Huatai Securities Co., Ltd. — Proxy Solicitation & Information Statement 2016

Jul 28, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

If you have sold or transferred all your Shares in the Company , you should at once hand this circular together with the accompanying form of proxy and reply slip to the purchaser(s) or the 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 the transferee(s).

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(A joint stock company incorporated in the People’s Republic of China with limited liability under the Chinese corporate name 華泰證券股份有限公司 and carrying on business in Hong Kong as HTSC) (Stock Code: 6886)

PROVISION OF THE NET CAPITAL GUARANTEE FOR HUATAI ASSET MANAGEMENT

AND NOTICE OF EGM

A notice convening the EGM of the Company to be held at Meeting Room 2, 2nd Floor, Renaissance Nanjing Olympic Centre Hotel, No. 139 Aoti Street, Jianye District, Nanjing, Jiangsu Province, PRC on Tuesday, 13 September 2016 at 2:00 p.m. is set out on pages 6 to 8 of this circular.

If you are not able to attend the EGM, 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 EGM and deposit it together with the notarised power of attorney or other document of authorisation with the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited (for holders of H Share). Completion and return of the form of proxy will not preclude you from attending and voting at the EGM should you so desire.

Shareholders intending to attend the EGM in person or by their proxies should complete and return the reply slip for attending the EGM to the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited (for holders of H Share) on or before Wednesday, 24 August 2016.

29 July 2016

TABLE OF CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
NOTICE OF THE EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
APPENDIX I RESOLUTION ON THE PROVISION OF THE NET CAPITAL GUARANTEE
FOR HUATAI ASSET MANAGEMENT BY THE COMPANY. . . . . . . . . . . . . . 9

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DEFINITIONS

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

“A Share(s)”	domestic shares of our Company, with a nominal value of RMB1.00 each, which
	are subscribed for or credited as paid up in Renminbi and are listed for trading
	on the Shanghai Stock Exchange
“Articles of Association”	the articles of association of our Company, as amended, which shall become
	effective on the Listing Date
“Board”	the board of directors of our Company
“Company”	a joint stock company incorporated in the PRC with limited liability under
	the corporate name華泰證券股份有限公司(Huatai Securities Co., Ltd.),
	converted from our predecessor華泰證券有限責任公司(Huatai Securities
	Limited Liability Company) on 7 December 2007, carrying on business in Hong
	Kong as “HTSC”, and was registered as a registered non-Hong Kong company
	under Part 16 of the Companies Ordinance under the Chinese approved name
	of “華泰六八八六股份有限公司” and English name of “Huatai Securities
	Co., Ltd.”; the H Shares of which are listed on the Main Board of The Stock
	Exchange of Hong Kong Limited on 1 June 2015 (Stock Code: 6886) and the
	A Shares of which are listed on the Shanghai Stock Exchange on 26 February
	2010 (Stock Code: 601688)
“CSRC”	the China Securities Regulatory Commission (中國證券監督管理委員會)
“Director(s)”	the director(s) of the Company
“EGM”	the second extraordinary general meeting for 2016 to be held by the Company on
	Tuesday, 13 September 2016
“Hong Kong” or “HK”	the Hong Kong Special Administrative Region of the PRC
“Hong Kong Stock	The Stock Exchange of Hong Kong Limited
Exchange”
“H Share(s)”	overseas listed foreign shares in the share capital of the Company with nominal
	value of RMB1.00 each, which are subscribed for and traded in HK dollars and
	are listed on the Hong Kong Stock Exchange
“Huatai Asset	Huatai Securities (Shanghai) Asset Management Co., Ltd.（華泰證券（上海）
Management”	資產管理有限公司）, a wholly-owned subsidiary of the Company
“Latest Practicable Date”	26 July 2016, being the latest practicable date for the purpose of ascertaining
	certain information contained in this circular prior to its publication
“Listing Rules”	Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
	Limited
“PRC” or “China”	the People’s Republic of China, excluding for the purposes of this circular, Hong
	Kong, Macau and Taiwan
“RMB” or “Renminbi”	Renminbi, the lawful currency of the PRC

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DEFINITIONS

“Share(s)” the ordinary share(s) with the nominal value of RMB1.00 each in the share capital of the Company “Shareholder(s)” the shareholder(s) of the Company

the shareholder(s) of the Company

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LETTER FROM THE BOARD

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(A joint stock company incorporated in the People’s Republic of China with limited liability under the Chinese corporate name 華泰證券股份有限公司 and carrying on business in Hong Kong as HTSC) (Stock Code: 6886)

Executive Director:

Mr. ZHOU Yi (Chairman, President)

Non-executive Directors:

Ms. PU Baoying Mr. SUN Hongning Mr. ZHOU Yong Mr. CAI Biao Mr. GAO Xu Mr. CHEN Ning Mr. XU Qing

Registered office:

No. 228 Middle Jiangdong Road, Nanjing, Jiangsu Province, PRC

Principal place of business in Hong Kong:

4201, 42/F, The Center, 99 Queen’s Road Central, Hong Kong

Independent Non-executive Directors:

Mr. BAI Wei Mr. LIU Hongzhong Mr. LEE Chi Ming Mr. CHEN Chuanming Mr. YANG Xiongsheng

29 July 2016

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 EGM (set out on pages 6 to 8 of this circular) and provide you with information reasonably necessary to enable you to make an informed decision on whether to vote for or against the proposed resolution or abstain from voting at the EGM.

For reference purpose only, a notice of the EGM of holders of A Shares has been published on the website of the Shanghai Stock Exchange (http://www.sse.com.cn/) on 29 July 2016.

At the EGM, the following resolution will be proposed to the Shareholders for voting:

1. To consider and approve the resolution on the provision of the net capital guarantee for Huatai Asset Management by the Company

The resolution listed above will be proposed as an ordinary resolution.

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LETTER FROM THE BOARD

INFORMATION ON THE RESOLUTION

1. To consider and approve the resolution on the provision of the net capital guarantee for Huatai Asset Management by the Company

Reference is made to the thirty-fifth meeting of the third session of the Board convened by the Company on 27 July 2016. The Board has approved the resolution on the provision of the net capital guarantee for Huatai Asset Management by the Company, and the resolution is hereby submitted to the general meeting of Shareholders for consideration.

Details of the resolution on the provision of the net capital guarantee for Huatai Asset Management by the Company are set out in the Appendix I to this circular.

INFORMATION ON ATTENDING THE EGM

The EGM will be held at Meeting Room 2, 2nd Floor, Renaissance Nanjing Olympic Centre Hotel, No. 139 Aoti Street, Jianye District, Nanjing, Jiangsu Province, the PRC on Tuesday, 13 September 2016 at 2:00 p.m. The notice of the EGM is also set out on pages 6 to 8 of this circular.

Summary of the important dates for H Shareholders is as follows:

Last Registration Date : on or before 4:30 p.m. Friday, 12 August 2016 Closure of Register of Members : Sunday, 14 August 2016 to Tuesday, 13 September 2016 for H Shareholders Submission of Reply Slip : on or before Wednesday, 24 August 2016 Submission of Proxy Form : on or before 2:00 p.m. Monday, 12 September 2016

The register of members of H Shares of the Company will be closed from Sunday, 14 August 2016 to Tuesday, 13 September 2016 (both days inclusive), during which time no share transfers of H Shares will be effected. In order to attend the EGM, unregistered holders of H Shares of the Company 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, on or before 4:30 p.m. on Friday, 12 August 2016. Holders of H Shares whose names appear on the H Shares register of members of the Company on Tuesday, 13 September 2016 are entitled to attend and vote in respect of the resolution to be proposed at the EGM.

Reply slip and the proxy form for the EGM have been despatched on Friday, 29 July 2016 and have also been published on the website of Hong Kong Stock Exchange (www.hkexnews.hk). Shareholders intending to attend the EGM in person or by their proxies should complete and return the reply slip for attending the EGM to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited (for holders of H Shares) on or before Wednesday, 24 August 2016.

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LETTER FROM THE BOARD

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

For reference purpose only, the record date for determining the eligibility of members of A Shares for attending the EGM is Monday, 5 September 2016. For more details, please refer to the notice of the EGM published on the website of the Shanghai Stock Exchange (http://www.sse.com.cn/) on Friday, 29 July 2016.

VOTING ARRANGEMENT

According to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a shareholders’ general meeting must be taken by poll. Accordingly, the chairman of the EGM will demand a poll in relation to the proposed resolution at the EGM in accordance with Article 113 of the Articles of Association of the Company.

The resolution proposed at the EGM is an ordinary resolution to be passed by the affirmative votes representing at least one half of the total number of Shares held by the attending Shareholders having voting rights.

Pursuant to Rule 2.15 of the Listing Rules, where shareholders’ approval is required with regard to a transaction, any shareholder that has a material interest in such transaction shall abstain from voting on the resolution(s) approving such transaction at the general meeting.

As far as the Directors are aware, as of the Latest Practicable Date, no Shareholder is considered to have a material interest in the resolution proposed at the EGM and has to abstain from voting at the EGM approving the resolution.

RECOMMENDATION

The Board believes that the resolution 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 resolution to be proposed at the EGM as set out in the notice of the EGM set out in this circular.

Yours faithfully, By order of the Board of the Company Jiang Jian Company Secretary

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NOTICE OF THE EGM

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

(Stock Code: 6886)

NOTICE OF THE EGM

NOTICE IS HEREBY GIVEN that the EGM of the Company will be held at Meeting Room 2, 2nd Floor, Renaissance Nanjing Olympic Centre Hotel, No. 139 Aoti Street, Jianye District, Nanjing, Jiangsu Province, the PRC on Tuesday, 13 September 2016 at 2:00 p.m. to consider the following issues:

ORDINARY RESOLUTION

1. To consider and approve the resolution on the provision of the net capital guarantee for the Company’s wholly-owned subsidiary Huatai Securities (Shanghai) Asset Management Co., Ltd.

INFORMATION ON THE RESOLUTION

Information of the resolution to be considered at the EGM and the recommendations of the Directors will be set out in detail in a circular to be despatched by the Company on Friday, 29 July 2016.

DEFINITIONS

In this notice, the following expressions have the meanings set out below unless the context otherwise requires.

“Board” the board of directors of the Company

“Company” a joint stock company incorporated in the PRC with limited liability under the corporate name 华泰證券股份有限公司 (Huatai Securities Co., Ltd.), converted from our predecessor 华泰證券有限責任公司 (Huatai Securities Limited Liability Company) on 7 December 2007, carrying on business in Hong Kong as “HTSC”, and was registered as a registered non-Hong Kong company under Part 16 of the Companies Ordinance under the Chinese approved name of “華泰六八八六股份有限公司” and English name of “Huatai Securities Co., Ltd.”; the H Shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited on 1 June 2015 (Stock Code: 6886) and the A Shares of which are listed on the Shanghai Stock Exchange on 26 February 2010 (Stock Code: 601688)

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

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NOTICE OF THE EGM

“EGM” the second extraordinary general meeting for 2016 to be held by the Company on Tuesday, 13 September 2016

“Listing Rules”

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

“PRC” or “China”

the People’s Republic of China, excluding for the purposes of this notice, Hong Kong, Macau and Taiwan

“Shareholder(s)”

the shareholder(s) of the Company

By order of the Board of the Company Jiang Jian Company Secretary

Jiangsu, PRC, 29 July 2016

As of the date of this notice, the Board comprises Mr. ZHOU Yi as an executive Director; Ms. PU Baoying, Mr. SUN Hongning, Mr. ZHOU Yong, Mr. CAI Biao, Mr. GAO Xu, Mr. CHEN Ning and Mr. XU Qing as non-executive Directors; and Mr. BAI Wei, Mr. LIU Hongzhong, Mr. LEE Chi Ming, Mr. CHEN Chuanming and Mr. YANG Xiongsheng as independent nonexecutive Directors.

Notes:

1. Eligibility for attending the EGM and date of registration of members for H Shares

The register of members of H Shares of the Company will be closed from Sunday, 14 August 2016 to Tuesday, 13 September 2016 (both days inclusive), during which time no share transfers of H Shares will be effected. In order to attend the EGM, unregistered holders of H Shares of the Company should ensure that the relevant share certificates, accompanied by all transfer documents, 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, on or before 4:30 p.m. on Friday, 12 August 2016. Holders of H Shares whose names appear on the H Shares register of members of the Company on Tuesday, 13 September 2016 are entitled to attend and vote in respect of the resolution to be proposed at the EGM.

2. Proxy

• (1) Each Shareholder entitled to attend and vote at the EGM may appoint one or more proxies in writing to attend and vote on his/her behalf. A proxy need not be a Shareholder.

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

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

• (3) Any voting at the EGM shall be taken by poll.

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NOTICE OF THE EGM

3. Registration procedures for attending the EGM

• (1) A Shareholder attending in person should present proof of identity or stock account cards when attending the EGM. In the case of attendance by proxy, the proxy should present proof of identity and the proxy form(s) from the Shareholders. If a Shareholder is a legal person, its legal representative may attend the EGM by providing his/her identify card and valid proof of its capacity as a legal representative of such Shareholder appointing such person to attend the meeting. In the case of attendance by proxy of the legal representative, the proxy should present his/her identity card and a written letter of authorisation duly issued by such legal representative when attending the EGM.

• (2) Shareholders intending to attend the EGM in person or by their proxies should complete and return the reply slip for attending the EGM to the Computershare Hong Kong Investor Services Limited (for holders of H Shares) at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on or before Wednesday 24 August, 2016.

4. Voting by poll

According to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a shareholders’ general meeting must be taken by poll. Accordingly, the chairman of the EGM will demand a poll in relation to the proposed resolution at the EGM in accordance with Article 113 of Articles of Association of the Company.

The resolution proposed at the EGM is an ordinary resolution to be passed by the affirmative votes representing at least one half of the total number of Shares held by the attending Shareholders having voting rights.

Pursuant to Rule 2.15 of the Listing Rules, where shareholders’ approval is required with regard to a transaction, any shareholder that has a material interest in such transaction shall abstain from voting on the resolution(s) approving such transaction at the general meeting.

As far as the Directors are aware, as of the Latest Practicable Date, no Shareholder is considered to have a material interest in the resolution proposed at the EGM and has to abstain from voting at the EGM approving the resolution.

5. Miscellaneous

• (1) The EGM is expected to be held for no more than half a day. Shareholders attending the meeting in person or by proxy shall bear their own travelling and accommodation expenses.

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

Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (3) The registered address of the Company:

No. 228 Middle Jiangdong Road Nanjing, Jiangsu Province People’s Republic of China

Contact Office: Board Office Telephone No.: +86 25 8338 7780/8338 7793 Fascimile No.: +86 25 8338 7784 E-mail: boardoffice@htsc.com

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RESOLUTION ON THE PROVISION OF THE NET CAPITAL GUARANTEE FOR HUATAI ASSET MANAGEMENT BY THE COMPANY

APPENDIX I

Dear Shareholders,

Huatai Asset Management was established in January 2015. The 2014 annual general meeting of the Company held on 30 March 2015 considered and approved the Resolution on the Provision of the Net Capital Guarantee for the Company’s Wholly-owned Subsidiary Huatai Securities (Shanghai) Asset Management Co., Ltd. , pursuant to which the Company is authorized to provide net capital guarantee in the maximum amount of RMB1.2 billion to Huatai Asset Management, and that the Company undertakes to provide cash unconditionally within the aforementioned limit to Huatai Asset Management to support its business needs. In addition, the senior management of the Company are authorized to handle all the procedures required for the net capital guarantee.

On 16 June 2016, the CSRC issued the latest revised Administrative Measures for Risk Control Indexes of Securities Companies and Provisions on the Calculation Standards for the Risk Capital Reserves of Securities Companies , pursuant to which Huatai Asset Management is required to make risk capital provisions at the rates of 1.0%, 0.9% and 0.5% (the ratios are subject to adjustment by the CSRC in accordance with its classification: 0.7 for assets categorized as above Class A for three consecutive years, 0.8 for Class A assets, 0.9 for Class B assets, 1.0 for Class C assets and 2.0 for Class D assets) for its structural collective asset management schemes, target plans on investment in non-standardized assets and other target plans, respectively, based on the net values of their respective business assets. The standard ratios are significantly higher than those under the previous measures. The abovementioned new measures will come into effect from 1 October 2016. On 15 July 2016, the CSRC announced the 2016 classification results of securities companies according to which the Company was downgraded from Class AA in 2015 to Class BBB. As the Company and its subsidiaries engaging in securities business were assessed in a combined manner pursuant to the measures, Huatai Asset Management was also classified as Class BBB. Based on the new measures above, it is estimated that as of the end of June 2016, the risk coverage ratio as one of the risk control indexes would be below the warning standard of 120% set by the CSRC.

In view of the above, to ensure the compliance of all risk control indexes of Huatai Asset Management with the measures, the Company has recently injected RMB1.6 billion to Huatai Asset Management, and proposed the followings:

1. The Company will provide net capital guarantee in the maximum amount of RMB5.0 billion to Huatai Asset Management and undertake to provide cash unconditionally within the aforementioned limit to Huatai Asset Management to support its business needs.

2. The senior management of the Company are authorized to handle all the procedures required for the net capital guarantee.

The resolution was considered and approved at the 35th meeting of the third session of the Board, among which, the Director of the related party, Mr. Zhou Yi, abstained from voting on this resolution, and is hereby submitted for the approval of Shareholders.

Attachment: The Feasibility Analysis Report on the Provision of the Net Capital Guarantee for the Company’s Wholly-owned Subsidiary Huatai Securities (Shanghai) Asset Management Co., Ltd.

The Board of the Company

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RESOLUTION ON THE PROVISION OF THE NET CAPITAL GUARANTEE FOR HUATAI ASSET MANAGEMENT BY THE COMPANY

APPENDIX I

Attachment:

FEASIBILITY REPORT ON THE PROVISION OF THE NET CAPITAL GUARANTEE FOR THE COMPANY’S WHOLLY-OWNED SUBSIDIARY HUATAI SECURITIES (SHANGHAI) ASSET MANAGEMENT CO., LTD.

For compliance with regulatory requirements of various risk control indicators by Huatai Asset Management, the Company proposes to provide a net capital guarantee of an amount not more than RMB5 billion for Huatai Asset Management and unconditionally undertakes to provide the abovementioned cash to support the business development of Huatai Asset Management. The analysis is set out as follows:

I. Basic information of Huatai Asset Management

Huatai Asset Management, our predecessor asset management headquarter, is a one-person liability company established subject to the approval by the CSRC in accordance with the Approval of the Establishment of A Securities Asset Management Subsidiary by Huatai Securities Co., Ltd. ( 關於核准華 泰證券股份有限公司設立證券資產管理子公司的批覆 ) (Zheng Jian Xu Ke [2014] No. 679). The Company contributed RMB0.3 billion for its establishment on 16 October 2014. On 16 September 2015, the Company increased its contribution in Huatai Asset Management by RMB0.7 billion. As such, its paid-in capital was changed to RMB1 billion.

Since the commencement of its operation, Huatai Asset Management, as directed by its strategic concept of covering the whole business chain, has vigorously stimulated and created customer needs and satisfied their diversified investment and financing needs with diversified financial products, so as to achieve full realization of customer value. Acting as both the assets manager and assets supplier, it has continued to enhance its capabilities in active management and product innovation, strived to forge core competiveness and has made breakthroughs in numerous business fields.

In order to scientifically respond to the ever-changing external environment, Huatai Asset Management has steadily conducted three core businesses, namely collective asset management, targeted asset management and special asset management, and continued to improve its proactive management and product innovation to further strengthen its core competitiveness. Breakthroughs have been achieved in various business aspects and the total scale of its asset management has continued to expand. As for the collective asset management business, the collective product line has continued to be enriched with introduction of products with various risk levels in sectors such as fixed-income investments, equity investments, financing, cross-border investments and other types of investments. The size of “Daily Gain (天天發) ”, its core product, has continued to expand with its daily average inventory reaching a new height. On the other hand, the introduction of “Daily Wealth (天天財) ”, an innovative integrated wealth management business, has optimized its service capability in supporting customer liquidity. The targeted asset management business has steadily enhanced and the cooperation with banks in channel business has rapidly expanded, delivering an effective and fruitful transformation and a growth in the customized wealth management services for institutions. By virtue of a rapidly-growing outsourcing business and an increasingly diversified customer structure, the cooperation with banks, insurance companies and other institutions has been further strengthened. The special asset management business recorded a strong growth and its asset securitization business has developed specialized business in fields such as rights to margin finance and securities lending, rights to financing leases, internet consumption finance, notes, policypledged loans and insurance and wealth management. Several special asset supporting schemes have been launched, marking milestones of the industry.

As of the end of 2015, the scale of assets managed by Huatai Asset Management amounted to RMB614.386 billion, ranking third in the industry. In 2015, Huatai Asset Management recorded operating income of RMB1,209,553,000, gross profit of RMB935,851,600 and net profit of RMB701,717,200, ranking top of the industry in terms of scale and income.

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RESOLUTION ON THE PROVISION OF THE NET CAPITAL GUARANTEE FOR HUATAI ASSET MANAGEMENT BY THE COMPANY

APPENDIX I

II. Overview of the guarantee

On 16 June 2016, the CSRC issued the latest revised Administrative Measures for Risk Control Indexes of Securities Companies (證券公司風險控制指標管理辦法) and Provisions on the Calculation Standards for the Risk Capital Reserves of Securities Companies (關於證券公司風險資本準備計算標 準的規定) (hereinafter collectively referred to as the “New Measures”) which will come into effect from 1 October 2016. Based on the new measures, it is estimated that as of the end of June 2016, among the risk control indicators, the risk coverage ratio of Huatai Asset Management would be far below the warning benchmark of 120% set by the CSRC. As such, the Company has to activate the net capital replenishing mechanism so as to comply with the regulatory requirements. The Company has recently injected an additional capital of RMB1.6 billion into Huatai Asset Management and intends to provide net capital guarantee of an amount not more than RMB5 billion.

III. Analysis of the necessity and feasibility of the net capital guarantee

In accordance with the latest Provisions on the Calculation Standards for the Risk Capital Reserves of Securities Companies (關於證券公司風險資本準備計算標準的規定) issued by the CSRC, Huatai Asset Management is required to make risk capital provisions at the rates of 1.0%, 0.9% and 0.5% (the ratios are subject to adjustment by the CSRC in accordance with its classification: 0.7 for assets categorized as above Class A for three consecutive years, 0.8 for Class A assets, 0.9 for Class B assets, 1.0 for Class C assets and 2.0 for Class D assets) for its structural collective asset management schemes, target plans on investment in non-standardized assets and other target plans, respectively, based on the net values of their respective business assets. The standard ratios are significantly higher than those under the previous measures. The abovementioned new measures will come into effect from 1 October 2016. On 15 July 2016, the CSRC announced the 2016 classification results of securities companies, according to which the Company was downgraded from Class AA in 2015 to Class BBB. As the Company and its subsidiaries engaging in securities business were assessed in a combined basis pursuant to the measures, Huatai Asset Management was also classified as Class BBB. Based on the new measures, it is estimated that as of the end of June 2016, among the risk control indicators, the risk coverage ratio of Huatai Asset Management would be below the warning benchmark of 120% set by the CSRC.

Taking all solutions into account, the Company is required to activate the net capital replenishing mechanism to inject an additional capital of RMB1.6 billion into Huatai Asset Management and provide a guarantee commitment of RMB5 billion, so as to enable the risk control indicators of Huatai Asset Management to comply with the regulatory requirement. After injecting an additional capital of RMB1.6 billion into Huatai Asset Management and providing a guarantee commitment of RMB5 billion, as calculated based on the data as of 30 June 2016, among the risk control indicators, the risk coverage ratio of Huatai Asset Management was 155.13%. All risk control indicators have been in compliance with regulatory requirements and there will be space for further development of the asset management business. In addition, based on the stress test on net capital, all indicators of the Company will still comply with regulatory requirements after injecting an additional capital of RMB1.6 billion into Huatai Asset Management and providing a guarantee commitment of RMB5 billion.

As mentioned above, the net capital guarantee provided by the Company to Huatai Asset Management may satisfy its needs for risk management and business development. All indicators of the Company will still comply with regulatory requirements. Therefore, the provision of net capital guarantee by the Company to Huatai Asset Management is necessary and feasible.

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