asset management plans issued by the Group. We noted that the Group's leading position in the relevant markets which would enable the Group to better seize the opportunities to provide financial services to China Merchants Group and/or its associates. According to the 2023 Annual Report, the Company was successfully named as a "benchmarking" (標桿) enterprise in the "Double-hundred Enterprises" (雙百企業) special assessment of the SASAC in 2022, and launched a new round of actions to deepen and upgrade the reform of state-owned enterprises in an all-round way. Furthermore, the Company fully benefits from the brand influence of "China Merchants" and the industrial and financial resources within China Merchant Group. With the strong support from China Merchants Group, the Company has continued to grow and develop and achieved A+H share listing.

In light of the above factors, including (i) the annual caps are generally in line with the estimation of transaction volume in the business plan and the forecasted breakdown of the Group; (ii) adequate buffer is required to prevent undue restriction on the future business development of the Group and for risk management regarding market volatility and changes; (iii) current status of PRC capital market; (iv) increase in the scale of operation of the Group since 2015 which demonstrates the business expansion in recent years; and (v) our discussion with the relevant personnel in the connected transaction management working team of the Company, we concur with the Directors that the CMG Financial Services Annual Caps for the three years ending 31 December 2027 to be fair and reasonable.

Shareholders should note that as the CMG Financial Services Annual Caps for the three years ending 31 December 2027 are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2027, and they do not represent forecasts of revenue/income/cost to be incurred from the securities

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and financial products and transactions. Consequently, we express no opinion as to how closely the actual revenue/income/cost to be incurred from the securities and financial products and transactions will correspond with the CMG Financial Services Annual Caps.

3. The 2024 COSCO Framework Agreement

3.1 The reasons for and benefits of entering into the 2024 COSCO Framework Agreement

As disclosed in the Letter from the Board, transactions contemplated under the 2024 COSCO Framework Agreement will comprehensively capitalise on the resource advantages of the Group and COSCO Shipping and/or its associates, enhance the market competitiveness of the parties' cooperation business, and create cost synergy by integrating the strengths of the parties, which will in turn improve the profitability of the Group and enhance the Group's leading position in the securities industry.

We have discussed with the Management and were given to understand that in light of the past and current cooperation relationships between the Group and COSCO Shipping, the abovementioned transactions have and will continue to contribute to the overall business operation and growth of the Group.

We were advised by the Directors that, as the transactions contemplated under the 2024 COSCO Framework Agreement will be entered into in the ordinary and usual course of business of the Group and on a frequent and regular basis, it would be (i) impracticable to negotiate for numerous agreements with COSCO shipping and/or its associates; and (ii) costly and impractical to make regular disclosure of each of the relevant transactions and obtain the prior approval from the Independent Shareholders as required by the Listing Rules, if necessary.

In light of the above factors, we concur with the Directors that the entering into of the 2024 COSCO Framework Agreement is in the interests of the Company and the Shareholders as a whole and the transactions contemplated under the 2024 COSCO Framework Agreement are conducted in the ordinary and usual course of business of the Group.

3.2 Principal terms of the 2024 COSCO Framework Agreement

As disclosed in the Letter from the Board, the validity of the 2022 COSCO Framework Agreement will expire on 31 December 2024. The Group and COSCO Shipping and/or its associates expect to continually conduct securities and financial transactions with each other and provide securities and financial products to each other, and the Group expects to continually provide financial services to COSCO Shipping and/or its associates thereafter in their respective ordinary course of business based on normal commercial terms and market practices at prevailing market prices or rates, the Company entered into the 2024 COSCO

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Framework Agreement with COSCO Shipping on 18 December 2024 to renew the 2022 COSCO Framework Agreement. The principal terms of the 2024 COSCO Framework Agreement are as follows:

Date: 18 December 2024

Parties: The Company and COSCO Shipping

Term: Subject to the approval by the Independent Shareholders at the EGM, the term of the 2024 COSCO Framework Agreement will commence from 1 January 2025 or the date of approval by the Independent Shareholders at the EGM (whichever is later), and will expire on 31 December 2027.

The 2024 COSCO Framework Agreement is conditional upon the obtaining of the approval from the Independent Shareholders. Details of the scope of the transactions and services contemplated under the 2024 COSCO Framework Agreement are set out under the sub-section headed "The 2024 COSCO Framework Agreement – Scope of the Transactions and Services" in the Letter from the Board.

3.3 Pricing basis for the 2024 COSCO Framework Agreement

In relation to securities and financial products and transactions

As stated under the sub-section headed "The 2024 COSCO Framework Agreement – Pricing basis" in the Letter from the Board, the securities and financial products and transactions are conducted through OTC markets such as the PRC Inter-bank Bond Market, the PRC Foreign Exchange Trading Center, the PRC Exchange Bond Market, the exchanges (including stock exchanges, futures exchanges, the Shanghai Gold Exchange, etc.) and the Interagency Private Placement Product Quotation and Service system.

We have discussed with the Management and noted that currently there are four securities and financial products to be provided under the 2024 COSCO Framework Agreement, namely fixed income products or transactions, equity products or transactions, financing transactions, and other securities and financial products and transactions as permitted by regulatory authorities, and it is expected that the said four types of securities and financial products will continue to comply with the corresponding pricing policies as disclosed in the Letter from the Board.

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In relation to financial services

As disclosed in the Letter from the Board, the Group provides various financial services to its clients, which include COSCO Shipping and/or its associates, in its ordinary course of business. Due to the expertise and professional capabilities of the Group, the Group has been engaged by COSCO Shipping and/or its associates to provide financial services, including but not limited to, (i) underwriting and sponsoring services; (ii) other investment banking services; and (iii) other financial services from time to time. The pricing basis for the financial services to be provided by the Group to COSCO Shipping and/or its associates under the 2024 COSCO Framework Agreement are set out under the section headed "The 2024 COSCO Framework Agreement – Pricing basis – 2. Financial services" in the Letter from the Board.

The terms, including pricing terms, between COSCO Shipping and/or its associates and the Group to be entered into in respect of the provision of financial services as stated above to be provided by the Group shall be no less favourable to the Group than those offered to the Group's other institutional clients of a similar size and with similar transaction volume who are independent third parties, and shall be subject to the same internal approval and monitoring procedures and pricing policies applicable to independent third party clients.

Assessment on the pricing basis of the 2024 COSCO Framework Agreement

In order to assess the fairness and reasonableness of the pricing basis of the 2024 COSCO Framework Agreement, we have randomly selected and sample agreements for different types of transactions entered into by the Group. We have randomly selected and reviewed five sample agreements entered into by the Company and COSCO Shipping pursuant to the 2022 COSCO Framework Agreement which covered (i) the fixed income products or transactions under the securities and financial products; and (ii) the underwriting and sponsoring services under the financial services for each of the two years ended 31 December 2023 and the six months ended 30 June 2024 as stated above, and noted that the pricing policies stipulated in the product agreements are consistent with the pricing policies as discussed above. Other types of products and transactions of securities and financial products and financial services under the 2022 COSCO Framework Agreement were not selected as no relevant transactions were conducted between the Company and COSCO Shipping during the period. We have also randomly selected and reviewed five sample agreements entered into between the Company and other independent third parties who provide/purchase similar products/services to/from the Company which covered (i) the fixed income products or transactions under the securities and financial products; and (ii) the underwriting and sponsoring services under the financial services, and noted that the terms of securities and financial products/services offered/

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purchased by such independent third parties are similar to the terms offered/purchased by COSCO Shipping, which covered the substantial time period as the 2022 COSCO Framework Agreement. In view of the aforesaid samples cover the principal and available types of (i) securities and financial products; and (ii) financial services provided by the Group to COSCO Shipping and/or its associates and similar products/services provided by the Group to independent third parties for each of the two years ended 31 December 2023 and the six months ended 30 June 2024, we consider that such samples are fair and representative to illustrate the pricing of transactions under the 2024 COSCO Framework Agreement is no less favourable to the Group than that provided/purchased to/from independent third parties. We consider such review covering the historical period under the 2024 COSCO Framework Agreement on a random sampling basis on financial products and financial services of the Group to be sufficient from the Independent Financial Adviser's perspective and nothing has come to our attention that causes us to believe that such agreements did not follow the internal control measures.

We were further advised that such service fees or commission or brokerage fees charged for the financial services provided to COSCO Shipping and/or its associates shall be based on negotiations between the parties with reference to the prevailing market rates and the fees or commissions charged by the Group for services provided to independent third parties, while taking into account individual factors such as deal size and complexities, market responses, and competition from other securities companies, and in accordance with the requirements of the applicable laws and regulations of the PRC. We have reviewed terms including but not limited to the (i) scope of service; (ii) payment terms; and (iii) basic information of the customers stated on the contract samples provided by the Company, and noted that pricing terms offered by the Group to COSCO Shipping and/or its associates were on normal commercial terms or on terms no less favourable than those offered by the Group to the independent third parties which substantiated the above.

Internal approval procedures and supervision

As advised by the Management, the Group has adopted a series of internal pricing policies and approval procedures to regulate the transactions under the 2024 COSCO Framework Agreement. For due diligence purpose, we have obtained and reviewed four guidelines showing the Group's internal approval and monitoring procedures for both (i) the securities and financial products; and (ii) transactions and the financial services. We noted from the documents that, among other things, the Group has formulated and established internal guidance and policies for (i) various securities and financial products and transactions; and (ii) financial services, as well as internal procedures and system for the approval and monitoring of such transactions. Such documents covered the major internal policies of the Group as set out in the section headed "Internal Control Measures of Continuing Connected Transactions" in the Letter from the Board, therefore we consider that the documents are fair and representative to illustrate the internal control measures. Based on the above, we consider that the internal control procedures are sufficient for the Company to monitor the transactions contemplated under the 2024 COSCO Framework Agreement and the effective implementation of the procedures would help to ensure fair pricing according to the pricing policies.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In light of the above and that the transactions under the 2024 COSCO Framework Agreement (i) are highly market-sensitive and the Group generally could not control on the counterparties of transactions due to the majority of the securities and financial products and transactions are conducted through intermediate system(s); and (ii) are monitored by the Group's internal control procedures as mentioned in the Letter from the Board, we are of the view that the terms of the 2024 COSCO Framework Agreement are on normal commercial terms and the pricing bases which are determined with reference to prevailing market prices/rates at the time of transactions and the terms are fair and reasonable so far as the Independent Shareholders are concerned.

3.4 The historical amounts and the proposed annual caps of securities and financial products and transactions

Set out below are (i) the actual historical transaction amount of the securities and financial products and transactions between the Company and COSCO Shipping and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024 with existing annual caps; (ii) the annualised historical transaction amount of the securities and financial products and transactions between the Company and COSCO Shipping and/or its associates for the year ending 31 December 2024; and (iii) the proposed annual caps in respect to the provision of securities and financial products and transactions for the three years ending 31 December 2027 ("COSCO Financial Products Annual Caps"):

	Historical transaction amounts			For the year ending31 December2024
	For the year ended 31 December2022		For the six monthsended 30 June 2024
	RMB million	RMB million	RMB million	(For illustrative purpose only)RMB million
Securities and financial products and transactions - Inflow(1)
Actual historical amount	84.56	0.19	-	-
Existing annual caps	600.00	1,600.00	800.00	1,600.00
Utilisation rate	14.1%	0.01%	Nil	Nil
Securities and financial products and transactions - Outflow(2)
Actual historical amount	94.00	555.00	130.00	260.00(3)
Existing annual caps	800.00	3,650.0	1,830.00	3,660.00
Utilisation rate	11.8%	15.2%	7.1%	7.1%

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	For the year ending 31 December
	2025	2026	2027
	RMB million	RMB million	RMB million
COSCO Financial Products
Annual Caps
Inflow(1)	6,500	6,500	6,500
Outflow(2)	9,500	9,500	9,500

Notes:

(2) "Outflow" refers to the Group's total cash outflow arising from the purchase of fixed income products and equity products and derivative products to, transactions with, and/or lending/resale from financing transactions with, COSCO Shipping and/or its associates.

(3) For the six months ended 30 June 2024, the amount of the inflow and outflow of the securities and financial products and transactions between the Company and COSCO Shipping and/or its associates were approximately nil and RMB130.0 million, respectively. The annualised amount of the said inflow and outflow of the securities and financial products and transactions for the year ending 31 December 2024, for illustrative purpose only, were approximately nil and RMB260.0 million, respectively. Such estimation does not take into account the inflow and outflow of the securities and financial products and transactions under new contracts commenced/to be commenced after 30 June 2024 or contracts that ended/to be ended between 1 July 2024 and 31 December 2024, and thus the actual utilisation rate may vary.

Due to the nature of the securities and financial products and transactions, the Company considers that it is more practicable to set a cap for the total inflow amount and outflow of all the securities and financial products and transactions under the 2024 COSCO Framework Agreement, instead of a separate cap for each category of those products and transactions. In arriving at the above caps, the Directors have considered the historical figures for similar transactions and have taken into account various factors, details of which are set out under the section headed "Proposed COSCO Annual Caps - 1. Securities and financial products and transactions" in the Letter from the Board.

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3.5 The historical amounts and the proposed annual caps of the financial services

Set out below are (i) the actual historical transaction amount of the financial services provided by the Group to COSCO Shipping and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024; (ii) the annualised historical transaction amount of the financial services provided by the Group to COSCO Shipping and/or its associates for the year ending 31 December 2024; and (iii) the proposed annual caps in respect of the provision of financial services for the three years ending 31 December 2027 (“COSCO Financial Services Annual Caps”):

	Historical transaction amounts			For the year ending 31 December 2024
	For the year ended 31 December		For the six months ended 30 June 2024
	2022	2023		(For illustrative purpose only)
	RMB million	RMB million	RMB million	RMB million
Financial services transactions – Revenue nature
Actual historical amount	3.09	1.76	0.40	0.8^{(Note)}
Existing annual caps	7.0	71.2	35.75	71.5
Utilisation rate	44.1%	2.5%	1.1%	1.1%
	For the year ending 31 December
---	---	---	---
	2025	2026	2027
	RMB million	RMB million	RMB million
COSCO Financial Services
Annual Caps	48.00	48.00	48.00

Notes: For the six months ended 30 June 2024, the amount of the financial services transactions between the Company and COSCO Shipping and/or its associates was approximately RMB0.4 million. The annualised amount of the said amount of the financial services transactions for the year ending 31 December 2024, for illustrative purpose only, was approximately RMB0.8 million. Such estimation does not take into account the transaction amount of the financial services under new contracts commenced/to be commenced after 30 June 2024 or contracts that ended/to be ended between 1 July 2024 and 31 December 2024, and thus the actual utilisation rate may vary.

With reference to the Letter from the Board, the COSCO Financial Services Annual Caps for the three years ending 31 December 2027 were determined after taking into account of various factors, details of which are set out under the section headed “Proposed COSCO Annual Caps – 2. Financial services” in the Letter from the Board.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.6 Utilisation rates of the existing annual cap

According to the table illustrated above, the utilisation rate of the existing annual cap for both (i) cash inflow and outflow of the securities and financial products and transactions for the two years ended 31 December 2023 and the six months ended 30 June 2024; and (ii) financial services for the two years ended 31 December 2023 and the six months ended 30 June 2024 were not at relatively high levels. As advised by the Management and as disclosed in the Letter from the Board, such low levels of utilisation rates of the existing annual caps for the inflow amounts of the securities and financial products and transactions in 2023 and for the six months ended 30 June 2024 were mainly attributable to (i) it was originally estimated that from 2022 to 2024, the cash outflow and inflow generated by the Group's purchase of fixed income securities issued by COSCO Shipping's associates, REITs and serving as ABS Manager initiated by COSCO Shipping's associates were both RMB1.0 billion each year. In 2023 and for the six months ended 30 June 2024, except for interest received of approximately RMB0.19 million in 2023, no other inflow generated as there was no maturity or redemption of the connected party bonds held by the Group or ABS managed by the Group; and (ii) in estimating the annual caps for 2022 to 2024, the Company expected that the scale of its agency primary bond auction business would be RMB150 billion in 2021, and the scale of its forward contracts/forward trading business and other fixed income intermediary business would be RMB150 billion, and that such businesses would continue to grow steadily from 2022 to 2024, and the annual cash outflow and inflow of connected transactions with COSCO Shipping and its associates arising from the above-mentioned fixed income capital intermediary business were approximately RMB2.0 billion and RMB500 million, respectively, representing approximately $1\%$ and $0.3\%$ of the transaction amounts for the year. In 2023 and for the six months ended 30 June 2024, affected by the rapid decline in loan interest rates and the acceleration of loan issuance by commercial banks, the financing increment of COSCO Shipping and its associates concentrated on loans, and the development of fixed income intermediary business was limited.

As further advised by the Management and as disclosed in the Letter from the Board, in accordance with the overall development plan of the Group's investment banking business, the Group's pipeline of investment banking projects for COSCO Shipping's associates, and the Group's plan for industry-finance integration with COSCO Shipping, it was originally expected that the Group would generate an underwriting income of RMB30-40 million from one IPO or refinancing project per year, and a financial advisory income of RMB30-40 million from completing one or two mergers and acquisitions projects per year from 2023 to 2024. The lower utilisation rate of the existing annual caps for revenue generated from financial services in 2023 and for the six months ended 30 June 2024 was primarily due to a significant reduction in the issuance of equity financing instruments (including IPOs and refinancing) in the PRC market in 2023 and for the six months ended 30 June 2024, and the spread between lending rates and bond rates narrowed sharply as lending rates declined rapidly, the underwriting and sponsoring services between the Group and COSCO Shipping in relation to IPOs, refinancing and bond issues almost ceased, and other investment banking services such as financial advisory in relation to mergers and acquisitions have also decreased significantly.

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3.7 Assessment on the Proposed COSCO Annual Caps

To assess the fairness and reasonableness of the Proposed COSCO Annual Caps, we conducted following analysis:

In relation to securities and financial products and transactions

As disclosed in the Letter from the Board, in estimating the COSCO Financial Products Annual Caps of the total inflow amount and the total outflow amount of the securities and financial products and transactions between the Group and COSCO Shipping and/or its associates for the three years ending 31 December 2027, the Group has considered, among other things, the following key factors:

The approximate historical amounts of total inflow amounts and total outflow amounts of those securities and financial products and transactions between the Group and COSCO Shipping and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024;
It is estimated that the total inflow and outflow amount from the purchase and redemption of the products (including fixed-income products, equity products, monetary products and customised products) managed by the Group by COSCO Shipping and/or its associates will be approximately RMB1.5 billion in each of the next three years, which was estimated based on the following facts: although the Group has not conducted the above transactions with COSCO Shipping and/or its associates in the past three years, given that COSCO Shipping and/or its associates have opened securities trading accounts with the Company and may conduct securities trading, and may purchase and redeem monetary products and/or other products managed by CMS Asset Management within a relatively short period of time before trading. For the two years ended 31 December 2023 and the six months ended 30 June, 2024, the maximum transaction amount of A shares of COSCO Shipping and/or its associates was approximately RMB1.47 billion. Taking into account that the subscription of the relevant products is subject to the business requirements and market conditions of COSCO Shipping and/or its associates and the transaction amount may be high, in order to avoid undue disruption and damage to the Group's ordinary course of business and to retain the business flexibility, the Company has made reference to the above-mentioned transaction amounts of A shares equity fund of COSCO Shipping and/or its associates in estimating the inflow and outflow amount generated by the relevant transactions. It is estimated that the inflow and outflow from the subscription of monetary and fixed income asset management plan products managed by CMS Asset Management by COSCO Shipping and/or its associates will not exceed RMB1.5 billion, namely the maximum transaction amount of RMB1.50 billion of A shares equity fund of COSCO Shipping and/or its associates in the past two years;
In view of the highly fluctuating capital demand of the securities industry with market changes, in order to meet the capital demand and ensure sufficient liquidity, the Group has established diversified financing channels to maintain adequate and stable financing
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channels. Among them, beneficiary certificates with flexible maturity and convenient issuance process, are one of the main debt financing instruments of the Group. For the two years ended 31 December 2023, the annual financing scale of beneficiary certificates issued by the Group was approximately RMB20.0 billion to RMB40.0 billion, and it is estimated that the annual financing scale of beneficiary certificates issued in the next three years will be approximately RMB50.0 billion to RMB60.0 billion. The Group will continue to improve the institutional customer service marketing system. Beneficiary certificates, as one of the important tools for wealth management of the Group's institutional clients, are featured by capital and interest preservation, flexible term and diversified structure, which can meet the investment requirements of COSCO Shipping and/or its associates for high-quality assets, especially in a low-interest rate environment. Considering that the beneficiary certificates meet the investment requirements of COSCO Shipping and/or its associates for financial instruments in the current market environment, therefore, it is estimated that the inflow and outflow from the purchase and redemption of beneficiary certificates to be issued by the Group by COSCO Shipping and/or its associates will be approximately RMB2.0 billion and RMB2.0 billion respectively in each of the next three years;

It is estimated that in each of 2025, 2026 and 2027, the Group will generate an outflow of not more than RMB6.0 billion from securities underwriting business co-investment, underwriting by way of standby commitment of fixed-income securities (including ABS initiated) issued by COSCO Shipping and/or its associates and acting as manager of ABS initiated by COSCO Shipping and/or its associates, respectively, and an inflow of not more than RMB3.0 billion from the maturity of ABS under management. The abovementioned estimates are based on the following facts:

(i) The Group may generate an outflow from the subscription of fixed income securities issued by COSCO Shipping and/or its associates as a result of co-investment and underwriting by way of standby commitment. The Group may generate an outflow from purchase of the underlying assets of China Merchants Group and/or its associates as original equity holders by CMS Asset Management, which is a wholly-owned subsidiary of the Company and may act as the manager of ABS, and may incur an inflow when ABS expires;

(ii) In 2022, 2023 and in the first half of 2024, the outflow arising from co-investment, underwriting by way of standby commitment and management of fixed income securities issued by COSCO Shipping and/or its associates was approximately RMB94 million, RMB555 million and RMB130 million, respectively;

(iii) The backbone business of COSCO Shipping and its associates includes shipbuilding, shipping and derived shipbuilding and shipping finance. In 2022 and 2023, the financing of COSCO Shipping and/or its associates was dominated by low-interest bank loans, and the scale of fixed income financial instruments issued in the domestic market of China was approximately RMB48.8 billion and RMB33.0 billion. In 2023, China has surpassed Greece to become the world's

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largest shipowner country in the world by gross shipping tonnage. In the first half of 2024, the completed volume, the volume of new orders received and hand-held orders of China's shipbuilding industry accounted for 55%, 74.7% and 58.9% of the world market share respectively. Given that there is an urgent demand for the replacement of old ships worldwide, the new environmental protection policy promotes the accelerate renewal of fleet, and the recovery of global trade drives the growth of shipping demand, the shipbuilding sector of China are expected to continue to grow in the future. In order to achieve the "national goods transported by national ships (國貨國運)" and ensure the growth of foreign trade business and shipping safety, COSCO Shipping Group has launched "100 Ships Plan (百船計劃)". In order to meet the rapid development of asset-heavy business, it is expected that COSCO Shipping and its associates will increase the financing scale of fixed-income securities. From January to August 2024, the scale of fixed income securities issued by COSCO Shipping and/or its associates was approximately RMB28.5 billion. Considering the rapid development of the Group's related business and the expected scale of fixed income securities to be issued by COSCO Shipping and its associates in the next three years, the Company's plan to increase future cooperation with COSCO Shipping, and the steady growth of the Company's debt investment scale year by year, etc., it is expected that the outflow amount from the subscription of fixed income securities issued by COSCO Shipping and/or its associates by the Group as a result of co-investment and underwriting by way of standby commitment will be approximately RMB3.0 billion for each of the three years ending 31 December 2027;

(iv) In 2022, 2023 and from January to August 2024, the total amount of ABS projects initiated by associates of COSCO Shipping as original equity holders amounted to approximately RMB21.3 billion, RMB21.4 billion and RMB7.1 billion, respectively. As the Company will deepen business cooperation with COSCO Shipping in the future, to ensure the normal operation of relevant businesses and avoid undue disruption and damage to the Group's ordinary course of business, and with reference to the maximum amount of a single ABS project of approximately RMB3.0 billion for which COSCO Shipping and/or its associates have been the original equity holders since the IPO of H shares of the Group in 2016, it is estimated that for each of the three years ending 31 December 2027, an outflow arising from the purchase of the underlying assets of COSCO Shipping and/or its associates as original equity holders by CMS Asset Management as the manager of ABS will be approximately RMB3.0 billion. Considering that ABS has a flexible term ranging from a few days to several decades, in order to ensure the normal operation of business, it is estimated that an inflow from the resale of underlying assets due to the maturity of ABS will be approximately RMB3.0 billion for each of the three years ending 31 December 2027;

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The Group provides integrated financial products to customers and conducts integrated financial transactions with customers. The Group has now obtained over 100 business qualifications and has been authorised to engage in integrated financial products and integrated financial transactions business activities, which have played an active role in the past three years. In recent years, the Group has promoted the transformation of investment banking, built a modern investment bank, promoted the transformation of wealth management, strategically developed institutional business, and continued to enrich the variety and quantity of the Company's financial services and financial products. In addition, COSCO Shipping and/or its associates serve global trade and operate global networks, and with the shipping, ports and logistics as the foundation and core industries, and with shipping finance, equipment manufacturing, value-added services and digital innovation as the empowering and value-added industries, COSCO Shipping and/or its associates strive to create a “3+4” industrial ecosystem, and are committed to building a world-class global integrated logistics supply chain service ecosystem. This will create more opportunities for the Group to engage in securities and financial transactions and provide securities and financial products to each other with COSCO Shipping and/or its associates. As a result, the total inflow and outflow are expected to increase from 2025 to 2027; and
Given that (i) the inherent nature of the securities and financial products and transactions described above, including their market-sensitivity and timeliness, (ii) the Group's limited control over the counterparties in those transactions, and (iii) the volatility and unpredictability of the financial market in general, an adequate buffer (representing 10%-15% of the Proposed COSCO Annual Caps) should be provided to prevent undue restriction on the future business operations of the Group.

We have discussed with the Management and were given to understand that an adequate buffer should be provided, given that (i) the inherent nature of the securities and financial products and transaction, including their market-sensitivity and timeliness; (ii) the Group's limited control over the counterparties in those transactions; and (iii) the volatility and unpredictability of the financial market in general. Accordingly, the COSCO Financial Product Annual Cap is determined with reference to (i) the buffer required for risk management regarding the transactions; (ii) the financing demands of COSCO Shipping and/or its associates will continue to increase in order to support their respective rapid business growth; (iii) the new types of securities and financial products that the Group may offer; and (iv) the business growth and diversification of COSCO Shipping and/or its associates, which will create more opportunities for the Group to conduct securities and financial transactions with COSCO Shipping and/or its associates and for the Group and COSCO Shipping and/or its associates to provide securities and financial products to each other.

To assess the fairness and reasonableness of the total inflow amount and total outflow amount of the COSCO Financial Products Annual Caps for the effective period of the 2024 COSCO Framework Agreement, we have taken into consideration the factors as detailed below.

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We have reviewed the business plan for the three years ending 31 December 2027 provided by the Company and noted that the COSCO Financial Products Annual Caps are estimated based on the expected transaction volume of different types of transactions in such business plan. We noted that the total inflow amount and the total outflow amount of the securities and financial products and transactions between the Group and COSCO Shipping and/or its associates for the three years ending 31 December 2027 is in line with the estimations in the business plan.

According to the information on the National Bureau of Statistics of the PRC (https://data.stats.gov.cn/), the PRC achieved steady economic growth, with gross domestic product increased by a CAGR of approximately 4.7% from approximately RMB81,370 per capita in 2021 to approximately RMB89,358 per capita in 2023. From 2021 to 2023, the per capita disposable income grew at a CAGR of approximately 5.5% from approximately RMB35,128 to approximately RMB39,218. The increase in per capita disposable income demonstrates the rapid accumulation of personal wealth in the PRC. Such wealth accumulation leads to stronger demands of securities and financial products and financial services.

For our due diligence purpose, we have obtained a list from the Company, showing the breakdown of the Proposed COSCO Financial Products Annual Caps for each of the three years ending 31 December 2027. We understood from the Company that relevant subsidiaries/departments of the Company provided an estimation of the forecasted sale and purchase amount of securities and financial products and transactions for the three years ending 31 December 2027. Such forecasted amounts based on (i) the historical growth of the amount of fixed-income financial instruments underwritten by the Group and the fixed-income intermediary business of the Group; and (ii) the expansion plans and potential business development between the Group and COSCO Shipping anticipated by the Management as detailed above. Such forecasted amounts can be reconciled with the estimations in the business plan, and were approved by management of the relevant subsidiaries before submitting to the Company for consolidation and review.

In addition, we have further discussed with the senior management, the members of the connected transaction management working team (who were from different departments), and the staffs of the Company's major relevant departments and subsidiaries and understood that the aforesaid parties will comply with relevant implemented internal approval and monitoring procedure when conducting the transactions.

We have randomly selected and reviewed five sample agreements entered into by the Company and COSCO Shipping pursuant to the 2022 COSCO Framework Agreement of the securities and financial products, and noted that the pricing policies stipulated in the product agreements are consistent with the pricing policies as discussed above. We have also reviewed sample agreements entered into with the Company and other third parties independent from the Company who provide similar services to the Company with respect to the securities and financial products and noted that the terms of securities and financial products offered by such independent third parties are similar to the terms offered by COSCO Shipping.

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Despite that the COSCO Financial Products Annual Caps for the three years ending 31 December 2027 are substantially higher than the historical transaction amount of the securities and financial products and transactions, taking into account the above factors, we concur with the Directors that the COSCO Financial Products Annual Caps for the three years ending 31 December 2027 to be fair and reasonable.

Shareholders should note that as the COSCO Financial Products Annual Caps for the three years ending 31 December 2027 are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2027, and they do not represent forecasts of revenue/income/cost to be incurred from the securities and financial products and transactions. Consequently, we express no opinion as to how closely the actual revenue/income/cost to be incurred from the securities and financial products and transactions will correspond with the COSCO Financial Products Annual Caps.

In relation to financial services

As disclosed in the Letter from the Board, in estimating the Proposed COSCO Annual Caps, the Directors have considered the historical amounts of the revenue generated by the Group from providing financial services to COSCO Shipping and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024, including the different service rates and fees the Group charged for the provision of different types of financial services, and considering, in particular, that the Group's provision of financial services to COSCO Shipping and/or its associates is mainly market-driven. Therefore, the Proposed COSCO Annual Caps shall include an adequate buffer (representing 10%-15% of the Proposed COSCO Annual Caps) to cover any market volatility and changes. Otherwise, an annual cap that is too restrictive might cause undue disruption to the operations of the Group and hamper its ability to respond quickly to changes in the highly volatile financial market.

In estimating the COSCO Financial Services Annual Caps of the revenue to be generated by the Group from the provision of financial services to COSCO Shipping and/or its associates for the three years ending 31 December 2027, the Group has considered, among other things, the following key factors:

historical amounts of the revenue generated by the Group from providing financial services to COSCO Shipping and/or its associates for the two years ended 31 December 2023 and the six months ended 30 June 2024, including the different service rates and fees the Group charged for the provision of different types of financial services, and considering, in particular, that the Group's provision of financial services to COSCO Shipping and/or its associates is mainly market-driven. Therefore, the Proposed COSCO Annual Caps shall include an adequate buffer (representing 10%-15% of the Proposed COSCO Annual Caps) to cover any market volatility and changes. Otherwise, an annual cap that is too restrictive might cause undue disruption to the operations of the Group and hamper its ability to respond quickly to changes in the highly volatile financial market;

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

as part of its normal course of business, the Group will continue to provide underwriting and sponsoring services by COSCO Shipping and/or its associates, which is expected to generate a revenue of approximately RMB31.5 million, RMB31.5 million and RMB31.5 million in 2025, 2026 and 2027, respectively. The above-mentioned estimates are based on the following facts:

(i) In 2022, 2023 and for the six months ended 30 June 2024, revenue from underwriting and sponsoring services provided by the Group for the equity and fixed income financial instruments issued by COSCO Shipping and/or its associates amounted to approximately RMB2.9 million, RMB0.6 million and RMB0.3 million, respectively; and

(ii) COSCO Shipping is a corporate group engaged in Industry-finance Integration with a relatively comprehensive industrial structure system, comprising shipping, terminals, logistics, shipping finance and shipyards. Those companies along the upstream and downstream industrial chain, such as shipping, terminals, logistics, shipping finance and shipyards, will require higher mid-to-long term financing in the next three years. Under the general background of encouraging direct financing by the central government, the reform of the registration-based system in the domestic securities market and Hong Kong supporting the listing of leading enterprises in mainland industries in Hong Kong, the re-financing, IPOs and other financing demands of COSCO Shipping and the relevant listed companies and industrial enterprises controlled by COSCO Shipping will increase significantly. The Group enjoys strong competitiveness in the above business sectors. Therefore, it is expected that revenue from the provision of underwriting and sponsoring services to COSCO Shipping and/or its associates will record significant growth. Due to the difficulty in estimating the progress of the projects and the subsequent market regulatory environment, it would be impracticable to predict the actual years for the realisation of such revenue. Based on the expected demand of COSCO Shipping and its associates for capital operation services, the expected progress of the ongoing projects, the potential transactions for which the Group may provide such services and the charges on large-scale projects in the market, it is expected that revenue from the provision of underwriting and sponsoring services (including but not limited to IPOs, re-financing, mergers and acquisitions and restructuring) by the Group to COSCO Shipping and/or its associates in the next three years will be to approximately RMB31.5 million, RMB31.5 million and RMB31.5 million, respectively;

In addition to underwriting and sponsoring services, the Group will continue to provide other financial services (mainly financial advisory services) to the COSCO Shipping and/or its associates in its ordinary course of business, and the service fees are expected to be approximately RMB16.5 million, RMB16.5 million and RMB16.5 million in 2025, 2026 and 2027, respectively. The above-mentioned estimates are based on the following facts:
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(i) For the two years ended 31 December 2023 and the six months ended 30 June 2024, service fees charged by the Group for other financial services (mainly financial advisory services) provided to COSCO Shipping and/or its associates amounted to approximately RMB0.2 million, RMB1.2 million and RMB0.1 million, respectively; and

(ii) Based on the expected demand for capital operation services from COSCO Shipping and its associates, the expected progress of projects in progress and potential transactions in which the Group may provide financial advisory or other financial services to COSCO Shipping and its associates, the Group expects that revenue from the provision of financial advisory and other financial services by the Group to COSCO Shipping and/or its associates will be approximately RMB16.5 million, RMB16.5 million and RMB16.5 million in 2025, 2026 and 2027, respectively.

As advised by the Management, we understood that the provision of financial services to COSCO Shipping and/or its associates under the 2024 COSCO Framework Agreement will continue to grow. The Group will continue to provide underwriting and sponsoring services by COSCO Shipping and/or its associates, which is expected to generate a revenue of approximately RMB31.5 million, RMB31.5 million and RMB31.5 million for the three years ending 31 December 2027, which represented approximately 65.6%, 65.6% and 65.6% of the COSCO Financial Services Annual Caps, respectively. For details of the basis of the estimation, please refer to the section "Proposed COSCO Annual Caps – 2. Financial services".

In addition, as discussed with the Management, it is expected that there will be an increase in other financial services fees (mainly for financial advisory services) to be received by the Group for providing services to COSCO Shipping and/or its associates in the three years ending 31 December 2027. The service fees, primarily financial advisory fees, to be received by the Group for providing other investment banking services to COSCO Shipping and/or its associates is estimated to be approximately RMB16.5 million, RMB16.5 million and RMB16.5 million for each of the three years ending 31 December 2027, which represented approximately 34.4%, 34.4% and 34.4% of the COSCO Financial Services Annual Caps, respectively. Taking into account (i) the ongoing transactions for which the Group is providing advisory or other investment banking services to COSCO Shipping and/or its associates, and the potential transactions for which the Group may provide such services; (ii) merger and acquisition and restructuring are among the strategic goals of COSCO Shipping; and (iii) the Group's plan to strengthen its financial advisory business, we were given to understand that the Management expect there will be more opportunities for the Group to provide financial advisory services to COSCO Shipping and/or its associates, and that the revenue of the Group derived from such services is expected to show significant growth in the next three years.

We have reviewed the business plan for the three years ending 31 December 2027 provided by the Company and noted that the COSCO Financial Services Annual Caps are estimated based on the expected transaction volume of different types of transactions in such business plan. We

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

noted that the revenue to be generated by the Group from the provision of financial services to COSCO Shipping and/or its associates for the three years ending 31 December 2027 is in line with the estimations in the business plan.

For our due diligence purpose, we have obtained a list from the Company, showing the breakdown of the COSCO Financial Services Annual Caps for each of the three years ending 31 December 2027. We understood from the Company that relevant subsidiaries/departments of the Company provided an estimation of the forecasted sale and purchase amount of financial services for the three years ending 31 December 2027. Such forecasted amounts based on (i) the historical revenue generated from the provision of financial services; and (ii) the expansion plans and potential business development between the Group and COSCO Shipping anticipated by the Management as detailed above. Such forecasted amounts can be reconciled with the estimations in the business plan, and were approved by management of the relevant subsidiaries before submitting to the Company for consolidation and review.

We have randomly selected and reviewed five sample copies of contracts for the underwriting and sponsoring services for the two years ended 31 December 2023 and the six months ended 30 June 2024 from the Group to COSCO Shipping and/or its associates and similar services from the Group to independent third parties as mentioned above. In view of the aforesaid samples cover the principal types of financial services from the Group to COSCO Shipping and/or its associates and similar services from the Group to independent third parties for the two years ended 31 December 2023 and the six months ended 30 June 2024, we consider that such samples are fair and representative to illustrate that the financial services provided/to COSCO Shipping and/or its associates is no less favourable to the Group than those provided to independent third parties.

We also noted that, among other things, (i) the Group has formulated and established internal guidance and policies for conduct of different types of financial services; (ii) the Group's connected transaction management working team, which comprises staff from various departments and are mainly responsible for managing the Group's connected transactions on a regular basis (every half year and every year) so as to ensure the proposed annual caps in respect of the provision of financial services will not be exceeded and will remind relevant departments and subsidiaries to control such connected transactions to be conducted on normal commercial terms from time to time; and (iii) the Group is required to offer the same pricing terms to all the customers and no preferential terms shall be provided to the customers who are the Group's connected persons in the offer of the same batch of financial services to customers (including both connected persons and independent third parties). Based on the above, we consider that the internal control procedures are sufficient for the Company to monitor the financial services and the effective implementation of the procedures would help to ensure fair pricing of the transactions contemplated under the financial services according to the pricing policies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Despite that the COSCO Financial Services Annual Caps for the three years ending 31 December 2027 are substantially higher than the historical transaction amount of the provision of financial services, taking into account the above factors, we concur with the Directors that the COSCO Financial Services Annual Caps for the three years ending 31 December 2027 to be fair and reasonable.

Shareholders should note that as the COSCO Financial Services Annual Caps for the three years ending 31 December 2027 are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2027, and they do not represent forecasts of revenue/income/cost to be incurred from the securities and financial products and transactions. Consequently, we express no opinion as to how closely the actual revenue/income/cost to be incurred from the securities and financial products and transactions will correspond with the COSCO Financial Services Annual Caps.

Listing Rules implication

The Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 to 14A.59 of the Hong Kong Listing Rules pursuant to which (i) the values of the transactions under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement must be restricted by the Proposed Annual Caps for the period concerned under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement; (ii) the terms of the transactions under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement must be reviewed by the independent non-executive Directors annually; and (iii) details of independent non-executive Directors' annual review on the terms of the transactions contemplated under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement must be included in the Company's subsequent published annual reports and financial accounts.

Furthermore, it is also required by the Hong Kong Listing Rules that the auditors of the Company must provide a letter to the Board confirming whether anything has come to their attention that causes them to believe that the transactions contemplated under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement (i) have not been approved by the Board; (ii) were not, in all material respects, in accordance with the pricing policies of the listed issuer's group if the transactions involve the provision of goods or services by the listed issuer's group; (iii) were not entered into, in all material respects, in accordance with the relevant agreement governing the transactions; and (iv) have exceeded the annual caps.

In the event that the total amounts of the transactions contemplated under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement are anticipated to exceed the annual caps, or that there are any proposed material amendments to the terms of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement, as confirmed by the Directors, the Company shall comply with the applicable provisions of the Hong Kong Listing Rules governing continuing connected transactions.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii)

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the transactions contemplated under the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement are in the interests of the Company and the Shareholders as a whole and conducted in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the 2024 CMG Framework Agreement and the 2024 COSCO Framework Agreement and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully,

For and on behalf of

Lego Corporate Finance Limited

Joshua Liu

Managing Director

Mr. Joshua Liu is a licensed person registered with the Securities and Futures Commission and a responsible officer of Lego Corporate Finance Limited to carry out Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong). He has over 25 years of experience in the securities and investment banking industries.

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APPENDIX I

STATUTORY AND GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND THE CHIEF EXECUTIVE OF THE COMPANY IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

As at the Latest Practicable Date, the interests and short positions of the Directors, Supervisors and chief executives of the Company in the shares, underlying shares or debentures of the Company or its associated corporations which would be required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or interests or short positions which would be required, pursuant to Section 352 of the SFO, to be recorded in the register referred to therein, or required, pursuant to the Model Code, to be notified to the Company and the Hong Kong Stock Exchange were as follows:

Directors/Supervisors	Position	Class of shares	Nature of interest	Number of shares held	Percentage of total number of issued shares of the Company (%)	Percentage of total number of issued A Shares of the Company (%)	Long positions/short positions/shares available for lending
HUO Da (霍達)	Chairman of the Board, executive Director and Chief Information Officer	A Shares	Beneficial owner	531,210	0.006	0.007	Long position
CHEN Jun (陳韋)	Employee representative Supervisor	A Shares	Beneficial owner	102,156	0.001	0.001	Long position

3. CONSENT AND QUALIFICATION OF EXPERT

The qualification of the expert who has given opinion or advice in this circular is set out below:

Name of Expert

Lego Corporate Finance Limited

Qualification

a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO

APPENDIX I

STATUTORY AND GENERAL INFORMATION

As of the Latest Practicable Date, the above expert has given and has not withdrawn its consent letter to the issuance of this circular with the inclusion of and/or references to its report or letter in the form and context in which they are included.

As of the Latest Practicable Date, the above expert did not own any equity interest in any member of the Group, or any right (whether legally enforceable or not) to subscribe or nominate others to subscribe for the securities of any member of the Group.

As of the Latest Practicable Date, the above expert did not have interest in any assets which have been acquired or disposed of by, or leased to any member of the Group, or are proposed to be acquired or disposed of by, or leased to any member of the Group since December 31, 2023, being the date to which the latest published audited consolidated accounts of the Company were made up.

4. MATERIAL ADVERSE CHANGE

There was no material adverse change in the financial or trading positions of the Group since December 31, 2023, being the date to which the latest published audited consolidated accounts of the Company were made up.

5. DIRECTORS' AND SUPERVISORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or Supervisors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

6. DIRECTORS' AND SUPERVISORS' INTERESTS IN ASSETS AND/OR CONTRACTS

As at the Latest Practicable Date, none of the Directors or Supervisors had interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or have been proposed to be acquired or disposed of by or leased to any member of the Group since December 31, 2023, being the date to which the latest published audited consolidated accounts of the Company were made up.

As at the Latest Practicable Date, none of the Directors, Supervisors or their respective associates was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

7. DIRECTORS' AND SUPERVISORS' EMPLOYMENT WITH SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following Directors or Supervisors were in the employment of those companies which had interests or short positions in the shares or underlying shares of the Company which are required to be notified to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO:

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APPENDIX I

STATUTORY AND GENERAL INFORMATION

Name of Director or Supervisor	Name of Shareholder	Position held
LIU Weiwu	China Merchants Group	Head of the finance department (property rights department)
LIU Zhenhua	China Merchants Group	Head of the strategic development department/technological innovation department
LIU Hui	China Merchants Financial Holdings Co., Ltd.	General manager
LI Delin	China Merchants Financial Holdings Co., Ltd.	Deputy general manager
LI Xiaofei	China Merchants Group	Deputy head of the human resources department
HUANG Jian	COSCO Shipping	General manager of the capital operation department
DING Lusha	PICC Life Insurance Company Limited	General manager of the investment business department
ZHU Eric Liwei	China Merchants Financial Holdings Co., Ltd.	Deputy general manager
SUN Xian	China Merchants Financial Holdings Co., Ltd.	Deputy general manager (financial officer)
	Shenzhen Jisheng Investment Development Co., Ltd.	Director
	Best Winner Investment Limited	Director

As of the Latest Practicable Date, the interests in the shares of the Company owned by China Merchants Group, China Merchants Financial Holding Co., Ltd., Shenzhen Jisheng Investment Development Co., Ltd., China Merchants Financial Holdings (Hong Kong) Company Limited, Best Winner Investment Limited, China COSCO Shipping Corporation Limited, China Ocean Shipping Company Limited, COSCO SHIPPING Investment Holdings Co., Limited, The People's Insurance Company (Group) of China Limited, PICC Life Insurance Company Limited and Hebei Port Group Co., Ltd., which are required to be disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO, have been recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

8. INTERESTS OF DIRECTORS IN COMPETING BUSINESS

As of the Latest Practicable Date, none of the Directors or their respective close associates had interests in any business which constitutes direct or indirect competition or may constitute competition with the business of the Group.

APPENDIX I

STATUTORY AND GENERAL INFORMATION

9. MATERIAL LITIGATION

As of the Latest Practicable Date, no member of the Group was involved in any material litigation or arbitration and there was no material litigation or claim known to the Directors to be pending or threatened by or against any member of the Group.

10. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the websites of the Hong Kong Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.cmschina.com) from the date of this circular up to and including the date of the EGM:

(1) the 2022 CMG Framework Agreement;

(2) the 2022 COSCO Framework Agreement;

(3) the 2024 CMG Framework Agreement;

(4) the 2024 COSCO Framework Agreement;

(5) the Letter from the Independent Board Committee;

(6) the Letter from the Independent Financial Adviser; and

(7) the Letter of consent from the expert referred to in the paragraph headed “Consent and Qualification of Expert” in this Appendix.

NOTICE OF EGM

招商证券股份有限公司

China Merchants Securities Co., Ltd.

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

(Stock Code: 6099)

NOTICE OF THE 2025 FIRST EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2025 first extraordinary general meeting (the “EGM”) of China Merchants Securities Co., Ltd. (the “Company”) will be held at China Merchants Securities Building, No. 111 Fuhua Yi Road, Futian Street, Futian District, Shenzhen, Guangdong Province, the PRC on Monday, April 7, 2025 at 10:00 a.m. to consider and approve the following resolutions:

ORDINARY RESOLUTIONS

To consider and approve the resolution in relation to the renewal of continuing connected transaction with China Merchants Group Limited:

(a) to approve the securities and financial products, transactions and services framework agreement (the “2024 CMG Framework Agreement”) dated December 18, 2024 entered into between the Company and China Merchants Group Limited;

(b) to approve the proposed annual caps for the transactions contemplated under the 2024 CMG Framework Agreement for the three years ending December 31, 2027; and

(c) to authorize any director of the Company who is not connected to China Merchants Group Limited to make amendments, adjustments, supplements to the 2024 CMG Framework Agreement or handle other related matters, according to the provisions in domestic and foreign laws and regulations, requirements and advices from the relevant domestic and foreign governmental departments and regulatory authorities (if any).

To consider and approve the resolution in relation to the renewal of continuing connected transaction with China COSCO Shipping Corporation Limited:

(a) to approve the securities and financial products, transactions and services framework agreement (the “2024 COSCO Framework Agreement”) dated December 18, 2024 entered into between the Company and China COSCO Shipping Corporation Limited;

(b) to approve the proposed annual caps for the transactions contemplated under the 2024 COSCO Framework Agreement for the three years ending December 31, 2027; and

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NOTICE OF EGM

(c) to authorize any director of the Company who is not connected to China COSCO Shipping Corporation Limited to make amendments, adjustments, supplements to the 2024 COSCO Framework Agreement or handle other related matters, according to the provisions in domestic and foreign laws and regulations, requirements and advices from the relevant domestic and foreign governmental departments and regulatory authorities (if any).

To consider and approve the resolution in relation to proposed appointment of Ms. LUO Li as a non-executive director of the Company.
To consider and approve the resolution in relation to proposed appointment of Mr. HUANG Zheng as a shareholders' representative supervisor of the Company.

By order of the Board

China Merchants Securities Co., Ltd.

HUO Da

Chairman

Shenzhen, the PRC

March 19, 2025

Notes:

Eligibility for attending the EGM and date of registration of members

(1) The register of members of H shares of the Company will be closed from Tuesday, April 1, 2025 to Monday, April 7, 2025 (both days inclusive), during which period no transfer of H Shares will be registered. All transfer documents accompanied by the relevant share certificates, shall be lodged with the Company's H Share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Monday, March 31, 2025. Purchasers of Shares who have submitted their transfer documents to the Company's H Share registrar, Computershare Hong Kong Investor Services Limited, and registered as Shareholders on the register of members of H Shares of the Company before 4:30 p.m. on Monday, March 31, 2025 are entitled to attend and vote in respect of all resolutions to be proposed at the EGM.

(2) Further announcement will be made by the Company in the PRC regarding the record date and arrangements for holders of A Shares of the Company who are entitled to attend the EGM.

Proxy

(1) A Shareholder who is entitled to attend and vote at the EGM may appoint one or more proxy(ies) to attend and vote on his/her behalf. A proxy need not be a Shareholder of the Company. A proxy of a Shareholder who has appointed more than one proxy may only vote by poll.

(2) If a Shareholder wishes to appoint his/her proxy(ies) to attend the EGM, the instrument appointing a proxy shall be in writing under the hand of the appointor or his/her attorney duly authorized in writing, or if the appointor is a legal entity, either under seal or signed by a director or duly authorized attorney. If the instrument is signed by an attorney of the appointor, the power of attorney authorizing the attorney to sign or other document of authorization shall be notarized.

NOTICE OF EGM

(3) In order to be valid, for holders of H Shares, the notarized power of attorney or other document of authorization and the form of proxy shall be delivered to Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 24 hours before the time appointed for the EGM.

3. Registration procedures for attending the EGM

(1) A Shareholder attending in person should present valid proof of identity or stock account card when attending the EGM. In the case of attendance by proxy, the proxy should present valid proof of identity and the proxy form(s) of the Shareholder.

(2) If a Shareholder is a legal person, its legal representative should present his/her proof of identity and valid proof of its capacity as a legal representative. In the case of attendance by proxy of the legal representative, the proxy should present his/her proof of identity and a written letter of authorization duly issued by such legal representative when attending the EGM.

4. Voting by poll

According to Rule 13.39(4) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, any vote of shareholders at a shareholders’ general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the chairman of the EGM will demand a poll in relation to the proposed resolutions at the EGM in accordance with Article 108 of the Articles of Association of the Company.

5. Miscellaneous

(1) Shareholders who attend the EGM in person or by proxy shall bear their own travelling and accommodation expenses.

(2) The contact details of the EGM are as follows:

Computershare Hong Kong Investor Services Limited

Address: Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for lodging transfer documents)

17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for deposit of proxy form)

Telephone: (852) 2862 8555

Fax: (852) 2865 0990

The Company

Contact address: No. 111, Fuhua Yi Road, Futian Street, Futian District, Shenzhen, Guangdong Province, the PRC

General office of China Merchants Securities Co., Ltd.

Contact person: SHANG Zhe and SUN Ya

Contact number: (86)755-8308 1596 and (86)755-8308 1580

NOTICE OF EGM

Fax: (86)755-8294 4669

(3) For details of the resolutions to be submitted for consideration and approval at the EGM, please refer to the circular of the Company dated March 19, 2025.

As at the date of this notice, the executive directors of the Company are Mr. HUO Da and Mr. WU Zongmin; the non-executive directors of the Company are Mr. LIU Weiwu, Mr. LIU Zhenhua, Ms. LIU Hui, Mr. LI Delin, Mr. LI Xiaofei, Mr. HUANG Jian, Mr. ZHANG Mingwen and Ms. DING Lusha; and the independent non-executive directors of the Company are Mr. YIP, Ying Chi Benjamin, Ms. ZHANG Ruijun, Ms. CHEN Xin, Mr. CAO Xiao and Mr. FENG Jinhua.

N-4 -

AI assistant

China Merchants Securities Co., Ltd. — Proxy Solicitation & Information Statement 2025

50969_rns_2025-03-18_025c317a-3bec-42cb-bd29-28bbf248da0f.pdf

招商证券股份有限公司

耐高证券股份有限公司

INTRODUCTION

2. Financial services

Pricing Basis

1. Securities and financial products and transactions

Condition Precedent

Miscellaneous

Historical Figures

1. Securities and financial products and transactions

Notes:

2. Financial services

Proposed CMG Annual Caps

1. Securities and financial products and transactions

2. Financial services

Reasons for and Benefits of Entering into the 2024 CMG Framework Agreement

2. The 2024 COSCO Framework Agreement

2. Financial services

Pricing Basis

1. Securities and financial products and transactions

2. Financial services

Condition Precedent

Miscellaneous

Historical Figures

1. Securities and financial products and transactions

2. Financial services

Reasons for and Benefits of Entering into the 2024 COSCO Framework Agreement

3. Internal Control Measures of Continuing Connected Transactions

4. General Information of the Company, China Merchants Group and COSCO Shipping

5. Board Approval

6. Implications under the Listing Rules

II. PROPOSED APPOINTMENT OF NON-EXECUTIVE DIRECTOR

III. PROPOSED APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE SUPERVISOR

IV. EGM

V. PROCEDURES FOR VOTING AT THE EGM

VI. RECOMMENDATION

VII. FURTHER INFORMATION

招商证券股份有限公司

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF THE SECURITIES AND FINANCIAL PRODUCTS, TRANSACTIONS AND SERVICES FRAMEWORK AGREEMENTS

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF THE SECURITIES AND FINANCIAL PRODUCTS, TRANSACTIONS AND SERVICES FRAMEWORK AGREEMENTS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. General information of the Company, China Merchants Group and COSCO Shipping

1.1 Information of the Company

1.2 Information of China Merchants Group

1.3 Information of COSCO Shipping

2. The 2024 CMG Framework Agreement

2.1 Reasons for and benefits of entering into the 2024 CMG Framework Agreement

2.2 Principal terms of the 2024 CMG Framework Agreement

2.3 Pricing basis for the 2024 CMG Framework Agreement

Internal approval procedures and supervision

2.4 The historical amounts and the proposed annual caps of securities and financial products and transactions

2.5 The historical amounts and the proposed annual caps of the financial services

2.6 Utilisation rates of the existing annual caps

2.7 Assessment on the Proposed CMG Annual Caps

In relation to securities and financial products and transactions

In relation to financial services

3. The 2024 COSCO Framework Agreement

3.1 The reasons for and benefits of entering into the 2024 COSCO Framework Agreement

3.2 Principal terms of the 2024 COSCO Framework Agreement

3.3 Pricing basis for the 2024 COSCO Framework Agreement

In relation to financial services

Assessment on the pricing basis of the 2024 COSCO Framework Agreement

Internal approval procedures and supervision

3.4 The historical amounts and the proposed annual caps of securities and financial products and transactions

3.5 The historical amounts and the proposed annual caps of the financial services

3.6 Utilisation rates of the existing annual cap

3.7 Assessment on the Proposed COSCO Annual Caps

In relation to securities and financial products and transactions

In relation to financial services

Listing Rules implication

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND THE CHIEF EXECUTIVE OF THE COMPANY IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

3. CONSENT AND QUALIFICATION OF EXPERT

4. MATERIAL ADVERSE CHANGE

China Merchants Securities Co., Ltd. Proxy Solicitation & Information Statement 2025