DFZQ — Capital/Financing Update 2017

Dec 29, 2017

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(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)

ANNOUNCEMENT IN RELATION TO THE ISSUANCE RESULTS OF THE NON-PUBLIC ISSUANCE OF A SHARES AND CHANGES IN SHARE CAPITAL

References are made to (i) the announcement of 東方證券股份有限公司 (the “ Company ”) dated February 28, 2017 in relation to, among other things, (1) the Proposed Non-public Issuance of A Shares, (2) connected transaction – proposed subscription of A Shares by substantial shareholder, and (3) the proposed subscription of A Shares by existing shareholders; (ii) the circular dated March 30, 2017 in relation to the Extraordinary General Meeting and the H Shares Class Meeting (the “ Circular ”); (iii) the announcement dated April 14, 2017 in relation to the poll results of the Extraordinary General Meeting, the A Shares Class Meeting and the H Shares Class Meeting held on April 14, 2017; (iv) the announcements dated May 15, 2017 and August 7, 2017, respectively, in relation to the Proposed Non-public Issuance of A Shares and proposed subscription of A Shares by existing shareholders; (v) the announcement dated June 8, 2017 in relation to the receipt of acceptance notice of the application for administrative permission from the CSRC; (vi) the announcement dated September 19, 2017 in relation to approval by the Issuance Approval Committee of the CSRC on application for Non-public Issuance of A Shares; and (vii) the announcement dated November 6, 2017 in relation to the receipt of approval by the CSRC in relation to the Non-public Issuance of A Shares. Unless otherwise defined herein, capitalized terms used in this announcement shall have the same meanings as those defined in the Circular.

The board of directors of the Company (the “ Board ”) is pleased to announce that the Non-public Issuance of A Shares of the Company (the “ Issuance ”) has been completed on December 28, 2017. Details of the Issuance are as follows:

I. BASIC DETAILS OF THE ISSUANCE

The Issuance targets on seven specific investors. Details are as follows:

(I) Class and nominal value of shares

The class of shares of the Issuance is ordinary shares (A Shares) denominated in RMB listed on domestic exchanges with a nominal value of RMB1.00 per share.

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(II) Method of the Issuance

The Issuance is carried out by way of non-public issuance to specific investors.

(III) Number of shares issued

The number of shares issued of the Issuance is 778,203,792 A Shares.

(IV) Issue price and pricing principles

The Pricing Benchmark Date of the Issuance is the first day of the offering period of the A Shares under the Issuance, i.e. December 11, 2017. The issue price of the Issuance shall not be lower than 90% of the average trading price of the A Shares of the Company during the 20 trading days immediately preceding the Pricing Benchmark Date (exclusive of the Pricing Benchmark Date), which is RMB14.21 per A Share. The average trading price of the A Shares during the 20 trading days immediately preceding the Pricing Benchmark Date is calculated by dividing the total trading amount of the A Shares during the 20 trading days immediately preceding the Pricing Benchmark Date by the total trading volume of the A Shares during the 20 trading days immediately preceding the Pricing Benchmark Date.

The Company and the joint lead underwriters have booked valid subscriptions based on the subscription status of the Issuance, the principles with price in priority, amount in priority and time in priority, and finally determined the issue price of the Issuance is RMB14.21 per A Share, which is the same as the base price RMB14.21 per A Share determined for the Issuance.

(V) Lock-up period

Under the Issuance, the shares subscribed by Shenergy Group shall not be transferred for 48 months from the date of completion of the Issuance; the shares subscribed by Shanghai Haiyan Investment shall not be transferred for 36 months from the date of completion of the Issuance; the shares subscribed by other target subscribers shall not be transferred for 12 months from the date of completion of the Issuance; consignor and partners of the investors who have been allotted with shares shall not transfer the shares of products held by them or retire from the partnership during the lock-up period.

(VI) The gross proceeds and net proceeds

The gross proceeds from the Issuance is RMB11,058,275,884.32. After deducting the issuance expenses, i.e. RMB101,095,545.51 (exclusive of value-add tax), the actual net proceeds is RMB10,957,180,338.81.

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(VII) The total issuance expenses

The expenses of the Issuance shall be RMB101,095,545.51 (exclusive of value-add tax).

(VIII) Sponsor and lead underwriter

The joint sponsor and joint lead underwriter of the Issuance are Guotai Junan Securities Co., Ltd. and Citi Orient Securities Co., Ltd.

II. ISSUANCE RESULTS AND OVERVIEW OF THE SUBSCRIBERS OF THE ISSUANCE

(I) Issuance results

A total of 778,203,792 A Shares were issued under the Issuance, not exceeding the cap of 800 million A Shares approved by the CSRC. There are a total of seven target subscribers, not exceeding ten, which meets the relevant requirements of the Administrative Measures for the Issuance of Securities by Listed Companies (《上市公司證券發行管理辦法》) and the Implementation Rules for the Nonpublic Issuance of Shares by Listed Companies (《上市公司非公開發行股票實施細則》).

Details of the target subscribers, the number of A Shares placed and the monetary amount of the placing are as follows:

No.	Target subscribers	Class of target subscribers	Number of A Shares placed (Share)	Monetary amount of the Placing (RMB)	Lock-up period (Months)
1	Shenergy (Group) Company Limited	Shareholder of the issuer	230,000,000	3,268,300,000.00	48
2	Shanghai Haiyan Investment Management CompanyLimited	Shareholder of the issuer	59,215,263	841,448,887.23	36
3	Zheneng Capital Holdings Limited. (浙能資本控股有限公司)	Other legal person	208,700,000	2,965,627,000.00	12
4	Shanxi Taigang Investment Co., Ltd. (山西太鋼投資 有限公司)	Other legal person	70,372,977	1,000,000,003.17	12
5	Guohua Life Insurance Co., Ltd.	Insurance	70,372,976	999,999,988.96	12
6	CaitongFund Management Co., Ltd.	Fund	104,356,087	1,482,899,996.27	12
7	Zhongyuan Equity Investment Management Co., Ltd. (中原股 權投資管理有限公司)	Other legal person	35,186,489	500,000,008.69	12
Total			778,203,792	11,058,275,884.32

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(II) Overview of the target subscribers

1. Basic information of the target subscribers

• (1) Shenergy (Group) Company Limited

Nature of corporation:

Joint stock limited liability (wholly state-owned)

Registered address: No. 159 Hongjing Road, Minhang District, Shanghai, PRC Date of incorporation: November 18, 1996 Registered capital: RMB10,000,000,000

Legal representative: Scope of operation:

黃迪南

Engaging in the investment, development and management of electric power and energy infrastructure industry, the investment of natural gas resources, the investment of municipal gas pipe network, the investment and management of real estate and high-technology industry, the industrial investment, the assets management and the domestic trades (excluding specially regulated items). (Items required approval according to laws shall only commence operation after obtaining approvals from related departments)

• (2) Shanghai Haiyan Investment Management Company Limited

Nature of corporation:

Joint stock limited liability (legal person sole investment by non-natural person investment or holding)

Registered address:

Room 318, Building 3, No. 717 Changyang Road, Yangpu District, Shanghai, PRC

Date of incorporation: October 15, 2009

Registered capital: RMB3,300,000,000

Legal representative:

陳宣民

Scope of operation: Industrial investment (excluding equity investment and its management), investment management (excluding equity investment and its management), engineering project management, asset management (excluding equity investment and its management), enterprise management and consultation (forbidden to engaging in agency), and domestic trade (excluding specially regulated items). (Items required approval according to laws shall only commence operation after obtaining approvals from related departments)

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• (3) Zheneng Capital Holdings Limited (浙能資本控股有限公司 )

Nature of corporation:

Joint stock limited liability (legal person sole investment by non-natural person investment or holding)

Registered address:

Room 248, No. 88 behind Yuanshuai Temple, Shangcheng District, Hangzhou, PRC

Date of incorporation: November 1, 2016 Registered capital: RMB10,000,000,000 Legal representative: 夏晶寒 Scope of operation:

Equity investment, private equity investment, industry investment, investment management, asset management, investment management consulting. (Shall not engage in financing deposits from the public, financing guarantees, financing on behalf of clients or other financial services without approval of the regulatory authorities such as financial sector)

• (4) Shanxi Taigang Investment Co., Ltd. ( 山西太鋼投資有限公司 )

Nature of corporation:

Joint stock limited liability (legal person sole investment by non-natural person investment or holding)

Registered address:

No. 72 North Taoyuan Road, Yingze District, Taiyuan, PRC (17th Floor of Ming Ding International)

Date of incorporation:

July 16, 1998

Registered capital: RMB2,000,000,000

Legal representative: 李華

Scope of operation:

Industrial investment (permitted by the laws and regulations) with own funds. (Items required approval according to laws shall only commence operation after obtaining approvals from related departments)

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• (5) Guohua Life Insurance Co., Ltd.

Nature of corporation:

Joint stock company (unlisted)

Registered address: Date of incorporation: November 8, 2007 Registered capital: RMB3,800,000,000 Legal representative: 劉益謙 Scope of operation:

Unit 3201, 3202, 3203, 3204, 3207 and 3208 of the 32nd Floor, No. 501 Middle Yincheng Road, Pilot Free Trade Zone (Shanghai), PRC

Life insurance, health insurance, accident insurance and other types of life insurance business; re-insurance of the above business; use of insurance funds permitted by the laws and regulations; and other business permitted the China Insurance Regulatory Commission. (Items required approval according to laws shall only commence operation after obtaining approvals from related departments)

• (6) Caitong Fund Management Co., Ltd.

Nature of corporation: Other joint stock limited liability

Registered address: Room 505, No. 619 of Wusong Road, Hongkou District, Shanghai, PRC

Date of incorporation: June 21, 2011 Registered capital: RMB200,000,000 Legal representative: 劉未 Scope of operation:

Fund raising, fund sales, asset management and other business permitted by the CSRC. (Items required approval according to laws shall only commence operation after obtaining approvals from related departments)

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• (7) Zhongyuan Equity Investment Management Co., Ltd. (中原股權投資管理有限公司 )

Nature of corporation:

Joint stock limited liability (legal person sole investment by non-natural person investment or holding)

Registered address:

Room 301 of the 3rd Floor, north of the Financial Square, intersection of Sigang Liandong Avenue and Yungang Road, Hangkonggang District, Zhengzhou, Henan Province, PRC

Date of incorporation: December 1, 2015

Registered capital: RMB2,000,000,000

Legal representative:

郭鴻勛

Scope of operation:

Management or entrusted management of non-securities equity investment and relevant consulting services. (Items required approval according to laws shall only commence operation after obtaining approvals from related departments)

2. Relationship between the target subscribers and the Company

As set out in the Circular, pursuant to the Chapter 14A of the Listing Rules, the transaction with Shenergy Group constitutes a connected transaction. Pursuant to applicable PRC laws and regulations, the transaction with Shanghai Haiyan Investment constitutes a related-party transaction. Fully disclosures of related parties/connected persons, related-party/connected relationship and related-party/connected transactions have been made by the Company.

None of the remaining five target subscribers of the Issuance, except Shenergy Group and Shanghai Haiyan Investment, has a related-party/connected relationship with the Company.

3. Material transactions between the target subscribers and their related parties/connected persons and the Company for the past year and the arrangements for future transactions between them

During the past year, the specific related-party/connected transactions of the Company with Shenergy Group and Shanghai Haiyan Investment are detailed in the periodic reports and announcements disclosed by the Company. As at the date of this announcement, other than the Company’s expected related-party/connected transactions approved and announced by the extraordinary general meeting, Shenergy Group, Shanghai Haiyan Investment and their related parties/connected persons have no arrangements for future transactions with the Company.

As at the date of this announcement, other than Shenergy Group and Shanghai Haiyan Investment, the remaining five target subscribers of the Issuance and their related parties/connected persons have no major transactions with the Company for the past year, except for the transactions in relation to the Issuance, or arrangements for future transactions.

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For the future transactions that may occur between the abovementioned target subscribers and their related parties/connected persons with the Company, the Company will strictly perform the corresponding internal approval and decision-making procedures and make adequate disclosure pursuant to its articles of association and the requirements of the relevant laws and regulations.

4. Lock-up period of the Issuance

Under the Issuance, the shares subscribed by Shenergy Group shall not be transferred for 48 months from the date of completion of the Issuance; the shares subscribed by Shanghai Haiyan Investment shall not be transferred for 36 months from the date of completion of the Issuance; the shares subscribed by other target subscribers shall not be transferred for 12 months from the date of completion of the Issuance; consignor and partners of the investors who have been allotted with shares cannot transfer the shares of products held by them or retire from the partnership during the lock-up period.

III. RELEVANT INFORMATION OF THE COMPANY BEFORE AND AFTER THE ISSUANCE

(I) Top 10 Shareholders of the Company before the Issuance

As at November 30, 2017, the top 10 Shareholders of the Company were as follows:

No.	Name of shareholders	Number of shares (Share)	Shareholding (%)
1	Shenergy(Group) CompanyLimited	1,537,522,422	24.74
2	HongKongSecurities ClearingCompanyNominees Limited	1,026,968,400	16.52
3	Shanghai Haiyan Investment Management CompanyLimited	286,271,333	4.61
4	Shanghai United Media Group	243,267,306	3.91
5	China Securities Finance Corporation Limited	199,128,018	3.20
6	Shanghai Electric (Group) Corporation	194,073,938	3.12
7	China Post GroupCorporation	178,743,236	2.88
8	Shanghai Jinqiao Export Processing Zone Development Co., Ltd. (上海金橋出口加工區開發股份有限公司)	160,653,687	2.58
9	Greatwall Information IndustryCo., Ltd.	143,000,000	2.30
10	Shanghai Construction GroupCo., Ltd.	133,523,008	2.15

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(II) Top 10 Shareholders of the Company after the Issuance (date of shares registration)

As at December 28, 2017 (date of shares registration), the top 10 Shareholders of the Company are as follows:

No.	Name of shareholders	Number of shares (Share)	Shareholding (%)
1	Shenergy(Group) CompanyLimited	1,767,522,422	25.27
2	HongKongSecurities ClearingCompanyNominees Limited	1,026,964,000	14.68
3	Shanghai Haiyan Investment Management CompanyLimited	345,486,596	4.94
4	China Securities Finance Corporation Limited	272,265,592	3.89
5	Shanghai United Media Group	243,267,306	3.48
6	ZhenengCapital Holdings Limited. (浙能資本控股有限公司)	208,700,000	2.98
7	Shanghai Electric (Group) Corporation	194,073,938	2.77
8	China Post GroupCorporation	178,743,236	2.56
9	Shanghai Jinqiao Export Processing Zone Development Co., Ltd. (上海金橋出口加工區開發股份有限公司)	160,653,687	2.30
10	Shanghai Construction GroupCo., Ltd.	133,523,008	1.91

(III) Impact of the Issuance on the control of the Company

There is no controlling shareholder or de facto controller of the Company before and after the Issuance.

Upon the completion of the Issuance, the number of the newly issued restricted shares will be 778,203,792 shares, total shares will increase to 6,993,655,803 shares, in which the percentage of shares held by Shenergy Group is 25.27%. The Company’s largest shareholder will not change.

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IV. THE SHAREHOLDING STRUCTURE OF THE COMPANY BEFORE AND AFTER THE ISSUANCE

The number of the shares of the Issuance is 778,203,792 A Shares. The share capital will increase from 6,215,452,011 shares to 6,993,655,803 shares. The shareholding of Shenergy Group which is the Company’s largest shareholder, will increase from 1,537,522,422 A Shares to 1,767,522,422 A Shares. The percentage of shares held by Shenergy Group will change to 25.27%.

Items	Before the Issuance	Before the Issuance	After the Issuance	After the Issuance
	Number of shares (Share)	Percentage (%)	Number of shares (Share)	Percentage (%)
1. Restricted shares	2,062,217,163	33.18	2,840,420,955	40.61
2. Non-restricted shares	4,153,234,848	66.82	4,153,234,848	59.39
3. Total	6,215,452,011	100.00	6,993,655,803	100.00

V. MANAGEMENT DISCUSSION AND ANALYSIS

(I) Effect on asset structure

Upon the completion of the Issuance, the total assets and net assets of the Company will increase correspondingly while the gearing ratio will decrease. The capital structure and financial condition of the Company will be improved and the financial risks will be mitigated, thus the Company’s overall risk resistance will be raised.

(II) Effect on business structure

The proceeds raised from the Issuance (after deducting the issuance expenses) shall all be used to increase the capital base of the Company. The projects to be invested with the proceeds raised from the Issuance are in line with the strategic development direction of the Company. Through increasing the capital base of the Company and replenishing the working capital, the Company will be able to expand its business scale and improve its market competitiveness and risk resistance.

Upon the completion of the Issuance, the principal business scope of the Company will remain unchanged without causing the integration of the business and assets of the Company.

(III) Effect on corporate governance

There is no controlling shareholder or de facto controller of the Company before and after the Issuance.

Upon the completion of the Issuance, the proportion of equity interest directly held by Shenergy Group, the largest shareholder of the Company, in the Company will rise from 24.74% to 25.27% without causing any change to the largest shareholder of the Company. The Issuance has introduced new investors, which is beneficial to the optimization of the structure of corporate governance.

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(IV) Effect on the structure of senior management

The Issuance has not made any adjustment to senior management. Therefore, the Issuance will not result in any material effect on the structure of senior management.

(V) Effect on related-party/connected transactions and horizontal competition

Upon the completion of the Issuance, there will still be no controlling shareholder or de facto controller of the Company. Therefore, there will be no horizontal competition among controlling shareholder, de facto controller and their controlled entities.

Upon the completion of the Issuance, there is no material change to the business relationship or the related-party/connected relationship between the Company and its related parties/connected persons. There will not be any new related-party/connected transactions as well.

By order of the Board of Directors PAN Xinjun Chairman

Shanghai, PRC December 29, 2017

As at the date of this announcement, the Board of Directors comprises Mr. PAN Xinjun and Mr. JIN Wenzhong as executive Directors; Mr. WU Jianxiong, Mr. ZHANG Qian, Mr. WU Junhao, Mr. CHEN Bin, Mr. LI Xiang, Mr. XU Jianguo and Ms. HUANG Laifang as non-executive Directors; and Mr. XU Guoxiang, Mr. TAO Xiuming, Mr. WEI Anning, Mr. XU Zhiming and Mr. JIN Qinglu as independent non-executive Directors.

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