THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. If you are in any doubt as to any aspect of this Circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers. If you have sold or transferred all your shares in Haitong Securities Co., Ltd., you should at once hand this Circular together with the accompanying form of proxy 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). (A joint stock limited company incorporated in the People s Republic of China with limited liability) (Stock Code: 6837) 2012 REPORT OF THE BOARD 2012 REPORT OF THE SUPERVISORY COMMITTEE 2012 ANNUAL REPORT 2012 FINAL ACCOUNTS REPORT 2012 PROFIT DISTRIBUTION PROPOSAL RENEWAL OF ENGAGEMENT OF A SHARE AUDITING FIRM AND H SHARE AUDITING FIRM FOR THE YEAR 2013 PROPOSAL REGARDING INVESTMENT ASSET ALLOCATION OF EQUITY, FIXED INCOME SECURITIES AND DERIVATIVE PRODUCTS FOR THE YEAR 2013 PROPOSED APPOINTMENT OF MR. XIAO SUINING AS INDEPENDENT NON-EXECUTIVE DIRECTOR OF THE COMPANY REPLACEMENT OF THE SUPERVISOR POTENTIAL CONNECTED/RELATED TRANSACTION INVOLVED IN THE ISSUANCE OF SHORT-TERM FINANCING BILLS OF SECURITIES COMPANIES, CORPORATE BONDS AND OTHER ONSHORE DEBT FINANCING INSTRUMENTS PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION ENLARGEMENT OF THE BUSINESS SCOPE OF THE COMPANY THE ISSUANCE OF SHORT-TERM FINANCING BILLS OF SECURITIES COMPANIES GENERAL MANDATE TO ISSUE SHORT-TERM FINANCING BILLS OF SECURITIES COMPANIES ISSUANCE OF CORPORATE BONDS GENERAL MANDATE TO ISSUE CORPORATE BONDS GENERAL MANDATE TO ISSUE OTHER ONSHORE DEBT FINANCING INSTRUMENTS SCALE OF FINANCING BUSINESS FOR CUSTOMERS OF THE COMPANY AND NOTICE OF ANNUAL GENERAL MEETING A notice convening the 2012 Annual General Meeting of the Company to be held at Room 3 of the banquet hall, 3/F, Galaxy Hotel, 888 Zhongshan West Road, Shanghai, the PRC on Monday, 27 May 2013 at 1:00 p.m. is set out on pages 24 to 28 of this Circular. Reply slip for holders of H Share for attending the AGM and the form of proxy have been distributed on 11 April 2013 and have also been published on the website of the Hong Kong Stock Exchange ( Whether or not you are able to attend the AGM, 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 deposit it together with the notarised power of attorney or other document of authorization with Computershare Hong Kong Investor Services Limited. Completion and return of the form of proxy will not preclude you from attending and voting at the AGM should you so desire. Shareholders of the Company intending to attend the AGM in person or by their proxies should complete and return the reply slip for attending the AGM to Computershare Hong Kong Investor Services Limited on or before 7 May * For identification purpose only 11 April 2013

2 TABLE OF CONTENTS Page DEFINITIONS LETTER FROM THE BOARD NOTICE OF ANNUAL GENERAL MEETING Annex A 2012 Report of the Board Annex B 2012 Report of the Supervisory Committee Annex C 2012 Final Accounts Report Annex D 2012 Work Report of Independent Directors Annex E Proposal Regarding the General Mandate to Issue Other Onshore Debt Financing Instruments Annex F Biography of Mr. Xiao Suining Annex G Biography of Mr. Li Lin i

3 DEFINITIONS In this Circular, unless the context otherwise requires, the following expressions have the following meanings: A Share(s) domestic shares of the 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 AGM or Annual General Meeting the annual general meeting for the year 2012 of the Company to be held at Room 3 of the banquet hall, 3/F, Galaxy Hotel, 888 Zhongshan West Road, Shanghai, the PRC on Monday, 27 May 2013 at 1:00 p.m. Articles of Association the articles of association of the Company, as amended from time to time Board or Board of Directors the board of directors of the Company Company Haitong Securities Co., Ltd., 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 6837 and the A Shares of which are listed on the Shanghai Stock Exchange under the stock code of CSRC the China Securities Regulatory Commission Director(s) the director(s) of the Company Group the Company and its subsidiaries H Share(s) ordinary shares in the share capital of our Company with nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars Hong Kong the Hong Kong Special Administrative Region of the PRC Hong Kong Listing Rules or Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited 1

4 DEFINITIONS Independent Director(s) or Independent Non-executive Director(s) the independent non-executive director(s) of the Company PBOC PRC or China RMB or Renminbi Share(s) Shareholder(s) Supervisor(s) Supervisory Committee the People s Bank of China, the central bank of the PRC the People s Republic of China, but for the purposes of this Circular only, excludes the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan Renminbi, the lawful currency of the PRC the ordinary share(s) of RMB1.00 each in the share capital of the Company, including A Shares and H Shares the shareholder(s) of the Company, including holder(s) of H Shares and holder(s) of A Shares the supervisor(s) of the Company the supervisory committee of the Company 2

5 LETTER FROM THE BOARD (A joint stock limited company incorporated in the People s Republic of China with limited liability) (Stock Code: 6837) Executive Directors: Mr. Wang Kaiguo (Chairman) Mr. Li Mingshan (General Manager) Non-executive Directors: Mr. Zhuang Guowei Mr. Zhou Donghui Mr. He Jianyong Mr. Zhang Jianwei Mr. Xu Chao Mr. Wang Hongxiang Mr. Li Gewei Mr. Feng Huang Registered office: Haitong Securities Building No. 689 Guangdong Road Shanghai PRC Principal place of business in Hong Kong: 21st Floor, Li Po Chun Chambers 189 Des Voeux Road Central Central Hong Kong Independent Non-executive Directors: Mr. Xia Bin Mr. Chen Qiwei Mr. Zhang Huiquan Mr. Zhang Ming Mr. Dai Genyou Mr. Liu Chee Ming 11 April 2013 To the Shareholders Dear Sir or Madam, INTRODUCTION The purpose of this Circular is to provide you notice of the AGM (set out on pages 24 to 28 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 resolutions at the AGM. * For identification purpose only 3

6 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 2012 (the 2012 Report of the Board ); (ii) the report of the Supervisory Committee of the Company for the year 2012 (the 2012 Report of the Supervisory Committee ); (iii) the annual report of the Company for the year 2012 (the 2012 Annual Report ); (iv) the final accounts report of the Company for the year 2012 (the 2012 Final Accounts Report ); (v) the profit distribution proposal of the Company for the year 2012 (the 2012 Profit Distribution Proposal ); (vi) the renewal of engagement of A Share auditing firm and H Share auditing firm for the year 2013; (vii) the proposal regarding investment asset allocation of equity, fixed income securities and derivative products for the year 2013; (viii) the proposal regarding the proposed appointment of Mr. Xiao Suining as independent non-executive Director of the Company; (ix) the proposal regarding the replacement of the Supervisor; and (x) the proposal regarding the potential connected/related transaction involved in the issuance of short-term financing bills of securities companies, corporate bonds and other onshore debt financing instruments. Special resolutions will be proposed to approve (i) the proposed amendments to the Articles of Association; (ii) the proposal regarding the enlargement of the business scope of the Company; (iii) the proposal regarding the issuance of short-term financing bills of securities companies; (iv) the proposal regarding the general mandate to issue short-term financing bills of securities companies; (v) the proposal regarding the issuance of corporate bonds; (vi) the proposal regarding the general mandate to issue corporate bonds; (vii) the proposal regarding the general mandate to issue other onshore debt financing instruments; and (viii) the proposal regarding the scale of financing business for customers of the Company. ORDINARY RESOLUTIONS: Report of the Board An ordinary resolution will be proposed at the AGM to approve the 2012 Report of the Board. Details of the aforesaid report of the Board are set out in Annex A of this Circular. The 2012 Report of the Board was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval Report of the Supervisory Committee An ordinary resolution will be proposed at the AGM to approve the 2012 Report of the Supervisory Committee. Details of the aforesaid report of the Supervisory Committee are set out in Annex B of this Circular. The 2012 Report of the Supervisory Committee was considered and approved by the Supervisory Committee on 26 March 2013 and is hereby proposed at the AGM for consideration and approval Annual Report An ordinary resolution will be proposed at the AGM to approve the 2012 Annual Report. The 2012 Annual Report of the Company will be despatched and also published on the website of the Hong Kong Stock Exchange ( and the website of the Company ( in due course, but no later than 30 April

7 LETTER FROM THE BOARD The 2012 Annual Report was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval Final Accounts Report An ordinary resolution will be proposed at the AGM to approve the 2012 Final Accounts Report. Details of the aforesaid Final Accounts Report are set out in Annex C of this Circular. The 2012 Final Accounts Report was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval Profit Distribution Proposal An ordinary resolution will be proposed at the AGM to approve the profit distribution proposal of the Company in accordance with the Articles of Association. Based on the audit results of the year 2012, relevant laws and regulations and the Articles of Association, the profit distribution proposal of the Company for the year 2012 is as follows: the Company shall distribute cash dividends of RMB1.20 per 10 shares (inclusive of tax) to all the shareholders of A Shares and H Shares who are registered in the register of shareholders on the record date on the basis of total share capital, namely 9,584,721,180 shares as of 31 December The distributed cash dividends amount to RMB1,150,166, in total, representing 73.42% of the cash profits available for distribution to investors for the year The undistributed profits of RMB7,994,320, attributable to parent company after this cash dividends distribution will be carried over to the next year. Cash dividends are denominated and declared in RMB and will be paid in RMB and Hong Kong dollars to A Shares shareholders and H Shares shareholders respectively. The actual amount distributed in Hong Kong dollar will be calculated based on the average exchange rate of RMB against Hong Kong dollar announced by the PBOC of the five working days prior the date of 2012 AGM. The 2012 Profit Distribution Proposal was considered and approved by the Board on 26 March 2013 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 the AGM, subject to the approval of the said profit distribution proposal at the AGM. The Company will give further notice on the record date and book closure dates for the dividend distribution of H Shares. 5

8 LETTER FROM THE BOARD 6. Proposal on Renewal of Engagement of A Share Auditing Firm and H Share Auditing Firm for the Year 2013 The Board proposes that BDO China Shu Lun Pan Certified Public Accountants LLP be re-appointed as the external auditor of the Company in 2013 for a period of one year, who will be responsible for provision of relevant domestic audit services in accordance with China Enterprise Accounting Standards. The auditing fees of 2013 including internal control is RMB2.65 million, of which RMB2.25 million is for financial and special regulatory reporting auditing and RMB400,000 is for internal control auditing. The Board recommends that Deloitte Touche Tohmatsu be re-appointed as the external auditor for the Company in 2013 for a period of one year, who will be responsible for provision of relevant audit and review services in accordance with International Financial Reporting Standards. The annual auditing fees and interim review fees of 2013 is RMB2.6 million. It will be proposed at the AGM to authorize the Board to determine the adjustment in the auditing fees if there is any increase to the auditing fees due to the change in the scope of auditing. The above-mentioned resolution was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval. 7. Proposal on Investment Asset Allocation of Equity, Fixed Income Securities and Derivative Products for the Year 2013 The Board recommends that subject to various regulatory requirements, in the year of 2013, the maximum amount of investment in proprietary equity securities (including the spot securities and the derivative products) shall not exceed 60% of net capital, the maximum amount of investment in fixed income securities (including the spot securities and the derivative products) shall not exceed 200% of net capital, the maximum amount of investment in actual equity securities shall not exceed 30.8% of net capital and the management of the Company shall be authorized to flexibly allocate cash scale and investment direction within the limit of proprietary investment according to market opportunity and the actual conditions of the Company, subject to various regulatory requirements. The above-mentioned resolution was considered and approved by the Board on 23 January 2013 and is hereby proposed at the AGM for consideration and approval. 8. Proposed Appointment of Mr. Xiao Suining as Independent Non-executive Director of the Company Reference is made to the announcement of the Company published on 26 March 2013 in relation to (among other things) the proposed appointment of new independent non-executive Director. The Board proposed to appoint Mr. Xiao Suining as the new independent non-executive Director of the Company, with the same terms of office as other Directors of the fifth session of the Board. An ordinary resolution will be proposed at the AGM to approve the appointment of Mr. Xiao Suining as independent non-executive Director of the Company. Details of Mr. Xiao Suining s biography and other information regarding to his appointment are set out in Annex F of this Circular. 6

9 LETTER FROM THE BOARD Mr. Xiao Suining confirmed that he was qualified for all the independence requirements set out in Rules 3.13 of the Hong Kong Listing Rules. The Company considered him as an independent person in accordance with the guidelines of independence set out in the Hong Kong Listing Rules. In accordance with the Articles of Association and the provisions of the relevant PRC laws and regulations, the appointment of Mr. Xiao is subject to approval of the Shareholders at the AGM and the CSRC s approval on his qualification for appointment. The above-mentioned resolution was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval. 9. Replacement of the Supervisor An ordinary resolution will be proposed at the AGM to approve the replacement of the Supervisor. Mr. Yuan Lingcai has tendered his resignation to the Supervisory Committee of the Company due to reason of personal professional development and resigned as the Supervisor of the Company. In accordance with the Articles of Associations, Mr. Li Lin was proposed to be the candidate of the Supervisor of the Company with the same terms of office as other Supervisors of the fifth session of the Supervisory Committee, which was passed at the ninth meeting of the fifth session of the Supervisory Committee. Details of Mr. Li Lin s biography and other information regarding to his appointment are set out in Annex G of this Circular. The above-mentioned resolution was considered and approved by the Supervisory Committee on 26 March 2013 and is hereby proposed at the AGM for consideration and approval. 10. Potential Connected/Related Transaction Involved in the Issuance of Short-term Financing Bills of Securities Companies, Corporate Bonds and Other Onshore Debt Financing Instruments Subject to the passing of the Resolution regarding the Issuance of Short-term Financing Bills of Securities Companies, the Resolution regarding the General Mandate to Issue Short-term Financing Bills of Securities Companies, the Resolution regarding the Issuance of Corporate Bonds of the Company, the Resolution regarding the General Mandate to Issue Corporate Bonds of the Company and the Resolution regarding the General Mandate to Issue Other Onshore Debt Financing Instruments at the general meeting of the Company, the Board has resolved to propose the following resolution at the general meeting of the Company for consideration and approval: (1) The Company may, within the range of the debt financing instruments of the Company and the term of the authorisation as set out in the above resolutions, conduct private placement on a one-off, multiple issuances or multi-tranche 7

10 LETTER FROM THE BOARD issuances basis of the financing instruments of the Company in an aggregate amount of no more than RMB5 billion to its connected/related party(ies) (including RMB5 billion, calculated based on the aggregate balance outstanding on the instruments issued and, in the case of an instrument denominated in foreign currency, based on the median exchange rate published by the People s Bank of China on the date of issuance). (2) Subject to the above range of RMB5 billion, it will be proposed to authorise the Board of the Company to determine the matters in connection with the connected/related transactions. The connected/related transactions shall be conducted in accordance with the applicable general market practice (if any) and on normal commercial terms; and the interest rate, term, price and other specific issue conditions involved in the transactions shall be determined in accordance with, among other things, the relevant PRC laws, regulations, market conditions and the capital supply and demand at the time of each issuance, and based on the market interest rate, price, term, market fee rates (if any) as may be then applicable to independent counterparties of the debt financing instruments of such type at market value on arm s length negotiation. (3) It will be proposed to authorise the Board of the Company to enter into the subscription agreement(s) and other relevant agreement(s) and document(s) with the connected/related party(ies) who wish to subscribe for the debt financing instruments to be issued by the Company, and complete the relevant procedures. (4) The Company shall, after entering into the subscription agreement(s) and other relevant agreement(s) and document(s) with the connected/related party(ies), publish connected/related transaction announcement(s) in a timely manner to disclose information in connection with the connected/related transactions in accordance with the listing rules of the stock exchanges on which the securities of the Company are listed. The above-mentioned resolution was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval. Shareholders of the Company should note that should the issuance of the short-term financing bills of securities companies, the corporate bonds, and other onshore debt financing instruments by the Company constitute the connected transactions under the Chapter 14A of the Hong Kong Listing Rules, and provided that the above-mentioned approval from the Board and the approval at the AGM (if the resolution is passed) are not enough to satisfy the requirements of the Hong Kong Listing Rules, the Company will take additional actions to satisfy the compliance requirements of the Hong Kong Listing Rules. 8

11 LETTER FROM THE BOARD SPECIAL RESOLUTIONS: 1. Proposed Amendments to Articles of Association In order to ensure the accurate description in the Articles of Association and to further improve the corporate governance and dividend distribution mechanism in accordance with a series of rules and regulations promulgated by CSRC, the Board of the Company resolved to amend the Articles of Association accordingly. Details of the proposed amendments are as follows: (1) Original Article 41 The Company s share certificates shall be in registered form. The following shall be specified in the Company s share certificates: (i) the name of the Company; (ii) the date on which the Company was established; (iii) the class and par value of the shares and the number of shares represented; (iv) the number of the share certificate; (v) any other matters needed to be specified as required by the Company Law and the securities regulatory authorities in the place where the Company s Shares are listed. The Company may issue overseas listed foreign shares in form of foreign depository receipts or other derivative means of shares in accordance with the laws and the practice of registration and depository of securities in the listing place. During the period of H shares listing in Hong Kong, the Company shall ensure that all its listing documents include the statements stipulated below and shall instruct and cause each of its share registrars not to register the subscription, purchase or transfer of any of its shares in the name of any particular holder unless and until such holder delivers to such share registrar a signed form in respect of such shares bearing statements to the following effect: (i) The acquirer of Shares agrees with the Company and each Shareholder of the Company, and the Company agrees with each Shareholder, to observe and comply with the Company Law, the Special Regulations and other requirements related to the laws, administrative regulations and the Articles of Association. 9

12 LETTER FROM THE BOARD (ii) The acquirer of shares agrees with the Company, each shareholder, Director, Supervisor, President and other senior management members of the Company and the Company acting for itself and for each Director, Supervisor, President and other senior management member agrees with each shareholder to refer all differences and claims arising from the Articles of Association or any right or obligation conferred or imposed by the Company Law or other relevant laws and administrative regulations concerning the affairs of the Company to arbitration in accordance with the Articles of Association, and any reference to arbitration shall be deemed to authorise the arbitration tribunal to conduct hearing in open session and to publish its award. Such arbitration shall be final and conclusive. (iii) The acquirer of shares agrees with the Company and each shareholder of the Company that shares in the Company are freely transferable by the holder thereof. (iv) The acquirer authorises the Company to enter into a contract on his behalf with each Director, President and other senior management member whereby such Directors, President and other senior management members undertake to observe and comply with their obligations to shareholders stipulated in the Articles of Association. Proposed New Article 41 The Company s share certificates shall be in registered form. The following shall be specified in the Company s share certificates: (i) (ii) the name of the Company; the date on which the Company was established; (iii) the class and par value of the shares and the number of shares represented; (iv) (v) the number of the share certificate; any other matters needed to be specified as required by the Company Law and the securities regulatory authorities in the place where the Company s Shares are listed. The Company may issue overseas listed foreign shares in form of foreign depository receipts or other derivative means of shares in accordance with the laws and the practice of registration and depository of securities in the listing place. During the period of H shares listing in Hong Kong, the Company shall ensure that the relevant documents related to H shares include the statements stipulated below and shall instruct and cause each of its share registrars not to register the subscription, 10

13 LETTER FROM THE BOARD purchase or transfer of any of its shares in the name of any particular holder unless and until such holder delivers to such share registrar a signed form in respect of such shares bearing statements to the following effect: (i) (ii) The acquirer of Shares agrees with the Company and each Shareholder of the Company, and the Company agrees with each Shareholder, to observe and comply with the Company Law, the Special Regulations and other requirements related to the laws, administrative regulations and the Articles of Association. The acquirer of shares agrees with the Company, each shareholder, Director, Supervisor, President and other senior management members of the Company and the Company acting for itself and for each Director, Supervisor, President and other senior management member agrees with each shareholder to refer all differences and claims arising from the Articles of Association or any right or obligation conferred or imposed by the Company Law or other relevant laws and administrative regulations concerning the affairs of the Company to arbitration in accordance with the Articles of Association, and any reference to arbitration shall be deemed to authorise the arbitration tribunal to conduct hearing in open session and to publish its award. Such arbitration shall be final and conclusive. (iii) The acquirer of shares agrees with the Company and each shareholder of the Company that shares in the Company are freely transferable by the holder thereof. (iv) The acquirer authorises the Company to enter into a contract on his behalf with each Director, President and other senior management member whereby such Directors, President and other senior management members undertake to observe and comply with their obligations to shareholders stipulated in the Articles of Association. (2) Original Article 60 Where a shareholder holding more than 5% of voting shares of the Company pledges any shares in his possession, he shall report the same to the Company in writing on the day on which he pledges his shares. Proposed New Article 60 A shareholder holding more than 5% of voting shares of the Company shall notify the Company within 5 working days upon the occurrence of the following events: (1) adoption of property preservation or mandatory enforcement measures with respect to the shares of the Company held or controlled by him or it; 11

14 LETTER FROM THE BOARD (2) pledge of shares of the Company held by him or it; (3) change of actual controller; (4) change of name; (5) merger or split; (6) imposition of regulatory measures such as suspension of business, designation of trustee, takeover or revocation on it, or it is in the process of dissolution, bankruptcy or liquidation; (7) imposition of administrative punishments or criminal liabilities due to material breach of laws and regulations; (8) occurrence of other events that may result in the transfer of shares of the Company held or controlled by him or it or may affect the operations of the Company. Where a shareholder holding more than 5% of voting shares of the Company pledges any shares in his possession, he shall report the same to the Company in writing on the day on which he pledges his shares. The Company shall report to the branch office of CSRC of its place of domicile within 5 working days from acknowledging the occurrence of the events as stated above. (3) Original Article 61 The controlling shareholders and beneficial controller of the Company shall not exploit their connected relationship with the Company to harm the interests of the Company. In the case of having violated such provision and caused damage to the company, they are liable for compensation. Proposed New Article 61 The controlling shareholders and beneficial controller of the Company shall not exploit their associated relationship with the Company to harm the interests of the Company. In the case of having violated such provision and caused damage to the company, they are liable for compensation. The controlling shareholders and beneficial controller of the Company and their associates shall adopt effective measures to avoid engaging in business in competition with that of the Company. 12

15 LETTER FROM THE BOARD The Company shall not have the following connections with its shareholders (or their associates): (1) holding shares of the shareholders, unless otherwise permitted by laws, administrative regulations or CSRC; (2) conferring improper benefits to shareholders by means of purchase of securities held by that shareholders; (3) allowing illegal appropriation of assets of the Company by shareholders; (4) engaging in any other actions as prohibited by laws, administrative regulations or CSRC. (4) Save as the deletion of the following sentence in Article 126, the rest of the contents thereof shall remain unchanged: The quorum for a separate class meeting (other than an adjourned meeting) to consider a variation of the rights of any class of shares shall be the holders of at least one-third of the issued shares of that class. (5) Original Article 146 Where an Independent Director is under one of the following circumstances, the Board shall timely convene a shareholders general meeting to dismiss or remove him/her from office: (i) (ii) Where the Independent Director is under the circumstances stipulated in Article 144 of the Articles of Association during his/her office; The Independent Director fails to attend in person for two consecutive Board meetings. Except those specified otherwise in the preceding provision, the Independent Director shall not be dismissed or removed from his/her office without justification prior to the expiry of his/her tenure. An independent Director may resign before the expiry of his/her tenure. He/She shall submit a written resignation to the Board. The written resignation shall contain explanation on the situation related to his/her resignation or any other matters which in his/her opinion, shall be brought to the notice of the shareholders and creditors of the Company. If the resignation of the Independent Director results in the number of Independent Directors of the Board to fall below the required proportion required by the Articles of Association, the out-going Independent Director shall continue to perform his/her duties in accordance with the provisions of laws, administrative regulations, department rules and the Articles of Association until the new Director is re-elected to 13

16 LETTER FROM THE BOARD take up his/her office. The Board shall convene a shareholders general meeting to re-elect an Independent Director for replacement within two months. If no shareholders general meeting is convened upon expiry of the period, the outgoing Independent Director may cease performing his/her duties. Proposed New Article 146 Where an Independent Director is under one of the following circumstances, the Board shall timely convene a shareholders general meeting to dismiss or remove him/her from office: (i) (ii) Where the Independent Director is under the circumstances stipulated in Article 144 of the Articles of Association during his/her office; The Independent Director fails to attend in person for three consecutive Board meetings. Except those specified otherwise in the preceding provision, the Independent Director shall not be dismissed or removed from his/her office without justification prior to the expiry of his/her tenure. An Independent Director may resign before the expiry of his/her tenure. He/She shall submit a written resignation to the Board. The written resignation shall contain explanation on the situation related to his/her resignation or any other matters which in his/her opinion, shall be brought to the notice of the shareholders and creditors of the Company. If the resignation of the Independent Director results in the number of Independent Directors of the Board to fall below the required proportion required by the Articles of Association, the out-going Independent Director shall continue to perform his/her duties in accordance with the provisions of laws, administrative regulations, department rules and the Articles of Association until the new Director is re-elected to take up his/her office. The Board shall convene a shareholders general meeting to re-elect an Independent Director for replacement within two months. If no shareholders general meeting is convened upon expiry of the period, the outgoing Independent Director may cease performing his/her duties. (6) Original Article 200 The Company shall have a Supervisory Committee. The Supervisory Committee shall compose of 11 Supervisors, including representatives of shareholders and representatives of employees, of which the ratio of employees representatives shall not be less than one third. The Supervisory Committee shall have one Chairman and one vice Chairman. The election or removal of the Chairman and vice Chairman of the Supervisory Committee shall be determined by the affirmative votes of two thirds or more of the members of the Supervisory Committee. Meetings of the Supervisory Committee shall be convened and presided over by the Chairman of the Supervisory Committee. Where the 14

17 LETTER FROM THE BOARD Chairman of the Supervisory Committee is incapable of performing or fails to perform his/her duties, the vice Chairman of the Supervisory Committee shall convene and preside over the meetings; if the vice Chairman of the Supervisory Committee is incapable of performing or fails to perform his/her duties, a Supervisor elected by more than half of the Supervisors shall convene and preside over Supervisory Committee meetings. Employee representative Supervisor of the Supervisory Committee shall be admitted to the Supervisory Committee directly after he/she is being elected by the employee representatives assembly. Proposed New Article 200 The Company shall have a Supervisory Committee. The Supervisory Committee shall compose of 11 Supervisors, including representatives of shareholders and representatives of employees, of which the ratio of employees representatives shall not be less than one third. The Supervisory Committee shall have one Chairman and one vice Chairman. The election or removal of the Chairman and vice Chairman of the Supervisory Committee shall be determined by the affirmative votes of two thirds or more of the members of the Supervisory Committee. Meetings of the Supervisory Committee shall be convened and presided over by the Chairman of the Supervisory Committee. Where the Chairman of the Supervisory Committee is incapable of performing or fails to perform his/her duties, the vice Chairman of the Supervisory Committee shall convene and preside over the meetings; if the vice Chairman of the Supervisory Committee is incapable of performing or fails to perform his/her duties, a Supervisor elected by more than half of the Supervisors shall convene and preside over Supervisory Committee meetings. In the event that the number of Directors elected by any one of the shareholders of the Company accounts for more than half of the members of the Board, the number of Supervisors elected by him/her shall not exceed one third of the members of the Supervisory Committee. Employee representative Supervisor of the Supervisory Committee shall be admitted to the Supervisory Committee directly after he/she is being elected by the employee representatives assembly. (7) Original Article 241 The Company adopts a continuous, stable and aggressive profit distribution policy, which focuses on providing reasonable investment returns to shareholders. The Company may, according to the profit made by the Company and taking into account the actual situation as well as current and long-term benefit of the Company, distribute dividend by way of cash or shares. In principle, the Company will distribute cash dividend for the year with profit. If no cash distribution proposal has been submitted for year with earnings, the Company will state the reasons for not distributing the profit and the usage of the profit retained in the periodic report. The Company may distribute interim dividend. The accumulated cash distribution of profit for the last three years of the Company were not less than 30% of the average annual distributable profit. 15

18 LETTER FROM THE BOARD Proposed New Article 241 The Company adopts a continuous, stable and aggressive profit distribution policy, which focuses on providing reasonable investment returns to shareholders. The Company may, according to the profit made by the Company and taking into account the actual situation as well as current and long-term benefit of the Company, distribute dividend by way of cash or shares. In the course of making specific dividend distribution plans, the Board and the shareholders general meeting shall fully consider the views of Independent Directors, the Supervisory Committee and public investors, communicate with public investors through a variety of tunnels and accept the inspections on the corporate profit distribution from Independent Directors, the Supervisory Committee and public investors. In principle, the Company will distribute cash dividend for the year with profit. The Company may distribute interim dividend. Profit distribution shall satisfy the regulatory requirements, not exceed the accumulated distributable profit and not influence continuous operation capacity of the Company. If the Company generated profits in the previous accounting year but the Board did not made any cash profit distribution proposal after the end of the previous accounting year, the Company shall state the reasons for not distributing the profit and the usage of the profit retained in the periodic report and the Independent Directors shall give an independent opinion in such regard. The accumulated cash distribution of profit for the last three years of the Company were not less than 30% of the average annual distributable profit. Specific percentage of dividend distribution for each year shall meet the needs of corporate operation and development and be resolved in accordance with the annual earnings conditions and future plans on usage of funds. If any of the following circumstances occurs, the Company can adjust the aforesaid cash dividend distribution percentage by obtaining the approval from more than two thirds of voting rights held by shareholders attending the shareholders general meeting: (i) (ii) there are changes in, or adjustments to, the relevant laws and regulations; the risk control indicators (such as net capital) reach the warning levels; (iii) the Company s operating conditions deteriorate; (iv) the Board proposes the adjustments. In the event that adjustments to the Company s profit distribution policy are necessary due to the needs of operation and long-term development, the adjusted profit distribution policy shall comply with the relevant requirements of the regulatory authorities. Any resolution regarding the adjustments to the Company s 16

19 LETTER FROM THE BOARD cash dividend policy shall be approved by two thirds of the voting rights of the shareholders attending the shareholders general meeting and online voting shall be available. The Company shall consider the views of public investors and timely respond to the questions concerned by public investors. The Company should disclose in periodic reports the implementation of the dividend distribution policy and other relevant circumstances in accordance with the relevant provisions. The amendments to Article 146 and 241 were considered and approved by the Board on 29 October 2012 while the amendments to Article 41, 60, 61, 126 and 200 were considered and approved by the Board on 26 March The above-mentioned resolution is hereby proposed at the AGM for consideration and approval. 2. Proposal Regarding the Enlargement of the Business Scope of the Company A special resolution will be proposed at the AGM to approve the proposal regarding the enlargement of the business scope of the Company. According to Tentative Provisions for the Examination and Approval of the Scope of Business of Securities Companies, in order to facilitate the process of obtaining appropriate business qualifications for agency sales of financial products by the Company, the Board of the Company proposed at the AGM to consider the followings: (1) to approve that the Company may apply to the local agency of the CSRC for approval of the business qualifications for agency sales of financial products, and to authorize the management of the Company to handle the relevant procedures; (2) to authorize the management of the Company to, if necessary, make amendments to the Articles of Association pursuant to regulatory requirements after obtaining the business qualifications for agency sales of financial products by the Company and make relevant change procedures. The above-mentioned resolution was considered and approved by the Board on 29 October 2012 and is hereby proposed at the AGM for consideration and approval. 3. Proposal Regarding the Issuance of Short-term Financing Bills of Securities Companies Special resolutions will be proposed at the AGM to approve the proposal regarding the issuance of short-term financing bills of securities companies. Details are as follows: (1) Issue Size The balance of the Company s outstanding short-term financing bills shall be no more than 60% of the net capital of the Company (maximum size of approximately RMB23.4 billion based on net capital of the parent company of RMB39 billion as 17

20 LETTER FROM THE BOARD at 31 December 2012) and such balance shall not exceed the maximum balance of outstanding short-term financing bills as published by the People s Bank of China for the national inter-bank bond market. (2) Issue Rate The issue rate will be determined with reference to the market interest rate level for the same period and investors level of subscription by means of tender, bookbuilding or any other means as recognized by regulatory authorities. (3) Issue Term The issue term shall be no more than 91 days. (4) Issue Method The issue shall be made to qualified investors in the inter-bank market and details of the issue method shall be subject to final approval by regulatory authorities. (5) Use of Proceeds The proceeds shall be used as a supplement to the Company s liquidity and other short-term funding purposes permitted under relevant laws and regulations. (6) Validity Period of Resolution The resolution regarding the issuance of short-term financing bills of securities companies shall be valid for a period of 40 months from the date of passing of the resolution at the general meeting. The above-mentioned resolutions were considered and approved by the Board on 26 March 2013 and are hereby proposed at the AGM for consideration and approval. 4. Proposal Regarding the General Mandate to Issue Short-term Financing Bills of Securities Companies A special resolution will be proposed at the AGM to approve the general mandate to issue short-term financing bills of securities companies. Details are as follows: (1) A resolution will be proposed at the general meeting to authorise the Board, and agree the Board of the Company in turn to authorise the Chairman and general manager of the Company to jointly or individually determine the details including issue size and issue timing for each tranche of the short-term financing bills of the Company as well as other matters relating to the issuance of short-term financing bills; and to monitor the issuance and payment of short-term financing bills. 18

21 LETTER FROM THE BOARD (2) The mandate shall be valid for a period of 40 months from the date of passing of the resolution at the general meeting. During the validity period, the balance of the outstanding short-term financing bills of the Company in the current period shall be no more than 60% of the net capital of the Company, and such balance shall not exceed the maximum balance of outstanding short-term financing bills as published by the People s Bank of China for the national inter-bank bond market. The above-mentioned resolution was considered and approved by the Board on 26 March 2013 and is hereby proposed at the AGM for consideration and approval. 5. Proposal Regarding the Issuance of Corporate Bonds Special resolutions will be proposed at the AGM to approve the issuance of corporate bonds. Details are as follows: (1) Issue Size The balance of issuance of corporate bonds shall be no more than 40% of the net asset value of the Company at the end of the preceding period prior to the issuance. (2) Issue Target and Arrangements on Placement to Shareholders of the Company The Company plans to issue the corporate bonds through public offering or any other means as recognized by regulatory authorities. (3) Type and Term of Bonds The types of corporate bonds include fixed rate and/or floating rate corporate bonds with a term of no more than 10 years. It may have single or multiple maturities. (4) Determination of Coupon Rate for Bonds The coupon rate for fixed rate bonds will be determined by the bookrunner within a certain range of interest rates by means of book-building. The coupon rate for floating rate bonds will be determined by the bookrunner within a certain range of interest spreads by means of book-building. (5) Security The corporate bonds are unsecured bonds. (6) Issue Method The corporate bonds may be issued in one or more tranches upon obtaining approval for issuance. 19

22 LETTER FROM THE BOARD (7) Use of Proceeds The proceeds raised from the issuance of corporate bonds are intended to be used as working capital of the Company to improve the financial structure of the Company. (8) Listing Arrangements The bonds, upon its completion of issuance, are intended to be listed and traded on the Shanghai Stock Exchange and/or traded on other stock exchanges as recognized by regulatory authorities. (9) Guarantee Measures for Repayment In the event that the Company expects that it is unable to repay the principal and interests of the corporate bonds as scheduled, or the Company is unable to repay the principal and interests of the corporate bonds when they become due, it shall implement, as a minimum, the following measures: 1) no dividend shall be distributed to the Shareholders; 2) suspend the implementation of projects that incur capital expenditure such as material external investments, acquisitions and mergers; 3) payment of salary and bonus of the Directors and senior management shall be adjusted, reduced or ceased; 4) key personnel accountable for such event shall not be allowed for redesignation. (10) Validity Period of Resolution The resolution regarding the issuance of corporate bonds shall be valid for a period of 36 months from the date of passing of the resolution at the general meeting. The above-mentioned resolutions were considered and approved by the Board on 26 March 2013 and are hereby proposed at the AGM for consideration and approval. 20

23 LETTER FROM THE BOARD 6. General Mandate to Issue Corporate Bonds The Board has resolved to propose a resolution at the general meeting of the Company to authorise the Board, and agree the Board of the Company in turn to authorise the Chairman and general manager of the Company to jointly or individually implement the issuance of corporate bonds, at their sole discretion in accordance with the Company Law, Securities Law, Measures for Pilot Projects for the Offering of Corporate Bonds and the provisions of the Articles of Association, and the then prevailing market conditions, including but not limited to: (1) Formulation of the details of the proposal regarding the issuance of corporate bonds based on the actual conditions of the Company and the market in accordance with the PRC laws, regulations and relevant requirements of securities regulatory authorities and the resolution passed at the general meeting of the Company; and revising and amending the terms for the issuance of corporate bonds, including but not limited to all matters relating to the terms of issue such as details of issue size, term of bonds, issue target, type of bonds, bond rates and its determination, timing of issue (whether by tranches and the number of tranches), use of proceeds, any repurchase and redemption terms, rating arrangements, details of subscription method, details of placement arrangements, term and means of payment of principal and interests and listing of bonds; (2) Engaging intermediary agency to handle the filing matters in connection with the issuance of corporate bonds and handle the listing matters with respect to the corporate bonds upon the completion of issuance, including but not limited to the authorisation, execution, implementation, amendment and completion of all necessary documents, contracts, agreements and treaties in connection with the issuance of corporate bonds and listing (including without limitation the prospectus, sponsor agreement, underwriting agreement, bond trustee agreement, listing agreement, various announcements and other legal documents, etc.), and information disclosure in accordance with the laws, regulations and other regulatory documents; (3) Appointing trustee manager in connection with the issuance of corporate bonds, signing the bond trustee agreement and formulating the rules for meeting of bondholders; (4) Adjusting the details of the proposal for the issuance of corporate bonds according to the recommendations made by regulatory authorities in the event that there are changes in the policies relating to the issuance of corporate bonds by the regulatory authorities or changes in prevailing market conditions, save as matters that require re-approval at the general meeting pursuant to the relevant laws, regulations and the Articles of Association; (5) Handling other matters in connection with the issuance of corporate bonds and listing; 21