Huatai Securities : CHANGE OF USE OF PARTIAL PROCEEDS FROM NON-PUBLIC ISSUANCE OF A SHARES

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 and carrying on business in Hong Kong as HTSC)

(Stock Code: 6886)

CHANGE OF USE OF PARTIAL PROCEEDS FROM

NON-PUBLIC ISSUANCE OF A SHARES

1. OVERVIEW OF CHANGE OF USE OF PARTIAL PROCEEDS
   In July 2018, upon the Approval for the Non-Public Issuance of Shares by Huatai Securities Co., Ltd. (Zheng Jian Xu Ke [2018] No. 315) 《( 關於核准華泰證券股份有限公司非公開 發行股票的批覆》(證監許可[2018]315號)) issued by the CSRC, the Company completed the non-public issuance of 1,088,731,200 A Shares to Alibaba (China) Technology Co., Ltd., Suning.Com Co., Ltd., Essence Securities Co., Ltd., China Structural Reform Fund Corporation Limited, Shanghai Beixin Ruifeng Asset Management Co., Ltd. and Sunshine Property & Casualty Insurance Co., Ltd. at an issuance price of RMB13.05 per share with the total funds raised of RMB14,207,942,160.00 (the "Non-public Issuance"). After deducting the issuing expenses of RMB74,736,488.79 related to the Non-public Issuance (including underwriting and sponsorship fees, counsel fees, accountants' fees, information disclosure fees, issuance registration fees, stamp duty, etc.), the net funds raised from the Non-public Issuance were RMB14,133,205,671.21, which were all deposited into the bank account designated for raised funds set up by the Company on July 31, 2018 and verified by KPMG Huazhen LLP with the Capital Verification Report on the Non-public Issuance of RMB-denominated Ordinary Shares (A Shares) by Huatai Securities Co., Ltd. (KPMG Huazhen Yan Zi No. 1800286) issued.
   After deducting the issuing expenses, all funds raised from the Non-public Issuance by the Company in 2018 will be fully used for replenishing the Company's capital and working capital so as to increase the business scale and enhance market competitiveness and risk tolerance of the Company. To improve the usage efficiency of raised funds, the Company proposed to change the use of partial proceeds.

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The Company proposed to make adjustment to the use of partial proceeds by changing the original purpose of "increasing investment in the Hong Kong subsidiary and expanding overseas business" for RMB100 million to "further expanding credit trading business such as margin financing and securities lending and stock pledge". The details of the proceeds investment projects before and after the change are as follows:

			Unit:100 million yuan (RMB)
			Investment	Investment
		amount before	amount after
No.	Proceeds investment projects		the change	the change
1	Further expanding credit trading business	48.00		49.00
	such as margin financing and securities
	lending and stock pledge
2	Expanding the investment of fixed income	80.00	80.00
	products and increasing the reserves of
	high-quality liquid assets of the Company
3	Increasing investment in domestic wholly-	5.00	5.00
	owned subsidiaries
4	Increasing investment in the Hong Kong	1.00	0.00
	subsidiary and expanding overseas
	business
5	Greater capital investment in information	3.00	3.00
	system and continuous improvement of
	informatization work
6	Other working capital arrangements		4.33	4.33
	Total		141.33		141.33

The change of use of partial proceeds does not involve connected transactions.

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1. REASONS FOR CHANGE OF USE OF PARTIAL PROCEEDS

1. Planned investment and actual investment of the original project
   As of August 31, 2019, an accumulative amount of RMB13.993 billion of the raised funds was used. Usage of funds has fulfilled its corresponding approval procedures. Details of usage are as follows:

			Unit:100 million yuan (RMB)
			Investment	Actual
		amount before	investment
No.	Proceeds investment projects		the change	amount
1	Further expanding credit trading business	48.00		48.00
	such as margin financing and securities
	lending and stock pledge
2	Expanding the investment of fixed income	80.00	79.68
	products and increasing the reserves of
	high-quality liquid assets of the Company
3	Increasing investment in domestic wholly-	5.00	5.00
	owned subsidiaries
4	Increasing investment in the Hong Kong	1.00	0.00
	subsidiary and expanding overseas
	business
5	Greater capital investment in information	3.00	3.00
	system and continuous improvement of
	informatization work
6	Other working capital arrangements	4.33	4.25
	Total	141.33		139.93

1. Reasons for change
   In June 2019, the Company completed the issuance of global depository receipts ("GDR") on the London Stock Exchange plc. The net funds raised were US$1.65 billion. As undertaken in the prospectus, 60% of the funds raised from GDR (i.e. approximately US$990 million, equivalent to approximately RMB6.93 billion) will be used for supporting the development of overseas business.
   The resolution passed at the 16th meeting of the fourth session of the Board of the Company agreed to increase the registered capital of Huatai International Financial Holdings Company Limited from HK$8.8 billion to not more than HK$10.8 billion, which was to be used for carrying out its overseas business and related investments. It is estimated that the funds raised from the Company's offering of GDR can satisfy its needs in the development of international business for the next two years. Compared to raised funds from GDR, injecting Renminbi capital raised from the Non-public Issuance into the Hong Kong subsidiary will involve a series of procedures such as currency exchange and outward remittance, which involve a more complicated process and a certain level of costs.

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Considering the factors mentioned above, the Company has proposed to give priority to using funds raised from GDR to increase investment in the Hong Kong subsidiary. Under this situation, the portion of funds raised from the Non-public Issuance originally for investment in the Hong Kong subsidiary cannot be used in the short run. To enhance efficiency in funds usage, the Company has proposed to change the original purpose of "increasing investment in the Hong Kong subsidiary and expanding overseas business" for RMB100 million of the funds raised from the Non-public Issuance to "further expanding credit trading business such as margin financing and securities lending and stock pledge".

1. DETAILS OF THE NEW PROJECT
   The Company will use partial funds raised from the Non-public Issuance to further support the continuous development of credit business and expand credit trading business such as margin financing and securities lending, meeting the capital needs of the margin financing and securities lending business and carrying out other capital-based intermediary businesses to strengthen the profitability of the Company.

IV. MARKET PROSPECT AND RISK WARNING OF THE NEW PROJECT

Credit trading business has become a significant source of income for major securities companies in recent years. Given that the launch of the STAR market and the further opening up of the securities market, the demand for credit trading business is expected to grow steadily.

Credit trading business is significant in enhancing the profit level of securities companies, improving financial services of securities companies, integrating client resources of securities companies and improving the profit model of securities companies. The profit level of the credit trading business is subject to the impact of factors such as market fluctuation, repayment ability of the borrowing party in margin financing and securities lending and the operation strategy of the company.

1. O P I N I O N S O F I N D E P E N D E N T N O N - E X E C U T I V E D I R E C T O R S , T H E SUPERVISORY COMMITTEE AND SPONSORS ON CHANGE OF PROCEEDS INVESTMENT PROJECTS
   In the opinion of the independent non-executive Directors of the Company: The change of the use of partial proceeds proposed by the Company is based on the actual situation of the Company. It is beneficial in enhancing the usage efficiency of raised funds. It is in the interest of the Company and its shareholders as a whole and is not detrimental to the lawful interests of the Company and its minority shareholders. The relevant decision-making procedure of the Company is in compliance with related requirements such as the Listing Rules of the Shanghai Stock Exchange, the Administrative Measures for Raising Proceeds by Companies Listed on the Shanghai Stock Exchange (Revised in 2013), Listed Companies Regulatory Guidance No. 2 -Regulatory Requirements for the Management and Usage of Proceeds of Listed Companies and the Proceeds Management System of the Company. We agree on the proposed change of use of partial proceeds of the Company and agree to submit the Resolution in relation to the Change of Use of Partial Proceeds from Non-public Issuance of A Shares to the general meeting for consideration.

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In the opinion of the Supervisory Committee: The change of the use of partial proceeds proposed by the Company is beneficial in enhancing the usage efficiency of raised funds and meets the actual development needs of the Company. The details and the decision-making procedure are in compliance with the requirements under relevant laws, regulations and regulatory documents and not detrimental to the interest of the Company and its minority shareholders. The Supervisory Committee agrees on the proposed change of use of partial proceeds of the Company and agrees to submit the Resolution in relation to the Change of Use of Partial Proceeds from Non-public Issuance of A Shares to the general meeting for consideration.

In the opinion of Guotai Junan Securities Co., Ltd. and Huatai United Securities Co., Ltd., the joint sponsors of the Non-public Issuance: The change of the use of partial proceeds proposed by the Company is beneficial in enhancing the usage efficiency of raised funds and meets the actual development needs of the Company. It is not detrimental to the lawful interests of the Company and its minority shareholders. The proposed change of the use of partial proceeds has been considered and approved by the Board and agreed on by the independent Directors and the Supervisory Committee. The necessary procedure has been performed in compliance with relevant laws, regulations and regulatory documents such as the Administrative Measures for Sponsorship of the Offering and Listing of Securities, Listed Companies Regulatory Guidance No. 2 -Regulatory Requirements for the Management and Usage of Proceeds of Listed Companies, the Administrative Measures for Raising Proceeds by Companies Listed on the Shanghai Stock Exchange and requirements under the Articles of Association and the Proceeds Management System of the Company. Therefore, the joint sponsors have no objection to the proposed change of the use of partial proceeds.

VI. DESCRIPTION OF SUBMITTING THE CHANGE OF PROCEEDS INVESTMENT PROJECTS FOR CONSIDERATION AT THE GENERAL MEETING

The proposed change of use of partial proceeds of the Company from non-public issuance of A Shares has been considered and approved in the 25th meeting of the fourth session of the Board and the 14th meeting of the fourth session of the Supervisory Committee. Its implementation is still subject to the consideration and approval at the EGM.

A circular containing (among others) further details of the above proposal together with the notice of the EGM will be despatched to the shareholders in due course.

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DEFINITIONS

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

"Articles of Association"

"A Share(s)"

the articles of association of the Company (as amended, supplemented or otherwise modified from time to time)

domestic shares in the share capital of the Company, with a nominal value of RMB1.00 each, which are subscribed for or credited as paid up in RMB and are listed and traded on the Shanghai Stock Exchange

"Board"

"Company"

"CSRC"

"Director(s)"

"EGM"

the board of directors of the 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 December 7, 2007, carrying on business in Hong Kong as "HTSC", and was registered as

a 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 have been listed on the Main Board of The Stock Exchange of Hong Kong Limited since June 1, 2015 (Stock Code: 6886); the A shares of which have been listed on the Shanghai Stock Exchange since February 26, 2010 (Stock Code: 601688); the global depository receipts of which have been listed on the London Stock Exchange plc since June 2019 (Symbol: HTSC), and unless the context otherwise requires, including its predecessors

the China Securities Regulatory Commission (中國證券監督管理委員

會)

the director(s) of the Company

the 2019 first extraordinary general meeting to be held by the Company at Conference room, Renaissance Nanjing Olympic Centre Hotel, 139 Aoti Street, Jianye District, Nanjing, Jiangsu Province, the PRC on Monday, December 16, 2019 at 2:30 p.m.

"HK$"

Hong Kong dollars, the lawful currency of Hong Kong

"Hong Kong"the Hong Kong Special Administrative Region of the PRC

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"H Share(s)"foreign shares in the share capital of the Company with a nominal value of RMB1.00 each, which are subscribed for and traded in HK$ and are listed on the Hong Kong Stock Exchange

"PRC" or "China"

"RMB" or "Renminbi"

"Share(s)"

"Shareholder(s)"

"STAR Market"

"Supervisory Committee"

"US$"

"%"

the People's Republic of China, excluding, for the purposes of this circular, Hong Kong, 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, comprising A Share(s) and H Share(s)

holder(s) of Shares

science and technology innovation board of the Shanghai Stock Exchange

the supervisory committee of the Company

US dollar(s), the lawful currency of the United States of America

per cent.

By order of the Board of the Company

Zhou Yi

Chairman

Jiangsu, the PRC, October 29, 2019

As at the date of this announcement, the Board comprises Mr. Zhou Yi and Mr. Zhu Xuebo as executive Directors; Mr. Ding Feng, Mr. Chen Yongbing, Mr. Xu Qing, Ms. Hu Xiao and Ms. Fan Chunyan as non-executive Directors; and Mr. Chen Chuanming, Mr. Liu Hongzhong, Mr. Lee Chi Ming, Ms. Liu Yan and Mr. Chen Zhibin as independent non- executive Directors.

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