DFZQ — AGM Information 2021

Apr 21, 2021

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

If you have sold or transferred all your shares in 東方證券股份有限公司 , you should at once hand this circular, together with the form(s) of proxy to the purchaser(s) or transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

under the Chinese corporate name “ 東方證券股份有限公司 ” and carrying on business

in Hong Kong as “ 東方證券 ” (in Chinese) and “DFZQ” (in English))

(Stock Code: 03958)

(1) 2020 REPORT OF THE BOARD

(2) 2020 REPORT OF THE SUPERVISORY COMMITTEE

(3) 2020 FINAL ACCOUNTS REPORT

(4) 2020 PROFIT DISTRIBUTION PROPOSAL

  - **(5) PROPRIETARY BUSINESS SCALE OF THE COMPANY IN 2021**

     - **(6) 2020 ANNUAL REPORT**

• (7) PROJECTED ROUTINE RELATED PARTY TRANSACTIONS OF THE COMPANY IN 2021

• (8) EXPECTED PROVISION OF GUARANTEES BY THE COMPANY IN 2021

• (9) ELECTION OF INDEPENDENT NON-EXECUTIVE DIRECTOR OF THE COMPANY

• (10) PROPOSAL REGARDING ALLOWANCE OF INDEPENDENT SUPERVISORS

  • (11) ENGAGEMENT OF AUDITING FIRMS FOR THE YEAR 2021

• (12) AMENDMENTS TO CERTAIN ARTICLES OF THE ARTICLES OF ASSOCIATION

• (13) GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS

• (14) PROPOSAL ON THE USE OF PROCEEDS FROM PREVIOUS FUND-RAISING ACTIVITIES

• (15) PROPOSAL ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

• (16) PROPOSAL ON THE PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE OF THE COMPANY

• (17) PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE OF THE COMPANY

  • (18) FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

• (19) RISK WARNING REGARDING DILUTION OF IMMEDIATE RETURNS BY

• RIGHTS ISSUE TO EXISTING SHAREHOLDERS AND REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

• (20) PROPOSAL ON THE SUBMISSION TO THE GENERAL MEETING OF THE COMPANY FOR FULL AUTHORIZATION TO THE BOARD TO DEAL WITH RELEVANT MATTERS IN RELATION TO THE RIGHTS ISSUE AND

• NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

A notice convening the AGM of the Company to be held at Meeting Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the PRC on Thursday, May 13, 2021 at 2:00 p.m. is set out on pages 35 to 39 of this circular. A notice convening the H Shares Class Meeting of the Company to be held at Meeting Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the PRC on Thursday, May 13, 2021 immediately following the conclusion of the AGM and the A Shares Class Meeting or any adjournment thereof is set out on pages 40 to 43 of this circular.

The A Share Rights Issue Plan and H Share Rights Issue Plan will proceed on a best-effort basis without any underwriting arrangements. Under the applicable PRC laws and regulations and as classified by the CSRC, the A Share Rights Issue Plan may only proceed if the subscription level of the A Rights Shares is at least 70% of the A Share Rights Issue Plan. The rights to subscribe for the A Shares which are not taken up will lapse and no new A Shares will be issued or allotted pursuant to such rights. Pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), the Hong Kong Listing Rules and the Articles of Association, there is no requirement for a minimum level of subscription in the H Share Rights Issue Plan.

The forms of proxy for the AGM and the H Shares Class Meeting have been distributed on Thursday, April 15, 2021 and have also been published on the website of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company’s website (www.dfzq.com.cn). If you are not able to attend the AGM and/or the H Shares Class Meeting, please complete and return the form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 24 hours before the time appointed for the holding of the AGM and/or the H Shares Class Meeting, and deposit it together with the notarized power of attorney or other document of authorization with the H Share Registrar, Computershare Hong Kong Investor Services Limited (for holders of H Shares). Completion and return of the form of proxy will not preclude you from attending and voting at the AGM and/or the H Shares Class Meeting should you so desire. This circular is prepared in both Chinese and English. In case of any discrepancies between the Chinese and English versions, the Chinese version shall prevail.

April 22, 2021

CONTENTS

		Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
NOTICE OF	ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING. . . .	35
ANNEX I	– 2020 REPORT OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
ANNEX II	– 2020 REPORT OF THE SUPERVISORY COMMITTEE. . . . . . . . . . . . . .	II-1
ANNEX III	– 2020 FINAL ACCOUNTS REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
ANNEX IV	– 2020 DUTY PERFORMANCE REPORT OF
	INDEPENDENT DIRECTORS OF THE COMPANY. . . . . . . . . . . . . . .	IV-1
ANNEX V	– PROPOSAL REGARDING THE PROJECTED ROUTINE
	RELATED PARTY TRANSACTIONS OF
	THE COMPANY IN 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
ANNEX VI	– PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE
	OFFSHORE DEBT FINANCING INSTRUMENTS OF
	THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
ANNEX VII	– STATEMENT ON THE COMPANY'S COMPLIANCE
	WITH REQUIREMENTS ON RIGHTS ISSUE. . . . . . . . . . . . . . . . . . . .	VII-1
ANNEX VIII	– PLAN OF PUBLIC ISSUANCE OF SHARES
	BY WAY OF RIGHTS ISSUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1
ANNEX IX	– FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS
	TO BE RAISED FROM RIGHTS ISSUE. . . . . . . . . . . . . . . . . . . . . . . . .	IX-1
ANNEX X	– RISK WARNING REGARDING DILUTION OF IMMEDIATE
	RETURNS BY RIGHTS ISSUE TO
	EXISTING SHAREHOLDERS AND REMEDIAL MEASURES
	AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES. . . . . . . . .	X-1
ANNEX XI	– SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS
	FUND-RAISING ACTIVITIES AS OF DECEMBER 31, 2020. . . . . . . .	XI-1

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following terms shall have the meanings set out below:

• “A Rights Shares” the new A Shares proposed to be allotted and issued to the Qualified A Shareholders pursuant to the A Share Rights Issue Plan (less any A Shares not taken up by the Qualified A Shareholders)

• “A Share(s)” PRC domestic share(s) with a par value of RMB1.00 each in the share capital of the Company, listed on the Shanghai Stock Exchange and traded in RMB

• “A Share Record Date” a date to be determined by the Board or its authorised person(s) by reference to which entitlements to the A Share Rights Issue Plan are to be determined

• “A Share Rights Issue Plan” the proposed issue of up to 1,789,972,740 A Rights Shares at the Rights Issue Price on the basis of up to three (3) A Rights Shares for every ten (10) existing A Shares held on the relevant A Share Record Date

• “A Shareholder(s)” holder(s) of the A Shares

• “A Shares Class Meeting” the class meeting of the A Shareholders to be convened to consider and, if thought fit, approve, among other matters, the Rights Issue Plan

• “AGM” or “Annual General the 2020 annual general meeting of the Company to be held at Meeting Meeting” Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the PRC on Thursday, May 13, 2021 at 2:00 p.m.

• “Articles of Association” the articles of association of 東方證券股份有限公司 , as amended from time to time

• “Board” or “Board of the board of directors of the Company Directors”

• “CSDC” China Securities Depository and Clearing Corporation Limited

• “Company” 東方證券股份有限公司 , a joint stock company incorporated in the PRC with limited liability, the H Shares of which are listed on the Hong Kong Stock Exchange under the stock code of 03958 and the A Shares of which are listed on the SSE under the stock code of 600958

• “Company Law” the Company Law of the People’s Republic of China

• “CSRC” the China Securities Regulatory Commission

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

– 1 –

DEFINITIONS

• “Excluded Shareholder(s)” Overseas Shareholder(s) whom the Board, based on legal opinions provided by legal advisers, considers it necessary or expedient to exclude any such Overseas Shareholder(s) from participating in the Rights Issue Plan on account either of the legal restrictions under the laws of the place of his/her/their registered address(es) or the requirements of the relevant regulatory body or stock exchange in that place

• “General Meeting”

• the general meeting of the Shareholders to be convened to consider and, if thought fit, approve, among other matters, the Rights Issue Plan

• “Group”

the Company and its subsidiaries

• “H Rights Shares”

• the new H Shares proposed to be allotted and issued to the Qualified H Shareholders pursuant to the H Share Rights Issue Plan, if any

• “H Share(s)”

• overseas listed foreign share(s) with a par value of RMB1.00 each in the share capital of the Company, listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars

• “H Share Registrar” Computershare Hong Kong Investor Services Limited

• “H Share Record Date”

• a date to be determined by the Board or its authorised person(s) by reference to which entitlements to the H Share Rights Issue Plan are to be determined

• “H Share Rights Issue Plan” the proposed issue of up to 308,124,000 H Rights Shares at the Rights Issue Price on the basis of up to three (3) H Rights Shares for every ten (10) existing H Shares held on the relevant H Share Record Date

• “H Share Rights Issue Prospectus”

• the prospectus in relation to the H Share Rights Issue Plan to be issued by the Company and despatched to the H Shareholders, which contains further details of the H Share Rights Issue Plan

• “H Shareholder(s)” holder(s) of the H Shares

• “H Shares Class Meeting” the class meeting of the H Shareholders to be convened to consider and, if thought fit, approve, among other matters, the Rights Issue Plan

• “HK$” or “Hong Kong dollars”

the lawful currency of Hong Kong

“HKSCC”

• Hong Kong Securities Clearing Company Limited

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “Hong Kong Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

– 2 –

DEFINITIONS

• “Hong Kong Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Latest Practicable Date”

• April 16, 2021, being the latest practicable date for the purpose of ascertaining certain information contained in this circular prior to its publication

• “Nil-paid H Rights Shares” the rights to subscribe for H Rights Shares (in the form of H Rights Shares in nil-paid form) before the Subscription Price is paid

• “Orient Finance Holdings”

• Orient Finance Holdings (Hong Kong) Limited ( 東方金融控股（香港） 有限公司 ), a wholly-owned subsidiary of the Company

• “Orient Futures”

• Orient Futures Co., Ltd ( 上海東證期貨有限公司 ), a wholly-owned subsidiary of the Company

• “Orient Securities Capital Investment”

• Shanghai Orient Securities Capital Investment Co., Ltd. ( 上海東方證 券資本投資有限公司 ), a wholly-owned subsidiary of the Company

• “Overseas Shareholder(s)”

• H Shareholders whose name(s) appear on the register of members of the Company on the H Share Record Date and whose registered address(es) is/are in a place outside Hong Kong

• “PRC” or “China”

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

• “PRC Southbound Trading Investors”

• PRC investors including enterprises and individuals who hold the shares of Hong Kong listed companies through CSDC as nominee under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect

• “Price Determination Date” the date on which the Rights Issue Price will be fixed for the purposes of the Rights Issue Plan, being a trading day prior to the date of the announcement in respect of the Rights Issue Plan to be published by the Company

• “Qualified A Shareholder(s)” A Shareholders whose name(s) appear(s) on the register of members of the Company on the A Share Record Date

• “Qualified H Shareholder(s)” H Shareholders whose name(s) appear(s) on the register of members of the Company on the H Share Record Date and who are not Excluded Shareholders

– 3 –

DEFINITIONS

“Record Date” the A Share Record Date and/or the H Share Record Date “Rights Issue Price(s)” the final rights issue price for the A Rights Shares and the H Rights Shares to be offered pursuant to the Rights Issue Plan “Rights Issue” the A Share Rights Issue and/or the H Share Rights Issue “Rights Issue Plan” the A Share Rights Issue Plan and/or the H Share Rights Issue Plan “Rights Share(s)” the A Rights Share(s) and/or the H Rights Share(s) “RMB” or “Renminbi” Renminbi, the lawful currency of the PRC “Shanghai-Hong Kong Stock the securities trading and clearing links programme developed by the Connect” Stock Exchange, the SSE, HKSCC and CSDC for the establishment of mutual market access between Hong Kong and Shanghai “Securities Law” the Securities Law of the People’s Republic of China “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share(s)” the A Share(s) and/or the H Share(s) “Shenergy Group” Shenergy (Group) Company Limited ( 申能 ( 集團 ) 有限公司 ) “Shenzhen-Hong Kong Stock the securities trading and clearing links programme developed by the Connect” Stock Exchange, the Shenzhen Stock Exchange, HKSCC and CSDC for the establishment of mutual market access between Hong Kong and Shenzhen “SSE” Shanghai Stock Exchange “Supervisor(s)” the supervisor(s) of the Company “Supervisory Committee” the supervisory committee of the Company “Takeovers Code” Hong Kong Code on Takeovers and Mergers “%” per cent.

Unless otherwise indicated, all the financial data in this circular were presented in Renminbi.

– 4 –

LETTER FROM THE BOARD

(A joint stock company incorporated in the People’s Republic of China with limited liability under the Chinese corporate name “ 東方證券股份有限公司 ” and carrying on business in Hong Kong as “ 東方證券 ” (in Chinese) and “DFZQ” (in English))

(Stock Code: 03958)

Executive Directors: Mr. SONG Xuefeng Mr. JIN Wenzhong (Chairman, President)

Non-executive Directors:

Mr. YU Xuechun Mr. LIU Wei Mr. ZHOU Donghui Mr. CHENG Feng Mr. REN Zhixiang Ms. ZHU Jing (Employee Representative Director)

Registered office: Orient Securities Building No. 119 South Zhongshan Road Huangpu Distric, Shanghai PRC

Principal place of business in Hong Kong: 28-29/F No.100 Queen’s Road Central Central Hong Kong

Independent non-executive Directors:

Mr. XU Zhiming Mr. JIN Qinglu Mr. WU Hong Mr. FENG Xingdong

To the Shareholders

Dear Sir or Madam,

INTRODUCTION

The purpose of this circular is to provide you, as holders of H Shares, with the notice of the AGM (set out on pages 35 to 39 of this circular) and the notice of the H Shares Class Meeting (set out on pages 40 to 43 of this circular) and information reasonably necessary to enable you to make an informed decision on whether to vote for or against the proposed resolutions or abstain from voting at the AGM and the H Shares Class Meeting.

– 5 –

LETTER FROM THE BOARD

At the AGM, ordinary resolutions will be proposed to approve, among others, (i) the report of the Board of Directors of the Company for the year 2020 (the “ 2020 Report of the Board ”); (ii) the report of the Supervisory Committee of the Company for the year 2020 (the “ 2020 Report of the Supervisory Committee ”); (iii) the final accounts report of the Company for the year 2020 (the “ 2020 Final Accounts Report ”); (iv) the profit distribution proposal of the Company for the year 2020 (the “ 2020 Profit Distribution Proposal ”); (v) the proposal regarding the proprietary business scale of the Company in 2021; (vi) the annual report of the Company for the year 2020 (the “ 2020 Annual Report ”); (vii) the proposal regarding the projected routine related-party transactions of the Company in 2021; (viii) the proposal regarding the expected provision of guarantees by the Company in 2021; (ix) proposal in relation to the election of independent non-executive director of the Company; (x) the proposal regarding allowances for independent supervisors; (xi) the proposal regarding the engagement of auditing firms for the year 2021. At the AGM, special resolutions will be proposed to approve, among others, (i) the proposal regarding the amendments to certain articles of the Articles of Association of the Company; (ii) the proposal regarding the general mandate to issue offshore debt financing instruments of the Company; (iii) proposal regarding the use of proceeds from previous fund-raising activities; (iv) proposal on the Company’s compliance with requirements on rights issue; (v) proposal on the public issuance of shares by way of rights issue of the Company; (vi) proposal on the plan of public issuance of shares by way of rights issue of the Company; (vii) proposal on feasibility analysis report on use of proceeds to be raised from rights issue of the Company; (viii) proposal on the risk warning regarding dilution of immediate returns by rights issue to existing shareholders and remedial measures and undertakings given by relevant parties; and (ix) proposal on the submission to the general meeting of the Company for full authorization to the Board to deal with relevant matters in relation to the rights issue.

At the H Shares Class Meeting, special resolutions will be proposed to approve, among others, (i) proposal on the Company’s compliance with requirements on rights issue; (ii) proposal on the public issuance of shares by way of rights issue of the Company; (iii) proposal on the plan of public issuance of shares by way of rights issue of the Company; (iv) proposal on feasibility analysis report on use of proceeds to be raised from rights issue by the Company; (v) proposal on risk warning regarding dilution of immediate returns by rights issue to existing shareholders and remedial measures and undertakings given by relevant parties; and (vi) proposal on the submission to the general meeting of the Company for full authorization to the Board to deal with relevant matters in relation to the rights issue.

ORDINARY RESOLUTIONS

1. 2020 Report of the Board

An ordinary resolution will be proposed at the AGM to consider and approve the 2020 Report of the Board. Details of the aforesaid report of the Board are set out in Annex I of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The 2020 Report of the Board was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

– 6 –

LETTER FROM THE BOARD

2. 2020 Report of the Supervisory Committee

An ordinary resolution will be proposed at the AGM to consider and approve the 2020 Report of the Supervisory Committee. Details of the aforesaid report of the Supervisory Committee are set out in Annex II of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The 2020 Report of the Supervisory Committee was considered and approved by the Supervisory Committee on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

3. 2020 Final Accounts Report

An ordinary resolution will be proposed at the AGM to consider and approve the 2020 Final Accounts Report. Details of the aforesaid final accounts report are set out in Annex III of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

The 2020 Final Accounts Report was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

4. 2020 Profit Distribution Proposal

An ordinary resolution will be proposed at the AGM to consider and approve the 2020 Profit Distribution Proposal in accordance with the Articles of Association.

In accordance with the Company Law, the Securities Law, the Financial Rules for Financial Enterprises, the Listed Companies Regulatory Guidance No.3 – Cash Dividends Distribution of Listed Companies (《上市公司監管指引第 3 號－上市公司現金分紅》) and the Interim Measures on the Supervision and Administration of Risk Reserves of Public Securities Investment Funds (《公開募集證 券投資基金風險準備金監督管理暫行辦法》) issued by the CSRC, and the Articles of Association and other relevant rules, and based on the actual needs of business development of the Company, the proposed profit distribution plan for 2020 of the Company is as follows:

As at the beginning of 2020, the undistributed profit of the Company was RMB4,766,558,982.91. Together with the net profit of the Company realized in 2020 of RMB1,536,393,008.19 and deducting the cash dividends of 2019 distributed of RMB1,049,048,370.45, the impact on unallocated profits of the owners’ interests internally carried forward of RMB28,712,812.04 and the interest expenses on perpetual subordinated bonds of RMB83,287,671.23, the distributable profit of the Company for 2020 was RMB5,141,903,137.38.

– 7 –

LETTER FROM THE BOARD

In accordance with the relevant requirements of the aforesaid laws and regulations and the Articles of Association, the net profits of the Company for 2020 shall be distributed according to the following sequence:

1. The Company appropriates RMB153,639,300.82 to the general risk reserve calculated on the basis of 10% of the net profit of the Company realized in 2020;

2. The Company appropriates RMB153,639,300.82 to the statutory surplus reserve calculated on the basis of 10% of the net profit of the Company realized in 2020;

3. The Company appropriates RMB153,639,300.82 to the transaction risk reserve calculated on the basis of 10% of the net profit of the Company realized in 2020;

4. The Company appropriates RMB76,819,650.41 to the discretionary surplus reserve calculated on the basis of 5% of the net profit of the Company realized in 2020;

5. A risk reserve for custodian business of RMB4,885.82 was set aside at 2.5% of the custodian fee income of the public funds.

The aggregate of the above amounted to RMB537,742,438.69.

Net of the above items, the Company’s distributable profits attributable to the investors as at the end of 2020 was RMB4,604,160,698.69.

The Company has considered factors such as long-term development and the interest of investors comprehensively, and proposed the profit distribution scheme for 2020 as follows:

1. Ways of cash dividend distribution for 2020 profit of the Company: based on the total share capital of 6,993,655,803 Shares as at the end of 2020, a cash dividend of RMB2.50 (inclusive of tax) for every 10 Shares will be distributed to A Shareholders and H Shareholders who are registered on the date of cash distribution in 2020, with a total cash dividend of RMB1,748,413,950.75, accounting for 64.21% of the net profit attributable to the owners of the parent company in 2020 consolidated statements.

2. Cash dividend will be denominated and distributed in RMB and paid in RMB to A Shareholders but paid in HK dollar to H Shareholders. The actual amount of distribution in HK dollar will be converted into HK dollar based on the average benchmark exchange rate published by the People’s Bank of China five working days prior to the date of 2020 AGM.

The 2020 Profit Distribution Proposal was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval. The Company will conduct the cash dividend distribution within two months from the date of convening the AGM, subject to the approval of the aforesaid profit distribution proposal at the AGM. The Company will give further announcement regarding the record date and the book closure period for the dividend of H Shares.

– 8 –

LETTER FROM THE BOARD

5. The Proposal Regarding the Proprietary Business Scale of the Company in 2021

An ordinary resolution will be proposed at the AGM to consider and approve the proposal regarding the proprietary business scale of the Company in 2021. Details are as follows:

The proprietary securities business is an important component of the principal business of the Company. In order to keep in line with regulatory requirements over listed securities companies and further strengthen risk management, the proprietary business scale of the Company in 2021 is set out as follows in accordance with the Rules on Strengthening the Supervision and Administration of Listed Securities Companies (as amended in 2020) and the Administrative Measures for Risk Control Indicators of Securities Companies (as amended in 2020) and relevant laws and regulations and relevant rules of the Company:

In accordance with various regulatory requirements of the CSRC, the maximum amount of investment in proprietary equity securities and their derivatives shall not exceed 80% of net capital of the Company, and the maximum amount of investment in proprietary non-equity securities and securities derivatives shall not exceed 400% of net capital of the Company. The Board of the Company will be authorized to determine the detailed investment scale within the aforesaid limit subject to the regulatory requirements of the CSRC in relation to proprietary business management and risk monitoring based on the market changes and business development.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

6. 2020 Annual Report

An ordinary resolution will be proposed at the AGM to consider and approve the 2020 Annual Report. The 2020 Annual Report has been despatched and also published on the website of the Hong Kong Stock Exchange (www.hkexnews.hk) and the website of the Company (www.dfzq.com.cn).

The 2020 Annual Report was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

7. The Proposal Regarding the Projected Routine Related Party Transactions in 2021

An ordinary resolution will be proposed at the AGM to consider and approve the proposal regarding the projected routine related party transactions of the Company for the year 2021, details of which are set out in Annex V of this circular.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

– 9 –

LETTER FROM THE BOARD

8. The Proposal Regarding the Expected Provision of Guarantees by the Company in 2021

Reference is made to the announcement of the Company dated March 30, 2021 in relation to the projected intragroup guarantees for the year 2021.

An ordinary resolution will be proposed at the AGM to consider and approve the guarantees provided by the Company for its subsidiaries or among its subsidiaries for the year 2021. Details are as follows:

In accordance with the operation plan of the Company, the Company and its subsidiaries propose to raise funds by issuing bonds, bank loans, and other channels. In order to reduce financing costs, the Company or its subsidiaries may provide financing guarantees for its wholly-owned subsidiaries. Meanwhile, in order to enhance the external operation capability of the Company’s subsidiaries in Hong Kong, Orient Finance Holdings (Hong Kong) Limited (“ Orient Finance Holdings ”), a wholly-owned subsidiary of the Company, which proposes to provide non-financing guarantees for its wholly-owned subsidiaries.

In accordance with the relevant laws and regulations, the Articles of Association and the Measures to Manage External Guarantees of the Company, expected provision of guarantees during the period from the date when this proposal is considered and approved at the AGM to the date of the 2021 annual general meeting of the Company is projected and the following matters are proposed for consideration and approval at the AGM:

(i) Financing guarantees

1. Limitation of the guarantees: the total amount of additional Intragroup Guarantees provided by the Company and its subsidiaries within the validity period of authorization shall not exceed 20% of the latest audited net assets of the Company, and the amount of each separate Intragroup Guarantee shall not exceed 10% of the latest audited net assets of the Company.

2. Types of the guarantees: including but not limited to providing guarantees for onshore or offshore debt financing instrument(s) is/are issued through public or non-public issuances (including but not limited to ordinary bonds, subordinated bonds, ultra-short-term financing bills, short-term financing bills, medium-term notes), or loans granted from onshore or offshore financial institutions (including but not limited to bank credit, bank loans and syndicated loans).

3. Models of the guarantees: collateralization include guarantees, security, pledges, and other models as stipulated under the provisions of the relevant laws and regulations.

4. Targets of the guarantees: directly and indirectly holding wholly-owned subsidiaries of the Company (including those with the gearing ratio over 70%).

5. Validity period of authorization: the aforementioned guarantees shall be valid from the date of consideration and approval of the guarantees by the 2020 annual general meeting to the date of the 2021 annual general meeting.

– 10 –

LETTER FROM THE BOARD

1. Authorization: subject to the quota, type, model, targets and validity period of financing guarantees, it is proposed to the general meeting for the shareholders to authorize the Board and agree the Board in turn to further authorize the management to, at its/their sole discretion, deal with all specific matters involved in the aforementioned financing guarantee, including but limited to executing all documents in connection with the aforementioned guarantees, obtaining approvals from and handling filing formalities with the relevant regulatory authorities, and fulfilling the obligation of information disclosure in a timely manner in accordance with the relevant laws and regulations upon the provision of letters of guarantees or issuance of guarantee documents between the Company and its wholly-owned subsidiaries and between the subsidiaries and their wholly-owned subsidiaries.

(ii) Non-financing guarantees

1. Limitation of the guarantees: the total amount of additional external guarantees provided by Orient Finance Holdings within the validity period of authorization shall not exceed US$1.6 billion and the amount guaranteed shall be calculated subject to the agreed amount as set out in the guarantee agreement or the limit of risk monitoring indicators.

2. Types of the guarantees: including but not limited to providing guarantees for non-financing transactions such as International Swaps and Derivatives Association (ISDA), Master Clearing Agreement, Bond Market Association/International Securities Market Association Global Master Repurchase Agreement (TBMA/ISMA GMRA), Master Brokerage Service Agreement, physical trading of precious metals, brokerage business, and issuance of structured notes.

3. Models of the guarantees: collateralization include guarantees, security, pledges, and other models as stipulated under the provisions of the relevant laws and regulations.

4. Targets of the guarantees: wholly-owned subsidiaries directly or indirectly held by Orient Finance Holdings (including those with the gearing ratio over 70%).

5. Validity period of authorization: the aforementioned guarantees shall be valid from the date of consideration and approval of the guarantees by the 2020 annual general meeting to the date of the 2021 annual general meeting.

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LETTER FROM THE BOARD

1. Authorization: subject to the quota, type, model, targets and validity period of the non-financing guarantees, it is proposed to the general meeting for the shareholders to authorize the Board and agree the Board in turn to further authorize the competent directors of Orient Finance Holdings to, at its/their sole discretion, deal with all specific matters involved in the aforementioned non-financing guarantees, including but not limited to executing all documents in connection with the aforementioned guarantees, obtaining approvals from and handling filing formalities with the relevant regulatory authorities, and fulfilling the obligation of information disclosure in a timely manner in accordance with the relevant laws and regulations upon the provision of letters of guarantees or issuance of guarantee documents for the wholly-owned subsidiaries of Orient Finance Holdings.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

9. The Proposal in Relation to the Election of Independent Non-Executive Director of the Company

Reference is made to the announcement of the Company dated March 30, 2021 in relation to the proposed appointment of independent non-executive Director. An ordinary resolution will be proposed at the AGM to consider and approve the election of Mr. LUO Xinyu (“ Mr. LUO ”) as an independent non-executive Director.

The biographical details of Mr. LUO are set out as below:

Mr. LUO Xinyu ( 羅新宇 ), is born in 1974 and holds a master’s degree. He is currently the general manager (president) of Shanghai State-owned Capital Operation Research Institute Co., Ltd. ( 上海國 有資本運營研究院有限公司 ), chairman of Shanghai State-owned Capital Training Center Co., Ltd. ( 上海國資培訓中心有限公司董事長 ), a director of Shanghai Pudong Technology Investment Co., Ltd. ( 上海浦東科技投資有限公司 ), a director of Kunshan Culture Business Tourism Group Co., Ltd. ( 昆山文商旅集團有限公司 ), a supervisor of Shanghai Guosheng Guxian Venture Capital Investment Management Co., Ltd. ( 上海國盛古賢創業投資管理有限公司 ), and vice president of China Enterprise Reform and Development Society. He once served as a teacher of Shaodong No. 10 Middle School in Hunan Province, a reporter from the Propaganda Department of Shaodong County Committee in Hunan Province, a reporter from China Youth Daily, and a reporter from Xinhua News Agency Shanghai Branch. From July 2004 to July 2009, he served as the general manager of the membership department of Shanghai United Assets and Equity Exchange, from July 2009 to April 2020, he served as the deputy director of the board office and the strategy and investment decision committee of Shanghai Guosheng (Group) Co., Ltd. and served as the general manager (president) of Shanghai State-owned Capital Operation Research Institute Co., Ltd. since April 2020.

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LETTER FROM THE BOARD

As at the Latest Practicable Date and to the best of the Board’s knowledge, during the past three years, Mr. LUO has not held any directorship in any public company whose securities are listed on any securities market in Hong Kong or overseas. As at the Latest Practicable Date, Mr. LUO is not connected with any other directors, supervisors, senior management, substantial Shareholders or controlling Shareholders of the Company. Mr. LUO has no interest in the shares of the Company or any of its associated corporations within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).

Save as disclosed in this circular, there is no information that needs to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, nor is there anything that needs to be brought to the attention of Shareholders of the Company in relation to the appointment of Mr. LUO.

As at the Latest Practicable Date, the Company has not entered into any service contract with Mr. LUO in relation to his position as an independent non-executive director of the Company. The remuneration of Mr. LUO will be determined in accordance with the resolution in relation to the Adjustment of Remuneration of the Independent Directors of the Company during his terms of office as an independent non-executive director. As at the Latest Practicable Date, to the best knowledge of the Board, the Board is of the view that Mr. LUO meets the independence guidelines set out in Rule 3.13 of the Listing Rules and is independent in accordance with the terms of the guidelines.

Pursuant to Rule A.5.5 in Appendix 14 to the Listing Rules, with reference to the Board Diversity Policy and the Directors’ Nomination Policy of the Company, the Board considers that Mr. LUO has experiences in economy, finance and other working experience required for performing independent non-executive Director’s duties. The appointment of Mr. LUO is able to facilitate the diversification of the members of the Board and help the Board better promote the implementation of development strategy plans of the Company.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

10. The Proposal Regarding the Allowances of Independent Supervisors

An ordinary resolution will be proposed at the AGM to consider and approve the proposal regarding allowances of independent supervisors. Details are as follows:

In order to further encourage independent Supervisors to work diligently in discharging their duties and responsibilities, the allowance of the independent Supervisors of the Company is proposed to be RMB100,000 per annum (inclusive of tax), in accordance with the principle that the allowance of independent Supervisors shall be commensurate with their labour, risks and responsibilities, and with reference to the market level of allowance for independent supervisors of domestic listed securities firms.

The aforesaid resolution was considered and approved by the Supervisory Committee on March 5, 2021 and is hereby proposed at the AGM for consideration and approval.

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LETTER FROM THE BOARD

11. The Proposal Regarding the Engagement of Auditing Firms for the Year 2021

An ordinary resolution will be proposed at the AGM to consider and approve the proposal regarding the engagement of accounting firms for the year 2021. Details are as follows:

According to the supervisory regulations of the domestic and overseas places where the Company’s securities are listed, the Company appoints accounting firms as the domestic and overseas auditors of the Company which were responsible for provision of relevant audit services in accordance with the PRC Accounting Standards for Business Enterprises and the International Financial Reporting Standards. Pursuant to the resolution approved at the 2019 annual general meeting of the Company, the Company appointed Deloitte Touche Tohmatsu Certified Public Accountants LLP as the domestic auditor for the year of 2020 and Deloitte Touche Tohmatsu as the overseas auditor for the year of 2020. During serving for the Company as auditors for the year of 2020, Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu followed auditing standards and other laws and regulations, adhered to professional ethics, showed strong professional competence and good abilities to perform their duties diligently, fulfilled effectively the responsibilities that the auditors should perform, and completed their audits independently, objectively and impartially.

It is therefore proposed to the general meeting to consider the following matters:

1. The Board proposes that Deloitte Touche Tohmatsu Certified Public Accountants LLP be reappointed as the domestic auditor of the Company for the year of 2021 and as the internal control auditor of the Company for the year of 2021, and will be responsible for provision of relevant audit services in accordance with the PRC Accounting Standards for Business Enterprises for a period of one year. In 2021, the financial and special regulatory reporting auditing fees amount to RMB1.19 million, and the internal control auditing fees amount to RMB420,000.

2. The Board proposes that Deloitte Touche Tohmatsu be reappointed as the overseas auditor of the Company for the year of 2021, and will be responsible for provision of relevant audit and review services in accordance with the International Financial Reporting Standards for a period of one year. In 2021, the financial reporting auditing fees amount to RMB1.19 million, and the semi-annual reviewing fees amount to RMB750,000.

3. If there is any increase to the auditing fees due to the change in auditing content, it is proposed that the AGM authorizes the Company’s management to determine the auditing fees in accordance with market principles and sign relevant contracts.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

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LETTER FROM THE BOARD

SPECIAL RESOLUTIONS

12. The Proposal Regarding the Amendments to Certain Articles of the Articles of Association

Reference is made to the announcement of the Company dated March 30, 2021 in relation to the proposed amendments to certain articles of the Articles of Association. A special resolution will be proposed at the AGM to consider and approve the proposal regarding the amendments to certain articles of the Articles of Association. Details are as follows:

Pursuant to relevant requirements of the Hong Kong Listing Rules, referring to the Companies Ordinance (Cap. 622 of the Laws of Hong Kong) and the Guidelines for Directors issued by the Hong Kong Institute of Directors and based on the actual operation and management of the Company, to further optimize division of duties among the directors of the Company, it is proposed to make the following amendments to the relevant Articles of Association:

Before amendment	After amendment	Basis of amendment
Article 157The Company shall have a Board of Directors accountable to the shareholders’ general meeting. The Board of Directors consists of 13 Directors,including one employee representative Director and at least one-third of independent Directors. The Board of Directors shall have a chairman and may have a vice chairman.	Article 157The Company shall have a Board of Directors accountable to the shareholders’ general meeting. The Board of Directors consists of 13 Directors,including executive Directors and non-executive Directors.	Corporate Governance Code as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, Article 91 of the Guidelines for Directors and other requirements as well as the actual operation of the Company
	Executive Directors comprise Directors who serve as senior management members and assume other operation and management positions within the Company; and Directors other than executive Directors are non-executive Directors,
	including independent Directors and employee representative Directors. The Board of Directors consists of at least one-third of independent Directors,including one employee representative Director. The Board of Directors shall have a chairman and may have a vice chairman.

Note: The Articles of Association are prepared in Chinese and there is no official English version. Therefore, any English translation serves as a reference only. In case of any inconsistencies between the Chinese and English version, the former shall prevail.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

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LETTER FROM THE BOARD

13. The Proposal Regarding the General Mandate to Issue Offshore Debt Financing Instruments of the Company

Reference is made to the announcement of the Company dated March 30, 2021 in relation to the proposed general mandate to issue offshore debt financing instruments. A special resolution will be proposed at the AGM to consider and approve the proposal regarding the general mandate to issue offshore debt financing instruments of the Company, details of which are set out in Annex VI of this circular.

The aforesaid resolution was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM for consideration and approval.

14. The Proposal Regarding the Use of Proceeds from Previous Fund-raising Activities

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve the special report on use of proceeds from previous fund-raising activities as of December 31, 2020. Details of the aforesaid proposal are set out in Annex XI of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

Special report on use of proceeds from previous fund-raising activities as of December 31, 2020 was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM and the H Shares Class Meeting for consideration and approval.

15. The Proposal on the Company’s Compliance with Requirements on Rights Issue

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve the statement on the Company’s compliance with requirements on rights issue. Details of the aforesaid proposal are set out in Annex VII of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

Statement on the Company’s compliance with requirements on rights issue was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM and the H Shares Class Meeting for consideration and approval.

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LETTER FROM THE BOARD

16. The Proposal on the Public Issuance of Shares by way of Rights Issue of the Company

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve the Rights Issue Plan of the Company.

Details of the Proposed A Share Rights Issue Plan and H Share Rights Issue Plan

The Rights Issue Plan will comprise an offer of the A Rights Shares to the Qualified A Shareholders and an offer of the H Rights Shares to the Qualified H Shareholders, respectively, on the preliminary terms set out below, which are subject to, among other things, the finalisation of the Rights Issue Plan and the actual market conditions.

Type and nominal The A Shares and the H Shares, each with a nominal value of value of the Rights RMB1.00 per Share. Shares:

Method of issuance:

The issuance will be conducted by way of issuing Shares to existing Shareholders.

Base, proportion and number of the Rights Issue:

The A Share Rights Issue is proposed to be based on the total number of A Shares after the trading hours on the A Share Record Date, and the Rights Issue will be made to all A Shareholders on the basis of up to three (3) Rights Shares for every ten (10) existing Shares, with fractions of less than one (1) Rights Share to be dealt with according to the relevant regulations of the SSE and the Shanghai branch of CSDC. The H Share Rights Issue is proposed to be based on the total number of qualified H Shares on the H Share Record Date, and the Rights Issue will be made to all H Shareholders for Rights Issue on the basis of up to three (3) Rights Shares for every ten (10) existing Shares. The Rights Issue proportion of both A Shares and H Shares are the same. The Rights Issue Prices shall be consistent after exchange rate adjustment. The final proportion of Rights Issue and the number of Rights Shares shall be subject to final determination by the Board as authorised by Shareholders at the General Meeting in consultation with the sponsor institution(s) (financial adviser(s)) prior to the issuance, having regard to the market conditions. The A Share Rights Issue Plan and H Share Rights Issue Plan will proceed on a best-effort basis without underwriting arrangements.

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LETTER FROM THE BOARD

The number of A Rights Shares and H Rights Shares shall be determined respectively based on the total number of A Shares as at the A Share Record Date and the total number of H Shares held by Qualified H Shareholders as at the H Share Record Date. On the basis of 6,993,655,803 Shares of the Company (comprising 5,966,575,803 A Shares and 1,027,080,000 H Shares) in issue as at the Latest Practicable Date and assuming that there will be no change in the issued share capital of the Company between the Latest Practicable Date and the Record Date, the Company expects to allot and issue, on the assumption of up to three (3) Rights Shares for every ten (10) existing Shares, no more than 2,098,096,740 Rights Shares (comprising no more than 1,789,972,740 A Rights Shares and no more than 308,124,000 H Rights Shares) in total. Prior to the implementation of the Rights Issue Plan, if the total share capital of the Company changes as a result of share bonus, capitalization of capital reserve and other reasons, the number of Rights Shares will be adjusted accordingly in accordance with the total share capital after the change. The final proportion of Rights Issue and the number of Rights Shares shall be subject to final determination by the Board as authorised at the General Meeting in consultation with the sponsor institution(s) (financial adviser(s)) prior to the issuance, having regard to the market conditions.

It is currently expected that the gross proceeds of the Rights Issue Plan will be no more than RMB16.8 billion. The final amount of gross proceeds shall be determined based on the actual Rights Issue Price and the actual number of Rights Shares to be issued.

Pricing Principle and Rights Issue Price:

1. Pricing principle

2. (1) Taking into account valuation indicators such as share prices, P/E ratios and P/B ratios of the shares of the Company in the secondary market as well as the Company’s development and shareholders’ interests;

3. (2) Capital requirements of projects to be financed with the proceeds; and

4. (3) Following the principle to determine through negotiations between the Board and the sponsor institution(s) (financial adviser(s)).

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LETTER FROM THE BOARD

1. Rights Issue Price

The Rights Issue Price will be determined by the Board as authorised by Shareholders at the General Meeting in consultation with the sponsor institution(s) (financial adviser(s)) prior to the publication of the issuance announcement, on a discount to market trading prices of A Shares having regard to the prevailing market conditions of the A Shares and H Shares. The Rights Issue Prices of the A Rights Shares and the H Rights Shares shall be the same after exchange rate adjustment, which may be higher or lower than market trade price of the H Shares at that time. As at March 30, 2021, the closing price for each A Share and H Share is RMB9.67 and HK$5.20, respectively.

Target subscribers In the Rights Issue, the target subscribers for the A Rights Shares for the Rights will be all Qualified A Shareholders who registered with the Issue: Shanghai branch of CSDC after the trading hours on the A Share Rights Issue Record Date, and the target subscribers for the H Rights Shares will be all Qualified H Shareholders as determined on the H Share Rights Issue Record Date. The Record Date of the Rights Issue will be otherwise determined after the approval of the Rights Issue Plan by CSRC.

Distribution The accumulated undistributed profits of the Company prior to arrangement the completion of the Rights Issue Plan shall be shared by all for accumulated Shareholders on a pro-rata basis after completion of the Rights undistributed Issue Plan. profits of the Company prior to the Rights Issue Plan:

Time of issuance:

The Rights Shares will be issued to all Shareholders at a suitable timing within the stipulated period after the approval from CSRC for the Rights Issue is obtained.

Method of Sale:

A Rights Shares Issue Plan and H Rights Shares Issue Plan will proceed on a best-effort basis.

Use of proceeds:

The total proceeds from the Rights Issue will not exceed RMB16.8 billion (the exact size of the issue will depend on the market conditions at the time of the issue).

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LETTER FROM THE BOARD

After deducting relevant issuance fees, the net proceeds raised from the Rights Issue will entirely be applied to increase the capital base of the Company, replenish the Company’s working capital, optimize its asset and liability structure, serve the real economy to expand business scale and enhance the Company’s market competitiveness and risk resistance.

All the proceeds raised from the Rights Issue Plan, after deduction of issuance expenses, shall be used for (1) investment banking business: not exceeding RMB6 billion; (2) wealth management and securities finance business: not exceeding RMB6 billion; (3) sales and trading business: not exceeding RMB3.8 billion; and (4) replenishing working capital: not exceeding RMB1 billion.

Without changing the use of proceeds, the Board may make appropriate adjustments to the order and amount of proceeds used for the above projects according to the actual needs of the projects. During the period from the approval at the meeting of the Board for the Rights Issue Plan until the proceeds are actually raised, the Company will first use its own funds for the projects in accordance with its operating condition and development plan, and when the proceeds are available, its own funds used will be replenished and replaced by the proceeds so raised in accordance with the procedures required by the relevant regulations.

• Effective period of the resolutions:

The effective period of the resolutions on the proposed Rights Issue Plan shall be 12 months starting from the date on which the resolution is approved at the General Meeting of the Company, the A Shares Class Meeting and the H Shares Class Meeting.

• Listing of shares to be issued:

• Upon completion of the A Share Rights Issue, the A Shares allocated will be listed on the SSE in accordance with relevant requirements.

Upon completion of the H Share Rights Issue, the H Shares allocated will be listed on the Hong Kong Stock Exchange in accordance with relevant requirements.

Qualified H Shareholders

Subject to, among other things, approval by the Shareholders at the General Meeting, the Company will send the H Share Rights Issue Prospectus to the Qualified H Shareholders (and to the extent permitted by the relevant laws, to the Excluded Shareholders for information purposes only). To qualify for the H Share Rights Issue Plan, a Shareholder must:

• (i) be registered as a H Shareholder of the Company on the H Share Record Date; and

• (ii) not be an Excluded Shareholder.

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LETTER FROM THE BOARD

Before the commencement of the H Share Rights Issue Plan, the Company will announce the date by which the H Shareholders must lodge any transfer documents in relation to the existing H Shares (together with the relevant H Share certificates) with the Company’s share registrar in Hong Kong, in order for the transferee to become a H Shareholder of the Company on or before the H Share Record Date.

The PRC Southbound Trading Investors will not be excluded from participation in the H Share Rights Issue.

PRC Southbound Trading Investors

The Directors have made the relevant enquiries and were advised that the PRC Southbound Trading Investors may participate in the H Share Rights Issue Plan through CSDC. CSDC will provide nominee services for the PRC Southbound Trading Investors to (i) sell (in full or in part) their Nil-paid H Rights Shares on the Stock Exchange under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect; and/or (ii) subscribe (in full or in part) for their pro-rata entitlement in respect of H Rights Shares held on the H Share Record Date at the Subscription Price under the H Share Rights Issue Plan in accordance with the relevant laws and regulations. However, CSDC will not support applications by such PRC Southbound Trading Investors for excess H Rights Shares under the H Share Rights Issue Plan through Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect. In addition, according to the PRC legal adviser of the Company, the PRC Southbound Trading Investors (or the relevant CSDC participants as the case may be) whose stock accounts in the CSDC are credited with Nil-paid H Rights Shares can only sell those Nil-paid H Rights Shares on the Stock Exchange via CSDC under Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect and can neither purchase any Nil-paid H Rights Shares nor transfer such Nil-paid H Rights Shares to other PRC Southbound Trading Investors.

Save and except for the PRC Southbound Trading Investors and Qualified H Shareholders who have been exempted by or have obtained the necessary and appropriate approvals from the relevant PRC authorities in accordance with the applicable PRC laws and regulations, according to the PRC legal adviser of the Company, other Shareholders in the PRC are not entitled to participate in the H Share Rights Issue Plan.

H Share Record Date

The H Share Record Date and the trading arrangements for the nil-paid H Rights Shares will be fixed by the Board and once so fixed, a further announcement will be made by the Company. The H Share Rights Issue Plan is conditional upon the fulfillment of the conditions set out under the section headed “Conditions of the H Share Rights Issue Plan” in this circular. The H Share Record Date will not precede the date of the General Meeting, the date of the A Shares Class Meeting, the date of the H Shares Class Meeting, or the date on which all relevant PRC governmental and regulatory approvals are granted to the Company in relation to the Rights Issue Plan.

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LETTER FROM THE BOARD

Trading of the H Rights Shares

Dealings in the H Rights Shares in both their nil-paid and fully-paid forms registered with the share registrar of the Company in Hong Kong will be subject to the payment of stamp duty in Hong Kong. A further announcement will be made by the Company regarding the trading arrangements for the H Rights Shares (in nil-paid and fully-paid forms) after such arrangements have been finalised by the Board.

Status of the H Rights Shares

The H Rights Shares, when allotted and fully paid, will rank pari passu in all respects with the H Shares then in issue. Holders of fully-paid H Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment and issue of the H Rights Shares.

Rights of Overseas Shareholders

The H Share Rights Issue Prospectus will not be registered under the applicable securities legislation of any jurisdiction other than Hong Kong. The Company will make enquiries regarding the feasibility of extending the H Share Rights Issue Plan to the Overseas Shareholders. If, based on the advice received from the relevant legal advisers, the Board considers that it is necessary or expedient not to offer the H Rights Shares to certain Overseas Shareholders (who are thus Excluded Shareholders) on account either of the legal restrictions under the laws of the place of his/her/their registered address(es) or the requirements of the relevant regulatory body or stock exchange in that place, the H Share Rights Issue Plan will not be made available to the Excluded Shareholders.

The Company will send copies of the H Share Rights Issue Prospectus to the Excluded Shareholders for their information only, but the Company will not send any provisional allotment letters or excess application forms to the Excluded Shareholders.

Arrangements will be made for the H Rights Shares, which would otherwise have been provisionally allotted to the Excluded Shareholders, to be sold in the market in their nil-paid form, as soon as practicable after the commencement of the dealings in the nil-paid H Rights Shares, if a premium (net of expenses) can be obtained. The proceeds of such sale, less expenses, will be paid on a pro-rata basis to the Excluded Shareholders, and the Company will pay individual amounts of more than HK$100 to the relevant Excluded Shareholders, provided that the Company will retain individual amounts of HK$100 or less for its own benefit.

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LETTER FROM THE BOARD

Application for Excess H Rights Shares

Qualified H Shareholders of the Company (other than the PRC Southbound Trading Investors) may apply, by way of excess application, for any H Rights Shares to which unsold entitlements of the Excluded Shareholders relate and for any H Rights Shares provisionally allotted to the Qualified H Shareholders but not accepted.

Application for excess H Rights Shares may be made by completing the excess application form to be despatched to the Qualified H Shareholders together with the H Share Rights Issue Prospectus and lodging the same with a separate remittance for such excess H Rights Shares. The Board will allocate the excess H Rights Shares at its discretion on a fair and equitable basis but will give preference to topping-up odd lots to whole board lots. The remaining excess H Rights Shares (if preference will be given) or all excess H Rights Shares (if no preference will be given) will be allocated to Qualified H Shareholders who have applied for excess H Rights Shares on a pro-rata basis with reference to their number of excess H Rights Shares applied for.

Conditions of the H Share Rights Issue Plan

It is expected that the H Share Rights Issue Plan will be conditional upon the fulfillment of the following matters:

• (i) the approval of the Rights Issue Plan by the Shareholders at the General Meeting;

• (ii) the approval of the Rights Issue Plan at the H Shares Class Meeting and the A Shares Class Meeting, respectively;

• (iii) the approval of the Rights Issue Plan by the CSRC and other relevant regulatory authorities;

• (iv) the Listing Committee of the Hong Kong Stock Exchange having granted to approval for the listing of, and permission to deal in, the H Rights Shares in their nil-paid and fully-paid forms, either unconditionally or subject to such conditions which the Company accepts and the satisfaction of such conditions (if any) by no later than the date of the delivery of the H Share Rights Issue Prospectus; and

• (v) the delivery to the Hong Kong Stock Exchange and filing and registration of all documents in relation to the H Share Rights Issue Plan as required by law to be filed by and registered with the Registrar of Companies in Hong Kong.

None of the above conditions for completion of the H Share Rights Issue Plan may be waived by the Company or has been satisfied as at the Latest Practicable Date. If the conditions are not fulfilled, the H Share Rights Issue Plan will not proceed.

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LETTER FROM THE BOARD

Conditions of the A Share Rights Issue Plan

It is expected that the A Share Rights Issue Plan will be conditional upon the fulfillment of the following matters:

• (i) the approval of the Rights Issue Plan by the Shareholders at the General Meeting;

• (ii) the approval of the Rights Issue Plan at the A Shares Class Meeting and the H Shares Class Meeting, respectively;

• (iii) the approval of the Rights Issue Plan by the CSRC and other relevant regulatory authorities; and

• (iv) the subscription of the A Rights Shares by the A Shareholders being at least 70% of the A Share Rights Issue Plan.

None of the above conditions for completion of the A Share Rights Issue Plan may be waived by the Company or has been satisfied as at the Latest Practicable Date. If the conditions are not fulfilled, the A Share Rights Issue Plan will not proceed.

The H Share Rights Issue Plan and A Share Rights Issue Plan are inter-conditional.

As the Rights Issue will be conducted on a best-effort basis, as indicated by Rule 7.19(5) of the Hong Kong Listing Rules, qualified holders of A Shares and H Shares who propose to take up all or partial of their entitlement under the Rights Issue or apply for excess Rights Issue Shares (if applicable) may unwittingly trigger the general offer obligation under the Takeovers Code unless exempted by the Executive (as defined under the Takeovers Code). Accordingly, the Rights Issue will be conducted on the following basis: in the event that the Rights Issue Share are not fully subscribed for, the Company will reduce the number within or beyond the quota of any applicant for the Rights Issue Shares to a level that will not trigger a general offer obligation under the Takeovers Code.

For the avoidance of doubt, the above provision do not apply to HKSCC Nominees Limited.

Registered Capital and Amendments to the Articles of Association

As a result of the completion of the Rights Issue Plan, the registered capital of the Company will be increased and certain amendments will be made to the Articles of Association in relation to the increase in the registered capital of the Company due to the issuance of the Rights Shares. The Company will duly comply with the relevant PRC laws and regulations and the requirements as set out under the Hong Kong Listing Rules in respect of such amendments to the Articles of Association. Details of such amendments will be provided to the Shareholders in a further announcement in relation to the Rights Issue Plan to be issued by the Company in due course.

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LETTER FROM THE BOARD

Methods of Sale

The H Share Rights Issue Plan will proceed on a best-effort basis without any underwriting arrangements. Pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), the Hong Kong Listing Rules and the Articles of Association, there is no requirement for a minimum level of subscription in the H Share Rights Issue.

The A Share Rights Issue Plan will proceed on best-effort basis as required under the applicable PRC laws and regulations. Under the applicable PRC laws and regulations and as classified by the CSRC, the A Share Rights Issue Plan may only proceed if the subscription level of the A Rights Shares is at least 70% of the A Share Rights Issue Plan. The rights to subscribe for the A Shares which are not taken up will lapse and no new A Shares will be issued or allotted pursuant to such rights.

Theoretical Dilution Effect

The Company confirms that, based on the currently proposed A Share Rights Issue Plan and H Share Rights Issue Plan, as at the Latest Practicable Date, the A Share Rights Issue Plan and H Share Rights Issue Plan will not result in a theoretical dilution effect of 25% or more as calculated under Rule 7.27B of the Hong Kong Listing Rules.

Fund-raising Activities Involving Securities Issuance during the Past 12 Months

The Company did not carry out any fund-raising activities involving securities issuance in the past 12 months immediately preceding the date of this circular.

The Largest Shareholders’ Undertaking

The Company’s largest shareholder, Shenergy Group which held 25.27% of the shareholding as of the Latest Practicable Date, will undertake to subscribe in full for the Rights Shares available under the Rights Issue Plan in cash before the General Meeting.

Publication of Further Announcement and H Share Rights Issue Prospectus in Relation to the H Share Rights Issue Plan

Prior to the commencement of the H Share Rights Issue Plan, the Company will make a further announcement and issue the H Share Rights Issue Prospectus, which will contain all relevant details of the Rights Issue Plan, including the definitive basis on which the Rights Shares are to be offered, the maximum number of Rights Shares to be issued, the Rights Issue Price, the period of closure of the register of members for the H Shares and the Record Date, trading arrangements of the H Rights Shares, the arrangements for excess H Rights Shares and the expected timetable of the Rights Issue Plan.

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LETTER FROM THE BOARD

Reasons for the Rights Issue Plan and Use of Proceeds

The reasons for the Rights Issue Plan and the use of proceeds raised are for (1) investment banking business: not exceeding RMB6 billion; (2) wealth management and securities finance business: not exceeding RMB6 billion; (3) sales and trading business: not exceeding RMB3.8 billion; and (4) replenishing working capital: not exceeding RMB1 billion. The Directors are of the view that the Rights Issue Plan is in the interests of the Company and the Shareholders as a whole, and that the Rights Issue Plan is an appropriate fund-raising method to increase the capital base of the Company, replenish the Company’s working capital, optimize its asset and liability structure, serve the real economy to expand business scale and enhance the Company’s market competitiveness and risk resistance.

Shareholding Structure of the Company

The following table sets out the Company’s current shareholding structure and its proposed shareholding structure upon completion of the Rights Issue Plan (assuming the Rights Issue Plan is conducted on the basis of three (3) Rights Shares for every ten (10) existing Shares with full subscription for the A Rights Shares and H Rights Shares and assuming no change in the issued share capital of the Company between the Latest Practicable Date and the Record Date):

					Approximate
	Total number				percentage of
	of issued Shares			Total number	the total number
	before the Rights	Approximate	Number of	of issued Shares	of issued Shares
	Issue Plan as	percentage of the	Shares to be	immediately	immediately
	at the Latest	total number of	issued under the	after the Rights	after the Rights
Class of Shares	Practicable Date	issued Shares	Rights Issue Plan	Issue Plan	Issue Plan
A Shares	5,966,575,803	85.3%	1,789,972,740	7,756,548,543	85.3%
Publicly held A Shares	4,199,053,381	60.0%	1,259,716,014	5,458,769,395	60.0%
Non-publicly held A Shares(1)	1,767,522,422	25.3%	530,256,726	2,297,779,148	25.3%
H Shares	1,027,080,000	14.7%	308,124,000	1,335,204,000	14.7%
Publicly held H Shares	1,019,194,800	14.6%	305,758,440	1,324,953,240	14.6%
Non-publicly held H Shares(2)	7,885,200	0.1%	2,365,560	10,250,760	0.1%
Total	6,993,655,803	100.0%	2,098,096,740	9,091,752,543	100.0%
Publicly held Shares	5,218,248,181	74.6%	1,565,474,454	6,783,722,635	74.6%
Non-publicly held Shares	1,775,407,622	25.4%	532,622,286	2,308,029,908	25.4%

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LETTER FROM THE BOARD

The following table sets out the Company’s current shareholding structure and its proposed shareholding structure upon completion of the Rights Issue Plan (assuming the Rights Issue Plan is conducted on the basis of three (3) Rights Shares for every ten (10) existing Shares with 70% subscription level for the A Rights Shares and full subscription for the H Rights Shares and assuming no change in the issued share capital of the Company between the Latest Practicable Date and the Record Date):

					Approximate
	Total number				percentage of
	of issued Shares			Total number	the total number
	before the Rights	Approximate	Number of	of issued Shares	of issued Shares
	Issue Plan as	percentage of the	Shares to be	immediately	immediately
	at the Latest	total number of	issued under the	after the Rights	after the Rights
Class of Shares	Practicable Date	issued Shares	Rights Issue Plan	Issue Plan	Issue Plan
A Shares	5,966,575,803	85.3%	1,252,980,918	7,219,556,721	84.4%
Publicly held A Shares	4,199,053,381	60.0%	722,724,192	4,921,777,573	57.5%
Non-publicly held A Shares(1)	1,767,522,422	25.3%	530,256,726	2,297,779,148	26.9%
H Shares	1,027,080,000	14.7%	308,124,000	1,335,204,000	15.6%
Publicly held H Shares	1,019,194,800	14.6%	305,758,440	1,324,953,240	15.5%
Non-publicly held H Shares(2)	7,885,200	0.1%	2,365,560	10,250,760	0.1%
Total	6,993,655,803	100.0%	1,561,104,918	8,554,760,721	100.0%
Publicly held Shares	5,218,248,181	74.6%	1,028,482,632	6,246,730,813	73.0%
Non-publicly held Shares	1,775,407,622	25.4%	532,622,286	2,308,029,908	27.0%

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LETTER FROM THE BOARD

The following table sets out the Company’s current shareholding structure and its proposed shareholding structure upon completion of the Rights Issue Plan (assuming the Rights Issue Plan is conducted on the basis of three (3) Rights Shares for every ten (10) existing Shares with full subscription level for the A Rights Shares and nil subscription for the H Rights Shares and assuming no change in the issued share capital of the Company between the Latest Practicable Date and the Record Date):

					Approximate
	Total number				percentage of
	of issued Shares			Total number	the total number
	before the Rights	Approximate	Number of	of issued Shares	of issued Shares
	Issue Plan as	percentage of the	Shares to be	immediately	immediately
	at the Latest	total number of	issued under the	after the Rights	after the Rights
Class of Shares	Practicable Date	issued Shares	Rights Issue Plan	Issue Plan	Issue Plan
A Shares	5,966,575,803	85.3%	1,789,972,740	7,756,548,543	88.3%
Publicly held A Shares	4,199,053,381	60.0%	1,259,716,014	5,458,769,395	62.1%
Non-publicly held A Shares(1)	1,767,522,422	25.3%	530,256,726	2,297,779,148	26.2%
H Shares	1,027,080,000	14.7%	0	1,027,080,000	11.7%
Publicly held H Shares	1,019,194,800	14.6%	0	1,019,194,800	11.6%
Non-publicly held H Shares(2)	7,885,200	0.1%	0	7,885,200	0.1%
Total	6,993,655,803	100.0%	1,789,972,740	8,783,628,543	100.0%
Publicly held Shares	5,218,248,181	74.6%	1,259,716,014	6,477,964,195	73.8%
Non-publicly held Shares	1,775,407,622	25.4%	530,256,726	2,305,664,348	26.2%

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LETTER FROM THE BOARD

The following table sets out the Company’s current shareholding structure and its proposed shareholding structure upon completion of the Rights Issue Plan (assuming the Rights Issue Plan is conducted on the basis of three (3) Rights Shares for every ten (10) existing Shares with 70% subscription level for the A Rights Shares and nil subscription for the H Rights Shares and assuming no change in the issued share capital of the Company between the Latest Practicable Date and the Record Date):

					Approximate
	Total number				percentage of
	of issued Shares			Total number	the total number
	before the Rights	Approximate	Number of	of issued Shares	of issued Shares
	Issue Plan as	percentage of the	Shares to be	immediately	immediately
	at the Latest	total number of	issued under the	after the Rights	after the Rights
Class of Shares	Practicable Date	issued Shares	Rights Issue Plan	Issue Plan	Issue Plan
A Shares	5,966,575,803	85.3%	1,252,980,918	7,219,556,721	87.5%
Publicly held A Shares	4,199,053,381	60.0%	722,724,192	4,921,777,573	59.7%
Non-publicly held A Shares(1)	1,767,522,422	25.3%	530,256,726	2,297,779,148	27.9%
H Shares	1,027,080,000	14.7%	0	1,027,080,000	12.5%
Publicly held H Shares	1,019,194,800	14.6%	0	1,019,194,800	12.4%
Non-publicly held H Shares(2)	7,885,200	0.1%	0	7,885,200	0.1%
Total	6,993,655,803	100.0%	1,252,980,918	8,246,636,721	100.0%
Publicly held Shares	5,218,248,181	74.6%	722,724,192	5,940,972,373	72.0%
Non-publicly held Shares	1,775,407,622	25.4%	530,256,726	2,305,664,348	28.0%

Note:

• (1) such Shares are held by Shenergy Group

• (2) such Shares are held by China Universal Asset Management Company Limited on behalf of China Universal – DFZQ ESOP Single Asset Management Scheme No. 1, which is used for directors, supervisors and chief executives of the Company and its subsidiaries or other core connected persons (as defined in the Hong Kong Listing Rules) to participate in the employee stock ownership plan of the Company. Please refer to the circular dated June 24, 2020 and the poll results announcement dated July 13, 2020 of the Company for details.

To the best knowledge of the Company, as at the Latest Practicable Date, the Rights Issue will not result in an increase in the market value of the Company by over 50% which will require an approval from the minority Shareholders under Rule 7.19A(1) of the Hong Kong Listing Rules.

Resolution on the rights issue plan of the Company was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM and the H Shares Class Meeting for consideration and approval.

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LETTER FROM THE BOARD

17. The Proposal on the Plan of Public Issuance of Shares by way of Rights Issue of the Company

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve plan of public issuance of shares by way of rights issue. Details of the aforesaid proposal are set out in Annex VIII of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

Plan of public issuance of shares by way of rights issue was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM and the H Shares Class Meeting for consideration and approval.

18. The Proposal on Feasibility Analysis Report on Use of Proceeds to Be Raised from Rights Issue by the Company

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve the feasibility analysis report on use of proceeds to be raised from rights issue. Details of the aforesaid proposal are set out in Annex IX of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

Feasibility analysis report on use of proceeds to be raised from rights issue was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM and the H Shares Class Meeting for consideration and approval.

19. The Proposal on Risk Warning regarding Dilution of Immediate Returns by Rights Issue to Existing Shareholders and Remedial Measures and Undertakings Given by Relevant Parties

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve risk warning regarding dilution of immediate returns by rights issue to existing shareholders and remedial measures and undertakings given by relevant parties. Details of the aforesaid proposal are set out in Annex X of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

Risk warning regarding dilution of immediate returns by rights issue to existing shareholders and remedial measures and undertakings given by relevant parties was considered and approved by the Board on March 30, 2021 and is hereby proposed at the AGM and the H Shares Class Meeting for consideration and approval.

– 30 –

LETTER FROM THE BOARD

20. The Proposal on the Submission to the General Meeting of the Company for Full Authorization to the Board to Deal with Relevant Matters in Relation to the Rights Issue

A special resolution will be proposed at the AGM and the H Shares Class Meeting to consider and approve the authorisations to the Board to take full charge of matters relating to the Rights Issue Plan.

The Board proposes the AGM and the H Shareholders Class Meeting to authorize the Board to take full charge of matters relating to the Rights Issue Plan, including but not limited to:

• (1) To formulate and implement a specific plan for the Rights Issue Plan covering all aspects relating to Rights Issue Plan, including the time of the implementation of the Rights Issue Plan, ratio, quantity and pricing, starting and ending dates, and actual size of proceeds, pursuant to relevant general meeting resolutions and with reference to actual circumstances, to such extent as the relevant laws, regulations and rules would allow;

• (2) To make any necessary adjustments to the Rights Issue Plan, including but not limited to, the projects in which the proceeds from the Rights Issue Plan are to be used, the amount of proceeds to be invested therein and the schedule thereof, or adjusting the rights issue ratio, quantity and pricing, according to any new requirements, guidelines or policies implemented by the state and securities regulator, market conditions or any actual needs of the Company and continue the issuance in the best interest of the Company and for the purpose of the Rights Issue Plan, to the extent not required to be considered at a general meeting pursuant to the relevant laws, regulations or rules or the Articles of Association;

• (3) To deal with filing matters in relation to the Rights Issue, including but not limited to producing, amending, signing, filing, supplementary submitting, execution and announcing filing documents and other legal documents in relation to the Rights Issue according to the requirements of regulatory authorities and responding to the comments from regulatory authorities such as the CSRC, the Hong Kong Stock Exchange, the Shanghai Stock Exchange;

• (4) To determine and appoint intermediary agencies such as sponsoring agencies, law firms and accounting firms and sign relevant agreements;

• (5) To formulate, amend, supplement, sign, submit, file and execute all agreements and other important documents during the operation of the projects in which the proceeds from the Rights Issue Plan are to be used and deal with all matters related thereto; and open a dedicated account for the proceeds from the Rights Issue Plan;

• (6) To amend the Articles of Association regarding the registered capital and the total number of Shares, capital verification arrangements, modification of the business registration of the Company and relevant filings procedures according to the outcome of the Rights Issue Plan;

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LETTER FROM THE BOARD

• (7) To register the Shares issued in the Rights Issue Plan and arrange for listing on the Shanghai Stock Exchange and the Hong Kong Stock Exchange following the completion of the Rights Issue Plan;

• (8) To repay any subscriber an amount equivalent to the issuing price together with any bank interest accrued thereon in the event of a failed Rights Issue Plan due to the substantial shareholders’ failure to subscribe the Shares allotted thereto as undertaken, or the underwritten period for the Rights Issue expires, or the A Shares subscribed by existing A Shareholders at the end of the A Shares Rights Issue Plan represents less than 70% of the A Shares to be allotted;

• (9) To deal with all other matters in relation to the Rights Issue;

• (10) Subject to obtaining the above-mentioned authorizations, to authorize the Board to delegate all the above authorisations (except those otherwise required by the laws, regulations, normative documents and the Articles of Association), jointly or individually, to the Chairman of the Board of the Company, the president of the Company or the secretary to the Board.

The above authorisation will be effective for 12 months from the respective approval dates at the AGM and H Shareholders Class Meeting.

The authorisations to the Board to take full charge of matters relating to the Rights Issue Plan were considered and approved by the Board on March 30, 2021 and are hereby proposed at the AGM and the H Shareholders Class Meeting for consideration and approval.

READING MATERIALS – 2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

Pursuant to the requirements of the Rules of General Meeting of Listed Companies (《上市公司 股東大會規則》) issued by the CSRC, independent Directors shall present a duty performance report at the AGM. Such report will be presented at the AGM, but no Shareholder’s resolution is required. The duty performance report of the independent Directors of the Company is made available to the Shareholders in Annex IV of this circular. In the event of any discrepancy between the English translation and the Chinese version of the document, the Chinese version shall prevail.

ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

The AGM of the Company will be held at Meeting Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the PRC on Thursday, May 13, 2021 at 2:00 p.m. The notice of the AGM is set out on pages 35 to 39 of this circular. A notice convening the H Shares Class Meeting of the Company to be held at Meeting Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the PRC on Thursday, May 13, 2021 immediately following the conclusion of the AGM and the A Shares Class Meeting or any adjournment thereof is set out on pages 40 to 43 of this circular.

– 32 –

LETTER FROM THE BOARD

The register of members of H Shares of the Company will be closed from Monday, May 10, 2021 to Thursday, May 13, 2021 (both days inclusive), during which time no share transfers of H Shares will be effected. Holders of H Shares who have submitted their instruments of share transfer to the H Share Registrar of the Company and registered as Shareholders on the register of members of H Shares of the Company before 4:30 p.m. on Friday, May 7, 2021 are entitled to attend and vote in respect of all resolutions to be proposed at the AGM and/or the H Shares Class Meeting. In order to attend the AGM and/or the H Shares Class Meeting, holders of H Shares should ensure that all transfer documents, accompanied by the relevant H Share certificates, are lodged with the H Share Registrar at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, before 4:30 p.m. on Friday, May 7, 2021.

The forms of proxy for the AGM and the H Shares Class Meeting have been distributed on Thursday, April 15, 2021 and have also been published on the website of Hong Kong Stock Exchange (www.hkexnews.hk) and the Company’s website (www.dfzq.com.cn).

To be valid, for holders of H Shares, the form of proxy and notarized power of attorney or other document of authorization must be delivered to the H Share Registrar not less than 24 hours before the time appointed for the AGM and/or the H Shares Class Meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the AGM and/or the H Shares Class Meeting in person if you so wish.

In accordance with the provisions of the relevant PRC laws and regulations, in relation to resolution No. 7 at the AGM, the relevant related Shareholders shall abstain from voting on the related proposals, respectively.

HONG KONG LISTING RULES REQUIREMENT

According to Rule 13.39(4) of the Hong Kong Listing Rules, any vote of shareholders at a 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. Therefore, all resolutions at the AGM and the H Shares Class Meeting will be taken by way of a poll.

Save as mentioned above, to the best knowledge of the Directors, as at the Latest Practicable Date, no Shareholder has a material interest in any of the above resolutions and therefore no Shareholder is required to abstain from voting in respect of the above resolutions at the AGM and/or the H Shares Class Meeting.

– 33 –

LETTER FROM THE BOARD

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong 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.

RECOMMENDATION

The Board considers that all the resolutions mentioned above are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends that all Shareholders to vote in favor of the relevant resolutions to be proposed at the AGM and the H Shares Class Meeting as set out in the notices of the AGM and the H Shares Class Meeting set out in this circular.

Yours faithfully, By Order of the Board JIN Wenzhong Chairman

April 22, 2021

– 34 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

(A joint stock company incorporated in the People’s Republic of China with limited liability under the Chinese corporate name “ 東方證券股份有限公司 ” and carrying on business in Hong Kong as “ 東方證券 ” (in Chinese) and “DFZQ” (in English))

(Stock Code: 03958)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting (the “ Annual General Meeting ”) of 東方證券股份有限公司 (the “ Company ”) will be held at Meeting Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the People’s Republic of China (the “ PRC ”) on Thursday, May 13, 2021 at 2:00 p.m., for the following purposes:

ORDINARY RESOLUTIONS

1. To consider and approve the report of the Board of Directors of the Company for the year 2020.

2. To consider and approve the report of the Supervisory Committee of the Company for the year 2020.

3. To consider and approve the final accounts report of the Company for the year 2020.

5. To consider and approve the profit distribution proposal of the Company for the year 2020.

6. To consider and approve the proposal regarding the proprietary business scale of the Company in 2021.

8. To consider and approve the annual report of the Company for the year 2020.

9. To consider and approve the proposal regarding the projected routine related-party transactions of the Company in 2021, including:

10. 7.01 Routine related-party transactions with Shenergy (Group) Company Limited and its related companies;

11. 7.02 Routine related-party transactions with other related parties.

12. To consider and approve the proposal regarding the expected provision of guarantees by the Company in 2021.

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NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

1. To consider and approve the proposal in relation to the election of independent non-executive director of the Company.

2. To consider and approve the proposal regarding the allowances for independent supervisors of the Company.

3. To consider and approve the proposal regarding the engagement of auditing firms for the year 2021.

SPECIAL RESOLUTIONS

1. To consider and approve the proposal regarding the amendments to certain articles of the articles of association of the Company.

2. To consider and approve the proposal regarding the general mandate to issue offshore debt financing instruments of the Company, including:

3. 13.01 Issue methods;

4. 13.02 Issue type;

5. 13.03 Issue size;

6. 13.04 Issuer;

7. 13.05 Issue term;

8. 13.06 Issue interest rate, way of payment and issue price;

9. 13.07 Security and other arrangements;

10. 13.08 Use of proceeds;

11. 13.09 Target subscribers;

12. 13.10 Listing of debt financing instruments;

13. 13.11 Authorization of issuance of offshore debt financing instruments;

14. 13.12 Validity period of resolution.

15. To consider and approve the proposal regarding the use of proceeds from previous fund-raising activities.

16. To consider and approve the proposal on the Company’s compliance with requirements on rights issue.

– 36 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

1. To consider and approve the proposal on the public issuance of shares by way of rights issue of the Company, including:

2. 16.01 Type and nominal value of the issued shares;

3. 16.02 Method of the issuance;

4. 16.03 Base, proportion and number of the rights issue;

5. 16.04 Pricing principle and issuance price;

6. 16.05 Target subscribers for the issuance;

7. 16.06 Distribution arrangement for accumulated undistributed profits of the Company prior to the issuance plan;

8. 16.07 Time of issuance;

9. 16.08 Method of sale;

10. 16.09 Use of proceeds from the rights issue;

11. 16.10 Effective period of the resolutions of the rights issue;

12. 16.11 Listing of shares to be issued.

13. To consider and approve the proposal on the plan of public issuance of shares by way of rights issue of the Company.

14. To consider and approve the proposal on feasibility analysis report on use of proceeds to be raised from rights issue by the Company.

15. To consider and approve the proposal on risk warning regarding dilution of immediate returns by rights issue to existing shareholders and remedial measures and undertakings given by relevant parties.

16. To consider and approve the proposal on the submission to the general meeting of the Company for full authorization to the Board to deal with relevant matters in relation to the rights issue.

By order of the Board of Directors

JIN Wenzhong

Chairman

Shanghai, the PRC April 15, 2021

– 37 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

Notes:

1. Eligibility for attending the Annual General Meeting and date of registration of holders for H Shares

The register of members of H Shares of the Company will be closed from Monday, May 10, 2021 to Thursday, May 13, 2021, (both days inclusive), during which time no share transfers of H Shares will be effected. Purchasers of shares who have submitted their instruments of share transfer to the H Share Registrar of the Company and registered as shareholders on the register of members of H Shares of the Company before 4:30 p.m. on Friday, May 7, 2021 are entitled to attend and vote in respect of all resolutions to be proposed at this Annual General Meeting.

In order to attend this Annual General Meeting, holders of H Shares should ensure that all transfer documents, accompanied by the relevant share certificates, are 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, before 4:30 p.m. on Friday, May 7, 2021.

2. Proxy

• (1) Each shareholder entitled to attend and vote at the Annual General Meeting may appoint one or more proxies in writing to attend and vote on his behalf. A proxy need not be a shareholder of the Company.

• (2) The instrument appointing a proxy must be in writing under the hand of the appointor or his attorney duly authorized in writing, or if the appointor is a legal entity, either under seal or signed by a director or a duly authorized attorney. If that instrument is signed by an attorney of the appointor, the power of attorney authorizing that attorney to sign or other document of authorization must be notarized.

To be valid, for holders of H Shares, the form of proxy and notarized power of attorney or other document of authorization must be delivered to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 24 hours before the time appointed for the Annual General Meeting (i.e. before 2:00 p.m. on Wednesday, May 12, 2021).

3. Registration procedures for attending the Annual General Meeting

A shareholder or his proxy should present proof of identity when attending the Annual General Meeting. If a shareholder is a legal person, its legal representative or other person authorized by the board of directors or other governing body of such shareholder may attend the Annual General Meeting by providing a copy of the resolution of the board of directors or other governing body of such shareholder appointing such person to attend the meeting.

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.

– 38 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

5. Miscellaneous

• (1) The Annual General Meeting is expected to be held for no more than half a day. Shareholders who attend the meeting in person or by proxy shall bear their own travelling and accommodation expenses. In addition, in order to get well prepared for the containment of COVID-19 pneumonia epidemic and protect people who will attend the meeting, shareholders who wish to attend the Annual General Meeting on-site must pay attention in advance and strictly abide by the regulations and requirements of Shanghai on health status declaration, quarantine and observation during the epidemic containment period. The Company will strictly follow the epidemic containment requirements of relevant government departments and take appropriate epidemic prevention and control measures for the on-site Shareholders under the guidance and supervision of relevant government departments. Shareholders who have fever and other symptoms or do not comply with the epidemic prevention and control requirements may not be admitted to the venue of the Annual General Meeting.

• (2) The address of Computershare Hong Kong Investor Services Limited is:

17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (3) The registered office of the Company:

Orient Securities Building No. 119 South Zhongshan Road Huangpu District, Shanghai the People’s Republic of China Contact office: Office of the Board Telephone No.: 86 (21) 6332 6373 Facsimile No.: 86 (21) 6332 6010 Contact Person: Mr. DENG Haipeng

• (4) Please refer to the circular of the Company in relation to the Annual General Meeting to be dispatched on or before Thursday, April 22, 2021 for details of the resolutions to be proposed at the Annual General Meeting for consideration and approval.

As at the date of this notice, the Board of Directors comprises Mr. SONG Xuefeng and Mr. JIN Wenzhong as executive Directors; Mr. YU Xuechun, Mr. LIU Wei, Mr. ZHOU Donghui, Mr. CHENG Feng, Mr. REN Zhixiang and Ms. ZHU Jing as non-executive Directors; and Mr. XU Zhiming, Mr. JIN Qinglu, Mr. WU Hong and Mr. FENG Xingdong as independent non-executive Directors.

– 39 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

(A joint stock company incorporated in the People’s Republic of China with limited liability under the Chinese corporate name “ 東方證券股份有限公司 ” and carrying on business in Hong Kong as “ 東方證券 ” (in Chinese) and “DFZQ” (in English))

(Stock Code: 03958)

NOTICE OF H SHARES CLASS MEETING

NOTICE IS HEREBY GIVEN that the class meeting of H Shareholders (the “ H Shares Class Meeting ”) of 東方證券股份有限公司 (the “ Company ”) will be held at Meeting Room, 15/F, No. 119 South Zhongshan Road, Shanghai, the People’s Republic of China (the “ PRC ”) on Thursday, May 13, 2021 immediately following the conclusion of the Annual General Meeting and the class meeting of A shareholders of the Company or any adjournment thereof, for the following purposes:

SPECIAL RESOLUTIONS

1. To consider and approve the proposal on the Company’s compliance with requirements on rights issue.

2. To consider and approve the proposal on the public issuance of shares by way of rights issue of the Company, including:

3. 2.01 Type and nominal value of the issued shares;

4. 2.02 Method of the issuance;

5. 2.03 Base, proportion and number of the rights issue;

6. 2.04 Pricing principle and issuance price;

7. 2.05 Target subscribers for the issuance;

8. 2.06 Distribution arrangement for accumulated undistributed profits of the Company prior to the issuance plan;

– 40 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

• 2.07 Time of issuance;

• 2.08 Method of sale;

• 2.09 Use of proceeds from the rights issue;

• 2.10 Effective period of the resolutions of the rights issue;

• 2.11 Listing of shares to be issued.

• To consider and approve the proposal on the plan of public issuance of shares by way of rights issue of the Company.

• To consider and approve the proposal on feasibility analysis report on use of proceeds to be raised from rights issue by the Company.

• To consider and approve the proposal on risk warning regarding dilution of immediate returns by rights issue to existing shareholders and remedial measures and undertakings given by relevant parties.

• To consider and approve the proposal on the submission to the general meeting of the Company for full authorization to the Board to deal with relevant matters in relation to the rights issue.

By order of the Board of Directors JIN Wenzhong Chairman

Shanghai, the PRC April 15, 2021

– 41 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

Notes:

1. Eligibility for attending the H Shares Class Meeting and date of registration of holders for H Shares

The register of members of H Shares of the Company will be closed from Monday, May 10, 2021 to Thursday, May 13, 2021 (both days inclusive), during which time no share transfers of H Shares will be effected. Purchasers of shares who have submitted their instruments of share transfer to the H Share Registrar of the Company and registered as shareholders on the register of members of H Shares of the Company before 4:30 p.m. on Friday, May 7, 2021 are entitled to attend and vote in respect of all resolutions to be proposed at this H Shares Class Meeting.

In order to attend this H Shares Class Meeting, holders of H Shares should ensure that all transfer documents, accompanied by the relevant share certificates, are 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, before 4:30 p.m. on Friday, May 7, 2021.

2. Proxy

• (1) Each shareholder entitled to attend and vote at the H Shares Class Meeting may appoint one or more proxies in writing to attend and vote on his behalf. A proxy need not be a shareholder of the Company.

• (2) The instrument appointing a proxy must be in writing under the hand of the appointor or his attorney duly authorized in writing, or if the appointor is a legal entity, either under seal or signed by a director or a duly authorized attorney. If that instrument is signed by an attorney of the appointor, the power of attorney authorizing that attorney to sign or other document of authorization must be notarized.

To be valid, for holders of H Shares, the form of proxy and notarized power of attorney or other document of authorization must be delivered to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 24 hours before the time appointed for the H Shares Class Meeting.

3. Registration procedures for attending the H Shares Class Meeting

A shareholder or his proxy should present proof of identity when attending the H Shares Class Meeting. If a shareholder is a legal person, its legal representative or other person authorized by the board of directors or other governing body of such shareholder may attend the H Shares Class Meeting by providing a copy of the resolution of the board of directors or other governing body of such shareholder appointing such person to attend the meeting.

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. As such, each of the resolutions set out in the notice of the H Shares Class Meeting will be voted on by poll.

– 42 –

NOTICE OF ANNUAL GENERAL MEETING AND H SHARES CLASS MEETING

5. Miscellaneous

• (1) The H Shares Class Meeting is expected to be held for no more than half a day. Shareholders who attend the meeting in person or by proxy shall bear their own travelling and accommodation expenses. In addition, in order to get well prepared for the containment of COVID-19 pneumonia epidemic and protect people who will attend the meeting, shareholders who wish to attend the H Shares Class Meeting on-site must pay attention in advance and strictly abide by the regulations and requirements of Shanghai on health status declaration, quarantine and observation during the epidemic containment period. The Company will strictly follow the epidemic containment requirements of relevant government departments and take appropriate epidemic prevention and control measures for the on-site Shareholders under the guidance and supervision of relevant government departments. Shareholders who have fever and other symptoms or do not comply with the epidemic prevention and control requirements may not be admitted to the venue of the H Shares Class Meeting.

• (2) The address of Computershare Hong Kong Investor Services Limited is:

17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (3) The registered office of the Company:

Orient Securities Building No. 119 South Zhongshan Road Huangpu District, Shanghai the People’s Republic of China Contact office: Office of the Board Telephone No.: 86 (21) 6332 6373 Facsimile No.: 86 (21) 6332 6010 Contact Person: Mr. DENG Haipeng

• (4) Please refer to the circular of the Company in relation to the Annual General Meeting and the H Shares Class Meeting to be dispatched on or before Thursday, April 22, 2021 for details of the resolutions to be proposed at the H Shares Class Meeting for consideration and approval.

As at the date of this notice, the Board of Directors comprises Mr. SONG Xuefeng and Mr. JIN Wenzhong as executive Directors; Mr. YU Xuechun, Mr. LIU Wei, Mr. ZHOU Donghui, Mr. CHENG Feng, Mr. REN Zhixiang and Ms. ZHU Jing as non-executive Directors; and Mr. XU Zhiming, Mr. JIN Qinglu, Mr. WU Hong and Mr. FENG Xingdong as independent non-executive Directors.

– 43 –

2020 REPORT OF THE BOARD

ANNEX I

Dear Shareholders,

The 2020 annual work report and 2021 annual work plan of the Board is set out below according to relevant requirements of laws and regulations and the Articles of Association:

During 2020, the COVID-19 pandemic inflicted the globe, leading to deep recession of global economies. China rose to be the only major economy that recorded positive growth globally, where the capital market advanced amid continued in-depth reform and risk resistance and competition in the securities industry further intensified. Throughout the year, the SSE Composite Index, the Shenzhen Component Index and the GEM Index rose by 13.87%, 38.73% and 64.96%, respectively; the ChinaBond Total Net Price (Total Value) Index slightly dropped by 0.42%; the daily average trading volume of stocks transactions on SSE and Shenzhen Stock Exchange amounted to RMB847.808 billion, representing a year-on-year increase of 63.05%; and the balances of margin financing and securities lending business as of the end of 2020 was RMB1,619.008 billion, representing a rise of 58.84% as compared to the end of the previous year. In 2020, the securities industry continued to enhance operating capacity, accelerated business transformation and maintained overall upbeat operating performances, with operating revenue and net profit recording a year-on-year increase of 24.41% and 27.98%.

Based on well-grounded judgments and scientific and effective decision-making and pursuant to the requirements for the final year of our three-year strategic planning, the Board upheld the work keynote of “risk prevention and steady growth”, attached equal importance to long-term strategy and annual focus area, further optimized business structure, enhanced the Group’s compliance and risk control management, grasped market opportunities and strengthened disposal of risky assets, thereby contributing to effective improvement of operating results, continuous enhancement of the Company’s strength and maintaining the relatively stable industry position.

I. PRINCIPAL OPERATION OF THE COMPANY IN 2020

(i) Key Financial Indicators

In 2020, the Company achieved consolidated operating revenue of RMB23.134 billion, a year-on-year increase of 21.42%; and net profit attributable to the parent company of RMB2.723 billion, a year-on-year increase of 11.82%. As of the end of the year, the Company had total assets of RMB291.117 billion, an increase of 10.70% from the end of the previous year; and net assets attributable to the parent company of RMB60.203 billion, an increase of 11.56% from the end of the previous year.

(ii) Principal Operation

In 2020, the Company adhered to the operating strategy of “steady growth, risk control and reform promotion”, proactively grasped market opportunities, achieved effective increase in operating results, secured steady growth in asset scale and comprehensive capabilities and maintained stable industry position. Meanwhile, the Company adopted measures to prevent and control risks and was rated as a “Grade A of Class A” company among securities companies.

– I-1 –

2020 REPORT OF THE BOARD

ANNEX I

1. Enhancing investment and research capabilities with sound returns from asset allocation

The equity-related proprietary investment business was rooted in the industry and research of specific stocks, held shareholding in leading listed companies with healthy finance and quality management capacity on a collective basis, secured remarkable absolute gains and struck a sound balance between yields and loss. The FICC business completed layout along the whole industry chain, forged benign synergy among market-making, foreign exchange, capital-intermediary and gold business through a rippling effect and maintained leading industry position in terms of investment scale and performances. In terms of the derivatives business, the Alpha transactions, intelligent transactions and over-the counter derivatives business recorded steady development and revenue with yield-loss rate comparable to that of leading private equity companies.

2. Remarkable performance in transformation of wealth management business

The Company proactively promoted the transformation of brokerage business towards wealth management, focused on the opportunities presented in wealth management business, stayed committed to agency sales of active equity products and sales volume of several products recorded new highs of the Company and the industry. The Company made notable achievements in exploring institutional clients and cooperated with several international leading investment institutions. It innovated service models for high net worth individual customers and conducted private wealth management business. In terms of securities financing, the balance of securities lending and margin financing of the Company reached RMB22.564 billion, a year-on-year increase of 75.56%; the Company adhered to the guidelines of “risk control and scale reduction”, enhanced removal and risk mitigation of existing share pledge projects and reduced business scale of over RMB5 billion throughout the year.

3. Sound momentum of the investment management business with management scale to a new level

Orient Securities Asset Management was committed to long-term value investment practice, further consolidated the Dongfanghong brand, and managed total asset scale of RMB298.548 billion, including publicly offered asset scale of RMB199.631 billion, an increase of 33.95% and 61.76% from the beginning of the year, respectively. China Universal followed the requirements underlying the “Year of Capability Enhancement” and comprehensively enhanced investment management, risk management, customer service, product innovation and other core capabilities with its total management scale exceeding RMB1.1 trillion, including scale of publicly offered securities of RMB835.2 billion, representing an increase of 52% and 61%, respectively, from the beginning of the year. Orient Securities Capital Investment grasped the opportunities presented by the reform of the capital market to record management scale of RMB16.055 billion and facilitated 13 enterprises to apply for initial public offering on the Science and Technology Innovation Board (the “ STAR Market ”) since the functioning of the STAR Market. Orient Securities International achieved management scale of HK$14.9 billion, a year-on-year increase of 53% and rose to be top three among Chinese brokers in Hong Kong.

– I-2 –

2020 REPORT OF THE BOARD

ANNEX I

4. Investment banking business expanding into both equity and bond financing amid progressive stability

In 2020, Citi Orient completed change in equity and was renamed as Orient Investment Banking. It flexibly coped with changes in the market and achieved remarkable performance in share and bonds underwriting. Orient Investment Banking completed 21 equity financing projects, involving an amount of RMB17.082 billion as lead underwriter, representing a year-on-year increase of 90.91% and 57.04%, respectively. Its underwriting projects included those for China International Capital Corporation Limited and Shanghai Sanyou Medical CO., LTD, which enjoyed wide market clout and IPO sponsoring approval rate reached 100%. In 2020, it acted as lead underwriter for 184 projects under the bond underwriting business with an amount reaching RMB132.202 billion. In particular, it consolidated advantages in interest rate bond sales and ranked among top two among peers in the industry in terms of underwriting of book-entry treasury bonds, financial bonds of China Development Bank and financial bonds of Agricultural Development Bank; and ranked second in terms of underwriting of local bonds.

5. Sound collectivized development

• Orient Futures regained the Class A Grade AA appraisal and achieved annual trading volume of 1.156 billion lots, a significant year-on-year increase of 69.8%, making it the only futures company nationwide to record trading volume of over 1 billion lots.

• Orient Securities Asset Management ranked first in the industry in terms of net income from entrusted asset management business, of which active management accounted for 99.79%. It is committed to the value investment concept and absolute yields on equity funds for last five years amounted to 125.26%.

• Orient Investment Banking recorded 11 IPO underwriting projects with an amount of RMB10.235 billion, a year-on-year increase of 500%. In 2020, despite increasing default in the bond market, bond projects underwritten by Orient Investment Banking achieved “zero default”.

– Orient Securities International leveraged financial technology to drive wealth management transformation with its total clients exceeding 0.23 million, a year-on-year increase of 760% and moved up 26 places in terms of ranking on the Hong Kong Stock Exchange. It strengthened capacity in investment banking business and underwriting amount for high-yielding US$ denominated bonds issued by Chinese companies ranked third among Chinese brokers in Hong Kong.

• Orient Securities Capital Investment invested in a wide spectrum of fields and had 48 funds under management with management scale reaching approximately RMB16.055 billion, and grasped opportunities arising from the registration system of the STAR Market and ChiNext Market with several projects successfully going initial public offering.

– I-3 –

2020 REPORT OF THE BOARD

ANNEX I

• Orient Securities Innovation Investment steadily promoted acquisition and disposal of special assets, equity investment and quantitative investment and invested RMB2.956 billion throughout the year, achieved business scale of RMB5.6 billion and disposed of assets of RMB1.178 billion. It enhanced revenue stability through portfolio allocation and secured satisfactory results.

• China Universal achieved net profit of RMB2.566 billion and management scale of RMB557.4 billion (excluding monetary funds and short-term wealth management funds), ranking second in the industry and maintained outstanding performances in mid-to-long term investment.

II. MAJOR WORK OF THE BOARD IN 2020

(i) Due diligence and scientific decision-making

In 2020, the Board focused on the consideration and decision on the Company’s major issues. Throughout the year, the Company held a total of 8 Board meetings, in which, 3 meetings were held on site and 5 meetings were via correspondence. Firstly, matters relating to daily operation including the Company’s annual business plan, allocation of assets and liabilities, allowance of asset impairment and related transactions were determined and followed up. Secondly, major decisions on H share employee stock ownership plan, personnel, organization and systems were considered and approved. The Board considered and approved the matters related to election of independent Director and member of the special committee according to its actual needs.

In strict compliance with relevant requirements of laws and regulations and the Articles of Association, the Board of the Company performed its duty as a convener of the Shareholders’ general meeting diligently. An annual general meeting and two extraordinary general meetings were convened in 2020, at which 24 resolutions or reports were considered or reviewed to improve communication system between the Board and investors and effectively protect the rights of Shareholders.

(ii) Successfully launching the H share employee stock ownership plan

To further establish and improve the benefit co-sharing mechanism between the employees and the Company, enhance corporate governance, strengthen cohesion among employees and competitiveness of the Company, the Board made the timely decision on formulation of the H share employee stock ownership plan based on the long-term, sustainable and healthy development requirements of the Company. The H share employee stock ownership plan broke through the restrictions on public float of H shares and promoted by the Board, the Company proactively coordinated among different parties, successfully implemented and completed purchase on the secondary market and commenced lock-up period. A total of 3,588 employees participated in the plan with a participation ratio of 63% and total subscription amount reached RMB317 million, which aligned employees’ interests with development of the Company and demonstrated the confidence of the employees in the Company.

– I-4 –

2020 REPORT OF THE BOARD

ANNEX I

(iii) Continuously improving corporate governance

To continue to improve the corporate governance with clear division of responsibilities, accountability, coordination and counter-balance, the Board proactively enhanced its capacities and duty performance and improved the corporate governance of the Company. Firstly, it implemented the regulatory requirements under the new Securities Law and Regulations on Equity Management of Securities Companies, comprehensively completed revision and improvements of the Articles of Association, the rules of procedures of the Board and the working system of the independent directors upon comprehensive review. Secondly, it promoted and optimized the assessment on the management structure and market-oriented remuneration mechanism. Thirdly, it continuously enhanced the management capacity of the Group over related-party/connected transactions, external guarantees and litigations and arbitrations. Fourthly, it strengthen implementation of the opinions of the Board and the feedback thereof, boosted self-construction such as trainings for members of the Board, actively participated in various kinds of trainings, compiled the Board briefings and improved duty performance capacity. Fifthly, it established sound relationships with the stakeholders, forged remarkable corporate culture and continued to participate in multiple social welfare and poverty-alleviation undertakings to proactively perform corporate social responsibilities.

(iv) Strengthening strategic management and collectivized synergy

Under the guidance of the Board, the Company launched the preparation of the 2021-2024 strategic planning in a timely manner. Within over eight months, the Board carried out research into the strategic planning of approximately 30 headquarters and subsidiaries and conducted extensive communications with shareholders, senior management interviews, external research and internal discussions to make a comprehensive analysis of the external and internal environment of the Company, specify the major targets, implementation principle, development path and measures underpinning the development of the Company in the next four years and submit the same to the Board for consideration and approval.

The Board focused on effective integration of strategy implementation and collectivized synergy. In 2020, it pressed ahead with collectivized management and secured remarkable results in upgrading concept, optimizing mechanism, business collaboration and system construction. Firstly, it achieved obvious improvements in comprehensive synergy and each business segment is able to offer clients with services along the whole industry chain through active resource integration and business collaboration. Secondly, the synergy mechanism was further optimized, the newly established quantitative appraisal indicators achieved noticeable results, and the number of projects and revenue from synergy projects recorded a year-on-year increase. Thirdly, it enhanced the width and depth of services provided for strategic customers. Leveraging the investment banking business, the Company has achieved initial success in the collaborative business model integrating wealth management and cross-border cooperation and received further recognition from major institutional clients on the comprehensive financial service capabilities of the Company. Fourthly, the Company completed phase I construction of the collaborative system and certain headquarters, subsidiaries and almost 40 branches have commenced online operation, thereby effectively enhancing business collaboration efficiency and quality.

– I-5 –

2020 REPORT OF THE BOARD

ANNEX I

(v) Strictly performing information disclosure responsibility

With the promulgation of the new Securities Law, the pivotal role of high-quality information disclosure in demonstrating the image and conveying the value of the Company has been heightened. The Board strictly followed the requirements of the new Securities Law and rules governing the listing of securities on the stock exchanges in Shanghai and Hong Kong, carried out self-review and implementation of the new regulatory policies and regulations in both Shanghai and Hong Kong, strictly regulated review processes and procedures to ensure that the Company performed its information disclosure obligations more truly, accurately, completely, timely and fairly for the purpose of compliance, effective and up-to-date information disclosure. In 2020, the Company prepared and disclosed in aggregate 4 periodic reports, issued 91 temporary announcements, 8 monthly financial data briefings and announcements on updates of H share employee stock ownership plan, thus continuously optimizing well-established information disclosure system.

(vi) Carrying out sound management on investor relations

The Board attached great importance to management over investor relations, continued to optimize investor relations management mechanism, proactively forged brand image and conveyed corporate values. Under the guidance of the Board, the Company constantly enriched investor relations management channels and enhanced communications with investors through multiple ways such as designated investor hotlines and mailbox, SSE e Interaction and performance roadshows. It continued to improve establishment of an investor relations platform and set up an information disclosure window through upgrading the investor relation webpage and maintaining the investor relations WeChat official account. In 2020, the Company arranged for and participated in approximately 50 roadshow exchanges, including three online performance press releases, and answered 75 questions of concern to investors through SSE e Interaction and pushed 46 articles through the investor relations WeChat official account, thereby enhancing recognition of the Company among investors from multiple dimensions. The Company specifically targeted different investors and held two online press results releases and online text exchanges for analysts, institutional investors and minority investors and provided two methods including online video conference and telephone conference, thereby resonating with regulatory guidance and effectively protecting the interests of different investors.

(vii) On-going improvement of comprehensive risk management and compliance management systems

In 2020, the Board followed regulatory requirements, further enhanced research into and judgment of the new compliance and risk management situation, strengthened comprehensive and vertical management and control over the Group’s risk control and stepped up compliance risk investigation and rectification to promote steady progress in compliance risk control culture and personnel cultivation, safeguard the compliance development of the Company and effective risk control. Firstly, it proactively implemented theme study events on the new Securities Law, comprehensively rolled out system benchmark and modification, revised the Basic System of Overall Risk Management of the Company and formulated Measures for Risk Management of Money Laundering and Terrorist Financing of the Company and timely applied the new requirements and changes in the compliance risk management and control. Secondly, it comprehensively implemented the Calculation Standard for Risk Control Indicators of Securities Companies (Revised in 2020), smoothly advanced with preparation and calculation of statements and upgraded monitoring system, stress test and revision of internal systems. Thirdly, it spared no efforts and overcame hardships to accelerate the disposal of risky assets underlying the stock pledge financing business and continued to promote risk mitigation.

– I-6 –

2020 REPORT OF THE BOARD

ANNEX I

In 2020, in the 11th Tianma Award for Investor Relations of Listed Companies in PRC sponsored by Securities Times and directed by CSI Minority Investor Service Center, the Company won the Tianma Award “Best Board of Directors on the Main Board” and the “Best Investor Relations Company”, which fully enhanced its market popularity and influence.

We take this opportunity to express our heartfelt gratitude to the Shareholders, Directors, Supervisors and customers of the Company for their great support for the development of the Company. In the future development of the Company, having noticed the gap between the development of the Company and the leading brokers, we need to further replenish capital, improve the Company’s market-oriented mechanism, and strengthen compliance and risk management, so as to effectively enhance the Company’s core competitiveness.

• III. S P E C I F I C E X P L A N A T I O N O N D U T Y P E R F O R M A N C E , A P P R A I S A L A N D REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT IN 2020

(i) Duty performance, appraisal and remuneration of Directors

In 2020, all Directors of the Company lawfully, honestly and diligently fulfilled their statutory duties in compliance with relevant requirements of laws and regulations, the Listing Rules and the Articles of Association. The Directors actively attended the meetings of the Board and special committees, carefully considered various issues, made recommendations and suggestions and provided professional opinions on important aspects including improvement of corporate governance, major operational decision-making, expansion of investment and financing channels, and enhancement of compliance and risk management, which ensured the scientific and standardized decision-making of the Board, pointed out an exact direction and laid down a solid foundation for seizing the opportunity of in-depth reform of the capital market, innovation and development in a timely and effectively manner to achieve a leaping development.

The Board of the Company held in aggregate 8 meetings during the year. All Directors have attended the meetings in person or by entrusting other Directors, and the particulars of attendance of meetings are as follows:

	Required
	attendance
	during the
	reporting	Attendance	Attendance
	period	in person	by proxy	Absence
Directors	(times)	(times)	(times)	(times)	Voting result
Jin Wenzhong	8	8	0	0	Voting in favour of all proposals
					submitted for voting
Liu Wei	8	8	0	0	Voting in favour of all proposals
					submitted for voting
Wu Junhao	8	8	0	0	Voting in favour of all proposals
					submitted for voting
Zhou Donghui	5	5	0	0	Voting in favour of all proposals
					submitted for voting

– I-7 –

2020 REPORT OF THE BOARD

ANNEX I

	Required
	attendance
	during the
	reporting	Attendance	Attendance
	period	in person	by proxy	Absence
Directors	(times)	(times)	(times)	(times)	Voting result
Li Xiang	8	7	1 (appointing	0	Voting in favour of all proposals
			Mr. Pan		submitted for voting
			Xinjun to
			exercise
			voting rights
			at the 21st
			meeting of the
			fourth session
			of the Board)
Xia Jinghan	8	6	2 (appointing	0	Voting in favour of all proposals
			Mr. Pan		submitted for voting
			Xinjun to
			exercise
			voting rights
			at the 20th
			and 21st
			meeting of the
			fourth session
			of the Board)
Xu Jianguo	8	8	0	0	Voting in favour of all proposals
					submitted for voting
Xu Zhiming	8	8	0	0	Voting in favour of all proposals
					submitted for voting
Jin Qinglu	8	7	1 (appointing	0	Voting in favour of all proposals
			Mr. Xu		submitted for voting
			Guoxiang
			to exercise
			voting rights
			at the 20th
			meeting of the
			fourth session
			of the Board)
Wu Hong	1	1	0	0	Voting in favour of all proposals
					submitted for voting
Feng Xingdong	1	1	0	0	Voting in favour of all proposals
					submitted for voting
He Xuan	1	1	0	0	Voting in favour of all proposals
					submitted for voting
Du Weihua*	1	1	0	0	Voting in favour of all proposals
					submitted for voting

– I-8 –

2020 REPORT OF THE BOARD

ANNEX I

	Required
	attendance
	during the
	reporting	Attendance	Attendance
	period	in person	by proxy	Absence
Directors	(times)	(times)	(times)	(times)	Voting result
Chen Bin*	2	2	0	0	Voting in favour of all proposals
					submitted for voting
Pan Xinjun*	6	6	0	0	Voting in favour of all proposals
					submitted for voting
Chen Xiaobo*	6	6	0	0	Voting in favour of all proposals
					submitted for voting
Xu Guoxiang*	7	7	0	0	Voting in favour of all proposals
					submitted for voting
Tao Xiuming*	7	7	0	0	Voting in favour of all proposals
					submitted for voting
Wei Anning*	7	7	0	0	Voting in favour of all proposals
					submitted for voting

Note: Directors marked with * represent those who resigned during the Reporting Period. For details regarding their resignation, please refer to “Section VIII Directors, Supervisors, Senior Management and Staff” contained in the 2020 Annual Report of the Company.

In 2020, the Board convened a total of 14 meetings of the special committees, including five meetings for the Compliance and Risk Management Committee, five meetings for the Audit Committee and four meetings for the Remuneration and Nomination Committee. Each special committee, with well-defined terms of reference, conducted prior consideration on the proposals respectively, and put forward professional review opinions as reference for consideration of proposals to the Board, providing strong support to improve the scientific and forward-looking decision-making of the Board and effectively enhancing the corporate governance. Independent Directors were capable of diligently performing their duties to express their independent opinions and recommendations on the proposals, practically maintaining the interests of Shareholders, especially minority Shareholders, and promoting the standardized operation of the Company.

In 2020, except that the independent Directors received the allowance for independent Directors in accordance with the resolution of the Shareholders’ general meeting each year, and the chairman, president and employees who are also employee representative Directors received the remuneration which was included into the personnel appraisal in accordance with the relevant provisions, the remaining Directors did not receive any remuneration from the Company.

– I-9 –

2020 REPORT OF THE BOARD

ANNEX I

(ii) Duty performance, appraisal and remuneration of senior management

In 2020, all senior management of the Company lawfully, honestly, diligently and effectively fulfilled their duties of operation and management in compliance with relevant requirements of laws and regulations, relevant systems of the Company including the Articles of Association and resolutions of the Board and president’s office meeting. Under the guidance and support of the Board, the asset management, fixed income and proprietary trading businesses of the Company achieved desirable growth momentum, the collaborative and international development of the Group secured sound results, significant progress was made in innovation-driven transformation, and the sustained effectiveness was achieved for compliance and risk control efforts. As a result, the Company gained the A Class rating for consecutive times, which paved the way for the new strategic planning and the new round of leapfrog development of the Company.

According to requirements of relevant systems of the Company, the Remuneration and Nomination Committee of the Board are responsible for annual performance evaluation of operational management team after the end of each year.

In 2020, the legal representative (chairman), president, vice president and other management members of the Company received basic salary, performance related bonus and term incentive according to requirements of relevant systems, where the basic salary was determined according to remuneration coefficient, while performance related bonus was determined according to annual assessment results and annual assessment coefficient. For term incentive, it was subject to the cap of 40% of total remuneration during the tenure and was determined according to the assessment during the period of terms. The salary and performance related bonus management of other senior management personnel shall be implemented according to the relevant regulations of the Company.

For the remuneration of senior management of the Company, please refer to “Remunerations of Directors, Supervisors and Senior Management” in 2020 annual report of the Company.

IV. WORK PLAN FOR THE BOARD IN 2021

The year of 2021 marks the debut of the “14th Five-year” Plan and the “2021-2024 Strategic Planning” of the Company. Domestic economy and capital market have embarked on quality development and the role of finance in serving the real economy has been bestowed with new implications and missions. The highly interconnected positioning of the capital market in finance operation has reached an unprecedented level and the progress of the registration system will present new opportunities and challenges to the industry. The securities market is trending towards market-oriented, standardized, international, leading and technology-based growth and the capacity of the securities industry in serving real economy and social development has been further enhanced.

As an important intermediary institution in the capital market, the Company will continue to fulfill its duty of serving the development of the real economy and the management of social wealth around the strategic goal of “becoming a modern investment bank which has the domestic first-class core competitiveness and provides comprehensive financial services for clients”. In 2021, the Company will continue to firmly grasp the overall keynote of seeking progress while maintaining stability and maintain strategic concentration, so as to strive to improve the Company’s operating performance, and return investors with good performance through addressing weaknesses, consolidating advantages, improving management, and continuously boosting compliance and risk management.

– I-10 –

2020 REPORT OF THE BOARD

ANNEX I

The Board of the Company will give a full play to its leading and decision-making role, diligently perform their duties, collectively make progress, oversee the overall situation, promote innovation, strictly control the risk and lead the development. In particular, the Board will focus on the following work:

(i) Further improving corporate governance and effectively performing the responsibility of information disclosure

Since the listing of A Shares and H Shares, the Company has made on-going efforts to improve the standardized operation and information disclosure of listed companies as required under regulations of the SSE and the Stock Exchange. In 2021, the Board will continue to implement the new situation and requirements of the SSE and the Stock Exchange and adhere to the dual-drivers of corporate governance and information disclosure by tapping into the special self-governance-review of listed corporations, so as to further enhance the corporate governance capacity of the Company. It will optimize systemic rules on corporate governance, strengthen “key minority” trainings and division of responsibilities and boost the internal driving force of corporate governance. The Board will strictly fulfill its information disclosure obligations, ensure true, accurate, complete, timely and fair information disclosure, improve disclosure subject and step up targeted and effective information disclosure. It will reinforce investor relations management, further establish and maintain smooth communication channels with domestic and overseas investors and forge a sound market image for the Company.

(ii) Boosting strategic planning and strategic management level

The 2021-2024 new strategic planning requires us to remain committed to the professional and quality development towards a first-class and modern investment bank, endeavor to improve core competitiveness, strive to catch up with industry leaders in terms of scale, strength and operating efficiency, and contribute to the reform of the capital market and the transformation of Shanghai to a world financial center. The Board will pay close attention to the new four-year strategic planning, grasp opportunities, address challenges and promote implementation. Meanwhile, it will step up monitoring and evaluation of the strategic planning, reinforce strategic analysis and theme research based on changes in the internal and external market environment, bring into full play the guiding role of strategic planning, consolidate advantageous business and shore up weak business. It will further strengthen management over overseas subsidiaries, improve equity management system, promote group synergy and resource integration and increase the revenue contribution from synergy business.

(iii) Reinforcing capital operation and enhancing capital strength

The capital strength of the Company is an important pillar underpinning its growth to an industry leading broker. Based on the development requirements of the Company, the Company will boost its capital strength through equity financing and share placement promote the organization and implementation of the Company’s allotment work, step up debt financing management of the Company to minimize the financing cost leveraging various debt financing instruments and achieve scientific and reasonable asset allocation of the Company to maximize the ROE of the Company on the precondition of risk control.

– I-11 –

2020 REPORT OF THE BOARD

ANNEX I

(iv) Adhering to the bottom line of compliance and strengthening the overall risk management

In 2021, the industry regulation continues to stress that the risk prevention shall be attached paramount importance, and the bottom line of non-occurring of major systemic risk shall be firmly held, “zero-tolerance” policy in crimes committed in the capital market shall be continued to maintain the capital market order. The Board will continuously urge the Company to strengthen compliance and the risk control management to ensure non-occurring of risk of material violations of regulations. The first is to strictly implement new regulatory requirements to ensure that every business of the Company is in line with regulatory indicators, and further enhance the quality and efficiency of operations. The second is to further rationalize and improve the compliance and risk management system of the Group, enhance comprehensive and vertical management of the Group, and explore management over consolidation of the risk control indicators of the parent and subsidiaries. The third is to enhance research and judgment, further promote the disposal of risk assets and comprehensively intensify the audit and monitoring of business risks. The fourth is to adhere to carry out risk-oriented audit, and strictly control the quality of audit.

(v) Strengthening the construction of talent team and promoting the reform of system and mechanism

The enhancement of comprehensive capabilities of the Company requires support and safeguard of cadre team and professional talents. In 2021, based on the requirements of the four-year strategic planning of the Company, the Board will deepen talent strategy, optimize talent governance, and continuously guide the Company in construction of talent echelon and training of key talents. The Company shall make greater efforts to promote the reform, innovation and trial of the human resources system and mechanism, strengthen management team construction, optimize management structure, promote the youthful and professional development of the talent structure, and further improve the incentive and restraint mechanisms to fully mobilize and stimulate the vitality and enthusiasm of the talent team, so as to provide strong support in terms of talents and mechanism for realizing strategic objectives of the Company.

(vi) Improving self-construction of the Board and enhancing the Directors’ capability to perform duties

Pursuant to the new regulatory requirements of the SSE and the Stock Exchange, the Company will continuously bring the functions of the special committees of the Board and the independent Directors into full play, improve self-construction of the Board to ensure that major decisions will be made scientifically and in compliance with laws and regulations, continue to optimize the tracking and feedback mechanism of major decisions of the Board, arrange for the Shareholders, Directors and “key minorities” to participate in regular and occasional targeted trainings held by relevant regulatory authorities and stock exchanges, and assist them to keep abreast of the latest policies and regulations of both the PRC and Hong Kong as well as the dynamics of the industry and the Company’s operation and to get familiar with the requirements of standardized operation and information disclosure for listed securities companies, so as to further improve their capability to perform duties.

– I-12 –

2020 REPORT OF THE BOARD

ANNEX I

During the past year, despite the severe and complex market environment at home and abroad, the Company withstood the test and secured remarkable operating results with its three-year planning drawing to a complete success. We cannot achieve such performances without the support of the Shareholders and Directors. In the face of new opportunities and challenges, in 2021, by remaining true to its original aspiration and with the strong support of all parties concerned, the Board will continue to perform its duties diligently and seek progress in stability through uniting all cadres and employees of the Company, closely focusing on the strategic goal of building a first-class modern investment bank, sticking to the bottom line of compliance and risk management, strengthening internal capabilities and making up the weaknesses, with the aim to enhance the core competitiveness of the Company and advance the development of the Company.

The above proposal is hereby put forth to Shareholders for consideration.

– I-13 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

Dear Shareholders,

In accordance with relevant requirements under the laws, regulations and the Articles of Association, the Report of the Supervisory Committee of the Company for the year 2020 is submitted to the shareholders’ general meeting for consideration as follows.

I. WORK OF THE SUPERVISORY COMMITTEE CARRIED OUT IN 2020

In 2020, following the Company Law, the Securities Law and relevant state laws and regulations, the Supervisory Committee upheld the guideline of “ keeping abreast with new regulatory rules, promoting in-depth supervision, pooling efforts from all sides and facilitating the sustainable and steady development of the Company ”, focused on the transformational progress of the Company, paid close attention to changes in external environment and industry regulatory dynamics, effectively performed supervision responsibilities, continued to enhance supervisory effect, proactively integrated supervision resources and constantly innovated supervision approaches to promote the standardized the healthy development of the Company, thereby safeguarding the legitimate rights and interests of all the Shareholders, the Company and its employees.

• (i) Effective participation in corporate governance and compliance performance of supervision responsibilities

1. Convening meetings of the Supervisory Committee in accordance with laws for compliance consideration of major matters. In 2020, the Supervisory Committee held a total of 6 meetings, at which 26 proposals were considered and the Supervisory Committee conducted thorough discussions and compliance consideration regarding the regular reports of the Company with its supervisory responsibilities covering the finance management, profit distribution, internal control compliance, risk management, anti-money laundering, related-party transactions and employee stock ownership plan of the Company. The Supervisory Committee acted in strict accordance with the regulatory rules, rigidly implemented information disclosure system and published announcements on the meetings and resolutions in a timely manner, so as to ensure true, accurate and complete information disclosure.

2. Actively attending relevant meetings and supervising over the major decisions of the Company. The Supervisory Committee earnestly organized the Supervisors to participate in the general meeting, attended 3 on-site Board meetings and 7 on-site meetings of the special committees under the Board, supervised over the major decision-making process of the Company and duty performance of Directors and senior management, and issued opinions on matters of concern to fulfill its responsibilities normatively.

– II-1 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

3. Smoothly promoting adjustment in composition and re-election of the Supervisory Committee. Firstly, it completed change of employee representative Supervisors and election of vice chairman of the Supervisory Committee, and published announcements thereon in a timely manner. Secondly, it smoothly proceeded with preparations for re-election, specified nomination conditions and criteria for shareholder representative Supervisors, and conducted research into relevant regulations and practices regarding establishment of independent supervisors. The new session of the Supervisory Committee comprises 5 shareholder representative Supervisors, 3 employee representative Supervisors and one independent Supervisor with a more optimized structure, professional backgrounds and diversity.

(ii) Strengthening problem-based research and focusing on supervision over key areas

1. Raising special supervision suggestions for key departments. Pursuant to the requirements on the finance, compliance and risk management of the Company put forward at the 13th meeting of the fourth session of the Supervisory Committee (annual meeting), Supervisory Suggestions were dispatched to the planning finance management headquarters, capital management headquarters, compliance legal management headquarters and the risk management headquarters, which raised supervisory suggestions regarding “enhancing macro research and optimizing assets and liabilities allocation”, “implementing new laws and rules and strengthening vertical management and control over subsidiaries” and “intensifying risk management and control of key areas and satisfying risk control indicator requirements on a going basis” and relevant departments formulated and filed written work plan and improvements to the Supervisory Committee. The Supervisory Committee maintained on-going attention to the implementation of its suggestions, in a bid to promote the Company to comprehensively enhance finance management level and compliance and risk management capacity.

2. Problem-based in-depth inspections and research. To further enhance the supervision over the overall compliance and risk control of the Group, the Supervisory Committee conducted the “research into vertical management over compliance and risk control of subsidiaries” and “inspections and research into Orient Investment Banking”. The Supervisory Committee focused on material and potential problems, specified matters of concern and intensified target research before conducting relevant tasks, sent the Supervisory Suggestions to the Board and management during the task, raising suggestions such as “exploring consolidation management, enhancing technology empowerment and deepening collaborative communications” and improved the closed loop management model through research re-visits, kept track of the rectification implemented by relevant departments and subsidiaries, stepped up vertical management over compliance and risk control of subsidiaries and urged the subsidiaries to play the role of the first line of defense.

– II-2 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

3. Earnestly conducting supervision and appraisal on duty performance of the Directors, Supervisors and senior management. The Supervisors proactively attended meetings of the Board and its special committees, and recorded the attendance, opinions and poll results of the meetings, so as to supervise over the duty performance of Directors. Meanwhile, pursuant to the revised Duty Performance Appraisal, the Supervisory Committee continued to carry out duty performance throughout the year, established duty performance files for Directors, Supervisors and senior management based on daily supervision, and solicited information from relevant departments of the Company regarding the performance and qualification of Directors, Supervisors and senior management and filed into duty performance report. In 2020, the Directors, Supervisors and senior management of the Company were appraised as “qualified” in duty performance.

4. Performing supervision over the employee stock ownership plan of the Company. The Supervisory Committee closely followed the progress of the Company’s employee stock ownership plan, issued the audit opinions of the Supervisory Committee in accordance with laws and regulations, and explained whether the employee stock ownership plan is conducive to the Company’s sustainable development, whether it harms the interests of the Company and all shareholders, and whether employees are forced to participate by apportionment or forced distribution, etc., earnestly carried out the supervision of the list of holders, and urged the Company to perform decision-making procedures according to law and strictly implement the information disclosure requirements.

(iii) Continuing to strengthen self-construction and improving the capacity of the Supervisory Committee to perform their duties

1. Continuously strengthen the system construction. Firstly, according to the latest laws, regulations and regulatory requirements, it analyzed the revision of the rules of procedure of the Supervisory Committee of listed securities firms, and revised and improved the Rules of Procedure of the Supervisory Committee to ensure that the convening of meetings of the Supervisory Committee meets the system requirements. Secondly, the Supervisor (Meeting) Performance Manual was formulated to clarify the supervisors’ (meeting) responsibilities, performance basis, performance standards, etc., so as to render the supervision law-abiding and rule-abiding, and improve the standardized and scientific supervision of the Supervisory Committee.

– II-3 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

1. Continuously improving the capability to perform duties. Firstly, it effectively carried out research projects, actively undertook corporate governance-related tasks initiated by the Organization Department of the Municipal Party Committee, the State-owned Assets Supervision and Administration Commission, the China Securities Association and the China Association for Public Companies, summed up the theoretical basis and practical experience of corporate governance and the operation of the “Three Meetings”, and the research results were published in China Securities Journal and selected as “Cases of Promoting High-quality Development of Enterprises by Modern Enterprise System with Chinese Characteristics”, offering suggestions for the revision of the Company Law and the high-quality development of companies and industries. Secondly, it actively organized supervisors to participate in training courses organized by supervisors at all levels and the Company, and strengthened supervisors’ study and implementation of the new Securities Law by regularly pushing the Work Newsletter of the Supervisory Committee, so as to enhance the effectiveness of supervision on anti-money laundering and integrity management, and laid a foundation for effective performance of duties. Thirdly, it further strengthened the work force of the office of the Supervisory Committee and introduced a legal talent to improve the professional level of the team; it dispatched staff to participate in the Company’s new Securities Law knowledge contest and secured excellent results. Through training seminars, daily morning meetings, study salons, etc., it continuously improved knowledge reserves on regulatory requirements and industry information.

2. Serving the overall strategy of Company. Firstly, it effectively enhanced inter-departmental cooperation, actively communicated and interacted with the Company’s compliance, risk control, Board office, party office and other departments, and cooperated closely in system revision, information disclosure and project cooperation to promote the Company’s continuous improvement of its operation and management level. Secondly, it gave full play to Group cooperation, jointly visited shareholder representative supervisors with the fixed income business headquarters of the Company and Orient Investment Banking, tapped the opportunity of integration of industry and finance, and smoothly promoted business cooperation with shareholders of the Company to achieve synergy and win-win. Thirdly, it facilitated the industry culture construction, gave full play to the supervisory checks and balances of the Supervisory Committee and relevant functional departments, and continuously improved the institutional mechanism of corporate governance to promote cultural construction.

II. MEETINGS AND PERFORMANCE OF DUTIES OF THE SUPERVISORY COMMITTEE

In 2020, all the Supervisors of the Company discharged their duties lawfully, honestly and diligently in accordance with laws and regulations and the requirements of the Articles of Association. The Supervisors actively attended the meetings and activities of the Supervisory Committee, conducted effective supervision over the finance, compliance and risk management and key business operations of the Company and gave prompt opinions and suggestions thereon, which promoted the sustainable and healthy development of the Company.

– II-4 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

During the year, the Supervisory Committee held a total of six meetings, details of which are set out below:

**No. **	Meeting	Form	Date	Proposal passed
1	12th meeting of the	Correspondence	February 19,	The Proposal on Election of Vice Chairman of the Supervisory Committee
	fourth session of		2020	of the Company was considered and approved.
	the Supervisory
	Committee
2	13th meeting of the	On-site	March 27, 2020	The Proposal on the 2019 Supervisory Committee Work Report of the
	fourth session of			Company, the Proposal on 2019 Financial Work Report of the Company,
	the Supervisory			the Proposal on 2019 Profit Distribution Plan of the Company, the
	Committee			Special Report on the Deposit and Actual Use of Raised Funds in 2019,
				the 2019 Compliance Report of the Company, the 2019 Risk Management
				Work Report of the Company, the 2019 Anti-Money Laundering Work
				Report of the Company, the Special Audit Report on Anti-Money
				Laundering in 2019, the Evaluation Report on Internal Control in 2019,
				the Evaluation Report on Effectiveness of Compliance Management in
				2019, the Proposal on Audit of Related Party Transactions in 2019, the
				Proposal on Estimating Daily Related Party Transactions in 2020, the
				Proposal on Estimating External Guarantees in 2020, Annual Report of
				2019, 2019 Directors’ Performance Evaluation Report, 2019 Supervisors’
				Performance Evaluation Report and 2019 Senior Management’s
				Performance Evaluation Report were considered and approved.
3	14th meeting of the	Correspondence	April 29, 2020	The Proposal on First Quarterly Report of the Company in 2020 was
	fourth session of			considered and approved.
	the Supervisory
	Committee
4	15th meeting of the	On-site	June 17, 2020	The Proposal on Employee Stock Ownership Plan (Draft) and Extract of
	fourth session of			東方證券股份有限公司was considered and approved.
	the Supervisory
	Committee
5	16th meeting of the	On-site	August 28,	The 2020 Interim Report, 2020 Interim Compliance Report, 2020 Interim
	fourth session of		2020	Risk Management Report, Proposal on Provision for Assets Impairment
	the Supervisory			were considered and approved, and the Company’s 2020 Interim Work
	Committee			Report of the Supervisory Committee and 2020 Interim Financial Work
				Report were heard.
6	17th meeting of the	Correspondence	October 29,	The Third Quarterly Report of the Company in 2020 and the Proposal on
	fourth session of		2020	Amending the Rules of Procedure of the Supervisory Committee of the
	the Supervisory			Company were considered and approved.
	Committee

– II-5 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

During the Reporting Period, the attendance of the Supervisors at the Supervisory Committee is set out below:

				Attendance
		Required	Attendance in	Attendance via	Attendance	by
Name of		attendances	person	correspondence	proxy
Supervisor	Position	(Times)	(Times)	(Times)	(Times)		Absence
Zhang Qian	Chairman of the Supervisory Committee,	6	6	3		0	0
	shareholder representative Supervisor
Du Weihua	Vice chairman of the Supervisory Committee,	6	6	3		0	0
	employee representative Supervisor
Huang Laifang	shareholder representative Supervisor	6	5	3		1	0
Tong Jie	Shareholder representative Supervisor	6	5	3		1	0
Liu Wenbin	Shareholder representative Supervisor	6	4	3		2	0
Yin Keding	Shareholder representative Supervisor	6	6	3		0	0
Zhou Wenwu	Employee representative Supervisor	6	6	3		0	0
Yao Yuan	Employee representative Supervisor	6	6	3		0	0
Meetings of Supervisory Committee held during the year (times)					6
Including: on-site	meeting (times)				3
Meetings held via	correspondence (times)				3

III. SUPERVISORY OPINIONS AND SUGGESTIONS

(i) Supervision opinions

1. Finance management

The financial management of the Company conscientiously implemented the national financial and taxation laws and regulations such as Accounting Standards for Business Enterprises and International Accounting Standards, strictly complied with the financial information disclosure requirements of A share and H share market, actively implemented the latest regulatory requirements, continuously improved the construction of the Group’s financial management system, continuously improved the level of refined financial management, optimized asset and liability allocation management, and provided effective support for the stable operation of the Company. Deloitte Touche Tohmatsu issued a “standard unqualified opinion” audit report on the Company’s financial statements, and the Company had no major defects in the internal control of financial reports.

– II-6 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

2. Compliance and risk management

In accordance with the Company Law, Securities Law and other laws and regulations, regulatory requirements and the requirements of the Company’s internal management system, the Company abided by the bottom line of compliance risk control, constantly improved the compliance inspection and accountability mechanism, strictly implemented the unified vertical control of parent and subsidiaries, strengthened the risk management and risk disposal of subsidiaries and business lines, standardly promoted anti-money laundering work, and ensured the smooth operation of various businesses of the Company. In 2020, the Company was classified as Class A Grade A by China Securities Regulatory Commission, and no major compliance risk event occurred during the Reporting Period.

3. Duty performance of directors and senior management

The Directors and senior executives of the Company have sound professional ethics and professional qualities, and are able to diligently perform their duties required by laws. The Directors attended the meetings of the Board and special committees in accordance with regulations, which ensured the scientific and effective decision-making of the Board and made positive contributions to promoting the steady operation and development of the Company and the improvement of corporate governance. Senior management of the Company followed the guiding ideology of annual work determined by the general meeting and the Board at the beginning of the year, adhered to the business strategy of “stabilizing growth, controlling risks and promoting reform”, seized the opportunity of reform, concentrated on business development, and achieved good business performance. During the Reporting Period, the Supervisory Committee did not identify any violations of laws, regulations, Articles of Association or damage to the legitimate rights and interests of shareholders by the Directors and senior management of the Company in duty performance.

4. Information disclosure

The Company disclosed information in a timely and fair manner in strict accordance with the information disclosure regulations of the A and H share market, such as Securities Law and the requirements of the Company’s Administrative Measures on Information Disclosure, and the information disclosed was true, accurate and complete, thus effectively safeguarding the legitimate rights and interests of shareholders and investors. During the Reporting Period, the Supervisory Committee did not identify any violation of laws and regulations in the Company’s information disclosure.

– II-7 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

5. Related party transactions

The Company conducted related party transactions in strict accordance with laws, regulations, external regulatory requirements, and internal management systems such as the Company’s Measures for the Administration of Related Party Transactions. The Company’s decision-making procedures on related party transactions were compliant, the list of related parties was updated in a timely manner, and information disclosure was standardized. During the Reporting Period, the Supervisory Committee did not identify any harm caused to the interests of the Company in related party transactions.

6. Registration of insiders

According to laws, regulations, regulatory requirements and the internal management system of the Company, the Company shall register, manage, disclose, record, keep confidential the inside information and investigate the responsibility for violations, and maintain the fair principle of information disclosure. During the Reporting Period, the Supervisory Committee did not identify any violation of the registration management and confidentiality obligations of insiders.

(ii) Supervision suggestions

In 2021, the Company should make an in-depth analysis of the opportunities and challenges under the background of deepening the reform of the capital market, pave the way for the new strategic cycle of the Company, strengthen the forward-looking, systematic and dynamic business layout, continuously optimize the mechanism and system, actively improve the business structure, empower the business innovation and development with financial technology, consolidate the foundation and stabilize the advantages with collaborative linkage, and continuously improve the overall business performance and comprehensive strength.

The Company should pay close attention to the industry market situation and the Company’s development process, actively seek opportunities for capital replenishment in line with the Company’s actual situation, dynamically optimize the allocation of assets and liabilities, focus on improving the efficiency of capital and funds utilization and asset returns, continuously strengthen liquidity management and overall management of liabilities, ensure the Company’s operational safety margin, and improve the overall financial management efficiency.

The Company should comprehensively and thoroughly implement the new Securities Law and other laws and regulations, strengthen the overall compliance and risk management of the Group, do a good job in preventing and resolving risky assets beforehand, specify the main responsibility of compliance risk control in the first line of business, deepen the vertical control of compliance risks of subsidiaries, promote the consolidated management of the Group’s risks, and promote the Company to achieve more quality development.

– II-8 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

IV. WORK PLAN FOR 2021

The guiding ideology and approach of the work of the Supervisory Committee in 2021 are as follows: under the guidance of Xi Jinping’s new era of socialism with Chinese characteristics, comprehensively implement the State Council’s Opinions on Further Improving the Quality of Listed Companies, conscientiously carry out the work arrangements and requirements of shareholder units and regulatory agencies, strictly abide by the Company Law, Securities Law and relevant national laws and regulations, actively respond to new environment and challenges, and take “ implement new laws and regulations on supervision, focusing on the core supervision function, promoting the Company to build a compliance and risk control defense line, and facilitating the Company to achieve higher quality development ” as the annual work goal, give full play to the supervision effectiveness of the Supervisory Committee, continuously improve the corporate governance structure, promote the preservation and appreciation of state-owned assets, further improve the governance capacity of listed companies, and assist the Company to achieve higher quality development.

(i) Improving the corporate governance mechanism and giving full play to the advantages of the composition of the Supervisory Committee

Firstly, it will standardize and promote the re-election of the Supervisory Committee, efficiently promote the qualification filing of new supervisors, and assist new supervisors to master the performance requirements. Secondly, it will give full play to the diversity of the composition of the new Supervisory Committee and promote the Supervisory Committee to effectively play its supervisory role: tap into the professional and independent advantages of independent Supervisors and prudently express the opinions of the Supervisory Committee; further consolidate the performance requirements of employee representative Supervisors, promote their targeted supervision in combination with their posts, and explore effective forms of democratic management; give full play to the professional experience of shareholder representative Supervisors in corporate governance of state-owned listed enterprises, and put forward supervision suggestions on the duty performance and decision-making of the Board and the management.

(ii) Focusing on the supervision and audit mechanism and strengthening financial supervision duties

According to the new Securities Law, the Supervisory Committee will further strengthen its responsibilities in the audit of financial reports, and prudently fulfill the supervisor’s obligation of “signing written confirmation opinions”. Firstly, it will continue to follow up the preparation process of the Company’s periodic reports, pay attention to important audit matters, and explore the supervision methods of independently listening to the audit opinions of agencies before the meeting. Secondly, it will strictly review the Company’s periodic reports, compare and sort out the Company’s financial accounting data, comprehensively study the industry situation and regulatory policies, and form a financial supervision analysis briefing.

– II-9 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

(iii) Implementing the supervision and re-visit mechanism and locking the closed loop of inspection and investigation

Firstly, based on “problem-based” research and combined with the improvements proposed after regulatory inspection, and internal audit, it will focus on the implementation and rectification of the supervisory opinions of the Supervisory Committee, establish a regular tracking, feedback and re-visit mechanism, and further strengthen the supervision of compliance risk management, investigation and treatment of potential risks, compliance assessment and accountability in innovative businesses and high-risk areas. Secondly, it will explore the inspection and rectification as an important basis for the performance evaluation of relevant executives, and gradually form a complete closed loop of identifying problems, investigating problems, putting forward suggestions, urging rectification and pursuing accountability.

(iv) Building a long-term communication mechanism and optimizing internal supervision and coordination

Firstly, it will draw lessons from the experience of listed securities firms and combine with the actual situation of the Company, formulate the Work Guidelines to Submit Operation and Management Information to the Supervisory Committee, clarify the list of information and materials submitted by relevant functional departments of the Company to the Supervisory Committee, further consolidate Supervisors’ right of information, and promote the Supervisory Committee to make effective use of the supervision results of relevant functional departments, identify common and emerging problems, and carry out in-depth supervision. Secondly, it will participate in the construction of the supervision consultation mechanism with the internal supervision departments of the Company such as financial planning, auditing, compliance, risk control and discipline inspection, integrate the supervision resources of all parties, share the information of supervision results, and improve the efficiency and effectiveness of supervision. Thirdly, according to the regulatory requirements, advanced experience in the industry and the actual situation of the Company, it will study and formulate the work plan of closed-loop management of Supervisors’ duty performance in parent and subsidiaries, explore the establishment of work guidance mechanism for Supervisors (meetings) in parent and subsidiaries, and work with relevant departments to study and promote the effective mode of providing professional support, performance guarantee and performance evaluation for Supervisors in subsidiaries.

(v) Improving the performance evaluation system with reference to the latest regulatory requirements

In accordance with the latest laws, regulations and regulatory policies such as the new Securities Law, the Supervisory Committee has continuously improved the performance evaluation system of Directors, Supervisors and senior management. Firstly, it will study the incorporation of integrity management into the performance evaluation index system, and improve the evaluation methods of performance of Directors and senior management in integrity management. Secondly, it will explore the optimization of assessment methods through on-site or written debriefing, strengthen the information communication between the Supervisory Committee and the Board and managers, and realize the benign interaction among decision-making mechanism, supervision mechanism and operation and management mechanism.

– II-10 –

ANNEX II 2020 REPORT OF THE SUPERVISORY COMMITTEE

(vi) Deepening the research on corporate governance and improving the professional level of supervision

Firstly, it will summarize the successful experience of the Supervisory Committee in cooperating with business departments to achieve business cooperation with Shanghai Construction Group Co., Ltd. and Shanghai Jinqiao Export Processing Zone Development Co., Ltd., give full play to the bridging role of shareholder representative Supervisors, and further explore the opportunities of integration of industry and finance with shareholder units. Secondly, it will continuously improve the Supervisor’s Performance Manual, and timely summarize the experience and working system of the Supervisory Committee. Thirdly, it will summarize the characteristic innovative practices of the supervisory committee of state-owned financial enterprises, form a report on exchange and study, and broaden ideas for improving supervision. Fourthly, it will strengthen communication with regulators and peers in the financial industry, learn from their own unique practices and actively explore innovative ways of supervision. Fifthly, it will actively participate in the research on corporate governance issues of China Securities Industry Association and provide theoretical guidance and basis for exerting independent supervision and innovating supervision methods. Sixthly, it will actively participate in the training of China Association of Listed Companies and MSCI rating agencies, study the corporate governance related content and promotion model in ESG evaluation indicators, provide support for the innovation of the Company’s market value management, and promote the continuous improvement of the Company’s value.

The above proposal is hereby put forth to Shareholders for consideration.

– II-11 –

2020 FINAL ACCOUNTS REPORT

ANNEX III

Dear Shareholders,

The preparation of 2020 final accounts report of the Company has been completed. The 2020 financial statements of the Company were audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu, each of whom issued a standard unqualified audit report.

Unless otherwise stated, the financial data in this report are based on its A Shares audited consolidated financial statements, among which, the data of net asset, net profit, and total comprehensive income are all based on those attributable to owners of the parent company.

2020 KEY ACCOUNTING DATA AND FINANCIAL INDICATORS

Unit: RMB100 million

		A Share			H Share
	As at the	As at the		As at the	As at the
Items	end of 2020	end of 2019	Change	end of 2020	end of 2019	Change
Total assets	2,911.17	2,629.71	+11%	2,911.17	2,629.71	+11%
Total liabilities	2,308.86	2,089.60	+10%	2,308.86	2,089.60	+10%
Net assets	602.03	539.66	+12%	602.03	539.66	+12%
Net capital (parent
company)	378.35	406.95	-7%	378.35	406.95	-7%
Items	2020	2019	Change	2020	2019	Change
Operating income/
revenue and other
income	231.34	190.52	+21%	276.47	243.51	+14%
Operating expenses/
total expenses	204.37	163.01	+25%	260.73	220.87	+18%
Total profit	27.86	28.55	-2%	27.86	28.55	-2%
Net profit	27.23	24.35	+12%	27.23	24.35	+12%
Total comprehensive
income	22.30	29.25	-24%	22.30	29.25	-24%
Earnings per Share
(RMB/Share)	0.38	0.35	+9%	0.38	0.35	+9%
Weighted average
returns on net
assets attributable
to ordinary			↑0.24			↑0.24
shareholders of			Percentage			Percentage
the parent	4.85%	4.61%	point	4.85%	4.61%	point

– III-1 –

2020 FINAL ACCOUNTS REPORT

ANNEX III

Note:

1. For financial report of A Share and H share, total assets, total liabilities and net assets are identical;

2. The differences in operating income and operating expenditure are mainly attributable to the income and expenses for fees and interests, which are reflected on a net basis for A Share but reflected separately for H Share;

3. The net capital figures at at the end of 2020 were compiled in accordance with the Regulations on the Calculation Standard for Risk Control Indicators of Securities Companies as amended and promulgated by the CSRC in January 2020, and the figures at at the end of 2019 have been restated accordingly.

I. FINANCIAL POSITION IN 2020

(i) Assets

As at the end of 2020, the total assets of the Company amounted to RMB291.117 billion, representing an increase of RMB28.146 billion or 11% compared with that of the end of the previous year. The major changes were as follows: with the increase in customer funds, monetary funds recorded an increase of RMB16.700 billion over the end of the previous year; clearing settlement funds recorded an increase of RMB8.273 billion over the end of the previous year; lending amount recorded an increase of RMB7.958 billion over the end of the previous year; long-term equity investments, fixed assets and other assets recorded an increase of RMB2.304 billion over the end of the previous year; various kinds of financial investments and derivative financial assets in aggregate recorded an increase of RMB2.251 billion over the end of the previous year; and the financial assets held under resale agreements recorded an decrease of RMB9.746 billion over the end of the previous year.

(ii) Liabilities

As at the end of 2020, total liabilities of the Company amounted to RMB230.886 billion, representing an increase of RMB21.926 billion or 10% compared with that of the end of the previous year. The major changes were as follows: amount from agency securities sales business increased by RMB26.463 billion over the end of the previous year; deposits due to banks and other financial institutions increased by RMB3.285 billion over the end of the previous year; financial liabilities held for trading increased by RMB1.945 billion over the end of the previous year; financial assets sold under repurchase agreements decreased by RMB4.617 billion over the end of the previous year; and bonds payable decreased by RMB5.044 billion over the end of the previous year.

After deducting amount from agency securities sales business and funds payable to securities issuers, as at the end of 2020, the gearing ratio of the Company was 73.13%, representing a decline of 2.62 percentage points compared with that of the end of the previous year.

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2020 FINAL ACCOUNTS REPORT

ANNEX III

(iii) Net assets and net capital

As at the end of 2020, the net assets of the Company amounted to RMB60.203 billion, representing an increase of RMB6.237 billion or 12% compared with that of the end of the previous year. The major changes were as follows: issuance of perpetual subordinated bonds of RMB5 billion, a net profit of RMB2.723 billion in 2020, other comprehensive income (net of tax) of RMB-493 million, and cash dividend distributed for 2019 of RMB1.049 billion.

At the end of 2020, net asset per share attributable to owners of the parent company was RMB8.61/ Share, representing an increase of RMB0.89/Share or 12% over the end of the previous year.

As of the end of 2020, net capital of the parent company amounted to RMB37.835 billion, representing a decrease of RMB2.860 billion over the end of the previous year, mainly due to the higher cost of long-term equity investments, and the deduction of net capital scale in full. During the year, major risk control indicators such as net capital continued to meet regulatory requirements.

II. OPERATION RESULTS IN 2020

(i) Operating Income

In 2020, the Company realized operating income of RMB23.134 billion, representing a year-on-year increase of RMB4.082 billion or 21%. Among which:

1. Net commission and fee income amounted to RMB7.122 billion, up by RMB2.606 billion year on year, which was mainly attributable to the increase of RMB1.075 billion in net fee income from brokerage business as compared with the same period last year; the increase of RMB665 million in net income from asset management business as compared with the same period last year and the increase of RMB532 million in net fee income from investment banking business as compared with the same period last year.

2. The investment gains amounted to RMB5.012 billion, representing a year-on-year increase of RMB1.597 billion and gains from fair value changes amounted to RMB1.376 billion, representing a year-on-year increase of RMB439 million, which was mainly attributable to a general rise in major stock indexes due to the active trading of domestic stock market in 2020, and the year-on-year increase in investment gains and fair value of proprietary securities of the Company, and the year-on-year increase in investment gains from associates of RMB621 million benefiting from the net profit growth of associates.

3. Exchange gains amounted to RMB208 million, representing a year-on-year increase of RMB196 million, which was mainly attributable to a drop in foreign exchange rates of US dollar and other foreign currencies, which led to a decrease in liabilities of the Company denominated in foreign currencies and payable in the functional currency of the Company.

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2020 FINAL ACCOUNTS REPORT

ANNEX III

(ii) Operating expenditure

In 2020, the Company incurred operating expenditure of RMB20.437 billion, representing a year-on-year increase of RMB4.136 billion or 25%, which was mainly attributable to a year-on-year increase of RMB2.841 billion in credit impairment loss under the impact of an impairment charges provided for the equity pledge business, a year-on-year increase of RMB1.864 billion in business and management fee as a result of the increase in business-associated cost due to the increase in revenue, and a year-on-year decrease of RMB594 million in cost of other businesses due to the decrease in bulk commodity cost of subsidiaries.

(iii) Profit and comprehensive income

In 2020, the Company realized net profit of RMB2.723 billion, an increase of RMB288 million or 12% compared with the same period of last year. The Company realized total comprehensive income of RMB2.230 billion, a decrease of RMB695 million or 24% compared with the same period of last year.

In 2020, earnings per Share attributable to ordinary shareholders of the parent company amounted to RMB0.38 per Share, an increase of RMB0.03 per Share or 9% compared with the same period of last year.

In conclusion, as the reform and development in the capital market accelerated in 2020, the Company actively seized market opportunities to promote the development of various businesses. Revenues from proprietary investment, wealth management, assets management and investment banking businesses increased significantly, the Company’s overall operating performance improved significantly year-on-year. During the year, the Company prudently assessed the expected credit impairment risk of its existing collateralized stock projects in strict compliance with the new financial instrument standards and reasonably provided for credit impairment losses.

The above proposal is hereby put forth to the Shareholders for consideration.

– III-4 –

2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

Dear Shareholders,

We, as the independent directors of Orient Securities Company Limited, hereby report our work for 2020 below pursuant to the Guidance on the Establishment of Independent Director System in Listed Companies, the Code of Corporate Governance for Listed Companies, the Rules for Governance of Securities Companies, the Listing Rules of Shanghai Stock Exchange as well as the relevant rules under the Guidelines for the Format of the Annual Work Report of Independent Directors promulgated by the Shanghai Stock Exchange:

I. BASIC INFORMATION OF INDEPENDENT DIRECTORS

At the beginning of the Reporting Period, the fourth session of the Board comprised 14 Directors, among whom 5 were independent Directors: Mr. Xu Guoxiang, Mr. Tao Xiuming, Mr. Wei Anning, Mr. Xu Zhiming and Mr. Jin Qinglu. At the end of the Reporting Period, the fourth session of the Board comprised 12 Directors, among whom 5 were independent directors: Mr. Xu Zhiming, Mr. Jin Qinglu, Mr. Wu Hong, Mr. Feng Xingdong and Mr. He Xuan.

On August 14, 2020, due to expiry of term of office, Mr. Xu Guoxiang applied to resign as an independent non-executive Director of the fourth session of the Board, member of the Remuneration and Nomination Committee and member of the Audit Committee of the Board. On October 29, 2020, due to the expiry of term of office, Mr. Tao Xiuming applied to resign as an independent non-executive Director of the fourth session of the Board and member of the Compliance and Risk Management Committee of the Board, and Mr. Wei Anning applied to resign as an independent non-executive Director of the fourth session of the Board, chairman of the Remuneration and Nomination Committee and member of the Audit Committee of the Board. The above resignation applications have taken effect since December 8, 2020, when new independent Directors were elected at the 2020 second extraordinary general meeting of the Company.

On December 8, 2020, the Company held the 2020 second extraordinary general meeting, and elected Mr. Wu Hong, Mr. Feng Xingdong and Mr. He Xuan as independent non-executive Directors of the fourth session of the Board, with a term of office expiring at the expiry of the fourth session of the Board. On December 14, 2020, the Company held the 24th meeting of the fourth session of the Board, and elected Mr. Wu Hong as chairman of the Remuneration and Nomination Committee and member of the Compliance and Risk Management Committee, Mr. Feng Xingdong as member of the Audit Committee of the fourth session of the Board, and Mr. He Xuan as member of the Remuneration and Nomination Committee and Audit Committee of the fourth session of the Board

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

The basic information of each of the independent Directors is as follows:

(i) Independent Directors as at the end of the Reporting Period

Mr. Xu Zhiming, born in 1961, holds a doctorate degree in economics. He currently serves as a founding partner of China Broadband Capital, a director of Donlink Group Co., Ltd., a director of Guangzhou Donlink Industrial Investment Group Co., Ltd., a director of Beijing Lianhang Hezhong Media Technology Co., Ltd. and a director of Beijing Baoxuan Culture Media Co., Ltd. He successively served as a research analyst of Institute for International Studies in China International Trust and Investment Corporation, and the co-director of corporate finance department and co-director of capital market department of Nomura International (Hong Kong) Limited, a director and the director of investment banking division in the Great China Region of National Westminster Bank of Britain, a director and the director of corporate financing division in the Great China Region of Bank of Boston of the United States from December 1986 to August 1999, an executive director of China Resources Enterprise, Limited, an executive director of China Resources (Beijing) Land Limited, the managing director and chief operating officer of China Resources Logic Limited from August 1999 to December 2001, as well as a senior consultant of TOM Group Limited, and an executive director and chief operating officer of TOM Online Inc from January 2002 to May 2005. Mr. Xu has been a founding partner of China Broadband Capital since March 2006.

Mr. Jin Qinglu, born in 1972, is a member of the CPC and holds a doctorate degree in accountancy. He currently serves as the dean of the School of Accountancy, accountancy professor and a doctoral supervisor of Shanghai University of Finance and Economics. He served as an assistant professor of accountancy in the School of Accountancy of Shanghai University of Finance and Economics from June 2005 to June 2011, then an associate professor of accountancy in the School of Accountancy of Shanghai University of Finance and Economics from July 2011 to June 2012, and a professor of accountancy in the School of Accountancy of Shanghai University of Finance and Economics since July 2012. He served as the associate dean of the Institute of Accounting and Finance of Shanghai University of Finance and Economics from February 2014 to November 2018, the associate dean of the School of Accountancy of Shanghai University of Finance and Economics from April 2015 to November 2018, the director of the Collaborative Innovation Center for Accounting Reform and Development of Shanghai University of Finance and Economics from January 2016 to November 2018 and the dean of the School of Accountancy of Shanghai University of Finance and Economics since November 2018.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

Mr. Wu Hong, born in 1956, is a member of the CPC and holds a degree of bachelor of laws. He current serves as a professor and a doctoral supervisor of East China University of Political Science and Law, an independent director of Shanghai Pudong Development Bank Co., Ltd., an independent director of Zhejiang Tailong Commercial Bank Co., Ltd., an independent director of Western Leadbank Fund Management Co., Ltd and an independent director of Shanghai Pudong Development Group Finance Co. Ltd. He has been working in East China University of Political Science and Law since July 1984, and used to serve as the dean of School of Economic Laws of East China University of Political Science and Law, the vice president of China Banking Law Society, an executive member of China Commercial Law Society, the president of Finance Law Committee under the Shanghai Law Society, the vice president of Shanghai Finance Law Society, the vice president of Shanghai International Commercial Law Society, and successively served as, among others, a member of the Proposition Committee of the Chinese National Judicial Examination and a legislative consultation expert of the Standing Committee of Shanghai Municipal People’s Congress.

Mr. Feng Xingdong, born in 1977, is a member of the CPC and holds a doctorate degree in statistics. He currently serves as the dean, a professor of statistics and doctoral supervisor of School of Statistics and Management of Shanghai University of Finance and Economics. He served as an assistant professor of statistics and an associate professor of statistics of School of Statistics and Management of Shanghai University of Finance and Economics from June 2011 to June 2015, a professor and doctoral supervisor of School of Statistics and Management of Shanghai University of Finance and Economics since July 2015, and the dean of School of Statistics and Management of Shanghai University of Finance and Economics since November 2019.

Mr. He Xuan, born in 1982, is a member of CPC, and holds a degree of executive master of business administration. He currently serves as the executive vice president of Securities Association of Guizhou, the chairman of U-shine Fund Management Co., Ltd., an executive director and general manager of Guizhou Rongchuang Investment Consulting Co., Ltd., and an executive director of Guizhou U-shine Property Management Co., Ltd. He served as an auditor of Shanghai Social Security Fund Management Center from July 2004 to July 2005, the senior manager and deputy general manager of Shanghai Changhai Road Branch of Hua Chuang Securities Co., Ltd. from July 2006 to December 2010, and the head of preparation team and chairman of U-shine Fund Management Co., Ltd. since November 2011.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

(ii) Independent Directors who resigned during the Reporting Period

Mr. Xu Guoxiang, born in 1960, is a member of CPC, a doctorate in economics. Currently, he is a director of the Research Center for Applied Statistics of Shanghai University of Finance and Economics, a professor of the School of Statistics and Management of Shanghai University of Finance and Economics, an independent director of Luzhou Laojiao Co., Ltd., an independent director of Ziquan Energy Technology Co., Ltd. ( 紫泉能源技術股份有限公司 ), an independent director of Zhichang Science and Technology Group Co., Ltd. ( 智昌科技集團股份有限公司 ), a supervisor of Dazhong Transportation (Group) Co., Ltd., and a supervisor of Shanghai Xintonglian Packaging Co., Ltd. Mr. Xu served as a lecturer of the Department of Management of Shanghai Maritime University, and a lecturer, associate professor, professor and the department head of the Department of Statistics of Shanghai University of Finance and Economics from January 1986 to May 2003. Mr. Xu has been the director of the Research Center for Applied Statistics and professor of the School of Statistics and Management of Shanghai University of Finance and Economics since June 2003.

Mr. Tao Xiuming, born in 1964, is a member of CPC, holds a master’s doctorate degree in law. Currently, he is a founding partner and the management committee director of Beijing JunZeJun Law Offices, an executive director of Beijing Houjian Investment Co., Ltd., and an independent director of Taikang Asset Management Co., Ltd. Mr. Tao served in the China Law Counsel Center and Tianping Law Firm from July 1989 to April 1992, and in the Institute of International Law of Chinese Academy of Social Sciences from April 1992 to December 1994. Mr. Tao has been a partner of Beijing JunZeJun Law Offices since July 1995.

Mr. Wei Anning, born in 1963, holds a doctorate in economics. Currently, he is the executive director and the general manager of Shanghai Guwang Investment Management Limited, an independent director of Hwabao WP Fund Management Co., Ltd., an executive director and chairman of the board of directors of DaChan Food (Asia) Limited, an executive director of Ningbo Guwang Investment Management Limited, an independent director of Jiahe Foods Industry Co., Ltd. and an independent director of Haicheng Bondex Supply Chain Management Co., Ltd. Mr. Wei served as a lecturer of the Department of Economics and Statistics of Ningxia Broadcasting and Television University (Yinchuan) ( 寧夏廣播電視大學 ( 銀川 )), a director and assistant researcher of the Economic Development Office of the Economic Research Institute of Chinese Academy of Social Science, an agricultural economist of Agriculture and Natural Resources Bureau of World Bank. Mr. Wei served as a director and a director of agriculture, food, industry and commerce of Rabo bank in Northeastern Asia from February 1998 to January 2003, the executive vice president of New Hope Group from February 2003 to June 2006, the director of Chinese Business Development, CEO in China and president of Shanghai Branch of Fortis Bank Belgium from January 2007 to July 2010, and the chairman of Shandong Pacific Zhonghui Group from August 2010 to August 2012. Mr. Wei has been the executive director and the general manager of Shanghai Guwang Investment Management Limited since September 2010.

(iii) Statement of independence

All of the independent Directors of the Company and their immediate family members, major social relations are not related to the Company’s substantial Shareholders or other units or individuals with material interests in the Company, and thus there is no situation affecting their independence.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

II. ANNUAL WORK PERFORMANCE OF INDEPENDENT DIRECTORS

(i) Attendance of the General Meetings

During the year, the Company held three general meetings. On May 15, 2020, the Company held the 2019 annual general meeting and Mr. Xu Guoxiang, an independent Director, attended the meeting and delivered an annual debriefing report on behalf of the independent Directors. On July 13, 2020, the Company held the 2020 first extraordinary general meeting and Mr. Xu Guoxiang and Mr. Wei Anning, independent Directors, attended the meeting. On December 8, 2020, the Company held the 2020 second extraordinary general meeting, and no independent Directors attended the meeting due to business engagements.

(ii) Attendance of the Board Meetings

There were 8 meetings convened by the Board this year, 3 of which were on-site meetings and 5 of which were held by way of correspondence and all the Directors attended the meetings in person or appointed other Directors as their proxies to attend the meetings. Details are as follows:

	Required
Independent	Attendance	Attendance in	Attendance by
Directors	(times)	Person (times)	Proxy (times)	Absence (times)	Voting results
Xu Zhiming	8	8	0	0	Voting in favour of all
					proposals
Jin Qinglu	8	7	1	0	Voting in favour of all
			(Appointing Mr.		proposals
			Xu Guoxiang,
			an independent
			Director to
			exercise voting
			rights at the 20th
			meeting of the
			fourth session of
			the Board)
Wu Hong	1	1	0	0	Voting in favour of all
					proposals
Feng Xingdong	1	1	0	0	Voting in favour of all
					proposals
He Xuan	1	1	0	0	Voting in favour of all
					proposals
Xu Guoxiang	7	7	0	0	Voting in favour of all
					proposals
Tao Xiuming	7	7	0	0	Voting in favour of all
					proposals
Wei Anning	7	7	0	0	Voting in favour of all
					proposals

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

(iii) Attendance of the Meetings of the Special Committees of the Board

According to the Securities Company Governance Guidelines and other laws and regulations as well as the provisions of the Articles of Association, the fourth session of the Board of the Company establishes four special committees: the Strategic Development Committee, the Compliance and Risk Management Committee, the Audit Committee and the Remuneration and Nomination Committee. The specific positions of each independent Director are as follows:

Independent Directors as at the

end of the Reporting Period

Position

Xu Zhiming Member of the Strategy Development Committee Jin Qinglu Chairman of the Audit Committee, member of the Remuneration and Nomination Committee Wu Hong Chairman of the Remuneration and Nomination Committee, member of the Compliance and Risk Management Committee Feng Xingdong Member of the Audit Committee He Xuan Member of the Remuneration and Nomination Committee, member of the Audit Committee

Independent Directors who

resigned during the Reporting

Period Position Xu Guoxiang Member of the Audit Committee, member of the Remuneration and Nomination Committee Tao Xiuming Member of the Compliance and Risk Management Committee Wei Anning Chairman of the Remuneration and Nomination Committee, member of the Audit Committee

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

The Board of the Company held a total of 14 meetings of the special committees this year, including 5 meetings for the Compliance and Risk Management Committee, 5 meetings for the Audit Committee and 4 meetings for the Remuneration and Nomination Committee. The specific attendance is as follows (actual attendance/required attendance):

	Compliance
	and Risk		Remuneration
	Management	Audit	and Nomination
Independent Directors	Committee	Committee	Committee
Xu Zhiming
Jin Qinglu		5/5	3/4
Wu Hong	1/1		0/0
Feng Xingdong		1/1
He Xuan		1/1	0/0
Xu Guoxiang		4/4	4/4
Tao Xiuming	4/4
Wei Anning		4/4	4/4

All independent Directors have fully reviewed and discussed the issues considered by the special committees they served, and put forward relevant opinions and suggestions. In the end, they all voted in favor of the relevant issues, and there was no objection or abstention. In addition, the Audit Committee also communicated with Deloitte Touche Tohmatsu on the Company’s mid-term review of IFRS in 2020 and its A+H audit plan in 2020, rationally arranged the audit process, defined the audit strategy and key concerns, and ensured the timely and effective completion of the Company’s audit work. The Compliance and Risk Management Committee also evaluated the performance of the Company’s chief risk officer and compliance director in 2019, and submitted the results to the Remuneration and Nomination Committee for approval and then to the Board for confirmation.

(iv) Other Duty Performance

In 2020, the Board acted in diligence and made scientific decisions, closely focused on the deployment and arrangement for the final year of the Company’s three-year strategic plan, fully implemented the guideline of “preventing risks and stabilizing growth”, persisted in innovation-driven mode and strictly controlled various risks, and effectively achieved the Company’s objectives. In particular, the independent Directors actively participated in the general meeting, the board meetings and meetings of special committees, actively learned about the Company’s strategic development, innovation and transformation, compliance and risk management, and put forward professional opinions and suggestions on relevant decision-making and corporate governance, which effectively improved the scientific and forward-looking decision-making of the Board and effectively improved the level of corporate governance.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

Independent Directors had timely access to information on the Company’s operation and management and grasped the Company’s operation dynamics through the Company Report, Board Briefing, Comprehensive Report on Compliance and Risk Management, Compliance Courier and other materials regularly compiled by the Company. At the same time, independent Directors maintained daily contact with the Company in a timely manner through e-mail and telephone, forming an effective communication mechanism to ensuring the information right.

III. KEY ISSUES ON THE ANNUAL WORK PERFORMANCE OF INDEPENDENT DIRECTORS

(i) Related-Party Transactions

The independent Directors of the Company made judgments on the necessity and objectivity of the related party transactions of the Company and determined whether the pricing was fair and reasonable or whether it damaged the interests of the Company and Shareholders in accordance with the Listing Rules of SSE, the Guidelines on Related Party Transactions of Listed Companies, the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and other regulations as well as the requirements of the Administrative Measures for Related Party Transactions formulated by the Company. The independent directors of the Company also reviewed the foregoing based on relevant processes.

During the Reporting Period, the independent Directors of the Company expressed their prior approval opinions and independent opinions on the Projected Routine Related-party Transactions of the Company for 2020 considered at the 18th meeting of the fourth session of the Board that: the routine related-party transactions of the Company for 2020 and the projected related-party transactions prior to the convening of the 2020 annual general meeting were conducted in the ordinary course of business and for the business development of the Company which did not impair the independence of the Company and the projected pricing was fair and reasonable without prejudice to the interests of non-related shareholders of the Company and the Company. The projecting procedures complied with laws, administrative regulations, departmental rules and other normative documents as well as the Articles of Association of the Company.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

(ii) External Guarantee and Capital Appropriation

In accordance with the Notification on Standardizing the Capital Transfer between Listed Companies and Related Parties and on Certain Issues of External Guarantee of Listed Companies and the Notification on Standardizing External Guarantee Behavior of Listed Companies promulgated by the CSRC, the Administrative Measures for External Guarantee formulated by the Company and other rules and requirements, the independent directors of the Company carefully and meticulously verified, among others, the external guarantee and capital occupation, and were of the opinion that there was no damage to the legitimate rights and interests of the Company and other Shareholders.

1. The independent Directors of the Company expressed independent opinions on the estimated 2020 external guarantees considered at the 18th meeting of the fourth session of the Board: the Company’s estimation of the guarantees provided to or among subsidiaries during the authorization period arose from the Company’s business plan and the need to reduce financing costs as well enhancement of the operating capacity of the Hong Kong subsidiary; and it was expected to comply with relevant regulations, the Articles of Association of the Company, the Administrative Measures for External Guarantees of the Company and other provisions, and the decision-making procedures were arranged legally.

2. The independent Directors of the Company issued special statements and independent opinions on the Company’s external guarantees as of December 31, 2019 in accordance with the Notice on Regulating the Capital Exchanges Between Listed Companies and Related Parties and Certain Issues Concerning the External Guarantees of Listed Companies (Zheng Jian Fa [2003] No.56) (revised in 2017) and relevant regulations and requirements: As of December 31, 2019, the Company’s external guarantees included the guarantee provided by the parent company and Orient Finance Holdings (Hong Kong) Limited (“ Orient Finance Holdings ”), a wholly-owned subsidiary, for financing guarantees and non-financing guarantees to subsidiaries of Orient Finance Holdings. The above-mentioned guarantees totalled RMB10.242 billion, accounting for 18.98% of the Company’s net assets. Such guarantees were carried out to meet the Company’s business development, broaden overseas financing channels and enhance the external operating capacity of the Hong Kong subsidiary. Save for the above, the Company did not have other external guarantees, and the Company did not provide any guarantees to controlling Shareholders, de facto controllers and their related parties. In accordance with legal procedures, the Company performed the review procedure for external guarantees to fully protect the legitimate rights and interests of the Company and all Shareholders without prejudice to the legitimate rights and interests of the Company and other Shareholders.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

1. Independent Directors expressed their independent opinions on providing liquidity guarantee for Orient Securities Investment Banking Co., Ltd (“ Orient Investment Banking ”), which was considered at the 22nd meeting of the fourth session of the Board that, the Company provided liquidity guarantee for Orient Investment Banking, a wholly-owned subsidiary of the Company, in order to support its business development and meet the requirements of regulatory authorities for its liquidity risk control indicators. The Company’s consideration of external guarantee strictly abided by relevant regulatory requirements and performed necessary decision-making procedures without prejudice to the legitimate rights and interests of the Company and Shareholders.

(iii) Use of Proceeds Raised

At the end of December 2017, the Company completed the non-public issuance of ordinary shares (A shares) dominated in Renminbi with net proceeds raised of RMB10,957,180,338.81. According to the “No. 2 Guideline on Supervision of Listed Companies – Regulatory Requirements for the Management and Use of Proceeds by Listed Companies” and “Measures for the Management of Proceeds by Listed Companies of SSE” and other regulations of the CSRC, independent Directors of the Company expressed their independent opinions on the above-mentioned issues concerning the deposit and actual use of proceeds at the 18th meeting of the fourth session of the Board that: upon verification, the deposit, use and management of the Company’s proceeds in 2019 conformed to the relevant provisions of the CSRC and the SSE on the deposit and use of the proceeds of listed companies, the relevant provisions of the Company’s “Administrative Measures for the Management of Proceeds” and the interests of all Shareholders of the Company. The investment projects of the proceeds remained unchanged. During the period, the Company fulfilled its relevant obligations without any violation of laws and regulations, and there was no untimely, untrue, inaccurate or incomplete disclosure of information about the proceeds.

(iv) Nomination and Appointment of Directors and Senior Management Personnel

1. After reviewing Mr. Zhou Donghui’s personal biographies and other relevant materials that are conducive to making judgments, the independent Directors expressed their independent opinions on the election of non-executive director considered at the 18th meeting of the fourth session of the Board that: Mr. Zhou Donghui has relevant professional knowledge and decision-making, supervision and coordination capabilities, and meets the requirements for performing relevant duties and his qualifications are in line with the Company Law, Securities Law, Regulations on the Qualification of Directors, Supervisors and Senior Management of Securities Companies and other laws and regulations and the Articles of Association. Mr. Zhou Donghui was nominated by the Board and his nomination was submitted to the general meeting for consideration. The underlying procedure was legal and effective and complied with the Articles of Association.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

1. After reviewing Mr. Lu Weiming’s personal biographies and other relevant materials that are conducive to making judgments, the independent Directors expressed their independent opinions on the appointment of senior management of the Company considered at the 22nd meeting of the fourth session of the Board that: there was no situation that prohibits Mr. Lu Weiming from serving as a senior management member as stipulated in Article 146 of the Company Law, nor was he banned from the securities market by the China Securities Regulatory Commission and the time limit has not yet expired and his relevant qualifications are in line with the conditions for serving as a senior management member of the Company and the Company Law and Securities Law. After understanding his educational background and work experience, he is competent for the duties and requirements of the corresponding position of the Company, which will be conducive to the Company’s operation and development. Mr. Lu Weiming’s nomination and appointment procedures complied with relevant regulations and the Articles of Association.

2. After reviewing the personal biographies of Mr. Wu Hong, Mr. Feng Xingdong and Mr. He Xuan and other relevant materials that are conducive to making judgments, the independent Directors expressed their independent opinions on the election of independent non-executive Directors considered at the 23rd meeting of the fourth session of the Board that: Mr. Wu Hong, Mr. Feng Xingdong and Mr. He Xuan have relevant professional knowledge and decision-making, supervision and coordination capabilities, and meets the requirements for performing relevant duties and their qualifications are in line with the Company Law, Securities Law, Regulations on the Qualification of Directors, Supervisors and Senior Management of Securities Companies and other laws and regulations and provisions of the Articles of Association. Mr. Wu Hong, Mr. Feng Xingdong and Mr. He Xuan were nominated by the Board and their nominations were submitted to the general meeting for consideration. The underlying procedures were legal and effective and complied with provisions of the Articles of Association.

(v) Results Forecast and Results Express

During the Reporting Period, the Company published the announcement on the expected increase of its 2019 annual results, the announcement on preliminary financial data for the year of 2019 and the announcement on preliminary financial data for the first three quarters of 2020, respectively. The independent directors of the Company were of the opinion that the company discloses information in a timely manner in accordance with the Listing Rules of SSE, the Memorandum of Understanding on the Daily Information Disclosure of Listed Companies No.1 and the Company’s Administrative Measures for Information Disclosure, and that the financial data and indicators contained in the results forecast and results express are not significantly different from the actual data and indicators disclosed in related regular reports.

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2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

(vi) Appointment of Accounting Firm

Given that Deloitte Touche Tohmatsu Certified Public Accountants LLP ( 德勤華永會計師事 務所 ( 特殊普通合夥 )) and Deloitte Touche Tohmatsu ( 德勤 • 關黃陳方會計師行 ) (collectively, “ DTT ”) were in compliance with the auditing standards and other laws and regulations as well as professional ethics to serve as the domestic and overseas auditor for 2019 of the Company, diligently performed its audit duties, and completed the audit work in an independent, objective and fair manner. The independent Directors expressed prior approval and independent opinion in respect of the issue for appointing the accounting firm for 2020 as considered at the 18th meeting of the fourth session of the Board that it agreed to re-appoint DTT as the domestic and overseas auditor of the Company for 2020 and to re-appoint Deloitte Touche Tohmatsu Certified Public Accountants LLP as the internal control auditor of the Company for 2020 and agreed to submit the same to the general meeting of the Company for consideration. The re-appointment of DTT was based on scientific decision-making, legal and compliant procedures, and complied with the provisions of the Articles of Association.

(vii) Provision for Impairment of Assets

The independent Directors of the Company expressed independent opinions on the matters concerning the provision for impairment of assets which was considered at the 21st meeting of the fourth session of the Board that: the provision for impairment of assets was based on sufficient grounds and standardized decision-making procedures, and complied with the provisions of the Accounting Standards for Business Enterprises and the Company’s accounting policies, which truly and fairly reflected the Company’s actual asset position and financial condition, conformed to the overall interests of the Company, and facilitated the provision of more authentic, reliable and accurate accounting information for investors; and the decision-making process complied with the provisions of relevant laws, regulations and the Articles of Association without prejudice to the interests of the Company and all Shareholders, especially the small and medium Shareholders.

(viii) Employee stock ownership plan of the company

According to the Guidance on the Pilot Implementation of Employee Stock Ownership Plan by Listed Companies (《關於上市公司實施員工持股計劃試點的指導意見》) (the “ Guidance ”) of the CSRC, the Guidelines on Information Disclosure of Employee Stock Ownership Plan of Listed Companies 《上市公司員工持股計劃信息披露工作指引》( ) of the Shanghai Stock Exchange, Articles of Association and the Independent Directors System of the Company, etc., the independent Directors are required to discuss whether the H share employee stock ownership plan is conducive to the Company’s sustainable development, whether it harms the interests of the Company and all shareholders, and whether the Company forces employees to participate by means of apportionment and forced distribution.

– IV-12 –

2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

The independent Directors expressed independent opinions on the matters concerning the employee stock ownership plan of the Company as considered at the 20th meeting of the fourth session of the Board that: 1. the Employee Stock Ownership Plan is in compliance with requirements of the Company Law, the Securities Law, the Guidance and other relevant regulations and the Articles of Association. At the Board meeting for consideration of relevant resolutions related to the Employee Stock Ownership Plan, the Directors that may participate in the Employee Stock Ownership Plan have abstained from voting, and the convening, attendance and voting procedure of the Board meeting are in compliance with the Company Law, the Articles of Association and other relevant requirements. 2. The Company is not involved in any matters that prohibit the implementation of the Employee Stock Ownership Plan as stipulated in the Guidance and other relevant regulations. 3. The contents of the Employee Stock Ownership Plan are in compliance with the Guidance and other relevant regulations without prejudice to the interests of the Company and its Shareholders as a whole. 4. The employees will participate in the Employee Stock Ownership Plan under the principles of compliance with laws and regulations, voluntary participation and risk taking, and the Company has not forced the employees to participate in the Employee Stock Ownership Plan by means of apportionment, forced distribution or other ways. 5. The Company has no plans or arrangements of provision of advances, guarantees, loans or any other financial assistance to the Holders of the Employee Stock Ownership Plan that violate relevant regulations. 6. The source of funds and source of Shares of the Employee Stock Ownership Plan are in compliance with relevant laws and regulations. 7. The implementation of the Employee Stock Ownership Plan may establish and improve the benefit sharing mechanism between employees and the Company, enhance the cohesion among employees and competitiveness of the Company, attract and retain talents, and effectively align the interests of the Shareholders and the Company with the personal interests of the Company’s employees, thereby promoting the long-term, sustainable and healthy development of the Company. To sum up, the employee stock ownership plan of the company is legal and compliant, which conforms to the interests of the company and all shareholders. It is agreed to submit the relevant matters of the employee stock ownership plan to the general meeting of the company for consideration.

(ix) Cash Dividends

The independent Directors of the Company expressed independent opinions on the 2019 profit distribution plan at the 18th meeting of the fourth session of the Board that, the 2019 profit distribution plan proposed by the Company upon comprehensive consideration of the interests of Shareholders, the Company’s development and other factors, was in line with relevant laws, regulations and normative documents as well as the ongoing, stable profit distribution policy determined in accordance with the Articles of Association and the Shareholders’ Returns in the Next Three Years of the Company (2017-2019), which was conducive to the Company’s long-term development and in line with the interests of Shareholders. The independent directors agreed to submit the plan to the general meeting.

– IV-13 –

2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

(x) Performance of the Undertakings of the Company and Shareholders

The independent Directors diligently performed their duties and safeguarded the overall interests of the Company. In particular, the independent directors attached great importance to protecting the legitimate rights and interests of the small and medium Shareholders from being damaged and actively concerned about the performance of the undertakings of the Company and Shareholders. The undertakings that had not yet been fulfilled by the Shareholders and the Company were fully disclosed in the Company’s announcements. During the reporting period, the Company and its Shareholders had fulfilled related undertakings in good faith, and there was no breach thereof.

(xi) Implementation of Information Disclosure

The Company earnestly disclosed the information in accordance with the Company Law, Securities Law, the Listing Rules of SSE, the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and other laws and regulations as well as internal regulations such as the Articles of Association. The independent directors were of the opinion that the Company’s information was disclosed in a true, accurate, complete, timely and fair manner, and there was no false representation, misleading statement or material omission.

(xii) Implementation of internal control

The Independent Directors of the company believe that the Company has formulated relevant internal control systems in accordance with laws, regulations and normative documents based on the basic principles of internal control and combined with the needs of operation and management. The relevant system covers all levels and links of the Company’s operation and management, and has formed a standardized management system in actual operation, which can effectively control the risks of operation and management, protect the safety and integrity of the Company’s assets, and safeguard the interests of the Company and all Shareholders. The Company’s internal control evaluation report comprehensively, truly and accurately reflected the actual situation of the Company’s internal control without false records, misleading statements or major omissions and agreed with the conclusions made in the 2019 Internal Control Evaluation Report of the Company.

(xiii) The Operation of the Board of Directors and its Special Committees

The independent Directors were of the opinion that the meetings for the Board of Directors and its special committees were convened and held in accordance with the Articles of Association, the Rules of Procedures of the Board of Directors and the working rules of the committees; and that their duties were performed under laws and rules, the decision-making process was scientific and efficient, the voting results were effectively implemented, and the information was disclosed in a true, accurate, complete and timely manner.

– IV-14 –

2020 DUTY PERFORMANCE REPORT OF INDEPENDENT DIRECTORS OF THE COMPANY

ANNEX IV

• (xiv) Other Issues that Independent Directors Consider Necessary to be Improved by the Listed Company

The independent Directors of the Company believe that under the influence of COVID-19 epidemic, the Company should make well-grounded judgments of the impact of macro-economy and capital market, actively and effectively respond to the Company’s operation and management, strengthen the compliance and risk control management of various departments, subsidiaries and branches, enhance the disposal of risky assets, strengthen the construction and training of employees and talents, optimize the incentive and restraint mechanism of the Company’s salary, fully mobilize the enthusiasm and creativity of talents, and further enhance the Company’s core competitiveness.

IV. OVERALL EVALUATION AND RECOMMENDATIONS

In 2020, all the independent directors were faithful in performing their duties. Through diligent and dedicated engagement in the decision-making for significant matters of the Company under the principle of objectivity, fairness and independence, the independent directors made positive contribution for improving the corporate governance structure and safeguarding the interests of the Company as a whole as well as the legitimate rights and interests of the public Shareholders.

In 2021, all the independent Directors will continuously abide by the regulatory requirements for listed securities companies; diligently and faithfully perform their duties in strict compliance with the requirements under the laws, regulations and the Articles of Association; actively engage in the decision-making for significant matters of the Company; and safeguard the legitimate rights and interests of all the Shareholders and in particular of the small and medium Shareholders, with a view to promote the Company to develop in a sustainable, health and stable way.

Independent Directors: Xu Zhiming, Jin Qinglu, Wu Hong, Feng Xingdong March 2021

– IV-15 –

PROPOSAL REGARDING THE PROJECTED ROUTINE RELATED PARTY TRANSACTIONS OF THE COMPANY IN 2021

ANNEX V

Dear Shareholders,

In accordance with the Listing Rules of Shanghai Stock Exchange, the Guidelines for the Implementation of Related Party Transactions of Listed Companies of Shanghai Stock Exchange, and the Administrative Measures for the Related Party Transactions of the Company, taking into consideration of the Company’s daily operation and business development needs, the Company has made estimation on the routine related party transactions that may occur in 2021 and during the period to 2021 annual general meeting, details of which are as follows:

I. DESCRIPTION OF RELATED PARTIES AND RELATED RELATIONSHIP

1. Shenergy (Group) Company Limited (“Shenergy Group”) and its Related Companies

Shenergy Group was established by Shanghai State-owned Assets Supervision and Administration Commission on November 18, 1996 with a registered capital of RMB20 billion. Its legal representative is HUANG Dinan. Shenergy Group holds 25.27% shares of the Company and is the largest shareholder of the Company. Shenergy Group and its related companies include legal persons or other organizations directly or indirectly controlled by Shenergy Group, upstream and downstream companies of Shenergy Group and the above entities and 30%-controlled companies and its subsidiaries held, directly or indirectly, by Shenergy Group.

2. Other related parties

Expect for the above-mentioned related parties, related natural persons and other related legal persons of the Company include:

(1) Related natural persons

Related natural persons refer to natural persons who directly or indirectly hold more than 5% of the shares of the Company; directors, supervisors and senior management of the company; close family members of the aforementioned persons, including their spouse, parents and parents-in-law, siblings and their spouses, offspring of 18 years old or above and their spouses, siblings of their spouses and parents of daughters-in-law or sons-in-law; and other natural persons, recognized based on the principal of substance over form by the CSRC, the SSE, or by the Company, who have a special relationship with the Company and may cause the Company to lean against its interest, including natural persons holding 10% or more of shares of the holding subsidiaries that controlled by and have significant influence on the Company.

– V-1 –

PROPOSAL REGARDING THE PROJECTED ROUTINE RELATED PARTY TRANSACTIONS OF THE COMPANY IN 2021

ANNEX V

(2) Other related legal persons

Related legal persons refer to legal persons or other organizations which hold more than 5% of the shares of the Company, other than Shenergy Group; legal persons or other organizations directly or indirectly controlled by the related natural persons of the Company, or where the related natural persons of the Company serve as directors and senior management, other than the Company and its holding subsidiaries; and legal persons or other organizations, recognized based on the principal of substance over form by the CSRC, the SSE, or by the Company, who have a special relationship with the Company and may cause the Company to lean against its interest, including legal persons or other organization holding 10% or more of shares of the holding subsidiaries that controlled by and have significant influence on the Company.

II. DETAILS OF PROJECTED ROUTINE RELATED-PARTY TRANSACTIONS

1. Projected related party-transactions with Shenergy Group and its related companies

Category of No. Transactions

Description Projected Amount

• 1 Securities and The services cover, including but not limited to, Financial securities and futures brokerage; underwriting Services and sponsoring; financial consultancy; entrusted assets management; settlement and sale of foreign exchange; margin financing and securities lending; securities and financial advisory and consultancy, etc.

• Due to uncertainties of the occurrence and volume of such business, the projected cap will be calculated based on the actual amount.

• 2 Trading in The trading covers, including but not limited to: Securities and Financial 1. transactions relating to equity products, Products non-equity products and their derivatives: including but not limited to stocks, bonds, funds, trusts, wealth management products, asset management schedules, asset securitization products, swaps, futures, options, forwards and other financial products.

– V-2 –

PROPOSAL REGARDING THE PROJECTED ROUTINE RELATED PARTY TRANSACTIONS OF THE COMPANY IN 2021

ANNEX V

Category of No. Transactions Description

Projected Amount

1. financing-related transactions: financial intermediation activities among financial institutions, including but not limited to interbank lending; repurchases; mutual holding of debt instruments such as income certificates, short-term financing bills, subordinated bonds and corporate bonds; and

2. other securities and financial products transactions as permitted by the regulatory authorities.

3. 3 Purchasing goods Including services within the business scope of and receiving Shenergy Group and its related companies, which labor cover, including but not limited to, acceptance of goods and labor such as electricity, gas, natural gas, gas stoves, gas equipment, gas kitchen equipment, and acceptance of services such as property management, gas transmission and distribution, gas project planning, design and construction.

4. Note: Under the requirements of the Hong Kong Listing Rules and other regulations, the Company carried out and managed the connected transactions with Shenergy Group and its related companies in compliance with the method determined by the “Resolution on Entering into the Connected Transaction Framework Agreement (2021-2023) with Shenergy (Group) Company Limited”, being Resolution No. 20, as considered and approved at the second meeting of the fifth session of the Board.

2. Projected related-party transactions with other related companies

• Category of

• No. Transactions Description Projected Amount 1 Securities and The services cover, including but not limited to, Due to uncertainties Financial securities and futures brokerage; leasing of of the occurrence Services trading seats; sale of securities and financial and volume of products; underwriting and sponsoring; financial such business, consultancy; entrusted assets management; the projected settlement and sale of foreign exchange; cap will be securities and financial business; entrusted calculated based assets management; securities and financial on the actual advisory and consultancy, etc. amount.

– V-3 –

PROPOSAL REGARDING THE PROJECTED ROUTINE RELATED PARTY TRANSACTIONS OF THE COMPANY IN 2021

ANNEX V

Category of No. Transactions

Description

Projected Amount

• 2 Trading in The trading covers, including but not limited to: Securities and Financial 1. transactions relating to equity products, Products non-equity products and their derivatives: including but not limited to stocks, bonds, funds, trusts, wealth management products, asset management schedules, asset securitization products, swaps, futures, options, forwards and other financial products.

• financing-related transactions: financial intermediation activities among financial institutions, including but not limited to interbank lending; repurchases; mutual holding of debt instruments such as income certificates, short-term financing bills, subordinated bonds and corporate bonds; and

• other securities and financial products transactions as permitted by the regulatory authorities.

3. Projected related-party transactions with related natural persons

Related natural persons of the Company will trade in securities and financial products with, and receive intermediary services and other services from the Company in accordance with laws, regulations and regulatory requirements. Due to uncertainties of the occurrence and volume of such business, the projected cap will be calculated based on the actual amount.

III. DESCRIPTION AND PRICING BASIS OF RELATED-PARTY TRANSACTIONS

For the aforementioned related-party transactions in the ordinary course of business, the Company will determine the transaction price in strict compliance with the principle of fairness with reference to the prevailing market price, industry practice and prices determined by any third party. The aforementioned related-party transactions did not impair the interests of the Company and its shareholders, especially small and medium shareholders.

– V-4 –

PROPOSAL REGARDING THE PROJECTED ROUTINE

ANNEX V

RELATED PARTY TRANSACTIONS OF THE COMPANY IN 2021

IV. IMPACT OF ROUTINE RELATED-PARTY TRANSACTIONS ON THE COMPANY

1. The above related-party transactions are those that arise from the ordinary business operation of the Company and will contribute to normal business development of the Company;

2. The pricing of the aforesaid related-party transactions was determined with reference to the market price, which was fair and reasonable without causing any prejudice against the interests of the non-related shareholders of the Company and the Company;

3. The above related-party transactions did not affect the independence of the Company as the principal businesses of the Company did not rely on the related parties as a result of the above related-party transactions.

The above proposal is hereby put forth to the Shareholders for consideration (the relevant related Shareholders shall abstain from voting on the related proposals, respectively).

– V-5 –

PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS OF THE COMPANY

ANNEX VI

Dear Shareholders,

The Company conducts quota management over offshore debt financing instruments. Pursuant to the Proposal Regarding the General Mandate to Issue Offshore Debt Financing Instruments of the Company considered and passed at the 2018 annual general meeting of the Company held on May 28, 2019, the maximum balance of the outstanding balance after the issuance of the offshore debt financing instruments shall not exceed RMB20 billion.

To further promote the international strategies of the Company, satisfy its business development requirements and prepare for replacement of offshore debt upon maturity in 2022, after prudent calculation and analysis, the Company proposes to submit a resolution in advance to ensure compliance with regulatory approval and raise the maximum balance of the outstanding balance after the issuance of the offshore debt financing instruments to RMB23 billion. To such end, the Company proposes to the general meeting to grant a package of authorizations regarding the issuance of offshore debt financing instruments (the “ Offshore Financing Instruments ”) through public or non-public offering, on a one-off or multiple issuances or multi-tranche issuances basis, details of which are as follows:

1. ISSUE METHODS

Offshore Debt Financing Instruments will be issued through public or non-public offering, on a one-off or multiple issuances or multi-tranche issuances basis.

2. ISSUE TYPE

According to the actual conditions, the issuance will be in the form of bonds, subordinated bonds or structural notes, including but not limited to offshore bonds or subordinated bonds in RMB or foreign currencies, notes (including but not limited to commercial notes), loans, syndicated loans and debt financing instruments to be drawn and issued under medium-term notes, etc.

3. ISSUE SIZE

The maximum balance of the outstanding balance after the issuance of the Offshore Debt Financing Instruments does not exceed RMB23 billion. For instrument denominated in foreign currency, it shall be based on the median exchange rate published by the People’s Bank of China on the date of issuance and shall be in compliance with the requirements prescribed in the relevant laws and regulations on the maximum amount of the specific debt financing instruments to be issued.

– VI-1 –

ANNEX VI PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS OF THE COMPANY

4. ISSUER

The issuer of Offshore Debt Financing Instruments can be one of the following entities according to the needs of the issuance:

• (1) the Company;

• (2) offshore wholly-owned subsidiaries of the Company;

• (3) on the premise of fulfilling the following conditions ① , ② and ③ , a directly or indirectly wholly-owned offshore subsidiary established overseas by the Company can be the issuer of Offshore Debt Financing Instruments to issue, on a one-off or multiple issuances or multi-tranche issuances basis, Offshore Debt Financing Instruments overseas.

• ① The wholly-owned offshore subsidiaries are established in Hong Kong or other appropriate offshore jurisdictions while the Company directly or indirectly holds 100% interest of those wholly-owned offshore subsidiaries.

• ② The registered capital of the proposed directly or indirectly wholly-owned offshore subsidiaries shall not be higher than US$10,000 or the equivalent amount in other currencies. The name of the entity will be subject to the final version approved by the approving and registering authorities.

• ③ The mandate will be granted at the general meeting and all necessary approval processes required by the regulatory authorities will have been fulfilled. The issuer will be determined in accordance with relevant laws and regulations as well as the advice and recommendations of regulatory authorities, the Company’s actual needs for funding and the then prevailing market conditions at the time of issuance.

5. ISSUE TERM

The term of the Offshore Debt Financing Instruments shall be no longer than 10 years (inclusive). It may have single or multiple combined maturities.

6. ISSUE INTEREST RATE, WAY OF PAYMENT AND ISSUE PRICE

The interest rate and payment methods of the issuance of Offshore Debt Financing Instruments will be determined by the issuer and sponsor or lead underwriter (if any) in accordance with the then prevailing market conditions at the time of issuance and relevant provisions. Issue price will be determined in accordance with the then prevailing market conditions at the time of issuance and relevant laws and regulations.

– VI-2 –

ANNEX VI PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS OF THE COMPANY

7. SECURITY AND OTHER ARRANGEMENTS

The Company, the wholly-owned subsidiary and/or third party will provide security or issue letter of support and/or keep-well agreement, standby letter of credit or other credit enhancements, according to the structure of each issuance.

8. USE OF PROCEEDS

The proceeds raised from the issuance of Offshore Debt Financing Instruments shall be used to fund business operation needs of the Company, improve the debt structure of the Company, supplement working capital of the Company and/or make project investment. Specific use of proceeds is subject to the actual capital requirements of the Company.

9. TARGET SUBSCRIBERS

The target subscribers of the Offshore Debt Financing Instruments shall be the onshore and offshore investors whom meet the conditions for subscription.

10. LISTING OF DEBT FINANCING INSTRUMENTS

Application for listing of the Offshore Debt Financing Instruments shall be determined in accordance with domestic and overseas laws and regulations and regulatory requirements, and based on the actual conditions of the Company and prevailing market conditions at the time of issuance.

– VI-3 –

PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS OF THE COMPANY

ANNEX VI

11. AUTHORIZATION OF ISSUANCE OF OFFSHORE DEBT FINANCING INSTRUMENTS

To ensure effective coordination for the issuance of Offshore Debt Financing Instruments and other matters in connection with the issuance, a resolution will be proposed at the general meeting to authorize the Board, and agree the Board in turn to further authorize the executive directors of the Company (“ Authorized Representatives ”) to deal with, at its/their sole discretion, all matters in connection with the issuance of Offshore Debt Financing Instruments in accordance with the relevant laws and regulations as well as the advice and recommendations from regulatory authorities, within the framework and under the principles approved at the general meeting, in order to maximize the interest of the Company, including but not limited to:

• ① formulation and adjustment of the details of the proposal for issuance of Offshore Debt Financing Instruments in accordance with the applicable laws, regulations and relevant provisions from regulatory authorities as well as resolutions passed at the general meeting of the Company, and based on the actual conditions of the Company and the specific conditions of the relevant debt market, including without limitation, the determination of the suitable issuer(s), timing of issue, details of issue size and method, terms of issue, issue targets, maturity, whether to issue on a one-off, multiple issuances, multi-tranche issuances or multiple-category issuances basis and, if on multiple issuances, multi-tranche issuances or multiple-category issuances basis, the issue size and term of each issuance, tranche and category, the methods in which the nominal value and interest rate are determined, currency (including offshore RMB), pricing method, issuance arrangements, credit enhancement arrangements including letter of guarantee or letter of support, rating arrangement, details of subscription method, whether to incorporate terms of repurchase or redemption, details of placement arrangements, use of proceeds, registration, listing of Offshore Debt Financing Instruments and place of listing, measures to mitigate repayment risks, measures to ensure debt repayment (if applicable), etc. and all matters in connection with the issuance of Offshore Debt Financing Instruments;

• ② handling, at its/their sole discretion, the establishment of directly or indirectly wholly-owned offshore subsidiaries and all related matters, including but not limited to procedures at home or abroad such as approval, filing and registration, in relation to the issuance of Off-shore Debt Financing Instruments according to relevant provisions;

– VI-4 –

ANNEX VI PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS OF THE COMPANY

• ③ determining and engaging intermediary agency, signing, implementing, amending and completing all agreements and documents relating to the issuance of Offshore Debt Financing Instruments, including without limitation, the sponsor agreement, underwriting agreement, credit enhancement agreements such as guarantee agreement or letter of support, bond indenture, engagement letter with intermediary agency, trust agreement, settlement management agreement, registration and custody agreement, listing agreement and other legal documents, etc., and disclosing the relevant information in accordance with the relevant laws, regulations and the listing rules of the stock exchanges on which the Company’s securities are listed (including without limitation, the preliminary and final offering memoranda of the debt financing instruments, and all announcements and etc. in relation to the issuance of Offshore Debt Financing Instruments);

• ④ selecting and engaging trustee manager(s) and settlement manager(s) for the issuance of Offshore Debt Financing Instruments, signing the trustee agreement(s) and settlement management agreement(s) and (if applicable), formulating rules for meetings of the holders of the debt financing instruments;

• ⑤ undertaking all applications and filings as well as listing matters (if applicable) in connection with the issuance of Offshore Debt Financing Instruments, including without limitation, preparing, revising and submitting relevant application and filing materials relating to the issuance and listing of the Offshore Debt Financing Instruments and application and filing materials in respect of credit enhancement agreements such as guarantee or letter of support to be provided by the Company, the issuer and/or third party, and signing the relevant application and filing documents and other legal documents;

• ⑥ making relevant adjustments to matters relating to the issuance of Offshore Debt Financing Instruments according to the advice of and changes in the policies of regulatory authorities or the changes in market conditions, or determining whether to continue with all or part of the work in respect of the issuance of Offshore Debt Financing Instruments in accordance with the actual conditions, unless re-approval by the shareholders at the general meeting is otherwise required pursuant to the relevant laws, regulations and the articles of association of the Company;

• ⑦ dealing with other relevant matters in connection with the issuance of Offshore Debt Financing Instruments;

• ⑧ subject to approval of the above authorization at the general meeting, a resolution will be proposed to the Board to authorize its Authorized Representatives for the issuance of Offshore Debt Financing Instruments to jointly or individually deal with all matters in connection with the issuance of Offshore Debt Financing Instruments on behalf of the Company pursuant to the resolutions passed at the general meeting and the authorization granted by the Board.

– VI-5 –

PROPOSAL REGARDING THE GENERAL MANDATE TO ISSUE OFFSHORE DEBT FINANCING INSTRUMENTS OF THE COMPANY

ANNEX VI

12. VALIDITY PERIOD OF RESOLUTION

The shareholder’s resolutions regarding the issuance of Offshore Debt Financing Instruments shall be valid for a period of 36 months from the date of passing of the resolutions at the general meeting. Where the Board and/or its Authorized Representatives have, during the term of the authorization, decided the issuance or partial issuance of Offshore Debt Financing Instruments, and provided that the Company has also, during the term of the authorization, obtained the approval or license from or completed filing or registration (if applicable) with regulatory authorities on the issuance, the Company may, during the validity period of such approval, license, filing or registration, complete the issuance or relevant partial issuance of Offshore Debt Financing Instruments.

The Company will allocate resources reasonably according to the annual asset-liability allocation plan and annual financing plan, so as to enhance coordinated management over offshore debts, improve capital utilization efficiency, control financing cost and ensure that the Company maintains liquidity safety, all businesses are carried out in an orderly manner and use of proceeds secures sound economic benefits.

The above proposal is hereby put forth to Shareholders for consideration.

– VI-6 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

Dear Shareholders,

The Company proposes to issue shares to existing shareholders through rights issue (the “ Rights Issue ” or “ Issue ”). Pursuant to the requirements of the Company Law of the People’s Republic of China 《中華人民共和國公司法》( ) (the “ Company Law ”), the Securities Law of the People’s Republic of China (《中華人民共和國證券法》) (the “ Securities Law ”), the Management Methods on Securities Issuance of Listed Companies (《上市公司證券發行管理辦法》) (the “ Management Methods ”), Q&A on Issuance Supervision – Regulatory Requirements on Guiding and Regulating Financing of Listed Companies (Revised) (《發行監管問答－關於引導規範上市公司融資行為的監管要求 ( 修訂 版 )》) and relevant laws, regulations and regulatory documents and based on the actual situation of the Company, the Board is of the opinion, after earnest item-by-item self-inspections with reference to the requirements for qualifications and conditions underlying rights issue by listed corporations, the Company is in compliance with the requirements and conditions on rights issue by listed corporations as stipulated in relevant laws, regulations and regulatory documents and the Company is a qualified applicant for rights issue. Details are set out below:

I. THE COMPANY IS IN COMPLIANCE WITH RELEVANT REQUIREMENTS OF THE COMPANY LAW

• (I) Shares to be issued under the Rights Issue will be Renminbi-denominated ordinary shares (A shares) and overseas listed foreign shares (H shares), and all shares of the same class shall be issued under the same conditions and at the same price, which complies with the followings requirements as set out in Article 126 of the Company Law:

Shares shall be issued in an open, fair and just manner, and shares of the same class shall carry the same rights; Each of the shares of the same class shall be issued under the same conditions and at the same price in each issuance. The price payable per share subscribed by any entity or individual shall be the same.

• (II) The issue price under the Rights Issue will not be lower than the nominal value of shares, which complies with requirements as set out in Article 127 of the Company Law.

– VII-1 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

II. THE COMPANY IS IN COMPLIANCE WITH RELEVANT REQUIREMENTS OF THE SECURITIES LAW

The Company did not make unauthorized changes to use of proceeds without rectification or approval from the general meeting, which complies with requirements as set out in Article 14 of the Securities Law.

III. THE COMPANY IS IN COMPLIANCE WITH RELEVANT REQUIREMENTS OF THE MANAGEMENT METHODS

• (I) The Company has set up a sound organizational structure that functions well, thus in compliance with the following requirements of Article 6 of the Management Methods:

• The articles of association of the Company remain valid and effective, and the mechanism of general meeting, the board of directors, the supervisory committee and the independent directors is sound and effective, who are capable of performing their duties in a lawful and efficient manner;

• The Company has established a sound internal control system to effectively ensure operating efficiency, legitimacy, compliance and reliability of financial reporting; and there is no major deficiency in the completeness, rationality and efficiency of the internal control system;

• The incumbent directors, supervisors and senior management of the Company are qualified for their positions and capable of discharging their duties in good faith and diligence without any breach to Articles 147 and 148 of the Company Law, and not subject to administrative punishment by China Securities Regulatory Commission (the “ CSRC ”) in the past 36 months or received public censure from the stock exchanges in the past 12 months;

• The Company has no controlling shareholder or actual controller, is independent of its substantial shareholders in personnel, assets, finance, organization and business and capable of independent operation;

• No third-party guarantees have been provided in violation of stipulated procedures in the past 12 months.

– VII-2 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

• (II) The Company has sustainable profitability, which complies with the following requirements as set out in Article 7 of the Management Methods:

• The Company has recorded profit for latest three consecutive financial years, which shall be measured on the basis of the lower of net profit after or before extraordinary items;

• The Company has relatively stable business and earning sources without undue reliance upon substantial shareholders;

• The existing principal business or investment targets of the Company is sustainable with sound operating model and investment plans and its core products or services enjoy broad market prospects without actual or foreseeable material adverse changes in operating environment and market demand;

• The senior management and core technical staff of the Company remain stable without any material adverse change in the past 12 months;

• The major assets, core technologies or other material interests of the Company are obtained in a lawful manner and available for use on a going concern basis without actual or foreseeable material adverse changes;

• There are no guarantees, litigation, arbitration or other material matters which have material effect on the Company’s on-going operation;

• The Company did not publicly issue any securities in the past 24 months and did not record a year-on-year decrease of 50% or more in operating profit for the year during which an issuance is proposed.

– VII-3 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

• (III) The Company is in sound financial position, which complies with the following requirements as set out in Article 8 of the Management Methods:

• The Company maintains standard accounting fundamentals and is in strict compliance with the state’s accounting system;

• There has not been any qualified opinion or negative opinion issued by the registered accountants, nor has there been any situation where the registered accountants are unable to express an opinion, in respect of the financial statements of the Company for the latest three years;

• The Company has sound asset quality;

• The Company has solid operating results and normal cash flows, recognizes operating revenue and costs in strict accordance with relevant national accounting standards for business enterprises, and provides asset impairment on sufficient and rational grounds for last three years without manipulation of operating performance;

• The cumulative cash dividends of the Company for the latest three years are not less than 30% of the average annual distributable profit for the same three-year period.

• (IV) During the latest 36 months, there has been no misrepresentation in financial and accounting documents of the Company, and there did not exist the following material non-compliance as stipulated in Article 9 of the Management Methods:

• Breach of securities laws, administrative regulations and rules and has been a subject to any administrative punishment by CSRC or penal punishment;

• Any instance of serious administrative punishment or penal punishment due to violation of laws and administrative regulations or rules on industrial and commerce, taxation, land, environmental protection or the customs;

• Material violations of other state laws and administrative regulations.

– VII-4 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

• (V) The amount and use of the proceeds raised by the Company complies with the following requirements as set out in Article 10 of the Management Methods:

• The amount of the proceeds shall not exceed the total estimated investment;

• The use of proceeds shall be in compliance with national and industrial policies and the laws and administrative regulations on environmental protection and land administration;

• Except for financial institutions, the proceeds shall not be utilized in financial investments such as financial assets held-for-trading, financial assets available-for-sale, lending to others and entrusted wealth management, and shall not be invested, either directly or indirectly, in any company which is principally engaged in securities trading;

• Implementation of the investment projects will not result in horizontal competition between substantial shareholders or hinder the independence of production and operation of the Company as the Company does not have controlling shareholders or actual controllers;

• The Company has formulated the special deposit system for raised proceeds, and the proceeds shall be deposited in a special deposit account as determined by the Board.

• (VI) No circumstance set out below, in which the Company is prohibited from public issuance of securities as stipulated in Article 11 of the Management Methods, has occurred:

• There is false representation, misleading statement or material omission in the offering application documents;

• Unauthorized change of use of proceeds raised from the previous public issuance of securities without rectification;

• Any instance of public censure from the stock exchanges in the past 12 months;

• Breach of public undertakings made to investors and its substantial shareholder(s) within the latest 12 months;

• There is pending investigation by the judicial authority relating to any suspected offence, or any pending investigation by CSRC relating to any suspected breach of law or regulation, committed by the Company or any of its existing directors or members of senior management;

• Other situation concerning serious prejudice to the legal interests of investors and the public interest of the society.

– VII-5 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

• (VII) The Rights Issue complies with the following requirements as set out in Article 12 of the Management Methods:

  1. The number of shares proposed to be issued shall not exceed 30% of the total number of share capital before the Rights Issue;

  2. The largest shareholder of the Company, Shenergy (Group) Company Limited, shall make a public undertaking regarding the number of shares to be subscribed for prior to the general meeting;

  3. The A shares to be issued under the Rights Issue shall be made on a best-effort basis as required under the Securities Law.

• IV. THE COMPANY IS IN COMPLIANCE WITH THE FOLLOWING REQUIREMENTS AS SET OUT IN Q&A ON ISSUANCE SUPERVISION – REGULATORY REQUIREMENTS ON GUIDING AND REGULATING FINANCING OF LISTED COMPANIES (REVISED) (《發行 監管問答－關於引導規範上市公司融資行為的監管要求 ( 修訂版 )》)

• (I) Listed companies shall take into comprehensive consideration the existing monetary funds, gearing ratio, operation scale and potential changes thereof and future liquidity requirements to reasonably determine the amount out of proceeds to be used for working capital replenishment and debt repayment. A Company that raises proceeds through rights issue, issuance of preferred shares or non-public issuance to target subscribers determined by the board of directors may fully use the proceeds to replenish working capital and pay back debts.

• (II) Where a listed company proposes to apply for rights issue, placing or non-public issuance of shares, the date of board meeting to resolve such issuance shall in principle not be less than 18 months from the date on which proceeds from the previous fundraising activity are in place. Companies that have basically fully utilized the proceeds from the previous fundraising activity or have not changed the use of proceeds and continued to invest as scheduled may be exempted from the above restrictions, provided that there shall be in principle an interval of not less than six months from last fundraising. The previous fundraising activity shall include initial issuance, rights issue, placement and non-public issuance.

– VII-6 –

ANNEX VII STATEMENT ON THE COMPANY’S COMPLIANCE WITH REQUIREMENTS ON RIGHTS ISSUE

• (III) Except for financial institutions, listed companies that apply for re-financing shall in principle not have any held-for-sale financial assets or available-for-sale financial assets with significant amount and long duration, lending to others, entrusted wealth management and other financial investments as at the end of the latest financial period.

In view of the above, the Board is of the opinion that the Company has a sound organizational structure that functions well, enjoys sustainable profitability, is in a healthy financial position and has no misrepresentation in its financial and accounting documents, the amount and use of proceeds complies with relevant requirements without material non-compliance, the Company is in line with the stipulations and requirements of relevant laws and regulations on rights issue by listed companies and the Company is a qualified applicant for rights issue.

The above proposal is hereby put forth to Shareholders for consideration.

– VII-7 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Dear Shareholders,

1. The Company proposes to publicly issue shares to the existing shareholders by way of rights issue (the “ Rights Issue ” or “ Issue ”).

2. The plan for public issuance of shares by way of the Rights Issue has been considered and approved at the second meeting of the fifth session of the Board and is pending consideration and approval at the general meeting, the A shares class meeting and the H shares class meeting of the Company and subject to approval by China Securities Regulatory Commission (the “ CSRC ”).

3. Upon completion of the Rights Issue, the share capital and asset scale of the Company will be significantly increased. However, it takes a certain period to produce benefits after the investment of proceeds and the Company will still derive revenue and shareholders’ returns from its existing business, so indicators such as earnings per share and weighted average return on net assets will experience a certain decrease in the short term, i.e., there is a risk that the immediate returns may be diluted after the Rights Issue. Please refer to the “Proposal on Risk Warning Regarding Dilution of Immediate Returns by Rights Issue to Existing Shareholders and Remedial Measures and Undertakings Given by Relevant Parties of 東方證券股份有限公司 ” for further details.

4. This plan represents the statement of the Rights Issue made by the Board and any statement to the contrary is untrue.

5. The statements set out herein do not represent any material judgement, confirmation or approval of the approving authorities on the Rights Issue and its relevant matters, the effecting and completion of which are subject to approval or authorization of approving authorities.

I. STATEMENTS ON THE ISSUE BEING QUALIFIED UNDER RELEVANT LAWS AND REGULATIONS IN RESPECT OF PUBLIC ISSUANCE BY WAY OF RIGHTS ISSUE

Pursuant to the requirements of the Company Law of the People’s Republic of China (《中華人 民共和國公司法》) (the “ Company Law ”), the Securities Law of the People’s Republic of China (《中 華人民共和國證券法》) (the “ Securities Law ”), the Management Methods on Securities Issuance of Listed Companies (《上市公司證券發行管理辦法》), Q&A on Issuance Supervision – Regulatory Requirements on Guiding and Regulating Financing of Listed Companies (Revised) (《發行監管問答－ 關於引導規範上市公司融資行為的監管要求 ( 修訂版 )》), the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and relevant laws, regulations and regulatory documents, the Board is of the opinion, after earnest item-by-item self-inspections with reference to the requirements for qualifications and conditions underlying rights issue by listed corporations in the A share and H share market, the Company is in compliance with the requirements and conditions on rights issue by listed corporations in the A share and H share market as stipulated in relevant laws, regulations and regulatory documents and the Company is a qualified applicant for Rights Issue.

– VIII-1 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

II. OVERVIEW OF THE ISSUE

(I) Class of Shares to Be Issued and Nominal Value

Shares to be issued under the Rights Issue are A shares and H shares with a nominal value of RMB1.00 each.

(II) Method of Issue

The issuance will be conducted by way of issuing Shares to existing Shareholders.

(III) Basis, Proportion and amount of the Rights Issue

A shares are proposed to be issued based on the total number of shares after trading hours on the record date determined for Rights Issue of A shares and allocated to all the A shareholders on the basis of up to three shares for every ten shares, with fractions to be dealt with according to relevant requirements of the Shanghai Stock Exchange and CSDC Shanghai Branch. H shares are proposed to be issued based on the total qualified number of H shares determined on the record date for Rights Issue of H shares and allocated to all the H shareholders on the basis of up to three shares for every ten shares. The A shares and H shares will be issued in the same proportion and at the same price upon exchange rate adjustment.

Calculated based on the total share capital of the Company as of December 31, 2020 of 6,993,655,803 shares, not more than 2,098,096,740 shares will be issued under the rights issue, including a maximum of 1,789,972,740 A shares and 308,124,000 H shares, respectively. In the event that there is any change in the total share capital of the Company due to rights issue, conversion of capital reserve into shares and otherwise before the Rights Issue, the number of shares to be issued will be adjusted according to the total share capital after such change. The final proportion and size under the rights issue are subject to determination by the Board as authorized at the general meeting after negotiation with the sponsor institution(s) (financial adviser(s)) prior to the Issue, having regard to the market conditions.

(IV) Pricing Principle and Rights Issue Price

1. Pricing principle

• (1) Taking into account valuation indicators such as share prices, P/E ratios and P/ B ratios of the shares of the Company in the secondary market as well as the Company’s development and shareholders’ interests;

• (2) Capital requirements of projects to be financed with the proceeds;

• (3) Following the principle to determine through negotiations between the Board and the sponsor institution(s) (financial adviser(s)).

– VIII-2 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

2. Rights issue price

The rights issue price will be determined by the Board as authorized at the general meeting after negotiations with the sponsor institution(s) (financial adviser(s)) prior to the publication of the rights issue announcement through adopting the A share market discounted pricing method based on trading profile of A shares and H shares. The rights issue price of A shares and H shares shall be the same upon exchange rate adjustment and may be higher or lower than the then prevailing market trading price of H shares.

The closing price of A shares and H shares on March 30, 2021 is RMB9.67 and HK$5.20 per share, respectively.

(V) Target Subscribers of the Rights Issue

Target A share subscribers will be all the A shareholders of the Company registered with CSDC Shanghai Branch after trading hours on the record date determined for the Rights Issue of A shares, and target H share subscribers will be all the eligible H shareholders on the record date for the rights issue of H shares. The record dates for the rights issue will be subject to approval of the rights issue plan by the CSRC.

Shenergy (Group) Company Limited, the Company’s largest shareholder, will undertake prior to the general meeting to fully subscribe in cash for its entitlement under the Rights Issue.

(VI) Distribution Plan for Accumulated Undistributed Profits Prior to the Rights Issue

The accumulated undistributed profits of the Company prior to the Rights Issue shall be shared by all shareholders on a pro-rata basis after completion of the rights issue of A shares and H shares.

(VII) Time of Issuance

The Rights Shares will be issued to all Shareholders at a suitable timing within the stipulated period after the approval from CSRC for the Rights Issue is obtained.

(VIII) Method of Sale

A Rights Shares Issue Plan and H Rights Shares Issue Plan will proceed on a best-effort basis.

– VIII-3 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

(IX) Use of Proceeds Raised from the Rights Issue

The total amount of the proceeds to be raised from the Rights Issue is expected to be not more than RMB16.8 billion, subject to the actual market condition prevailing at the Rights Issue, which, after netting off issuance expenses, are proposed to be fully used for increasing the capital pool of the Company, replenishing working capital and optimizing gearing ratio to serve the real economy and comprehensively enhance the Company’s market competitiveness and risk resistance capacity. Proceeds raised from the rights issue will be primarily used for the following purposes:

Projects to be financed with proceeds

	Projects to be financed with proceeds
No.	from rights issue	Amount
1	Investment banking business	Not more than RMB6 billion
2	Wealth management and securities finance business Not more than RMB6 billion
3	Distribution and trading business	Not more than RMB3.8 billion
4	Replenishing working capital	Not more than RMB1 billion
	Total	Not more than RMB16.8 billion

The Board of the Company may, having taken into account the actual project requirements, adjust the priority and amount of the proceeds to be applied towards the above projects without altering the purpose of proceeds. Upon approval at the Board meeting to consider the rights issue plan and before the proceeds are in place, the Company can, based on its operating condition and development schedule, use self-raised funds to invest in the projects to be financed with proceeds and replace the self-financed funds with proceeds after they are in place according to requirements of relevant regulations.

(X) Validity Period of the Resolution in relation to the Rights Issue

The resolution in relation to the Rights Issue shall be effective for a period of 12 months commencing from the date on which the resolution is approved at the Company’s general meeting, the A shares class meeting and the H shares class meeting.

(XI) Listing of the Shares to be Issued

The A shares issued under the Rights Issue will be listed on the Shanghai Stock Exchange according to relevant requirements after completion of the rights issue of A shares.

The H shares issued under the Rights Issue will be listed on The Stock Exchange of Hong Kong Limited according to relevant requirements after completion of the rights issue of H shares.

This plan has been considered and approved at the second meeting of the fifth session of the Board held on March 30, 2021 and is pending consideration and approval at the general meeting, the A shares class meeting and the H shares class meeting of the Company and subject to approval by CSRC.

– VIII-4 –

PLAN OF PUBLIC ISSUANCE OF SHARES

ANNEX VIII

BY WAY OF RIGHTS ISSUE

III. FINANCIAL AND ACCOUNTING INFORMATION AND MANAGEMENT DISCUSSION AND ANALYSIS

The financial reports of the Company for 2018, 2019 and 2020 have been audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP ( 德勤華永會計師事務所 ( 特殊普通合夥 which has issued the standard unqualified audit reports thereon (De Shi Bao (Shen) Zi (19) No. P02153, De Shi Bao (Shen) Zi (20) No. P01071 and De Shi Bao (Shen) Zi (21) No. P01428).

(I) Consolidated Financial Statements

1. Consolidated Balance Sheet

Unit: RMB0’000

	December 31,	December 31,	December 31,
Item	2020	2019	2018
Assets:
Cash and bank balances	6,564,035.96	4,894,083.39	3,676,463.87
Of which: De posits held
on behalf of
customers	4,838,442.32	2,974,988.54	2,426,167.87
Clearing settlement funds	2,151,635.66	1,324,365.37	935,427.19
Of which: Se ttlement funds
held on behalf of
customers	1,859,139.49	1,083,248.91	808,828.50
Advance to customers	2,117,191.94	1,321,426.22	1,027,675.46
Derivative financial assets	15,587.65	60,910.21	31,848.98
Deposits with exchanges and
financial institutions	218,308.97	164,289.43	102,536.53
Receivables	87,440.56	101,991.97	66,840.82
Contract assets	174.19	–	–
Financial assets acquired under
resale agreements	1,446,042.54	2,420,654.20	2,816,858.39

– VIII-5 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

	December 31,	December 31,	December 31,
Item	2020	2019	2018
Financial investment:
Transactional financial assets	7,270,111.70	6,690,109.35	5,203,534.70
Debt investment	624,389.71	719,355.42	791,259.64
Other debt investment	6,264,597.49	6,489,556.34	6,220,943.55
Other equity instruments
investment	1,093,645.76	1,083,287.32	931,626.22
Long-term equity investments	577,119.39	445,375.42	401,526.33
Investment properties	4,046.07	3,007.13	–
Fixed assets	201,960.20	204,027.34	208,759.40
Construction in progress	6,583.85	5,003.43	6,106.38
Right-of-use assets	84,735.49	100,274.91	–
Intangible assets	21,531.31	16,851.91	13,234.03
Goodwill	3,213.54	3,213.54	3,213.54
Deferred income tax assets	145,592.21	76,099.38	89,583.20
Other assets	213,799.97	173,261.88	159,528.99
Total assets	29,111,744.16	26,297,144.16	22,686,967.22
Liabilities:
Short-term borrowings	57,973.22	64,015.35	165,316.17
Short-term financial bills
payable	1,625,548.58	1,611,319.96	1,241,160.61
Due to banks and other financial
institutions	967,011.39	638,465.88	1,102,706.74
Transactional financial
liabilities	1,457,607.31	1,263,096.06	683,438.11
Derivative financial liabilities	50,495.67	264,337.48	90,580.86
Financial assets sold under
repurchase agreements	5,286,088.34	5,747,806.29	4,941,567.67
Account payable to brokerage
clients	6,664,267.12	4,017,917.84	3,205,906.47
Funds payable to securities
issuers	34,600.00	8,000.00	–
Accrued staff costs	260,800.86	160,108.59	124,928.87
Taxes payable	78,281.46	27,822.40	51,221.59
Payables	57,658.46	48,010.10	41,162.39
Contract liabilities	40,412.36	20,811.36	13,489.69
Bonds payable	6,226,547.35	6,730,919.88	5,704,896.83
Lease liabilities	85,691.03	99,500.52	–
Deferred income tax liabilities	2,017.94	1,903.12	–
Other liabilities	193,628.67	191,945.66	93,345.99
Total liabilities	23,088,629.76	20,895,980.48	17,459,721.99

– VIII-6 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

	December 31,	December 31,	December 31,
Item	2020	2019	2018
Equity of owners (or equity of
shareholders):
Paid-up capital (or share capital)	699,365.58	699,365.58	699,365.58
Other equity instruments	500,000.00	–	–
Capital reserve	2,831,140.37	2,825,493.00	2,825,493.00
Other comprehensive income	3,559.43	49,996.08	(19,881.49)
Surplus reserve	367,614.84	344,568.94	308,537.85
General risk reserve	869,109.72	799,767.63	706,160.51
Undistributed profits	749,495.15	677,360.41	654,272.42
Total equity attributable to the
owners (or shareholders) of
the parent company	6,020,285.09	5,396,551.63	5,173,947.88
Non-controlling interests	2,829.32	4,612.04	53,297.36
Total equity of owners (or
equity of shareholders)	6,023,114.40	5,401,163.67	5,227,245.23
Total liabilities and equity
of owners (or equity of
shareholders)	29,111,744.16	26,297,144.16	22,686,967.22

– VIII-7 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

2. Consolidated Income Statement

Unit: RMB0’000

Item		2020	2019	2018
I.	Total operating income	2,313,394.68	1,905,209.73	1,030,349.09
	Net interest income	77,877.26	89,062.20	87,062.11
	Of which: Interest income	553,818.35	608,609.49	637,438.88
	Interest expense	475,941.08	519,547.29	550,376.77
	Net fee and commission income	712,153.05	451,566.25	498,897.43
	Of which: Net fee income from brokerage business	262,060.22	154,559.03	135,182.26
	Net fee income from investment banking
	business	158,179.57	105,001.19	113,561.48
	Net fee income from asset management
	business	246,547.77	180,022.98	237,964.36
	Investment gains	501,162.93	341,472.19	259,344.96
	Of which: Gains from investments in associates
	and joint ventures	121,245.80	59,107.02	66,426.43
	Other income	1,752.85	2,376.72	–
	Gains/(Losses) from changes in fair value	137,589.33	93,671.01	(193,129.19)
	Foreign exchange gains/(losses)	20,830.23	1,216.35	(1,760.23)
	Other business income	862,082.69	925,863.75	379,939.10
	Losses from asset disposal	(53.67)	(18.74)	(5.08)
II.	Total operating expenses	2,043,715.42	1,630,066.35	904,598.37
	Business tax and surcharges	9,694.34	7,133.86	7,235.62
	Business and administrative expenses	780,528.05	594,142.55	503,901.80
	Credit impairment loss	388,513.24	104,445.81	15,711.39
	Other business cost	864,979.78	924,344.14	377,749.55
III.	Operating profit	269,679.25	275,143.38	125,750.72
	Add: Non-operating income	13,375.93	15,900.91	12,961.25
	Less: Non-operating expenses	4,418.80	5,591.22	5,581.42
IV.	Total profit	278,636.38	285,453.07	133,130.55
	Less: Income tax expenses	6,460.00	37,579.19	5,077.83
V.	Net profit	272,176.38	247,873.89	128,052.72
	(i) Classified based on continuing operation
	1. Net profit from continuing operation	272,176.38	247,873.89	128,052.72
	(ii) Classified based on the nature of ownership
	1. Net profit attributable to owners of
	the parent company	272,298.85	243,507.98	123,101.32
	2. Profit or loss attributable to
	non-controlling interests	(122.47)	4,365.91	4,951.40

– VIII-8 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Item				2020	2019	2018
VI.	Other comprehensive income after tax, net			(49,307.93)	49,032.34	(29,561.40)
	Other comprehensive income attributable to the owners
		of the parent company after tax, net		(49,307.93)	49,032.34	(29,561.40)
		(i)	Other comprehensive income that
			cannot be reclassified to profit or loss in
			subsequent periods	(4,835.09)	5,401.53	(121,480.18)
			1. Other comprehensive income that
			cannot be transferred to profit or loss
			under the equity method	–	–	(3,866.01)
			2. Changes in fair value of other equity
			instruments investment	(4,835.09)	5,401.53	(117,614.16)
		(ii)	Other comprehensive income that will be
			reclassified to profit and loss in subsequent
			periods	(44,472.83)	43,630.81	91,918.78
			1. Other comprehensive income that can
			be transferred to profit or loss under
			the equity method	(968.17)	(852.39)	(199.29)
			2. Changes in fair value of other debt
			investments	(43,606.16)	42,105.68	89,164.23
			3. Credit impairment provisions of
			other debt investment	11,088.17	1,627.19	164.60
			4. Exchange differences from
			translation of financial statements
			denominated in foreign currencies	(10,986.66)	750.33	2,789.24
			Other comprehensive income after
			tax attributable to non-controlling
			interests, net	–	–	–
VII.	Total comprehensive income			222,868.45	296,906.22	98,491.32
	Total comprehensive income attributable to owners of
		the parent company		222,990.93	292,540.31	93,539.92
	Total comprehensive income attributable to
		non-controlling interests		(122.47)	4,365.91	4,951.40
VIII.	Earnings per share:
	(i)	Basic (RMB/share)		0.38	0.35	0.18
	(ii)	Diluted (RMB/share)		N/A	N/A	N/A

– VIII-9 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

3. Consolidated Statement of Cash Flows

Unit: RMB0’000

Item	2020	2019	2018
I. Cash flows from operating activities:
Cash received for interests, fees and commissions	1,062,866.70	771,533.84	930,634.88
Net decrease in financial assets held for transaction
purposes	102,334.70	–	55,830.76
Net increase in transactional financial liabilities	167,067.12	534,538.59	47,285.22
Net increase in funds from repurchase business	144,879.52	1,137,138.38	–
Net increase in amount due to banks and other financial
institutions	328,545.51	–	–
Net decrease in advances to customers	–	–	278,005.32
Net cash received from securities trading agency
services	2,646,349.28	812,011.37	383,954.35
Net cash received from securities underwriting agency
services	26,600.00	8,000.00	–
Cash received relating to other operating activities	972,636.23	1,003,534.29	453,695.05
Sub-total of cash inflows from operating activities	5,451,279.06	4,266,756.47	2,149,405.59
Net decrease in amount due to banks and other financial
institutions	–	464,240.86	20,078.71
Net decrease in funds from repurchase business	–	–	72,335.50
Net increase in advances to customers	795,834.43	290,723.21	–
Net increase in financial assets held for transaction
purposes	–	603,957.66	–
Net cash paid for securities underwriting agency services	–	–	26,403.26
Cash paid for interests, fees and commissions	236,073.88	228,087.52	270,725.94
Cash paid to and paid for staff	405,602.13	330,278.71	343,393.80
Taxes paid	23,879.57	67,240.93	84,002.18
Cash paid relating to other operating activities	1,170,325.03	1,243,724.18	760,498.19
Sub-total of cash outflows from operating activities	2,631,715.03	3,228,253.08	1,577,437.57
Net cash from operating activities	2,819,564.02	1,038,503.39	571,968.01

– VIII-10 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Item	2020	2019	2018
II. Cash flows from investing activities:
Cash received from disposal of investment	27,950.48	53,958.62	16,790.79
Cash received from investment gains	385,331.56	394,587.86	361,369.62
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets	1,311.53	295.25	–
Cash received from disposal of subsidiaries	–	141.76	–
Net decrease in other transactional financial assets	–	–	555,431.06
Net decrease in other debt investment	193,672.58	–	–
Net decrease in debt investment	89,230.28	68,674.89	–
Cash received relating to other investing activities	–	–	187.89
Sub-total of cash inflows from investing activities	697,496.43	517,658.39	933,779.36
Cash paid for investments	67,281.26	44,946.50	5,852.87
Cash paid for purchase and construction of fixed assets,
intangible assets and other long-term assets	44,931.08	29,815.43	41,755.07
Cash paid for prepayments of right-of-use assets	334.71	590.73	–
Net increase in other transactional financial assets	221,900.73	573,890.63	–
Net increase in other debt investment	–	196,353.23	1,041,346.79
Net increase in other equity investment	16,805.23	144,571.99	347,903.95
Net increase in debt investment	–	–	210,297.57
Sub-total of cash outflows from investing activities	351,253.01	990,168.51	1,647,156.24
Net cash flows from investing activities	346,243.42	(472,510.12)	(713,376.89)
III. Cash flows from financing activities:
Cash received from investments	500,000.00	153.00	51.00
Of which: C ash received by subsidiaries from
investments from non-controlling
shareholders	–	153.00	51.00
Cash received from borrowings	192,779.99	337,543.56	218,223.86
Cash received from issue of bonds and
short-term financing bills	7,780,151.59	6,674,619.62	2,986,350.81
Sub-total of cash inflows from financing activities	8,472,931.58	7,012,316.19	3,204,625.67
Cash repayment of debts	8,589,927.31	5,546,250.47	3,114,863.43
Cash paid for withdrawal by non-controlling
shareholders	47,558.39	3,094.32	1,094.19
Cash paid for distribution of dividends, profits or
interest payment	438,454.12	426,962.81	484,596.42
Of which: Di vidends and profits paid to non-controlling
interests by subsidiaries	467.45	2,308.62	2,107.29
Payment for principal of lease liabilities	30,019.20	26,205.65	–
Payment for interest of lease liabilities	3,566.98	2,892.03	–
Sub-total of cash outflows from financing activities	9,109,526.00	6,005,405.28	3,600,554.04
Net cash flows from financing activities	(636,594.43)	1,006,910.91	(395,928.38)

– VIII-11 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Item	2020	2019	2018
IV. Effect of foreign exchange rate changes on cash and
cash equivalents	(37,888.53)	13,146.00	21,576.55
V. Net increase in cash and cash equivalents	2,491,324.49	1,586,050.18	(515,760.70)
Add: Balance of cash and cash equivalents at
the beginning of the period	6,194,017.23	4,607,967.05	5,123,727.74
VI. Balance of cash and cash equivalents at the end of the
period	8,685,341.72	6,194,017.23	4,607,967.05

(II) Financial Statements of the Parent Company

1. Balance Sheet of the Parent Company

Unit: RMB0’000

	December	December 31,	December 31,
Item	31, 2020	2019	2018
Assets:
Cash and bank balances	3,082,792.51	2,758,452.86	1,665,230.75
Of which: Deposits held on behalf of customers	2,234,328.23	1,532,872.64	1,132,448.51
Clearing settlement funds	666,510.16	596,464.03	510,880.67
Of which: Settlement funds held on behalf of customers	382,017.64	362,421.27	391,278.08
Advance to customers	2,094,541.43	1,292,495.50	991,528.21
Derivative financial assets	14,008.60	57,551.53	22,246.85
Deposits with exchanges and financial institutions	136,864.46	103,947.89	75,208.35
Receivables	23,645.00	51,502.31	20,956.48
Financial assets acquired under resale agreements	1,411,467.67	2,318,966.57	2,745,013.08
Financial investment:
Transactional financial assets	5,197,648.90	4,561,123.52	3,289,546.19
Debt investment	624,389.71	719,355.42	791,259.64
Other debt investment	6,264,597.49	6,489,556.34	6,220,943.55
Other equity instruments investment	1,086,837.73	1,079,686.38	910,801.76
Long-term equity investments	1,835,911.38	1,605,229.53	1,371,537.48
Investment properties	4,095.66	3,120.72	–
Fixed assets	195,535.49	200,346.82	205,579.36
Construction in progress	4,909.04	3,205.31	4,805.40
Right-of-use assets	52,074.33	60,069.21	–
Intangible assets	16,543.81	13,335.82	11,038.00
Goodwill	1,894.76	1,894.76	1,894.76
Deferred income tax assets	111,892.11	48,354.40	67,101.05
Other assets	35,346.49	24,844.54	36,692.21
Total assets	22,861,506.75	21,989,503.46	18,942,263.79

– VIII-12 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

	December	December 31,	December 31,
Item	31, 2020	2019	2018
Liabilities:
Short-term financial bills payable	1,625,509.94	1,498,899.07	1,142,829.44
Due to banks and other financial institutions	967,011.39	638,465.88	1,102,706.74
Transactional financial liabilities	1,227,762.00	1,119,036.88	506,688.72
Derivative financial liabilities	48,636.41	261,809.76	90,117.02
Financial assets sold under repurchase agreements	4,935,291.65	5,195,025.48	4,528,420.47
Account payable to brokerage clients	2,606,450.50	1,859,894.99	1,485,011.06
Accrued staff costs	83,059.59	51,676.37	24,645.30
Taxes payable	19,827.97	8,542.93	9,139.02
Payables	17,291.72	10,931.07	1,731.44
Bonds payable	5,634,613.01	6,212,247.25	5,196,995.47
Lease liabilities	51,661.83	59,119.34	–
Other liabilities	77,985.52	15,164.82	24,685.05
Total liabilities	17,295,101.55	16,930,813.86	14,112,969.72
Equity of owners (or equity of shareholders):
Paid-up capital (or share capital)	699,365.58	699,365.58	699,365.58
Other equity instruments	499,575.47	–	–
Capital reserve	2,815,700.84	2,815,700.84	2,815,700.84
Other comprehensive income	17,883.14	55,606.19	(4,091.19)
Surplus reserve	367,614.84	344,568.94	308,537.85
General risk reserve	697,520.50	666,792.15	604,338.25
Undistributed profits	468,744.84	476,655.90	405,442.74
Total equity of owners (or equity of shareholders)	5,566,405.20	5,058,689.60	4,829,294.07
Total liabilities and equity of owners
(or equity of shareholders)	22,861,506.75	21,989,503.46	18,942,263.79

– VIII-13 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

2. Income Statement of the Parent Company

Unit: RMB0’000

Item		2020	2019	2018
I.	Total operating income	896,925.58	666,555.66	218,379.87
	Net interest income	70,580.81	84,327.47	86,029.31
	Of which: Interest income	510,903.34	560,571.17	588,037.80
	Interest expense	440,322.53	476,243.70	502,008.49
	Net fee and commission income	265,662.86	159,212.64	140,555.20
	Of which: Net fee income from brokerage business	209,913.81	126,467.83	108,374.31
	Net fee income from investment banking
	business	59,169.91	33,497.83	34,423.04
	Investment gains	460,853.53	302,313.11	173,548.89
	Of which: Gains from investments in associates
	and joint ventures	90,585.74	44,376.29	36,046.64
	Other income	1,276.34	808.09	–
	Gains/(Losses) from changes in fair value	83,701.50	120,752.09	(183,259.38)
	Foreign exchange gains/(losses)	14,253.30	(2,137.64)	(902.06)
	Other business income	651.52	1,299.88	2,412.61
	Losses from asset disposal	(54.28)	(19.99)	(4.70)
II.	Total operating expenses	788,284.57	425,666.29	258,791.28
	Business tax and surcharges	6,943.96	5,302.07	5,317.69
	Business and administrative expenses	392,930.06	318,350.14	244,076.23
	Credit impairment loss	388,076.00	101,274.23	9,397.35
	Other business cost	334.54	739.85	–
III.	Operating profit	108,641.02	240,889.36	(40,411.40)
	Add: Non-operating income	3,704.78	3,397.28	5,700.35
	Less: Non-operating expenses	2,610.83	4,980.61	2,100.63
IV.	Total profit	109,734.96	239,306.04	(36,811.68)
	Less: Income tax expenses	(43,904.34)	(901.26)	(58,927.71)
V.	Net profit	153,639.30	240,207.30	22,116.03
	(I) Net profit from continuing operation	153,639.30	240,207.30	22,116.03

– VIII-14 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Item				2020	2019	2018
VI.	Other comprehensive income after tax, net			(40,594.33)	59,124.79	(14,571.62)
	(i)	Other	comprehensive income that cannot be
		reclassified to profit or loss in subsequent
		periods		(7,240.63)	15,196.72	(104,263.09)
		1.	Changes in fair value of other equity
			instruments investment	(7,240.63)	15,196.72	(104,263.09)
	(ii)	Other	comprehensive income that will be
		reclassified to profit and loss in subsequent
		periods		(33,353.70)	43,928.07	89,691.47
		1.	Other comprehensive income that can
			be transferred to profit or loss under the
			equity method	(835.70)	195.20	362.64
		2.	Changes in fair value of other debt
			investments	(43,606.16)	42,105.68	89,164.23
		3.	Credit impairment provisions of other debt
			investment	11,088.17	1,627.19	164.60
VII.	Total	comp	rehensive income	113,044.97	299,332.09	7,544.42

VII. Total comprehensive income

– VIII-15 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

3. Cash Flow Statement of the Parent Company

Unit: RMB0’000

Item		2020	2019	2018
I.	Cash flows from operating activities:
	Cash received for interests, fees and commissions	570,064.37	432,328.44	495,796.24
	Net decrease in financial assets held for transaction
	purposes	–	–	215,490.23
	Net increase in transactional financial liabilities	99,015.19	574,366.88	–
	Net increase in funds from repurchase business	279,780.43	1,031,840.13	14,294.89
	Net increase in amount due to banks and other
	financial institutions	328,545.51	–	–
	Net decrease in advances to customers	–	–	292,687.51
	Net cash received from securities trading agency
	services	746,555.51	374,883.93	–
	Cash received relating to other operating activities	105,744.97	22,799.33	11,812.14
	Sub-total of cash inflows from operating activities	2,129,705.97	2,436,218.72	1,030,081.02
	Net decrease in amount due to banks and other
	financial institutions	–	464,240.86	20,078.71
	Net increase in advances to customers	801,752.33	297,939.74	–
	Net increase in financial assets held for transaction
	purposes	67,575.27	885,042.83	–
	Net decrease in transactional financial liabilities	–	–	82,545.19
	Net cash paid for securities trading agency services	–	–	263,160.17
	Cash paid for interests, fees and commissions	222,877.83	223,465.38	239,515.84
	Cash paid to and paid for staff	227,718.96	178,288.85	191,031.75
	Taxes paid	3,019.47	6,326.66	8,519.41
	Cash paid relating to other operating activities	126,770.59	165,756.15	142,163.17
	**Sub-total of cash outflows from operating activities **	1,449,714.45	2,221,060.46	947,014.23
	Net cash flows from operating activities	679,991.53	215,158.25	83,066.79

– VIII-16 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Item		2020	2019	2018
II.	Cash flows from investing activities:
	Cash received from investment gains	439,024.79	461,999.86	399,967.43
	Net cash received from disposal of fixed assets,
	intangible assets and other long-term assets	422.98	94.11	–
	Net decrease in other transactional financial assets	–	–	287,821.78
	Net decrease in other debt investment	193,672.58	–	–
	Net decrease in debt investment	89,230.28	68,674.89	–
	Cash received relating to other investing activities	–	–	109.53
	Sub-total of cash inflows from investing activities	722,350.64	530,768.87	687,898.75
	Cash paid for investments	185,292.34	208,804.00	180,000.00
	Cash paid for purchase and construction of fixed
	assets, intangible assets and other long-term assets	32,245.28	22,038.42	35,953.16
	Cash paid for prepayments of right-of-use assets	112.11	264.15	–
	Net increase in other transactional financial assets	239,089.34	160,452.90	–
	Net increase in other debt investment	–	196,353.23	1,041,346.79
	Net increase in other equity investment	13,934.25	148,030.75	338,689.11
	Net increase in debt investment	–	–	210,297.57
	Sub-total of cash outflows from investing activities	470,673.32	735,943.45	1,806,286.63
	Net cash flows from investing activities	251,677.31	(205,174.58)	(1,118,387.88)
III.	Cash flows from financing activities:
	Cash received from investments	499,575.47	–	–
	Cash received from borrowings	60,170.69	273,847.13	141,905.47
	Cash received from issue of bonds and
	short-term financing bills	7,676,444.32	6,235,516.60	2,720,696.85
	Sub-total of cash inflows from financing activities	8,236,190.48	6,509,363.73	2,862,602.32
	Cash repayment of debts	8,342,503.38	4,955,671.11	2,678,324.34
	Cash paid for distribution of dividends, profits or
	interest payment	412,062.70	380,792.37	449,331.34
	Payment for principal of lease liabilities	19,324.48	18,401.15	–
	Payment for interest of lease liabilities	2,151.50	1,947.88	–
	Sub-total of cash outflows from financing activities	8,776,042.05	5,356,812.51	3,127,655.68
	Net cash flows from financing activities	(539,851.57)	1,152,551.22	(265,053.36)
IV.	E ffect of foreign exchange rate changes on cash and
	cash equivalents	43.23	(2,137.64)	(902.06)
V.	Net increase in cash and cash equivalents	391,860.50	1,160,397.26	(1,301,276.52)
	Add: Balance of cash and cash equivalents at
	the beginning of the period	3,335,167.31	2,174,770.05	3,476,046.57
VI.	B alance of cash and cash equivalents at the end of
	the period	3,727,027.80	3,335,167.31	2,174,770.05

– VIII-17 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

(III) Management Discussion and Analysis

1. Key financial indicators of the Company for last three years

Item	2020	2019	2018
Basic earnings per share (RMB/share)	0.38	0.35	0.18
Basic earnings per share after non-recurring
profits and losses (RMB/share)	0.37	0.34	0.17
Diluted earnings per share (RMB/share)	N/A	N/A	N/A
Diluted earnings per share after non-recurring
profits and losses (RMB/share)	N/A	N/A	N/A
Weighted average return on net assets (%)	4.85	4.61	2.37
Weighted average return on net assets after
non-recurring profits and losses (%)	4.74	4.49	2.28

2. Brief analysis of the financial position of the Company

• (1) Analysis on composition of assets

The composition of assets of the Company for last three years is as follows:

Unit: RMB0’000

	December 31,	December 31,	December 31,
Item	2020	2019	2018
Cash and bank balances	6,564,035.96	4,894,083.39	3,676,463.87
Of which: Deposits held on behalf of customers	4,838,442.32	2,974,988.54	2,426,167.87
Clearing settlement funds	2,151,635.66	1,324,365.37	935,427.19
Of which: Se ttlement funds held on behalf of
customers	1,859,139.49	1,083,248.91	808,828.50
Advance to customers	2,117,191.94	1,321,426.22	1,027,675.46
Derivative financial assets	15,587.65	60,910.21	31,848.98
Deposits with exchanges and financial
institutions	218,308.97	164,289.43	102,536.53
Receivables	87,440.56	101,991.97	66,840.82
Contract assets	174.19	–	–
Financial assets acquired under resale
agreements	1,446,042.54	2,420,654.20	2,816,858.39

– VIII-18 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

	December 31,	December 31,	December 31,
Item	2020	2019	2018
Financial investment:
Transactional financial assets	7,270,111.70	6,690,109.35	5,203,534.70
Debt investment	624,389.71	719,355.42	791,259.64
Other debt investment	6,264,597.49	6,489,556.34	6,220,943.55
Other equity instruments investment	1,093,645.76	1,083,287.32	931,626.22
Long-term equity investments	577,119.39	445,375.42	401,526.33
Investment properties	4,046.07	3,007.13	–
Fixed assets	201,960.20	204,027.34	208,759.40
Construction in progress	6,583.85	5,003.43	6,106.38
Right-of-use assets	84,735.49	100,274.91	–
Intangible assets	21,531.31	16,851.91	13,234.03
Goodwill	3,213.54	3,213.54	3,213.54
Deferred income tax assets	145,592.21	76,099.38	89,583.20
Other assets	213,799.97	173,261.88	159,528.99
Total assets	29,111,744.16	26,297,144.16	22,686,967.22

As at the end of each reporting period, total assets of the Company reached RMB291,117.4416 million, RMB262,971.4416 million and RMB226,869.6722 million, respectively. As of December 31, 2020, balance of cash and bank balances of the Company reached RMB65,640.3596 million, representing 22.55% of total assets; balance of advance to customers reached RMB21,171.9194 million, representing 7.27% of total assets; balance of transactional financial assets reached RMB72,701.117 million, representing 24.97% of total assets; and balance of financial assets acquired under resale agreements reached RMB14,460.4254 million, representing 4.97% of total assets. The Company maintains a reasonable asset structure with sound liquidity.

– VIII-19 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

(2) Analysis of composition of liabilities

The composition of liabilities of the Company for last three years is as follows:

Unit: RMB0’000

	December 31,	December 31,	December 31,
Item	2020	2019	2018
Short-term borrowings	57,973.22	64,015.35	165,316.17
Short-term financial bills payable	1,625,548.58	1,611,319.96	1,241,160.61
Due to banks and other financial
institutions	967,011.39	638,465.88	1,102,706.74
Transactional financial liabilities	1,457,607.31	1,263,096.06	683,438.11
Derivative financial liabilities	50,495.67	264,337.48	90,580.86
Financial assets sold under repurchase
agreements	5,286,088.34	5,747,806.29	4,941,567.67
Account payable to brokerage clients	6,664,267.12	4,017,917.84	3,205,906.47
Funds payable to securities issuers	34,600.00	8,000.00	–
Accrued staff costs	260,800.86	160,108.59	124,928.87
Taxes payable	78,281.46	27,822.40	51,221.59
Payables	57,658.46	48,010.10	41,162.39
Contract liabilities	40,412.36	20,811.36	13,489.69
Bonds payable	6,226,547.35	6,730,919.88	5,704,896.83
Lease liabilities	85,691.03	99,500.52	–
Deferred income tax liabilities	2,017.94	1,903.12	–
Other liabilities	193,628.67	191,945.66	93,345.99
Total liabilities	23,088,629.76	20,895,980.48	17,459,721.99

As at the end of each reporting period, total liabilities of the Company reached RMB230,886.2976 million, RMB208,959.8048 million and RMB174,597.2199 million, respectively. As of December 31, 2020, balance of short-term financial bills payable of the Company reached RMB16,255.4858 million, representing 7.04% of total liabilities; balance of financial assets sold under repurchase agreements reached RMB52,860.8834 million, representing 22.89% of total liabilities; balance of account payable to brokerage clients reached RMB66,642.6712 million, representing 28.86% of total liabilities; and balance of bonds payable reached RMB62,265.4735 million, representing 26.97% of total liabilities. The Company has a reasonable liability structure with a controllable size and does not have repayment risk.

– VIII-20 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

(3) Analysis of profitability

Unit: RMB0’000

Item	2020	2019	2018
Operating income	2,313,394.68	1,905,209.73	1,030,349.09
Operating expense	2,043,715.42	1,630,066.35	904,598.37
Total profit	278,636.38	285,453.07	133,130.55
Net profit	272,176.38	247,873.89	128,052.72
Net profit attributable to owners
of the parent company	272,298.85	243,507.98	123,101.32

During each reporting period, net profit attributable to the owners of the parent company was RMB2,722.9885 million, RMB2,435.0798 million and RMB1,231.0132 million, respectively. During the reporting period, the Company primarily derived operating income and profit from securities distribution and trading business, investment management business, brokerage and securities financing business and investment banking business. During the reporting period, the Company recorded an increase in operating income primarily attributable to the macro-market environment and investors’ sentiment.

IV. USE OF PROCEEDS RAISED FROM THE RIGHTS ISSUE

The total amount of the proceeds to be raised from the Rights Issue is expected to be not more than RMB16.8 billion, subject to the actual market condition prevailing at the rights issue, which, after netting off issuance expenses, are proposed to be fully used for increasing the capital pool of the Company, replenishing working capital and optimizing gearing ratio to serve the real economy and comprehensively enhance the Company’s market competitiveness and risk resistance capacity. Proceeds raised from the Rights Issue will be primarily used for the following purposes:

	Projects to be financed with proceeds
No.	from rights issue	Amount
1	Investment banking business	Not more than RMB6 billion
2	Wealth management and securities finance	Not more than RMB6 billion
	business
3	Distribution and trading business	Not more than RMB3.8 billion
4	Replenishing working capital	Not more than RMB1 billion
	Total	Not more than RMB16.8 billion

– VIII-21 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Proceeds from the Rights Issue will primarily be used for the four-year strategic planning and overall operating strategies of the Company and in the following aspects:

(I) To Increase Investment in Investment Banking Business and Promote Development of the Investment Banking Business

The Company proposes to use not more than RMB6 billion out of the proceeds to increase investment in the investment banking business, including but not limited to underwriting and sponsoring business, financial consultancy business, project co-investment, equity investment funds and other corporate financing life-cycle services, so as to promote development of investment banking in the whole industrial chain.

With the gradual improvement of the multi-level capital markets, diversification of financing instruments and further opening of the capital markets, the direct financing market, comprising equity financing and debt financing, has been expanded. Meanwhile, relevant requirements of the Sci-Tech innovation board explicitly stipulated on co-investment by sponsors and the market-oriented issuance and underwriting mechanism also raised stricter requirements on capital scale of companies that engage in the investment banking business.

Therefore, the Company will proactively promote the comprehensive development of light and heavy capital business through investment banking, and establish an integrated and all-round modern investment banking model covering the whole industry chain leveraging the reform of the registration system. In particular, the Company will focus on the requirements of the real economy, nurture industrial mind-set, enhance sponsoring, pricing and underwriting capacity, promote interaction between investment banking and direct investment, cross-border investment banking interaction, establish a comprehensive, efficient and synergetic business and support system, strengthen appeal to investors and target enterprises and satisfy the all-round and life-cycle investment and financing requirements of customers.

(II) To Develop Wealth Management and Securities Finance Businesses and Promote the Transformation of Wealth Management Business

The Company proposes to use not more than RMB6 billion out of the proceeds to increase investment in the wealth management and securities finance business, including but not limited to wealth management, securities lending and margin financing and financial technology, so as to further promote the transformation of its wealth management business.

The involvement of banks, foreign funded institutions, internet platforms and other institutions in the wealth management business has reshaped the industry competition landscape and customers have raised ever-stricter requirements on the expertise of wealth management business.

– VIII-22 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

Therefore, the Company will be dedicated to establish elite business teams, provide efficient asset allocation, trading services and capital intermediary services leveraging the Group’s advantages at the asset end, promote the asset allocation-driven transformation of wealth management strategies and increase investment in securities lending and margin financing business. The Company will enhance service capacity towards institutional clients, cooperate with various institutional investors such as funds to broaden asset scale and establish an incubation system for institutional clients. It will strengthen cooperation with international asset management institutions, extensively reach out to global customers, proactively explore growth opportunities, speed up digital transformation, integrate financial technology and forge an integrated customer service system covering both online and offline channels.

(III) To Strengthen Sales and Trading Business and Forge itself into a Financial Service Provider Along the Whole Value Chain

The Company proposes to use not more than RMB3.8 billion out of the proceeds to increase investment in the sales and trading business, so as to further promote the development of proprietary investment business.

In recent years, the investment and trading business of brokers has attracted market attention, which is shifting towards de-orientation and diversified transaction with overall investment strategies trending mature and stable. Therefore, the Company will take the initiative to grasp the innovation and development opportunities in the capital market, and boost investment research, asset allocation and trading and risk pricing capacity. In particular, the Company will give due consideration to risk exposure and results elasticity of equity investments to forge sustainable investment and trading systems, establish a leading FICC business segment with international perspectives, propel construction of quantitative, market-making and distribution systems, explore stable profit sources such as gold, bulk commodities, foreign exchange and derivatives and expand the proprietary trading into agency business with a focus on customers. It will tap into innovative trading models of financial derivative business and increase investment in long/short equity portfolio, macro-hedging, statistical arbitrage and option strategies to broaden and enrich revenue streams.

(IV) Other Working Capital Arrangement

The Company proposes to use not more than RMB1 billion out of the proceeds for other working capital arrangement. The Company will monitor closely the changes in regulatory policies and market trends, rationally allocate proceeds raised from the Issue based on its strategic planning and actual development and replenish working capital required in daily operation in time to ensure smooth progress of various businesses.

– VIII-23 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

V. NECESSITY AND FEASIBILITY OF THE RIGHTS ISSUE

(I) Necessity of the Issue

1. The Issue represents a necessary choice for the Company to grasp industry opportunities

China’s economic pattern is upgrading from rapid growth to quality development, which redefines the positioning and missions of the capital market during the new era. The Central Economic Working Conference proposed that given the close interconnection between capital market and financial operation, we should forge a standardized, transparent, open, energetic and resilient capital market leveraging in-depth reform. The “14th five-year plan” has made it clear to “increase the proportion of direct financing” and the implementation of the new Securities Law in 2020 turned a new leaf in in-depth reform of the capital market. Meanwhile, thanks to the two-way business opening in the financial market, the regulatory authorities issue new business licenses in foreign exchange business, cross-border investment, wealth management and other fields to promote industry innovation and development. Dynamic financial activities will revitalize economic development and a brand new era has unfolded for the growth of securities market. Therefore, the Company shall take the initiative to grasp development opportunities presented by the times and enhance capital strength and comprehensive financial service capacity to further expand the depth and breadth of services to the real economy.

2. The Issue constitutes a solid effort for the Company to cope with industry competition and enhance comprehensive competitiveness

Amid the progress of China’s capital market reform, competition in the securities industry has been intensifying. On one hand, with the accelerating competition and increasing market concentration in the securities market, it is apparent that large-scale security firms with strong capital strength and leading operating scale are more advantageous. On the other, due to the further opening of the securities market, measures to allow access to foreign-held joint ventures and expansion of the business scope of joint ventures will accelerate penetration of overseas large-scale investment banks and asset management institutions, thereby further intensifying competition in domestic securities industry.

Under the backdrop of scalable and intensive development of the securities industry with increasingly fierce competition, capital strength has risen to be the key factor driving future development of brokers and the obtaining of relevant business qualifications and scale of operations are directly linked to the net capital of brokers. Currently, the key performance indicators of the Company still fall far behind those of leading brokers, which poses certain obstacles to customer base broadening and business development. As a result, it is imminent for the Company to speed up capital replenishment, enhance capital strength, proactively explore business innovation and new paths to serve the real economy based on consolidation of existing advantages, expand business scale and improve operating performance to create greater returns for the shareholders.

– VIII-24 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

3. The Issue is beneficial for the Company in terms of scale expansion and profit structure optimization

The Company currently offers comprehensive and one-stop financial services comprising securities, futures, asset management, investment banking, investment consultancy and securities research and its proprietary investment, asset management and securities research businesses are at the forefront of the industry. Under the pressure of declining profitability of traditional businesses, brokers are shifting from the commission-focused business model in the past to comprehensive business models with due regards to service agency and capital agency business as well as investment trading business, and revenue and profit generated from fund utilization business and comprehensive operations are on the rise. To promote long-term sustainable development, upholding the strategy of “shoring up weak spots and sharpening advantages”, the Company increases investment in investment banking, wealth management and distribution and trading business, so as to proactively forge a more balanced business portfolio.

Upon capital replenishment with proceeds from the Rights Issue, the Company proposes to further expand the scale of distribution and trading as well as capital agency business and take the initiative to explore foreign exchange, derivatives and other innovation business, in a bid to improve hedging methods and trading strategies. Meanwhile, the Company will continue to extend the depth and breadth of its wealth management, asset management and investment banking business and accelerate transformation with a focus on fields such as customer base, products and investment consultancy to establish an extensive investment banking ecosystem covering the whole industry chain. Forward-looking planning and scientific and effective allocation of funds will facilitate the Company to optimize business structure and profit model and enhance asset yields.

– VIII-25 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

4. The Issue will facilitate the Company to mitigate liquidity risk and enhance its risk resistance capacity

It is explicitly required in regulatory policies issued by the CSRC such as Administrative Measures on Risk Control Indicators of Securities Companies (《證券公司 風險控制指標管理辦法》) and Regulations on Classification of Securities Companies (《證 券公司分類監管規定》) that securities companies shall establish a risk control indicator system focused on net capital and liquidity and brokers shall be selectively instructed to enhance capital restriction and improve comprehensive risk management efficiency. Risk control is closely related to the survival and sustainable development of securities companies and reasonable liquidity serves as a crucial pillar for the healthy operation of securities companies. While accelerating innovative business, the Company is required to strengthen liquidity risk management capacity, establish and optimize liquidity risk management systems and effectively identify, measure, supervise and monitor liquidity risks to ensure the liquidity demands are satisfied in a timely manner and at reasonable costs.

With the expansion in business scale, only by maintaining sufficient capital that matches business scale can securities firms better prevent and mitigate liquidity risk, market risk, credit risk, operation risk and other potential risks. The Rights Issue will further boost the capital strength of the Company and optimize its relevant regulatory indicators. Meanwhile, replenishing working capital with the proceeds will facilitate the Company to enhance its risk resistance capacity and achieve sound and healthy development.

5. The Issue will help the Company to realize strategic goals

During the strategic planning period from 2021 to 2024, the Company aims to stay committed to professional and quality development towards a first-class modern investment bank, strive to enhance core competitiveness, rank into the top tier in the industry in terms of scale and strength, and contribute to the capital markets reform and development of Shanghai into an international financial center. To such end, the Company will proactively tap into the steering role of traditional investment banking business in its overall business development, promote effective transformation of wealth management business, bring into play the advantages and leading role of asset management business, improve the diversified investment system, maintain steady investment returns, strengthen development and application of financial technology, and propel data-driven transformation of business and management, thus forging a first-class modern investment bank. The Rights Issue will provide strong capital support for the Company to realize its strategic goals and help the Company to achieve quality development.

– VIII-26 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

(II) Feasibility of the Issue

1. The Issue complies with the requirements of relevant laws, regulations and regulatory documents

The Company has a sound corporate governance structure and internal control systems, has set up well-established risk control systems with strong risk control capacity, boasts quality assets and healthy financial position and enjoys sustainable profitability, and is thus in compliance with the requirements of the Company Law, the Securities Law, the Management Methods on Securities Issuance of Listed Companies (《上市公司證券 發行管理辦法》), Q&A on Issuance Supervision – Regulatory Requirements on Guiding and Regulating Financing of Listed Companies (Revised) (《發行監管問答－關於引導 規範上市公司融資行為的監管要求 ( 修訂版 )》), the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and other laws, regulations and regulatory documents on rights issue by listed companies; as such the Company is qualified for rights issue.

2. The Issue is in line with national and industrial policy guidance

In May 2014, the State Council issued Several Opinions on Further Promoting the Healthy Development of Capital Market (《關於進一步促進資本市場健康發展的若 干意見》), which made it clear to promote the innovative development of intermediary institutions, facilitate securities institutions to achieve differentiated, professional and specialized development and contribute to the establishment of certain modern investment banks with international competitiveness, brand influence and systemic importance.

In May 2014, the CSRC promulgated the Opinions on Further Promoting the Innovative Development of Securities Institutions (《關於進一步推進證券經營機構創 新發展的意見》), which expressly stated the major tasks and specific measures to promote the innovative development of securities institutions from the three aspects of establishing modern investment banks, supporting business and product innovation and propelling regulatory transformation, including broadening financing channels and supporting securities institutions to conduct equity financing and debt financing.

In September 2014, the CSRC issued the Notice on Encouraging Further Capital Replenishment of Securities Companies (《關於鼓勵證券公司進一步補充資本的通 知》) and the Securities Association of China issued the Guidelines on Capital Replenishment of Securities Companies (《證券公司資本補充指引》), requiring securities companies to establish scientific capital management mechanism, pay due attention to capital management and replenishment, and in principle, “a securities company should complete capital replenishment at least once through IPO or capital increase or otherwise in the next three years, to ensure its capital strength to accommodate its business scale and the matching of its total risk profile with risk tolerance”.

– VIII-27 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

In June 2016, the CSRC amended the Administrative Measures on Risk Control Indicators of Securities Companies (《證券公司風險控制指標管理辦法》) and supporting rules to enhance on-going effectiveness of risk control indicators and facilitate the steady and healthy development of securities companies through, among other things, improving the calculation formula of net capital and risk capital reserve.

In November 2019, the CSRC announced the Letter of Reply to Proposal No.3353 (Finance, Taxation No.280) of the Second Session of the 13th National Committee of Chinese People’s Political Consultative Conference (《關於政協十三屆全國委員會 第二次會議第 3353 號 ( 財稅金融類 280 號 ) 提案答覆的函》), indicating that it will continue to encourage and guide securities companies to replenish capital, enrich service offerings, optimize incentive and restraint mechanism, increase investment in technology and innovation, improve international outlook, strengthen compliance risk control and support injection of state-owned capital to securities companies through subscription for preferred shares, ordinary shares, convertible bonds and subordinate bonds, so as to promote the development of securities companies.

In May 2020, the CSRC issued the Decision on Amending the Provisions on the Administration of Subordinated Bonds of Securities Companies (《關於修改〈證券公司次 級債管理規定〉的決定》) to further implement relevant requirements of the new Securities Law, and support securities companies to replenish capital, enhance risk tolerance and better serve the real economy.

As the regulatory approach with a focus on regulation of net capital progresses, policies are in place to support securities companies to improve profitability, strengthen risk control, broaden financing channel and increase proportion of direct financing and encourage securities companies to further replenish capital. With the rapid expansion of business scale and continuous development of new business, the current net capital scale cannot satisfy the Company’s development requirements. The Rights Issue marks an effort of the Company to cater for the CSRC on capital replenishment by securities companies, and resonates with national and industrial policy guidance.

– VIII-28 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

VI. DILUTION OF IMMEDIATE RETURNS BY THE RIGHTS ISSUE AND REMEDIAL MEASURES

Upon completion of the Rights Issue, the share capital and asset scale of the Company will be significantly increased. However, it may take a certain period of time to produce benefits after the investment of proceeds and the Company will still derive revenue and shareholders’ returns from its existing business, so indicators such as earnings per share and weighted average return on net assets will experience a certain decrease in the short term, i.e., the immediate returns will potentially be diluted after the Rights Issue.

At the second meeting of the fifth session of the Board held on March 30, 2021, the “Resolution in relation to Risk Warning Regarding Dilution of Immediate Returns by Rights issue to Existing Shareholders and Remedial Measures and Undertakings Given by Relevant Parties” was considered and approved. For details, please refer to the “Announcement on Risk Warning Regarding Dilution of Immediate Returns by Rights issue to Existing Shareholders and Remedial Measures and Undertakings Given by Relevant Parties of 東方證券股份有限公司 ”.

The specific remedial measures for the dilution of immediate returns do not constitute a guarantee of future profit by the Company. Investors shall not make decisions related to investment on the above basis, and any losses thus incurred shall not be borne by the Company.

VII. PROFIT DISTRIBUTION OF THE COMPANY

(I) Policies Stipulated in the Articles of Association

As of the date of proposal of this plan, the provisions of profit distribution policy in the Articles of Association of 東方證券股份有限公司 (the “ Articles of Association ”) are as follows:

• “1. Forms of profit distribution: the Company may distribute its profits in cash, shares or a combination of both or in any other forms as permitted by the laws. The Company shall determine a cash dividend policy that enables the shareholders to share the growth and development results of the Company and receive reasonable investment returns, by considering factors such as its development stage, capital requirements.

• Specific conditions and proportions of dividends in cash: the Company adopts cash dividend as its priority dividend distribution policy, i.e. the Company shall distribute its dividends in cash when the Company gains profit in that year and the accumulated undistributed profits are positive and if there are distributable after-tax profits available after making up losses, and making appropriation of various accumulation funds and reserve funds in accordance with the laws. The profit distributed by the Company shall not exceed its accumulated distributable profit. Profit distributed in cash in a single year shall be no less than 30% of the distributable profit of that year.

• Intervals of profit distributions: the Company generally distributes its profit on a yearly basis. Subject to the compliance of the profit distribution principle and cash dividends conditions, the Company may also distribute interim cash dividends.

– VIII-29 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

1. Specific conditions of distributing dividends: if the Company grows rapidly and the Board of Directors considers that there is a mismatch between Company’s share price and the size of its share capital, the Company may, after making the above cash dividends distribution and taking into consideration the growth of the Company and the diluted net assets per share, propose and implement a proposal on distribution of dividends in cash.

2. The Board of Directors shall take into account, among other things, features of the industries where the Company operates, its development stage, business model, and profit level and whether it has any significant capital expenditure plans, and formulate differentiated cash dividend proposals in accordance with the provisions set out below and procedures provided in the Articles of Association:

3. (1) If the Company is at the mature stage of development and has no significant capital expenditure plan, the proportion of cash dividends shall be at least 80% in the profit distribution;

4. (2) If the Company is at the mature stage of development and has a significant capital expenditure plan, the proportion of cash dividends shall be at least 40% in the profit distribution;

5. (3) If the Company is at the growing stage and has a significant capital expenditure plan, the proportion of cash dividends shall be at least 20% in the profit distribution.

If it is difficult to determine the Company’s stage of development while it has a significant capital expenditure plan, the profit distribution may be dealt with pursuant to the rules applied in the previous distribution.”

– VIII-30 –

PLAN OF PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

ANNEX VIII

(II) Dividend Distribution Plan for Shareholders

In order to further strengthen the awareness of rewarding shareholders, maintain a continuous and stable shareholders return policy, according to the requirements of the Company Law, the Securities Law, the Notice of the CSRC on Further Implementing Matters Relevant to the Cash Dividend Distribution by Listed Companies (《中國證券監督管理委員會關於進 一步落實上市公司現金分紅有關事項的通知》), the Guideline No. 3 on the Supervision and Administration of Listed Companies – Distribution of Cash Dividends of Listed Companies 《上市公司監管指引第( 3 號－上市公司現金分紅》), the Guidelines on Distribution of Cash Dividends by Listed Companies issued by the Shanghai Stock Exchange (《上海證券交易所上市 公司現金分紅指引》) as well as the Articles of Association, after comprehensive consideration of the Company’s strategic development goals, operating plan, profitability, shareholder demands, social capital cost, the external funding environment and other factors, the Board formulated the Dividend Distribution Plan for Shareholders for the Next Three Years (2020-2022) of 東方證券股 份有限公司 , of which the details are as follows:

“1. Formulation principle of the distribution plan

The distribution plan shall be formulated in accordance with the requirements of relevant laws, regulations and the Articles of Association, which shall attach importance to reasonable investment return to investors with a view to the actual operation of the Company in a given year and sustainable development. The distribution plan shall take into full consideration the opinions of the shareholders (especially minority investors), independent directors and supervisors.

2. Specific distribution plan of the Company for the next three years (2020-2022)

• (1) The Company may distribute its profits in cash, shares or a combination of both or in any other forms as permitted by the laws. The Company shall determine a cash dividend policy that enables the shareholders to share the growth and development results of the Company and receive reasonable investment returns, by considering factors such as its development stage, capital requirements.

• (2) The Company adopts cash dividend as its priority dividend distribution policy, i.e. the Company shall distribute its dividends in cash when the Company gains profit in that year and the accumulated undistributed profits are positive and if there are distributable after-tax profits available after making up losses, and making appropriation of various accumulation funds and reserve funds in accordance with the laws. The profit distributed by the Company shall not exceed its accumulated distributable profit. Profit distributed in cash in a single year shall be no less than 30% of the distributable profit of that year.

– VIII-31 –

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ANNEX VIII

• (3) The Company generally distributes its profit on a yearly basis. Subject to the compliance of the profit distribution principle and cash dividends conditions, the Board of Directors may propose to distribute interim cash dividends based on the operating condition of the Company.

• (4) If the Company grows rapidly and the Board of Directors considers that there is a mismatch between Company’s share price and the size of its share capital, the Company may, after making the above cash dividends distribution and taking into consideration the growth of the Company and the diluted net assets per share, propose and implement a proposal on distribution of dividends in cash.

• (5) The Board of Directors shall take into account, among other things, features of the industries where the Company operates, its development stage, business model, and profit level and whether it has any significant capital expenditure plans, and formulate differentiated cash dividend proposals in accordance with the provisions set out below and procedures provided in the Articles of Association:

• ① If the Company is at the mature stage of development and has no significant capital expenditure plan, the proportion of cash dividends shall be at least 80% in the profit distribution;

• ② If the Company is at the mature stage of development and has a significant capital expenditure plan, the proportion of cash dividends shall be at least 40% in the profit distribution;

• ③ If the Company is at the growing stage and has a significant capital expenditure plan, the proportion of cash dividends shall be at least 20% in the profit distribution.

If it is difficult to determine the Company’s stage of development while it has a significant capital expenditure plan, the profit distribution may be dealt with pursuant to the rules applied in the previous distribution.”

The above proposal is hereby put forth to Shareholders for consideration.

– VIII-32 –

FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

ANNEX IX

Dear Shareholders,

China’s economy has embarked on quality development and the pivotal role of the capital markets in serving national strategies, and the growth of real economy has been increasingly heightened. Due to intensified competition and concentration, the securities industry is subject to accelerated reshuffling. In order to proactively seize industry opportunities and enhance comprehensive competitiveness, 東方證券 股份有限公司 (the “ Company ”) proposes to broaden its scale of capital, boost capital strength, improve service and risk resistance capacity and promote the smooth implementation of its strategic planning for 2021 to 2024 and on-going nurturing of diversified competitive advantages through rights issue, aiming to create greater value for the shareholders of the Company.

I. BASIC INFORMATION OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

The total amount of the proceeds to be raised from the rights issue is expected to be not more than RMB16.8 billion, subject to the actual market condition prevailing at the rights issue, which, after netting off issuance expenses, are proposed to be fully used for increasing the capital pool of the Company, replenishing working capital and optimizing gearing ratio to serve the real economy and comprehensively enhance the Company’s market competitiveness and risk resistance capacity. Proceeds raised from the rights issue will be primarily used for the following purposes:

Projects to be financed with proceeds

	Projects to be financed with proceeds
No.	from rights issue	Amount
1	Investment banking business	Not more than RMB6 billion
2	Wealth management and securities finance	Not more than RMB6 billion
	business
3	Distribution and trading business	Not more than RMB3.8 billion
4	Replenishing working capital	Not more than RMB1 billion
	Total	Not more than RMB16.8 billion

The Board of the Company may, having taken into account the actual project requirements, adjust the priority and amount of the proceeds to be applied towards the above projects without altering the purpose of proceeds. Upon approval at the Board meeting to consider rights issue plan and before the proceeds are in place, the Company may, based on its operating condition and development schedule, use its own funds to invest in the projects to be financed with proceeds and replace the self-financed funds with proceeds after they are in place according to requirements of relevant regulations.

– IX-1 –

FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

ANNEX IX

II. ANALYSIS ON NECESSITY OF THE PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

(I) The Issue Represents a Necessary Choice for the Company to Grasp Industry Opportunities

China’s economic pattern is progressing from rapid growth to quality development, which redefines the positioning and objectives of the capital markets during this new stage of development. The Central Economic Working Conference proposed that given the close interconnection between capital markets and financial operations, we should forge standardized, transparent, open, energetic and resilient capital markets leveraging in-depth reform. The “14th five-year plan” has made it clear to “increase the proportion of direct financing” and the implementation of the new Securities Law of the People’s Republic of China in 2020 turned a new leaf in in-depth reform of the capital market. Meanwhile, as a result of the two-way business opening in the financial market, the regulatory authorities issue new business licenses in foreign exchange business, cross-border investment, wealth management and other fields to promote industry innovation and development. Dynamic financial activities will revitalize economic development and a brand new era has unfolded for the growth of securities market. Therefore, the Company shall take the initiative to grasp development opportunities presented by the times and enhance capital strength and comprehensive financial service capacity to further expand the depth and breadth of services to the real economy.

(II) The Issue Constitutes a Solid Effort for the Company to Cope with Industry Competition and Enhance Comprehensive Competitiveness

Amid the progress of China’s capital markets reform, competition in the securities industry has been intensifying. On one hand, with the accelerating competition and increasing market concentration in the securities market, it is apparent that large-scale security firms with strong capital strength and leading operating scale are more advantageous. On the other hand, due to the further opening of the securities market, measures to allow access to foreign-held joint ventures and expansion of the business scope of joint ventures will accelerate penetration of overseas large-scale investment banks and asset management institutions, thereby further intensifying competition in domestic securities industry.

Under the backdrop of scalable and intensive development of the securities industry with increasingly fierce competition, capital strength has risen to be the key factor driving future development of brokers and the obtaining of relevant business qualifications and scale of operations are directly linked to the net capital of brokers. Currently, the key performance indicators of the Company still fall far behind those of leading brokers, which poses certain obstacles to customer base broadening and business development. As a result, it is imminent for the Company to speed up capital replenishment, enhance capital strength, proactively explore business innovation and new paths to serve the real economy based on consolidation of existing advantages, expand business scale and improve operating performance to create greater returns for the shareholders.

– IX-2 –

FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

ANNEX IX

(III) The Issue is Beneficial to the Company in Terms of Scale Expansion and Profit Structure Optimization

The Company currently offers comprehensive and one-stop financial services comprising securities, futures, asset management, investment banking, investment consultancy and securities research and its proprietary investment, asset management and securities research businesses are at the forefront of the industry. Under the pressure of declining profitability of traditional businesses, brokers are shifting from the commission-focused business model in the past to comprehensive business models with due regards to service agency and capital agency business as well as investment trading business, and revenue and profit generated from fund utilization business and comprehensive operations are on the rise. To promote long-term sustainable development, uphold the strategy of “shoring up weak spots and sharpening advantages”, the Company increases investment in investment banking, wealth management and distribution and trading business, so as to proactively forge a more balanced business portfolio.

Upon capital replenishment with proceeds from rights issue, the Company proposes to further expand the scale of distribution and trading as well as capital agency business and take the initiative to explore foreign exchange, derivatives and other innovation business, in a bid to improve hedging methods and trading strategies. Meanwhile, the Company will continue to extend the depth and breadth of its wealth management, asset management and investment banking business and accelerate transformation with a focus on fields such as customer base, products and investment consultancy to establish an extensive investment banking ecosystem covering the whole industry chain. Forward-looking planning and scientific and effective allocation of funds will facilitate the Company to optimize business structure and profit model and enhance asset yields.

(IV) The Issue will Facilitate the Company to Mitigate Liquidity Risk and Enhance its Risk Resistance Capacity

It is explicitly required in regulatory policies issued by the CSRC such as Administrative Measures on Risk Control Indicators of Securities Companies (《證券公司風險控制指標管 理辦法》) and Regulations on Classification of Securities Companies (《證券公司分類監管 規定》) that securities companies shall establish a risk control indicator system focused on net capital and liquidity and brokers shall be selectively instructed to enhance capital restriction and improve comprehensive risk management efficiency. Risk control is closely related to the survival and sustainable development of securities companies and reasonable liquidity serves as a crucial pillar for the healthy operation of securities companies. While accelerating innovative business, the Company is required to strengthen liquidity risk management capacity, establish and optimize liquidity risk management systems and effectively identify, measure, supervise and monitor liquidity risks to ensure the liquidity demands are satisfied in a timely manner and at reasonable costs.

With the expansion in business scale, only by maintaining sufficient capital that matches business scale can securities firms better prevent and mitigate liquidity risk, market risk, credit risk, operation risk and other potential risks. Rights issue will further boost the capital strength of the Company and optimize its relevant regulatory indicators. Meanwhile, replenishing working capital with the proceeds will facilitate the Company to enhance its risk resistance capacity and achieve sound and healthy development.

– IX-3 –

FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

ANNEX IX

(V) The Issue will Help the Company to Realize Strategic Goals

During the strategic planning period from 2021 to 2024, the Company aims to stay committed to professional and quality development towards a first-class modern investment bank, strive to enhance core competitiveness, ranking top tier in the industry in terms of scale and strength, and contribute to the capital markets reform and development of Shanghai into an international financial center. To such end, the Company will proactively tap into the steering role of traditional investment banking business in its overall business development, promote effective transformation of wealth management business, bring into play the advantages and leading role of asset management business, improve the diversified investment system, maintain steady investment returns, strengthen development and application of financial technology, and propel data-driven transformation of business and management, thus forging a first-class modern investment bank. Rights issue will provide strong capital support for the Company to realize its strategic goals and help the Company to achieve quality development.

III. ANALYSIS ON FEASIBILITY OF THE PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

(I) The Issue Complies with the Requirements of Relevant Laws, Regulations and Regulatory Documents

The Company has a sound corporate governance structure and internal control systems, has set up well-established risk control systems with strong risk control capacity, boasts quality assets and healthy financial position and enjoys sustainable profitability, and is thus in compliance with the requirements of the Company Law of the People’s Republic of China (《中華人民共和國公 司法》), the Securities Law of the People’s Republic of China (《中華人民共和國證券法》), the Management Methods on Securities Issuance of Listed Companies (《上市公司證券發行管 理辦法》), Q&A on Issuance Supervision – Regulatory Requirements on Guiding and Regulating Financing of Listed Companies (Revised) (《發行監管問答－關於引導規範上市公司融資行 為的監管要求 ( 修訂版 )》), the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and other laws, regulations and regulatory documents on rights issue by listed companies; as such, the Company is qualified for rights issue.

(II) The Issue is in Line with National and Industrial Policy Guidance

In May 2014, the State Council issued Several Opinions on Further Promoting the Healthy Development of Capital Market (《關於進一步促進資本市場健康發展的若干意見》), which made it clear to promote the innovative development of intermediary institutions, facilitate securities institutions to achieve differentiated, professional and specialized development and contribute to the establishment of certain modern investment banks with international competitiveness, brand influence and systemic importance.

– IX-4 –

FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

ANNEX IX

In May 2014, the CSRC issued the Opinions on Further Promoting the Innovative Development of Securities Institutions (《關於進一步推進證券經營機構創新發展的意見》), which expressly stated the major tasks and specific measures to promote the innovative development of securities institutions from the three aspects of establishing modern investment banks, supporting business and product innovation and propelling regulatory transformation, including broadening financing channels and supporting securities institutions to conduct equity financing and debt financing.

In September 2014, the CSRC issued the Notice on Encouraging Further Capital Replenishment of Securities Companies (《關於鼓勵證券公司進一步補充資本的通知》) and the Securities Association of China issued the Guidelines on Capital Replenishment of Securities Companies (《證券公司資本補充指引》), requiring securities companies to establish scientific capital management mechanism, pay due attention to capital management and replenishment, and in principle, “a securities company should complete capital replenishment at least once through IPO or capital increase or otherwise in the next three years, to ensure its capital strength to accommodate its business scale and the matching of its total risk profile with risk tolerance”.

In June 2016, the CSRC amended the Administrative Measures on Risk Control Indicators of Securities Companies (《證券公司風險控制指標管理辦法》) and supporting rules to enhance on-going effectiveness of risk control indicators and facilitate the steady and healthy development of securities companies through, among other things, improving the calculation formula of net capital and risk capital reserve.

In November 2019, the CSRC announced the Letter of Reply to Proposal No.3353 (Finance, Taxation No.280) of the Second Session of the 13th National Committee of Chinese People’s Political Consultative Conference (《關於政協十三屆全國委員會第二次會議第 3353 號 ( 財稅金融類 280 號 ) 提案答覆的函》), indicating that it will continue to encourage and guide securities companies to replenish capital, enrich service offerings, optimize incentive and restraint mechanism, increase investment in technology and innovation, improve international outlook, strengthen compliance risk control and support injection of state-owned capital to securities companies through subscription for preferred shares, ordinary shares, convertible bonds and subordinate bonds, so as to promote the development of securities companies.

In May 2020, the CSRC issued the Decision on Amending the Provisions on the Administration of Subordinated Bonds of Securities Companies (《關於修改〈證券公司次級債 管理規定〉的決定》) to further implement relevant requirements of the new Securities Law of People’s Republic of China, and support securities companies to replenish capital, enhance risk tolerance and better serve the real economy.

As the regulatory approach with a focus on regulation of net capital progresses, policies are in place to support securities companies to improve profitability, strengthen risk control, broaden financing channel and increase proportion of direct financing and encourage securities companies to further replenish capital. With the rapid expansion of business scale and continuous development of new business, the current net capital scale cannot satisfy the Company’s developmental requirements. Rights issue marks an effort of the Company to cater for the CSRC on capital replenishment by securities companies, and resonates with national and industrial policy guidance.

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FEASIBILITY ANALYSIS REPORT ON USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

ANNEX IX

IV. USE OF PROCEEDS TO BE RAISED FROM RIGHTS ISSUE

Total amount of proceeds to be raised from rights issue are expected to be not more than RMB16.8 billion, subject to the actual market condition prevailing at rights issue and will primarily be used for the following purposes:

(I) To Increase Investment in Investment Banking Business and Promote Development of the Investment Banking Business

The Company proposes to use not more than RMB6 billion out of the proceeds to increase investment in the investment banking business, including but not limited to underwriting and sponsoring business, financial consultancy business, project co-investment, equity investment funds and other corporate financing life-cycle services, so as to promote development of investment banking in the whole industrial chain.

With the gradual improvement of the multi-level capital markets, diversification of financing instruments and further opening of the capital markets, the direct financing market, comprising equity financing and debt financing, has been expanded. Meanwhile, relevant requirements of the Sci-Tech innovation board explicitly stipulated on co-investment by sponsors and the market-oriented issuance and underwriting mechanism also raised stricter requirements on capital scale of companies that engage in the investment banking business.

Therefore, the Company will proactively promote the comprehensive development of light and heavy capital business through investment banking, and establish an integrated and all-round modern investment banking model covering the whole industry chain leveraging the reform of the registration system. In particular, the Company will focus on the requirements of the real economy, nurture industrial mindset, enhance sponsoring, pricing and underwriting capacity, promote interaction between investment banking and direct investment, cross-border investment banking interaction, establish a comprehensive, efficient and synergetic business and support system, strengthen appeal to investors and target enterprises and satisfy the all-round and life-cycle investment and financing requirements of customers.

(II) To Develop Wealth Management and Securities Finance Businesses and Promote the Transformation of Wealth Management Business

The Company proposed to use not more than RMB6 billion out of the proceeds to increase investment in the wealth management and securities finance business, including but not limited to wealth management, securities lending and margin financing and financial technology, so as to further promote the transformation of its wealth management business.

The involvement of banks, foreign funded institutions, internet platforms and other institutions in the wealth management business has reshaped the industry competition landscape and customers have raised ever-stricter requirements on the expertise of wealth management business.

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ANNEX IX

Therefore, the Company will be dedicated to establish elite business teams, provide efficient asset allocation, trading services and capital intermediary services leveraging the Group’s advantages at the asset end, promote the asset allocation-driven transformation of wealth management strategies and increase investment in securities lending and margin financing business. The Company will enhance service capacity towards institutional clients, cooperate with various institutional investors such as funds to broaden asset scale and establish an incubation system for institutional clients. It will strengthen cooperation with international asset management institutions, extensively reach out to global customers, proactively explore growth opportunities, speed up digital transformation, integrate financial technology and forge an integrated customer service system covering both online and offline channels.

(III) To Strengthen Distribution and Trading Business and Forge itself into a Financial Service Provider Along the Whole Value Chain

The Company proposes to use not more than RMB3.8 billion out of the proceeds to increase investment in the distribution and trading business, so as to further promote the development of proprietary investment business.

In recent years, the investment and trading business of brokers has attracted market attention, which is shifting towards de-orientation and diversified transaction with overall investment strategies trending mature and stable. Therefore, the Company will take the initiative to grasp the innovation and development opportunities in the capital market, and boost investment research, asset allocation and trading and risk pricing capacity. In particular, the Company will give due consideration to risk exposure and results elasticity of equity investments to forge sustainable investment and trading systems, establish a leading FICC business segment with international perspectives, propel construction of quantitative, market-making and distribution systems, explore stable profit sources such as gold, bulk commodities, foreign exchange and derivatives and expand the proprietary trading into agency business with a focus on customers. It will tap into innovative trading models of financial derivative business and increase investment in long/short equity portfolio, macro-hedging, statistical arbitrage and option strategies to broaden and enrich revenue streams.

(IV) Other Working Capital Arrangement

The Company proposes to use not more than RMB1 billion out of the proceeds for other working capital arrangement. The Company will monitor closely the changes in regulatory policies and market trends, rationally allocate proceeds raised from the Issue based on its strategic planning and actual development and replenish working capital required in daily operation in time to ensure smooth progress of various businesses.

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V. CONCLUSION

In view of the above, the rights issue will facilitate the Company to grasp industry development opportunities, enhance its comprehensive competitiveness, boost capital strength, strengthen risk resistance capacity during day-to-day operation, and expand business scale and optimize business and profit structure to lay the foundation for achieving the strategic goals of the Company. Meanwhile, rights issue is in compliance with the requirements as stipulated in relevant laws, regulations and regulatory documents and resonates with national and industrial policy guidance. Therefore, rights issue is necessary and feasible.

The above proposal is hereby put forth to Shareholders for consideration.

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RISK WARNING REGARDING DILUTION OF IMMEDIATE RETURNS BY RIGHTS ISSUE TO EXISTING SHAREHOLDERS AND REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

ANNEX X

Dear Shareholders,

東方證券股份有限公司 (the “ Company ”) proposes to issue shares to existing shareholders through rights issue (the “ Rights Issue ” or “ Issue ”). Pursuant to the requirements of Opinions of the General Office of the State Council on Further Strengthening the Protection of the Legitimate Rights and Interests of Small and Medium Investors in the Capital Markets (《國務院辦公廳關於進一步 加強資本市場中小投資者合法權益保護工作的意見》) (Guo Ban Fa [2013] No. 110), Several Opinions on Further Promoting the Healthy Development of Capital Market of the State Council (《國務 院關於進一步促進資本市場健康發展的若干意見》) (Guo Fa [2014] No. 17), Guiding Opinions on Matters Relating to Dilution of Immediate Returns by Initial Offering, Refinancing and Major Asset Restructuring (《關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) (CSRC Announcement [2015] No. 31) issued by China Securities Regulatory Commission (the “ CSRC ”) and other laws, regulations and regulatory documents, to safeguard the legitimate rights and interests of all the shareholders, the Company earnestly analyzed the impact of dilution of immediate returns by the rights issue and raised specific remedial measures, and the directors, senior management and the largest shareholder of the Company have given undertakings regarding the effective implementation of the remedial measures. Details are set out below:

I. CALCULATION OF THE IMPACT OF THE RIGHTS ISSUE ON THE COMPANY’S KEY FINANCIAL INDICATORS

(I) Major Assumptions and Calculation Explanation

1. Assume that there would be no material adverse change in the macroeconomic environment, industry development trends and the Company’s operating performance in 2021;

2. Assume that the shares would be allotted on the basis of three shares for every ten shares, based on the total share capital of 6,993,655,803 shares of the Company as of December 31, 2020 and the maximum number of shares to be allocated under the Rights issue of 2,098,096,740 shares, the total share capital of the Company upon completion of the Issue would be 9,091,752,543 shares;

3. Assume that the total proceeds from the Rights issue (excluding issue expense) would be RMB16.8 billion;

4. Assume that the Rights issue would be completed on November 30, 2021, which is adopted for the sole purpose of calculating the impact of the Rights issue on key financial indicators of the Company, and is subject to the final issue size as approved by the CSRC, amount of proceeds and actual issue date;

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ANNEX X

1. Assume that net profit attributable to the owners of the parent before and after non-recurring profits and losses for 2021 would record an increase of 10%, remain flat or record a decrease of 10% compared with 2020;

2. That the impact of the proceeds from the Rights issue on the production, operation and financial conditions (such as the financial expenses and investment returns) of the Company is not considered;

3. Assume that cash dividend for 2020 would be RMB0.25 per share and would be distributed in late June 2021;

4. Assume that there would be no event that affect the number of shares such as the conversion of reserve funds into share capital, distribution of dividends and share repurchase in 2021;

5. The impacts of factors other than the profit distribution, proceeds and net profit are not considered during the calculation of the weighted average return on net assets of the Company.

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ANNEX X

(II) Impact on Earnings per Share and Return on Net Assets of the Company

On the basis of the aforesaid assumptions, the Company calculated the impact of the Rights issue on the dilution of immediate returns of shareholders as follows in accordance with relevant provisions in the Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 9-Calculation and Disclosure of Return on Net Assets and Earnings per Share (《公 開發行證券的公司信息披露編報規則第9號－淨資產收益率和每股收益的計算及披露》) (2010 Revision):

	2020/	2021/December	31, 2021
Item	December 31, 2020	Before the Issue	After the Issue
Total share capital (0’000 shares)	699,365.58	699,365.58	909,175.25
Assumption I: The net profit attributable to the owners of the parent and the net profit attributable to the
owners of the parent after non-recurring profits and losses in 2021 record an increase of 10%
compared with 2020
Net profit attributable to the owners of the
parent (RMB0’000)	272,298.85	299,528.74	299,528.74
Net profit attributable to the owners of the
parent after non-recurring profits and
losses (RMB0’000)	266,248.84	292,873.73	292,873.73
Basic earnings per share (RMB/share)	0.38	0.39	0.38
Basic earnings per share after non-recurring
profits and losses (RMB/share)	0.37	0.38	0.38
Diluted earnings per share (RMB/share)	N/A	N/A	N/A
Diluted earnings per share after non-recurring
profits and losses (RMB/share)	N/A	N/A	N/A
Weighted average return on net assets (%)	4.85	4.96	4.84
Weighted average return on net assets after
non-recurring profits and losses (%)	4.74	4.84	4.72

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ANNEX X

2020/ 2021/December 31, 2021 Item December 31, 2020 Before the Issue After the Issue

Assumption II: The net profit attributable to	the owners of the parent and the net profit	the owners of the parent and the net profit	attributable to the
owners of the parent after non-recurring profits and losses in 2021 remain flat compared with
2020
Net profit attributable to the owners of the
parent (RMB0’000)	272,298.85	272,298.85	272,298.85
Net profit attributable to the owners of the
parent after non-recurring profits and
losses (RMB0’000)	266,248.84	266,248.84	266,248.84
Basic earnings per share
(RMB/share)	0.38	0.36	0.35
Basic earnings per share after non-recurring
profits and losses (RMB/share)	0.37	0.35	0.35
Diluted earnings per share (RMB/share)	N/A	N/A	N/A
Diluted earnings per share after
non-recurring profits and losses
(RMB/share)	N/A	N/A	N/A
Weighted average return on net assets (%)	4.85	4.48	4.37
Weighted average return on net assets after
non-recurring profits and losses (%)	4.74	4.37	4.26
Assumption III: The net profit attributable to the owners of the		parent and the net profit	attributable to the
owners of the parent after non-recurring profits and losses in 2021 record			a decrease of 10%
compared with 2020
Net profit attributable to the owners of
the parent (RMB0’000)	272,298.85	245,068.97	245,068.97
Net profit attributable to the owners of the
parent after non-recurring profits and
losses (RMB0’000)	266,248.84	239,623.96	239,623.96
Basic earnings per share (RMB/share)	0.38	0.32	0.31
Basic earnings per share after non-recurring
profits and losses (RMB/share)	0.37	0.31	0.30
Diluted earnings per share (RMB/share)	N/A	N/A	N/A
Diluted earnings per share after non-recurring
profits and losses (RMB/share)	N/A	N/A	N/A
Weighted average return on net assets (%)	4.85	4.00	3.90
Weighted average return on net assets after
non-recurring profits and losses (%)	4.74	3.90	3.80

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ANNEX X

REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

(III) Explanations on the Calculation

The aforesaid assumptions of such calculation do not constitute a profit forecast of the Company. Investors shall not make investment decisions on the above basis, and any losses thus incurred shall not be borne by the Company.

The number of shares to be issued, total amount of proceeds and date of completion of issuance are only estimations, subject to the approval by the regulatory authority and the subscription to the shares issued.

II. RISK WARNING ON THE DILUTION OF IMMEDIATE RETURNS BY THE ISSUE

Upon completion of the Rights Issue, the number of shares and capital scale of the Company will be significantly increased. However, it may take a certain period of time to produce benefits after the investment of proceeds, and the Company mainly depends on its existing business to realize profits and shareholders’ return, so indicators such as the basic earnings per share and weighted average return on net assets will experience a certain decrease in the short term, i.e. the immediate returns will potentially be diluted after the Company’s share Rights Issue. In addition, if expected benefits from the proceeds from the Issue cannot be realized, basic earnings per share and the return on net assets may be diluted, which will in turn reduce the Company’s return for the shareholders.

III. NECESSITY AND FEASIBILITY OF THE ISSUE

(I) Necessity of the Issue

1. The Issue represents a necessary choice for the Company to grasp industry opportunities

China’s economic pattern is upgrading from rapid growth to quality development, which redefines the positioning and missions of the capital market during the new era. The Central Economic Working Conference proposed that given the close interconnection between capital market and financial operation, we should forge a standardized, transparent, open, energetic and resilient capital market leveraging in-depth reform. The “14th five-year plan” has made it clear to “increase the proportion of direct financing” and the implementation of the new Securities Law of the People’s Republic of China (the “ Securities Law ”) in 2020 turned a new leaf in in-depth reform of the capital markets. Meanwhile, thanks to the two-way business opening in the financial market, the regulatory authorities issue new business licenses in foreign exchange business, cross-border investment, wealth management and other fields to promote industry innovation and development. Dynamic financial activities will revitalize economic development and a brand new era has unfolded for the growth of securities market. Therefore, the Company should take the initiative to capitalize on development opportunities presented by the current state of development and enhance capital strength and comprehensive financial service capacity to further expand the depth and breadth of services to the real economy.

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ANNEX X

2. The Issue constitutes a solid effort for the Company to cope with industry competition and enhance comprehensive competitiveness

Amid the progress of China’s capital market reform, competition in the securities industry has been intensifying. On one hand, with the accelerating competition and increasing market concentration in the securities market, it is apparent that large-scale security firms with strong capital strength and leading operating scale are more advantageous. On the other, due to the further opening of the securities market, measures to allow access to foreign-held joint ventures and expansion of the business scope of joint ventures will accelerate penetration of overseas large-scale investment banks and asset management institutions, thereby further intensifying competition in domestic securities industry.

Under the backdrop of scalable and intensive development of the securities industry with increasingly fierce competition, capital strength has risen to be the key factor driving future development of brokers and the obtaining of relevant business qualifications and scale of operations are directly linked to the net capital of brokers. Currently, the key performance indicators of the Company still fall far behind those of leading brokers, which poses certain obstacles to customer base broadening and business development. As a result, it is imminent for the Company to speed up capital replenishment, enhance capital strength, proactively explore business innovation and new paths to serve the real economy based on consolidation of existing advantages, expand business scale and improve operating performance to create greater returns for the shareholders.

3. The Issue is beneficial to the Company in terms of scale expansion and profit structure optimization

The Company currently offers comprehensive and one-stop financial services comprising securities, futures, asset management, investment banking, investment consultancy and securities research and its proprietary investment, asset management and securities research businesses are at the forefront of the industry. Under the pressure of declining profitability of traditional businesses, brokers are shifting from the commission-focused business model in the past to comprehensive business models with due regards to service agency and capital agency business as well as investment trading business, and revenue and profit generated from fund utilization business and comprehensive operations are on the rise. To promote long-term sustainable development, upholding the strategy of “shoring up weak spots and sharpening advantages”, the Company increases investment in investment banking, wealth management and distribution and trading business, so as to proactively forge a more balanced business portfolio.

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Upon capital replenishment with proceeds from the Rights Issue, the Company proposes to further expand the scale of distribution and trading as well as capital agency business and take the initiative to explore foreign exchange, derivatives and other innovation business, in a bid to improve hedging methods and trading strategies. Meanwhile, the Company will continue to extend the depth and breadth of its wealth management, asset management and investment banking business and accelerate transformation with a focus on fields such as customer base, products and investment consultancy to establish an extensive investment banking ecosystem covering the whole industry chain. Forward-looking planning and scientific and effective allocation of funds will facilitate the Company to optimize business structure and profit model and enhance asset yields.

4. The Issue will facilitate the Company to mitigate liquidity risk and enhance its risk resistance capacity

It is explicitly required in regulatory policies issued by the CSRC such as Administrative Measures on Risk Control Indicators of Securities Companies (《證券公司 風險控制指標管理辦法》) and Regulations on Classification of Securities Companies (《證 券公司分類監管規定》) that securities companies shall establish a risk control indicator system focused on net capital and liquidity and brokers shall be selectively instructed to enhance capital restriction and improve comprehensive risk management efficiency. Risk control is closely related to the survival and sustainable development of securities companies and reasonable liquidity serves as a crucial pillar for the healthy operation of securities companies. While accelerating innovative business, the Company is required to strengthen liquidity risk management capacity, establish and optimize liquidity risk management systems and effectively identify, measure, supervise and monitor liquidity risks to ensure the liquidity demands are satisfied in a timely manner and at reasonable costs.

With the expansion in business scale, only by maintaining sufficient capital that matches business scale can securities firms better prevent and mitigate liquidity risk, market risk, credit risk, operation risk and other potential risks. The Rights issue will further boost the capital strength of the Company and optimize its relevant regulatory indicators. Meanwhile, replenishing working capital with the proceeds will facilitate the Company to enhance its risk resistance capacity and achieve sound and healthy development.

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ANNEX X

5. The Issue will help the Company to realize strategic goals

During the strategic planning period from 2021 to 2024, the Company aims to stay committed to professional and quality development towards a first-class modern investment bank, strive to enhance core competitiveness, rank into the top tier in the industry in terms of scale and strength, and contribute to the capital markets reform and development of Shanghai into an international financial center. To such end, the Company will proactively tap into the steering role of traditional investment banking business in its overall business development, promote effective transformation of wealth management business, bring into play the advantages and leading role of asset management business, improve the diversified investment system, maintain steady investment returns, strengthen development and application of financial technology, and propel data-driven transformation of business and management, thus forging a first-class modern investment bank. The Rights issue will provide strong capital support for the Company to realize its strategic goals and help the Company to achieve quality development.

(II) Feasibility of the Issue

1. The Issue complies with the requirements of relevant laws, regulations and regulatory documents

The Company has a sound corporate governance structure and internal control systems, has set up well-established risk control systems with strong risk control capacity, boasts quality assets and healthy financial position and enjoys sustainable profitability, and is thus in compliance with the requirements of the Company Law of the People’s Republic of China (the “ Company Law ”), the Securities Law, the Management Methods on Securities Issuance of Listed Companies (《上市公司證券發行管理辦法》), Q&A on Issuance Supervision – Regulatory Requirements on Guiding and Regulating Financing of Listed Companies (Revised) (《發行監管問答－關於引導規範上市公司融資行為的監管 要求 ( 修訂版 )》), the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and other laws, regulations and regulatory documents on rights issue by listed companies; as such the Company is qualified for rights issue.

2. The Issue is in line with national and industrial policy guidance

In May 2014, the State Council issued Several Opinions on Further Promoting the Healthy Development of Capital Market (《關於進一步促進資本市場健康發展的若 干意見》), which made it clear to promote the innovative development of intermediary institutions, facilitate securities institutions to achieve differentiated, professional and specialized development and contribute to the establishment of certain modern investment banks with international competitiveness, brand influence and systemic importance.

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In May 2014, the CSRC issued the Opinions on Further Promoting the Innovative Development of Securities Institutions (《關於進一步推進證券經營機構創新發展 的意見》), which expressly stated the major tasks and specific measures to promote the innovative development of securities institutions from the three aspects of establishing modern investment banks, supporting business and product innovation and propelling regulatory transformation, including broadening financing channels and supporting securities institutions to conduct equity financing and debt financing.

In September 2014, the CSRC issued the Notice on Encouraging Further Capital Replenishment of Securities Companies (《關於鼓勵證券公司進一步補充資本的通 知》) and the Securities Association of China issued the Guidelines on Capital Replenishment of Securities Companies (《證券公司資本補充指引》), requiring securities companies to establish scientific capital management mechanism, pay due attention to capital management and replenishment, and in principle, “a securities company should complete capital replenishment at least once through IPO or capital increase or otherwise in the next three years, to ensure its capital strength to accommodate its business scale and the matching of its total risk profile with risk tolerance”.

In June 2016, the CSRC amended the Administrative Measures on Risk Control Indicators of Securities Companies (《證券公司風險控制指標管理辦法》) and supporting rules to enhance on-going effectiveness of risk control indicators and facilitate the steady and healthy development of securities companies through, among other things, improving the calculation formula of net capital and risk capital reserve.

In November 2019, the CSRC announced the Letter of Reply to Proposal No.3353 (Finance, Taxation No.280) of the Second Session of the 13th National Committee of Chinese People’s Political Consultative Conference (《關於政協十三屆全國委員會 第二次會議第 3353 號 ( 財稅金融類 280 號 ) 提案答覆的函》), indicating that it will continue to encourage and guide securities companies to replenish capital, enrich service offerings, optimize incentive and restraint mechanism, increase investment in technology and innovation, improve international outlook, strengthen compliance risk control and support injection of state-owned capital to securities companies through subscription for preferred shares, ordinary shares, convertible bonds and subordinate bonds, so as to promote the development of securities companies.

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ANNEX X

In May 2020, the CSRC issued the Decision on Amending the Provisions on the Administration of Subordinated Bonds of Securities Companies (《關於修改 < 證券公 司次級債管理規定 > 的決定》) to further implement relevant requirements of the new Securities Law, and support securities companies to replenish capital, enhance risk tolerance and better serve the real economy.

As the regulatory approach with a focus on regulation of net capital progresses, policies are in place to support securities companies to improve profitability, strengthen risk control, broaden financing channel and increase proportion of direct financing and encourage securities companies to further replenish capital. With the rapid expansion of business scale and continuous development of new business, the current net capital scale cannot satisfy the Company’s development requirements. The Rights issue marks an effort of the Company to cater for the CSRC on capital replenishment by securities companies, and resonates with national and industrial policy guidance.

IV. THE RELATIONSHIP BETWEEN THE INVESTMENT PROJECTS TO BE FINANCED WITH THE PROCEEDS FROM THE ISSUE AND THE EXISTING BUSINESS OF THE COMPANY

The principal business of the Company comprises securities distribution and trading business, investment management business, brokerage and securities finance business and investment banking business. The total amount of the proceeds to be raised from the rights issue is expected to be not more than RMB16.8 billion (including issuance expenses), which, after netting off issuance expenses, are proposed to be used for increasing the capital pool of the Company and replenishing working capital of the Company and optimizing gearing ratio to serve the real economy and expand the Company’s business scale and enhance its market competitiveness and risk resistance capacity.

Upon completion of the Issue, the principal business of the Company will remain unchanged and the capital strength of the Company will be further enhanced, which will facilitate the Company to expand business scale, and boost its overall profitability and risk resistance capacity.

V. THE COMPANY’S RESERVE IN PERSONNEL, TECHNOLOGY AND MARKET FOR THE INVESTMENT PROJECTS

In terms of personnel reserve, the Company boasts a professional, stable and well-structured talent team. The senior management of the Company has accumulated profound experience in the capital market and deep insights into the securities and financial industries. Various business teams of the Company possess extensive market experience accumulated for years, enjoy outstanding expertise and have forged several business brands. In recent years, the Company, on one hand, strengthens introduction of leading and top-tier talents, and on the other, enhances talent pool. Its employees are of high quality, youthful and professional and staff structure is further optimized to reach balance and rationality among size, post accommodation, employment form and labor cost.

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RISK WARNING REGARDING DILUTION OF IMMEDIATE RETURNS BY RIGHTS ISSUE TO EXISTING SHAREHOLDERS AND REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

ANNEX X

In terms of technical reserve, the Company values overall arrangement in the financial technology field, and brings digital comprehensive financial service experience to all customers employees through full coverage of customer service, investment decision-making, risk control decision-making and other business requirements leveraging cloud computing, big data and artificial intelligence. The Company established Orient Securities Financial Science and Technology Innovation Research Institute in 2019, which was deeply integrated with various business lines, management layers and subsidiaries to strengthen technology research and application. The continuous investment in information technology provides all-round technological support for the business of the Company and also lays the solid technical foundation for the implementation of the investment projects to be financed with proceeds from the Rights issue.

In terms of market reserve, as of December 31, 2020, the Company had a total of 177 securities branches, covering 87 cities in 31 provinces, autonomous regions and municipalities directly under the Central Government. The Company has obtained full-scope licenses in asset management, trading and institution, investment banking and investment management, market share of its principal businesses are leading the market and the Company boasts market influence and brand recognition. The Company will consolidate its existing advantages and continue to proactively explore other fields to further enhance its competitive edges.

VI. MAJOR MEASURES ADOPTED BY THE COMPANY IN RESPONSE TO THE DILUTION OF THE IMMEDIATE RETURNS BY THE RIGHTS ISSUE

(I) Promote Implementation of the Company’s Strategic Planning and Improve its Profitability

The investment projects to be financed with proceeds from the Rights issue focus on the Company’s principal business, which is in line with the development strategies of the Company. Implementation of the investment projects to be financed with proceeds from the Rights issue will facilitate the Company to capitalize on new development opportunities in the securities industry, consolidate business development foundation, further adjust revenue structure, increase income from investment banking business, wealth management business, securities finance business and distribution and trading business, mitigate operating risks and enhance its profitability and sustainability.

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RISK WARNING REGARDING DILUTION OF IMMEDIATE RETURNS BY RIGHTS ISSUE TO EXISTING SHAREHOLDERS AND REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

ANNEX X

(II) Strengthen the Management of Proceeds and Improve Utilization Efficiency of Proceeds

The Company has formulated the Administrative Measures on the Use of Proceeds by 東方 證券股份有限公司 (《東方證券股份有限公司募集資金管理辦法》) in accordance with the Company Law, the Securities Law, the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (《上海證券交易所股票上市規則》) and other laws, regulations and regulatory documents as well as the Articles of Association of 東方證券股份有限公司 (the “ Articles of Association ”), which explicitly stipulates the requirements on the special account deposit, use and supervision of the proceeds to guarantee the reasonable and compliance use of the proceeds, and active cooperation with the sponsors and regulatory banks in the inspection and supervision of use of proceeds, in order to guarantee the reasonable and legal use of the proceeds. Meanwhile, the Company will enhance efficiency of the use of proceeds, improve and strengthen the investment decision-making procedures, optimize the financing structure, raise the profitability level, further expedite the realization of effects of existing projects, shore up the sustainable development capability, and enhance the operation efficiency.

(III) Strengthen Internal Control and Enhance the Healthy and Stable Development of the Company

The Company will strengthen the internal control to tap into corporate governance and control through optimizing the budget management processes, strengthening cost management, intensifying the supervision on budget performance, comprehensively and effectively controlling the operation and management risks, and enhancing operational efficiency. It will also further consolidate and enhance its core competitive advantages, and expand the market scale to raise the income level and profitability.

(IV) Improve Corporate Governance and Strengthen Risk Management to Provide System Guarantee for the Company’s Development

The Company will continuously improve the corporate governance structure in strict accordance with relevant laws, regulations and regulatory documents such as the Company Law, the Securities Law and the Governance Rules of Listed Companies (《上市公司治理準則》), in order to guarantee that its shareholders can fully exercise their rights, the Board can diligently fulfill its duties and make scientific, rapid and prudent decisions for its operation and development in accordance with laws, regulations and the Articles of Association, and independent directors can fulfill their responsibilities in a prudent, objective and careful manner to protect the overall interest of the Company, especially the legitimate rights and interests of the minority shareholders, and provide system guarantee for the development of the Company.

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RISK WARNING REGARDING DILUTION OF IMMEDIATE RETURNS BY RIGHTS ISSUE TO EXISTING SHAREHOLDERS AND REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

ANNEX X

(V) Further Improve the Company’s Profit Distribution Policy and Optimize the Investors’ Return Mechanism

The Company emphasizes the reasonable return on investment for shareholders with consideration to the sustainable development of the Company, and formulates sustainable, stable and scientific dividend policies. In order to protect shareholders’ interests and establish the sustainable, stable and scientific return mechanism, the Company proactively implements relevant requirements in the Notice on Further Implementing Matters Relevant to the Dividend Distribution by Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) of the CSRC and the Guideline No. 3 on the Supervision and Administration of Listed Companies – Distribution of Dividends of Listed Companies (《上市公司監管指引第 3 號 - 上市公司現金 分紅》), and explicitly specifies matters including the research and demonstration procedures for profit distribution, decision-making mechanism, profit distribution plans, specific conditions and proportion for cash dividend distribution, the interval of profit distribution, necessary deliberation procedures and information disclosure in the Article of Association and the Dividend Distribution Plans for Next Three Years (2020-2022) of 東方證券股份有限公司 (《東方證券股份有限公 司未來三年股東回報規劃 (2020-2022)》).

VII. UNDERTAKINGS GIVEN BY RELEVANT PARTIES

(I) Undertakings Given by Directors and Senior Management of the Company

All the directors and senior management of the Company have given the following undertakings in accordance with the relevant provisions of the CSRC, in order to protect the legitimate rights and interests of all the shareholders and guarantee the proper implementation of the remedial measures for the dilution of immediate returns:

• “1. Not to offer benefits to other units or individuals for free or under unfair conditions, or otherwise impair the Company’s interests;

• Restrain their work-related consumption behavior;

• Not to conduct any investment or consumption activities not related to the performance of duties by making use of the Company’s assets;

• The remuneration system formulated by the Board or the remuneration and appraisal committee of the Board is linked with the implementation of the remedial measures for dilution of immediate returns;

• The exercise conditions for the stock incentive will be linked with the implementation of the remedial measures for returns if the Company launches a stock incentive policy in future;

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RISK WARNING REGARDING DILUTION OF IMMEDIATE RETURNS BY RIGHTS ISSUE TO EXISTING SHAREHOLDERS AND REMEDIAL MEASURES AND UNDERTAKINGS GIVEN BY RELEVANT PARTIES

ANNEX X

1. If the CSRC issues other new regulatory provisions related to the remedial measures and the undertakings thereof before the completion of the Issue, and the aforesaid undertakings fail to satisfy such provisions of the CSRC, supplementary undertakings shall be given according to the latest provisions of the CSRC;

2. In case of violations of aforesaid undertakings or refusal to fulfill the aforesaid undertakings, which causes losses to the Company or its shareholders, relevant liability for compensation for the Company or its shareholders shall be borne in accordance with the laws.”

(II) Undertakings Given by the Largest Shareholder of the Company

Shenergy (Group) Company Limited, the Company’s largest shareholder, has given the following undertakings: it will not interfere with the operation and management of 東方證券股份 有限公司 beyond authority, nor will it encroach on the interests of 東方證券股份有限公司 .

The above proposal is hereby put forth to Shareholders for consideration.

– X-14 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

Dear Shareholders,

The board of directors of 東方證券股份有限公司 (the “ Company ”) prepared the report on use of proceeds from initial public offering of H shares and non-public issuance of A shares as of December 31, 2020 (the “ Report on Use of Proceeds from Previous Fund-raising Activities ”) pursuant to Regulations on Use of Proceeds from Previous Fund-raising Activities (《關於前次募集資金使用 情況報告的規定》) (Zheng Jian Fa Xing Zi [2007] No. 500) issued by China Securities Regulatory Commission and other relevant regulations. The special report on use of proceeds from initial public offering of H shares and non-public issuance of A shares is hereby stated below:

I. BASIC INFORMATION OF PROCEEDS FROM THE PREVIOUS FUND-RAISING ACTIVITIES

Upon the approval of Zheng Jian Xu Ke [2016] No. 1026 by the China Securities Regulatory Commission, the Company issued the overseas-listed foreign shares (H shares) on The Stock Exchange of Hong Kong Limited on July 8, 2016, and exercised the over-allotment option on August 3, 2016. As of August 3, 2016, the Company issued 933,709,090 overseas-listed foreign shares (H shares), and the selling shareholders sold 93,370,910 H Shares, which amounted to a total of 1,027,080,000 shares with a par value of RMB1 per share at an issuing price of HK$8.15 per H share in cash, totaling HK$8,370,702,000.00. After deduction of the transaction fee and other expenses of HK$145,045,025.30, HK$8,225,656,974.70 was deposited in the special account for the proceeds from the issuance of H shares. Actual capital assigned to the above account amounted to RMB7,083,154,510.65 (including interest income received) on the basis of the median exchange rates of HK$ against RMB announced by the People’s Bank of China. After deduction of the proceeds for the National Council for Social Security Fund of the PRC and other issuing expenses, the net proceeds from the issuance of H shares of the Company amounted to HK$7,417,133,357.56 (equivalent to RMB6,386,884,274.40).

After deducting issuing expenses of RMB61,949,749.63 paid by the Company, the actual net proceeds were HK$7,345,307,900.42 (equivalent to RMB6,324,934,524.77). The above actual net proceeds from the issuance of H shares have been verified by Deloitte Touche Tohmatsu Certified Public Accountants LLP, who issued the capital verification report (De Shi Bao (Yan) Zi (16) No. 1082) thereon.

As of December 31, 2020, the Company had accumulatively utilized HK$1,114,273,672.19 (before foreign exchange rate settlement) and RMB5,431,857,042.86 (after foreign exchange rate settlement) out of the proceeds, totaling RMB6,391,073,963.18 based on actual foreign exchange rate settlement and utilization. As of December 31, 2020, balance of the proceeds account in Hong Kong dollars was HK$152,581,997.06 and balance of the proceeds account in Renminbi was RMB1,070,217.87, aggregating RMB129,483,226.60 based on the closing exchange rate.

– XI-1 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

Upon the Approval in Relation to the Non-public Issuance of Shares by 東方證券股份有限公 司 (《關於核准東方證券股份有限公司非公開發行股票的批覆》) (Zheng Jian Xu Ke [2017] No. 1940), the Company completed non-public issuance of Renminbi-denominated ordinary shares (A shares) in December 2017. The Company non-publicly issued a total of 778,203,792 Renminbi-denominated ordinary shares (A shares) at an issue price of RMB14.21 per share, and raised total proceeds of RMB11,058,275,884.32 and proceeds of RMB10,988,790,614.35 after deducting certain underwriting fees of RMB69,485,269.97. The aforesaid proceeds were fully deposited in the designated account opened by the Company on December 27, 2017, and were verified by Deloitte Touche Tohmatsu Certified Public Accountants LLP, which has issued the capital verification report (De Shi Bao (Yan) Zi (17) No. 00593) thereon.

After deducting the issue expenses incurred of RMB101,095,545.51, the actual net proceeds were RMB10,957,180,338.81.

As of December 31, 2019, the aforesaid proceeds raised from non-public issuance of A shares had been fully utilized and the designated proceeds accounts had been cancelled. The report on use of proceeds raised from the non-public issuance of A shares on December 27, 2017 as of December 31, 2019 has been audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, which has issued the audit report (De Shi Bao (He) Zi (20) No. E00095) thereon.

– XI-2 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

II. DEPOSIT AND MANAGEMENT OF PROCEEDS FROM PREVIOUS FUND-RAISING ACTIVITIES

As at December 31, 2020, the total closing balance of the bank accounts for the proceeds from the issuance of H shares of the Company amounted to HK$152,581,997.06 and RMB1,070,217.87, which amounted to a total of RMB129,483,226.60 according to the closing exchange rate. Details are set out below:

Bank account number Currency Amount in original currency ICBC Hong Kong Branch 86152010748-6 HK$ 321,874.43 Bank of Communications of China Limited Hong Kong Branch 027-532-0-2147940 HK$ 27,151.13 Bank of Shanghai Hong Kong Branch 200173 HK$ – Standard Chartered Bank (Hong Kong) Limited 447-1-799978-8 HK$ 38,102.27 ICBC Shanghai Branch 1001244329137000285 HK$ 152,134,333.79 Bank of Shanghai Huangpu Branch 3160811305000274072 HK$ 50,989.01 Bank of Communications Shanghai Huangpu Branch 310066713132404000118 HK$ 9,546.43 Sub-total 152,581,997.06 ICBC Shanghai Branch 1001244329072201621 RMB 1,070,215.25 Bank of Shanghai Huangpu Branch 31608103002995394 RMB – Bank of Communications Shanghai Huangpu Branch 310066713012113000392 RMB 2.62 Sub-total 1,070,217.87 Total	RMB equivalent 270,889.52 22,850.39 – 32,066.87 128,036,255.32 42,912.35 8,034.28 128,413,008.73
	1,070,215.25 – 2.62 1,070,217.87
	129,483,226.60

– XI-3 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

As of December 31, 2019, proceeds from non-public issuance of A shares of the Company had been fully utilized and the bank accounts had been cancelled. Details are set out below:

Unit: RMB

Deposit bank Bank account number Date of deposit Amount deposited Date of cancellation China Construction Bank 31050163360000003841December 27, 2017 6,000,000,000.00 October 9, 2019 Corporation Shanghai Second Branch Industrial and Commercial 1001141529025702817 December 27, 2017 4,988,790,614.35 September 25, 2019 Bank of China Limited Shanghai Super Brand Mall Branch Total / / 10,988,790,614.35 /

Note: The above amount deposited included issue expenses payable yet to be paid.

III. ACTUAL USE OF PROCEEDS FROM THE PREVIOUS FUND-RAISING ACTIVITIES

Use of proceeds under the prospectus of H shares of the Company is described below:

• (1) About 35% of the proceeds will be used for further developing the brokerage and securities financing business of the Company;

• (2) About 30% of the proceeds will be used for developing the overseas business of the Company;

• (3) About 15% of the proceeds will be used for expanding the investment management business of the Company;

• (4) About 10% of the proceeds will be used for developing the securities sales and trading business of the Company;

• (5) About 5% of the proceeds will be used for capital expenditure to improve the IT system and expand capital-light branches network;

• (6) About 5% of the proceeds will be used for working capital and other general corporate purpose.

As of December 31, 2020, the Company had utilized H share proceeds equivalent to RMB6,391.074 million pursuant to the undertakings made in the prospectus for initial public offering of H shares. For details, please refer to Appendix I to this report “Checklist for the Use of the Proceeds from the Issuance of H Shares”.

– XI-4 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

In the plan for non-public issuance of A shares by the Company in 2017 (third revision), the Company had undertaken to use the proceeds for increasing the capital and replenishing working capital of the Company to expand business scale.

In the response to feedback on application for non-public issuance of A shares, the Company had undertaken to use the proceeds primarily for the following purposes:

• (1) Not more than RMB2.5 billion to be used for supporting brokerage and securities financing business development;

• (2) Not more than RMB3 billion to be used for investing in securities distribution and trading development;

• (3) Not more than RMB2 billion to be used for improving investment management service capacity;

• (4) Not more than RMB2 billion to be used for expanding innovative business field;

• (5) Not more than RMB2.3 billion to be used for advancing collectivized development strategy of the Company;

• (6) Not more than RMB0.2 billion to be used for working capital and other general corporate purposes.

As of December 31, 2019, proceeds from non-public issuance of A shares had been fully utilized. For details, please refer to Appendix II to this report – “Checklist for the Use of the Proceeds from the Non-public Issuance of A Shares”.

IV. CHANGE OF USE OF PROCEEDS RAISED FROM THE PREVIOUS FUND-RAISING ACTIVITIES

As of December 31, 2020, the Company did not change the use of proceeds from the previous fund-raising activities.

V. DISPOSAL OR ASSET SWAP WITH EXTERNAL PARTIES OF PROJECTS TO BE FINANCED WITH PROCEEDS FROM PREVIOUS FUND-RAISING ACTIVITIES

As of December 31, 2020, the Company did not dispose of or swap the projects to be financed with proceeds from previous fund-raising activities.

– XI-5 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

VI. USE OF TEMPORARILY IDLE PROCEEDS

As of December 31, 2020, balance of the H share proceeds were deposited in designated bank accounts and the idle proceeds were not temporarily used for other purposes.

As of December 31, 2019, proceeds from non-public issuance of A shares had been fully utilized and no idle proceeds were available therefore not temporarily used for other purposes.

VII. ECONOMIC BENEFITS GENERATED FROM PROJECTS TO BE FINANCED WITH PROCEEDS FROM PREVIOUS FUND-RAISING ACTIVITIES

After receiving the proceeds from the issuance of H shares, the proceeds have partially been used for the commitments under the prospectus. Accordingly, the net assets and net capital of the Company have been increased. As the funds invested in the projects invested with the previous proceeds both include the original funds of the Company and the proceeds, the benefits from the proceeds as at December 31, 2020 cannot be calculated on a separate basis.

After receiving the proceeds from the non-public issuance of A shares, the proceeds have been fully used for further developing the brokerage and securities financing business, investing in securities distribution and trading business, improving investment management service capacity, expanding innovative business field, advancing collectivized development strategy of the Company and working capital and other general corporate purposes. As the funds invested in the projects invested with the previous proceeds both include the original funds of the Company and the proceeds, the benefits from the proceeds cannot be calculated on a separate basis.

VIII. USE AND DISCLOSURE OF THE PROCEEDS

The use of the proceeds raised from previous fund-raising activities was in line with the relevant disclosures in the periodic reports of the Company and other information disclosure documents.

IX. UNUSED PROCEEDS FROM PREVIOUS FUND-RAISING ACTIVITIES

As at December 31, 2020, the committed proceeds from the issuance of H shares that were not used by the Company were RMB123.6836 million. The Company invested proceeds from the issuance of H shares in accordance with the actual business development. In particular, proceeds from the issuance of H shares proposed to be used for overseas business will be utilized based on the actual business requirements of the Company and proceeds proposed to be used for capital expenditure will be used for the upgrading of information system and the expansion of the network of the capital-light branches. The capital-light branches of the Company have entered preparation stage and the information system is improving as scheduled, and the proceeds will be put into use according to the actual demands in follow-up periods.

– XI-6 –

SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

ANNEX XI

Closing date: December 31, 2020	Net proceeds (HK$0’000) 741,713.34 Total accumulative proceeds invested (RMB0’000) 639,107.40	Total proceeds used in 2016 (RMB0’000) 487,602.94	Total accumulative amount of proceeds with change in purpose (HK$0’000) – Total proceeds used in 2017 (RMB0’000) 140,936.27	Total proceeds used in 2018 (RMB0’000) –	Percentage of total accumulative amount of proceeds with change in purpose – Total proceeds used in 2019 (RMB0’000) 2,378.81	Total proceeds used in 2020 (RMB0’000) 8,189.38	Accumulative investment amount with the proceeds Difference	Investment project Total investment amount with the proceeds as at closing date between actual	investment Committed	amount and Committed investment Committed	committed investment Actual amount prior investment Actual	investment amount after investment to amount after investment Date of the project	amount after Committed investment fund-raising amount fund-raising fund-raising amount reaching expected	fund-raising amount prior to fund-raising (Note) (Note) (Note) (Note) (Note) condition for use	No. Committed investment project Actual investment project HK$0’000 RMB0’000 RMB0’000 RMB0’000 RMB0’000 RMB0’000 RMB0’000 RMB0’000	(Note)	1 Brokerage and securities financing Brokerage and securities financing 256,034.13 229,164.95 229,164.95 229,164.95 229,164.95 229,164.95 229,164.95 – N/A	business business	2 Overseas business Overseas business 222,513.99 189,058.32 189,058.32 189,046.55 189,058.32 189,058.32 189,046.55 (11.77) N/A	3 Investment management business Investment management business 109,725.00 98,236.79 98,236.79 98,236.79 98,236.79 98,236.79 98,236.79 – N/A	4 Securities distribution and trading Securities distribution and trading 73,150.00 65,491.20 65,491.20 65,491.20 65,491.20 65,491.20 65,491.20 – N/A	business business	5 Capital expenditure Capital expenditure 40,145.11 33,939.87 33,939.87 20,371.59 33,939.87 33,939.87 20,371.59 (13,568.28) N/A	6 Working capital and other general Working capital and other general 40,145.11 35,584.63 35,584.63 36,796.32 35,584.63 35,584.63 36,796.32 1,211.69 N/A	corporate purposes corporate purposes	Total 741,713.34 651,475.76 651,475.76 639,107.40 651,475.76 651,475.76 639,107.40 (12,368.36) N/A	Note: The proceeds from the issuance of H shares in RMB that were used are calculated based on the actual settlement exchange rate, and the proceeds from the issuance of H Shares in HK$	that were used are calculated based on the exchange rate at the end of the current month, and the proceeds from the issuance of H shares that were not yet used are calculated based on	the exchange rate at the end of the period.

– XI-7 –

ANNEX XI SPECIAL REPORT ON USE OF PROCEEDS FROM PREVIOUS FUND‑RAISING ACTIVITIES AS OF DECEMBER 31, 2020

Closing date: December 31, 2019	Unit: RMB0’000	Total amount of proceeds: 1,105,827.59 Total accumulative used proceeds: 1,099,264.10	Net proceeds: 1,095,718.03 Annual breakdown:	Total accumulative amount of proceeds with change in purpose: Nil Total proceeds used in 2017: 320,000.00	Percentage of the total accumulative proceeds with change in purpose: Nil Total proceeds used in 2018: 755,000.00	Total proceeds used in 2019: 24,264.10	Investment project Total investment amount with the proceeds Accumulative investment amount with the proceeds as at closing date	Difference	between actual	investment amount	Committed Committed and committed	investment Committed Actual investment Committed Actual investment amount	amount investment investment amount investment investment after fund-raising Date of the project	Committed Actual prior to amount after amount (including prior to amount after amount (including (including reaching expected	No. investment project investment project fund-raising fund-raising deposit interest) fund-raising fund-raising deposit interest) deposit interest) condition for use	1 Supporting brokerage and Supporting brokerage and Not more than Not more than 250,000.00 Not more than Not more than 250,000.00 N/A	securities financing business securities financing business RMB2.5 billion RMB2.5 billion RMB2.5 billion RMB2.5 billion	development development	2 Investing in securities Investing in securities Not more than Not more than 300,000.00 Not more than Not more than 300,000.00 N/A	distribution and trading distribution and trading RMB3 billion RMB3 billion RMB3 billion RMB3 billion	business development business development	3,546.07 3 Improving investment management service capacity Improving investment management service capacity Not more than RMB2 billion Not more than RMB2 billion 125,000.00 Not more than RMB2 billion Not more than RMB2 billion 125,000.00 N/A	4 Expanding innovative business Expanding innovative business Not more than Not more than 200,000.00 Not more than Not more than 200,000.00 N/A	field field RMB2 billion RMB2 billion RMB2 billion RMB2 billion	5 Advancing collectivized Advancing collectivized Not more than Not more than 204,264.10 Not more than Not more than 204,264.10 N/A	development strategy of the development strategy of the RMB2.3 billion RMB2.3 billion RMB2.3 billion RMB2.3 billion	Company Company	6 Working capital and other Working capital and other Not more than Not more than 20,000.00 Not more than Not more than 20,000.00 N/A	general corporate purposes general corporate purposes RMB0.2 billion RMB0.2 billion RMB0.2 billion RMB0.2 billion	Total Not more than Not more than 1,099,264.10 Not more than Not more than 1,099,264.10 3,546.07	RMB12 billion RMB12 billion RMB12 billion RMB12 billion	Note: The project invested with the proceeds and the invested funds of the Company both include the original funds of the Company and the proceeds. The original funds and the proceeds	used for the same project cannot be calculated on a separate basis, and the income cannot be identified on a separate basis.

– XI-8 –